acaciaauto-10q33109.htm
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,
2009 |
| |
|
| r |
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.)
|
|
|
|
|
3515
East Silver Springs Blvd. - #243 Ocala,
FL
|
34470
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(352)
502-4333
(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 x No r
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 r |
|
Accelerated
filer r |
|
|
|
|
|
Non-accelerated
filer
r
|
|
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 r No 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 r
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, 2009: 12,062,524.
PART
I FINANCIAL INFORMATION
Item
1. Financial Statements
ACACIA
AUTOMOTIVE, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
March
31, |
|
|
December
31, |
|
| |
|
2009 |
|
|
2008 |
|
|
ASSETS
|
|
(Unaudited) |
|
|
(Audited) |
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$ |
42,198 |
|
|
$ |
5,586 |
|
|
Certificate
of Deposit (Restricted)
|
|
|
150,296 |
|
|
|
157,255 |
|
|
Accounts
receivable
|
|
|
87,104 |
|
|
|
236,524 |
|
|
Deposits
and prepaid expenses
|
|
|
1,800 |
|
|
|
3,481 |
|
|
Total
Current Assets
|
|
|
281,398 |
|
|
|
402,846 |
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net of accumulated depreciation of $63,344 and $52,103 in
2009 and 2008, respectively
|
|
|
165,064 |
|
|
|
172,346 |
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
427,929 |
|
|
|
427,929 |
|
|
|
|
|
|
|
|
|
|
|
|
Customer
list and Non-Compete Agreement, net of amortization of $298,492 and
$255,850 respectively
|
|
|
342,642 |
|
|
|
385,284 |
|
|
Total
Other Assets
|
|
|
770,571 |
|
|
|
813,213 |
|
|
TOTAL
ASSETS
|
|
$ |
1,217,033 |
|
|
$ |
1,388,405 |
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Cash
overdraft
|
|
$ |
|
|
|
$ |
42,893 |
|
|
Accounts
payable
|
|
|
225,690 |
|
|
|
277,561 |
|
|
Accrued
liabilities
|
|
|
438,106 |
|
|
|
404,374 |
|
|
Line
of credit
|
|
|
186,000 |
|
|
|
275,000 |
|
|
Capital
lease obligations, current portion
|
|
|
11,240 |
|
|
|
14,619 |
|
|
Shareholder
payables
|
|
|
1,511 |
|
|
|
- |
|
|
Total
Current Liabilities
|
|
|
862,547 |
|
|
|
1,014,447 |
|
|
NONCURRENT
LIABILTIES
|
|
|
|
|
|
|
|
|
|
Capital
lease obligations, less current portion
|
|
|
18,695 |
|
|
|
16,900 |
|
|
TOTAL
LIABILITIES
|
|
|
881,242 |
|
|
|
1,031,347 |
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value, 150,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
12,062,524
shares issued and outstanding.
|
|
|
12,062 |
|
|
|
12,062 |
|
|
Additional
paid-in capital
|
|
|
11,111,358 |
|
|
|
11,095,181 |
|
|
Retained
deficit
|
|
|
(10,787,629 |
) |
|
|
(10,750,185
|
) |
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
335,791 |
|
|
|
357,058 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY AND LIABILITES
|
|
$ |
1,217,033 |
|
|
$ |
1,388,405 |
|
The
accompanying notes are an integral part of these financial
statements.
ACACIA
AUTOMOTIVE, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
THREE
MONTHS ENDED MARCH 31, 2009 AND 2008
|
|
|
2009 |
|
|
2008 |
|
| |
|
|
|
|
|
|
|
|
| REVENUES |
|
|
|
|
|
|
|
|
|
Buyers fees
|
|
$ |
129,630 |
|
|
$ |
81,382 |
|
|
Sellers fees
|
|
|
136,550 |
|
|
|
128,332 |
|
|
Other Revenue
|
|
|
55,470 |
|
|
|
4,506 |
|
|
Total
Revenues
|
|
|
321,650 |
|
|
|
214,220 |
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Cost of fees earned
|
|
|
81,351 |
|
|
|
34,845 |
|
|
Employee compensation
|
|
|
103,241 |
|
|
|
467,544 |
|
|
General and administrative
|
|
|
114,024 |
|
|
|
201,541 |
|
|
Depreciation and amortization
|
|
|
54,176 |
|
|
|
55,762 |
|
|
Total operating expenses
|
|
|
352,792 |
|
|
|
759,692 |
|
|
Operating
loss before other income (expense) and income taxes
|
|
|
(31,142
|
) |
|
|
(545,472
|
) |
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
444 |
|
|
|
2,021 |
|
|
Interest Expense
|
|
|
(5,985
|
) |
|
|
(1,908
|
) