UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







Form
10-Q







(Mark
One)




x QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934






For the
quarterly period ended March 31,
2008




o TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT






For the
transition period from __________________ to ______________




Commission
file number: 1-14088




Acacia
Automotive, Inc.


(Exact
name of small business issuer as specified in its charter)








Texas
            75-2095676(State or other
      jurisdiction of incorporation or organization)
            (IRS Employer
      Identification No.)The
      Gardner Building – Suite 104, 5214 Maryland Way, Brentwood, TN
            37027(Address
      of principal executive offices)
            (Zip
  Code)




(352)
427-6848


(Registrant's
telephone number)





(Former
name, former address and former fiscal year, if changed since last
report)




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




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (Check one):








Large accelerated
      filer o
            
            Accelerated filer
      oNon-accelerated
      filer  o
            
            Smaller Reporting
      Company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes oNo
x




APPLICABLE
ONLY TO ISSUERS 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 Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes x
No o




APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of March 31, 2008:  11,997,524.













PART
I FINANCIAL INFORMATION





Item
1. Financial Statements


ACACIA
AUTOMOTIVE, INC.


CONSOLIDATED
BALANCE SHEETS




March
      31,
            
            December
      31,2008
            
            2007ASSETSCURRENT
      ASSETSCash
            $
            259,729
            
            $
            203,077Escrow
      cash –future common stock sale
            
            80,000
            
            
            -Accounts
      receivable
            
            312,759
            
            
            210,130Employee
      receivables
            
            294
            
            
            294Deposits
      and prepaid expenses
            
            18,562
            
            
            33,562Total
      Current Assets
            
            671,344
            
            
            447,063PROPERTY
      AND EQUIPMENT, net of accumulated depreciationof $26,827
      and $13,707
      in 2008 and 2007, respectively
            
            197,007
            
            
            203,142OTHER
      ASSETSGoodwill
            
            427,929
            
            
            427,929Customer
      list and Non-Compete Agreement, net of amortizationof $127,925
      and $85,283, respectively
            
            513,209
            
            
            555,850Total
      Other Assets
            
            941,138
            
            
            983,779TOTAL
      ASSETS
            $
            1,809,489
            
            $
            1,633,984LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
            $
            510,882
            
            $
            224,927Accrued
      liabilities
            
            176,344
            
            
            87,238Line
      of credit
            
            98,900
            
            
            139,900Stock
      subscriptions payable
            
            80,000
            
            
            -Capital
      lease obligations, current portion
            
            11,914
            
            
            11,706Shareholder
      payables
            
            32,467
            
            
            47,104Total
      Current Liabilities
            
            910,507
            
            
            510,875NONCURRENT
      LIABILTIESCapital
      lease obligations, less current portion
            
            31,871
            
            
            32,078TOTAL
      LIABILITIES
            
            942,378
            
            
            542,953STOCKHOLDERS'
      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;11,997,524
      shares issued and outstanding.
            
            11,997
            
            
            11,997Additional
      paid-in capital
            
            11,240,160
            
            
            10,918,722Retained
      deficit
            
            (10,385,046
            )
            
            (9,839,688
            )TOTAL
      STOCKHOLDERS' EQUITY
            
            867,111
            
            
            1,091,031TOTAL
      STOCKHOLDERS' EQUITY AND LIABILITES
            $
            1,809,489
            
            $
            1,633,984




The
accompanying notes are an integral part of these financial
statements.
  F-2
  ACACIA
AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007


2008
              
              2007REVENUESBuyers fees
              $
              81,382
              
              $
              -Sellers fees
              
              128,332
              
              
              -Other Revenue
              
              4,506
              
              
              -Total
    Revenues
              
              214,220
              
              
              -OPERATING
      EXPENSESCost of fees earned
              
              34,845
              
              
              -Employee compensation
              
              467,544
              
              
              1,115,515General and administrative
              
              201,541
              
              
              51,724Depreciation and amortization
              
              55,762
              
              
              1,822Total operating expenses
              
              759,692
              
              
              (1,169,061
              )Operating loss
      before other income (expense) and income taxes
              
              (545,472
              )
              
              (1,169,061
              )OTHER INCOME
      (EXPENSE)Interest Income
              
              2,021
              
              
              137Interest Expense
              
              (1,908
              )
              
              -Loss on sale of assets
              
              -
              
              
              -Total Other Income (Expense)
              
              113
              
              
              137Income Tax
              
              -
              
              
              -Net loss
              $
              (545,359
              )
              $
              (1,168,924
              )BASIC AND
      DILUTED LOSS PER SHAREWeighted average shares outstanding
              
              11,997,524
              
              
              10,262,801Loss per
      share
              $
              (0.05
              )
              $
              (0.11
              )
    F-3
  ACACIA
AUTOMOTIVE, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 THREE
MONTHS ENDED MARCH 31, 2008 AND 2007
 
 2008
              
              2007Cash flows from operating
      activitiesNet loss
              $
              (545,359
              )
              $
              (1,168,924
              )Adjustments to reconcile net loss to net cash used in operating
      activities:Depreciation and amortization
              
              55,761
              
              
              1,822Common stock issued for services
              
              -
              
              
              1,000,000Stock options and warrants issued for services
              
              321,438
              
              
              30,225Changes in operating assets and liabilitiesAccounts receivable
              
              (102,629
              )
              
              -Deposits and prepaid expenses
              
              15,000
              
              
              -Accounts payable
              
              285,956
              
              
              28,842Accrued liabilities
              
              89,106
              
              
              87,750Shareholder
      payables
              
              (14,636
              )
              
              20,808Net cash used in operating activities
              
              104,637
              
              
              523Cash
      flows from investing activitiesPurchase of property and equipment
              
              (6,985
              )
              
              (422
              )Cash
      flows from financing activitiesEscrow account
              
              (80,000
              )
              
              (100,000
              )Common stock subscription payable
              
              80,000
              
              
              100,000Borrowings from line of credit
              
              635,000
              
              
              -Repayments on line of credit
              
              (676,000
              )
              
              -Net cash used by financing activities
              
              (41,000
              )
              
              -Net
      increase in cash and cash equivalents
              
              56,652
              
              
              101Cash,
      beginning of period
              
              203,077
              
              
              1,432Cash,
      end of period
              $
              259,729
              
              $
              1,533


F-4




ACACIA
AUTOMOTIVE, INC.


NOTES
TO FINANCIAL STATEMENTS


MARCH
31, 2008 AND 2007





NOTE 1 – THE COMPANY AND
BASIS OF PRESENTATION





Acacia
Automotive, Inc. (“Acacia” or the “Company”) is engaged in acquiring and
operating automotive auctions, including automobile, truck equipment, boat,
motor home, RV and other related vehicles.





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.





The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
annual financial information and with the instructions to Form 10-Q and Article
10 of Regulation SX.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements.  In the opinion of
management, all adjustments considered necessary for a full presentation have
been included.  All such adjustments are of a normal and recurring
nature.





Historically,
the Company had issued warrants to purchase shares of our common stock in
connection with certain of its debt and equity financings.  The
Company records each of the securities issued on a relative fair value basis up
to the amount of the proceeds received.  The Company estimates the
fair value of the warrants using the Black-Scholes option pricing
model.  The Black-Scholes model is dependent on a number of variables
and estimates including: interest rates, dividend yield, volatility and the
expected term of the warrants.  The estimates are based on market
interest rates at the date of issuance, our past history for declaring
dividends, the Company’s estimated stock price volatility and the contractual
term of the warrants.  The value ascribed to the warrants in
connection with debt offerings is considered a cost of capital and amortized to
interest expense over the term of the debt.





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.





NOTE 2 – GOING CONCERN
CONSIDERATIONS





The
Company neither has sufficient cash on hand nor is it generating sufficient
revenues to cover its operating overhead.  These facts raise doubt as
to the Company’s ability to continue as a going concern.  The Company
has been operating over the past year based on the proceeds from the sale of
Common stock in private offerings, loans from its officers/directors, and
revenues from its auction operating unit.  There is no guarantee that
such officers/directors will continue to provide operating funds for the
Company.  In order to pursue its goals and commitments, the Company
will be required to obtain significant funding to meet its projected minimum
expenditure requirements.  Management’s plans include raising funds
from the public through a private placement stock offering, acquiring additional
auto auction operations that will provide profitability and liquidity, and
attempting to increase the revenues from its current auction
operations.  Management intends to make every effort to identify and
develop sources of funds, but there is no assurance that Management’s plans will
be successful.





The
Company has entered into a Letter of Intent to acquire its next auto auction
operation.  If it were to be successful in arranging the funding for
that acquisition and consummate the purchase through a definitive agreement, the
Company anticipates that it would thereafter be cash flow
positive.  This assumption is based on the past three years’ unaudited
financials provided to the Company by that target entity, and is subject to
updated information at the time of any consummation of the transaction. There is
no assurance the Company
will achieve its funding goals or complete the transaction as
planned.




F-5


Item
2. Management’s Discussion and Analysis of Financial Condition and Results 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-Q 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-Q 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, and those operations remain the Company’s only
operations.




During
the third and fourth quarters of 2007, the Company made substantial improvements
to the physical plant in Augusta and upgraded our technology equipment and
software. Our commitment to software enhancement involved installation of an
auction operating system in which we agreed to assist the vendor in more fully
broadening the software’s functionality. We believe that many of the
difficulties encountered in the initial installation have been resolved;
however, we continue to work with the vendor to improve the software’s speed and
functionality for Acacia’s specific needs and for use its use in the whole-car
auction industry in general. Based on the representations of our supplier, we
also anticipate that the software’s accounting functionality will substantially
increase control of and reporting about our operations, features that are still
being planned and developed.




The
objectives we seek to be achieved with the new software include (a) providing an
operating environment in which the Company can monitor and/or combine the
operating results of any or all its auctions and other operations in real time
as it grows through planned acquisitions; (b) exporting all financial and
operating data relative to any one or more of its entities directly to our new
financial reporting software, thus greatly reducing the labor requirement, time
to reporting delays, and associated costs in the accounting area even as the
Company is given faster and broader access to its information and operating
statistics; (c) providing state-of-the-art, redundant access through web-based
servers utilizing Oracle database technologies housed in high-security
environments at diverse geographical locations; (d) providing a complete portal
allowing the Company’s auctions to engage in Internet selling through both
static and simulcast sales, giving it the additional exposure required to take
its place in the current sales technology environment; and (e) increasing the
ability of the Company’s auctions to better compete in the salvage auction
industry as a result of having the current high level of technology demanded by
larger salvage industry sellers and which has not been previously available to
the Company.




Operating
Results of the Auction




The
Auction incurred a loss of $43,445 for the three months ended March 31, 2008. Of
that loss, $54,855 represented non-cash expenses for amortization and
depreciation, leaving the auction in a cash-flow positive posture for the
period. Additionally, more than $25,000 represented non-recurring cash expenses
associated with the improvements described above that were not
capitalized.




Wholesale
automotive markets remain suppressed throughout the entire U.S. as compared to
previous year’s levels, although not so much as the retail markets. While lower
volumes of vehicles are generally available to the wholesale markets as compared
to the prior year, the constrictions are not sufficient to preclude
profitability.  During previous periods of economic downturns and
recession, the automotive auction industry has traditionally fared well compared
to many other industries.





The first
quarter of 2008 saw a small increase in the number of vehicles entered at our
Augusta Auto Auction operation, but more notable were decreases in the number of
units sold as reflected by a lower conversion rate than in the same period of
2007.  As previously indicated, the Company anticipated this as a
result of generally-weakening economic conditions, reduced productivity at
automotive manufacturers, tightening credit and higher consumer interest rates,
and other negative pressures affecting trade in general. In addition to a
sluggish economy, the Company continued to face operating hardships associated
with the initial installation and personalization of the new operating software
instituted in December.  As program development has accelerated
through Q1, those pressures have eased somewhat as the projects have become
somewhat more manageable, streamlined and friendly to our operations, but we are
far from reaching the desired result.  In hopes that improvements will
be more forthcoming in Q2, the Company is now redirecting its efforts to
capturing the lost market share it lost in Q1 2008, and anticipates that it can
regain much of the sales momentum it was generating during Q3 and Q4 of 2007
under Acacia’s ownership. The table below is reflective of the Company’s
performance in Q1 2008 versus the same period in 2007.





1




Q1
      2008Units
      Entered vs. Q1 2007
            +6.47
            %Units
      Sold vs. Q1 2007
            -17.59
            %Conversion
      Rate Q1 2007
            71.00
            %Conversion
      Rate Q1 2008
            54.96
            %Change
      in Buy/Sell Fee Revenues vs. Q1 2007
            -12.77
            %




On
several occasions during 2007 in Q3 and early Q4, the auction set several
records for the highest numbers of entries and sales in more than five years and
reflects a market that had not been previously developed, eventually leading us
to greater market penetration in Augusta.  The conversion rate,
however, declined from year to year, consistent with a national trend believed
by management to be related to a slowing economy in the United States. We do
believe that the current economic environment could inhibit our present growth
based upon (i) the negative influences of higher consumer automotive interest
rates, tighter credit, and higher gasoline prices on the automotive industry,
(ii) the unwillingness of consumers to spend as freely on major purchases in an
uncertain economy, and (iii) the other wide-ranging negative impacts of a
troubled general economy. In addition, it is not uncommon for conversion rates
to decline as volumes increase.  The number of units entered in those
quarters of 2007 was up nearly 46%, potentially contributing to a reduction in
the percentage of units sold..





Based on
the results of the National Auto Auction Association (NAAA) 2007 Auction
Industry Survey, Augusta Auto Auction during Q3 and Q4 of 2007 achieved a
conversion rate of more than 5% above the national average, at 54.4% for dealer
consignment vehicles, the Company’s primary concentration of business, and
achieved a conversion rate 17% lower than the national average for
fleet/lease/repossessed units, at 57.8%.  Full year results at our
auction reflected conversion rates of 60.1% and 68.6%
respectively.  While our 2007 conversion rate continued to be
satisfactory to management, particularly in the dealer consignment segment that
accounted for most units sold, we believe that any decline in Augusta’s
comparative performance during the latter part of Q4 2007 and all of Q1 2008
versus the previous year’s same periods is directly related to certain events
that resulted in a loss of efficiencies and market share during the
period.





In the
second half of December 2007, and in Q1 of 2008, the auction’s performance
declined.  That is partially due to the expected slowness associated
with the holiday periods and weather conditions attendant to the end of the
year, and also reflects the difficulties associated with implementation of the
new auction operating system as detailed elsewhere in this discussion and in the
10-K for 2007.  Additionally, the effects of a much more suppressed
general economy and its impact on the buying preferences of consumers, coupled
with a serious downturn in the automotive manufacturing and distribution
channels, lead to a more significant decrease in volumes and conversion rates
than were foreseen last year.  All these factors combined to produce a
difficult environment for the Company’s auction operations and performance with
resulting negative effects.  Management believes that most, if not
all, automotive auctions are suffering from a majority of the same negative
influences as are affecting Augusta Auto Auction, with the exclusion of our
software issues





Discussion
Regarding the Parent Company’s Operating Results




The
auction’s Q1 loss accounted for only a small part of the consolidated Q1 loss to
the parent company of $545,359 of which $321,438 represented non-cash expenses
in connection with the accounting charges associated with transactions that
occurred in 2006 and 2007, including the issuance of Common stock as grants or
options for employee or outside director compensation, for warrants, for
conversion of all the Company’s outstanding Preferred shares to Common shares,
and $55,762 was incurred as additional depreciation and amortization by the
parent company. While there have been no new issuances of options or warrants in
2008,  the $321,438 in non-cash operating expenses related to options
and warrants issued under the Company’s 2007 Stock Incentive Plan are the
ratable expense for Q1 2008 resulting from options and warrants issued in 2006
and 2007, but not yet fully vested or exercised.





There are
no longer any Preferred shares issued or outstanding. The Company anticipates
becoming cash flow positive upon the closing of the next acquisition which is
currently under a signed Letter of Intent, and continuing to be self-sufficient
thereafter. The closing of that acquisition is dependent upon successfully
arranging the required funding, and then effecting a final definitive purchase
agreement.  (See Note 2 to Financial Statements – Going Concern
Considerations on Page F-5)




The
Company has experienced and expects to continue to experience fluctuations in
its quarterly results of operations due to a number of factors, 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.




2




Taking
into consideration the events leading up to and including the first quarter of
2008 and their influences on the Company’s current operating results, the
Company's revenues would 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.




Liquidity
and Need for Additional Capital




The
Company is currently engaged in its plan of seeking to grow through acquisitions
as well as through organic means.  To succeed in doing so, the Company
will require additional capital, anticipated to be through sale of Common
Stock.




The
Company’s liquidity in 2007 was provided through the closing of a private
placement of $1,025,000 of common stock in the second quarter of 2007.
Presently, the Company’s liquidity is supplemented by a $300,000 line of credit
with Wachovia Bank, N.A.  Although the Company presently has a
certificate of deposit with the same bank of just over $155,000, this line of
credit is used to cover some instances in which payments to dealers selling
vehicles through the auction exceeds collected payments for those
vehicles.  The Company anticipates increasing the size of the
available line as its sales volume grows.  The bank charges an
interest rate on the line of credit equal to prime plus 1.5% on the outstanding
daily balance, if any.  The line of credit is secured by all of the
Company’s deposits at the bank.




Also, the
Company will ultimately be forced to seek a larger operating facility for its
auction operations in the greater Augusta area, since the auction cannot
accommodate the anticipated growth at its present location. The Company has
plans to utilize the current facility for other auction-related activities after
relocating the mainstream auction business to a new location.




Financing
of Planned Expansions and Other Expenditures




To assist
with providing strategic guidance and direction in the areas of financing,
mergers, acquisitions and more, the Company retained the services of Investment
Banker 4G Group, LLC, of Dallas, Texas, in December of 2007.  Mr.
Christopher A.F. Griffin, 4G’s CEO, works directly with Acacia Automotive’s
management in providing these services under the blanket of its investment
banking company.  On July 19, 2007, 4G Group acquired Security
Research Corporation, a 23 year-old New York-based NASD Member broker-dealer
firm that was formed in 1984.  The Company felt that 4G Group and its
employees had the experience and wherewithal to guide it through implementation
of its strategies and has relied upon them in this regard.




The
Company has signed a Letter of Intent to acquire a profitable automobile auction
in the southeastern United States, but for reasons of confidentiality cannot
disclose the nature or location of that entity until funding is in place and a
final agreement is effected and closed.  Based on the financial
history provided by that acquisition target, the Company anticipates that
acquisition, if consummated, will result in a cash flow positive posture for the
Company from the inception, eliminating its further dependency on investment
capital to meet its needs. For that reason, the Company considers this
acquisition to be critical to its future success.




Simultaneously
with the closing of this planned acquisition, the Company also anticipates
making its entry into the wholesale vehicle inventory floor plan financing
segment of the industry by providing floor plan and “float” financing to its
automobile dealer clients.  Floor plan financing refers to
medium-length wholesale financing terms, usually to a maximum of 90 to 120 days.
“Float” financing refers to shorter-term wholesale vehicle financing-usually to
a maximum of 30 to 60 days, often related to promotional sales
activities.




The
Company anticipates using the launch of those local financing activities as a
springboard to providing financing services to its clients on a regional and
ultimately a national basis.  The Company plans to establish a
stand-alone subsidiary to accommodate that business model, and to institute
those services in its present and future auction operations and potentially to
certain other selected well-qualified clients.  The Company
anticipates raising capital to accommodate the funding needs for these
operations through a combination of the sale of Common stock and the
establishment of credit facilities with banks or other lenders.




Financial
Reporting and New Technologies




As part
of its commitment to improve technologies that will improve our operating and
reporting efficiencies, we have engaged a part time senior accounting
professional, a certified public accountant, experienced in auto auction
management. With his participation, we anticipate the completion of a new
financial reporting system that integrates tightly with our new auction
operating software through the automatic population of operating data and
resultant savings in time and labor in financial reporting. Efforts continue to
achieve these goals.




Item
4T. Controls and Procedures




The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company's Securities Exchange
Act reports is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
and that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer who acts as our Chief
Financial Officer to allow timely decisions regarding required
disclosure.  During the 90-day period prior to the date of this
report, an evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures.  Based upon that evaluation, the
Chief Executive Officer concluded that the Company's disclosure controls and
procedures were effective.  Nonetheless, we have identified areas that
we are addressing which we believe need to be rectified.




3




Changes
in Internal Control over Financial Reporting




In the
course of conducting our audit for the fiscal year 2007, our auditor, Killman,
Murrell & Company, P.C. identified to us material weaknesses involving
internal control, although it did not identify to us any report that
necessitated restatement. These material weaknesses related to our accounting
personnel, accounting for cash, documentation with respect to options and
warrants as well as the issuance of common stock.




We
believe that two factors most affect these reported material weaknesses, namely,
the lack of experienced accounting personnel and the lack of integration of
software that manages our operations and our accounting software. Our lack of
senior accounting personnel affected the adequacy our general systems and
practices. While the failure of the processes and systems affected our
documentation of options and warrants as well as one issuance of common stock,
all matters of which have been rectified, its most critical manifestation was in
the software integration referred to above. We have identified and largely
rectified matters regarding the issuance and reporting of checks, although we
are yet making certain that our actions will be adequate in that area. Further,
we are working with our software vendor to rectify errors, particularly as they
relate to problems associated with populating our accounting systems with
accurate financial information and data from the auction
operations.




Most of
these issues other than the software-related issues, we believe, relate mostly
to the lack of experienced accounting personnel, particularly senior accounting
personnel. In that regard, we have identified a certified public accountant who
is helping us on a part time basis and who has extensive experience in
automobile auctions, both in accounting and finance.







PART
II OTHER INFORMATION




None






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SIGNATURES





Pursuant
to the requirements of the Securities exchange Act of 1934, registrant has duly
caused this report to be signed on its behalf by the undersigned.





Acacia
Automotive, Inc.




Dated: June 4,
      2008
            /s/
      Steven L.
      SampleSteven L.
      Sample, Chief Executive Officer
              and
      Principal Financial Officer






































































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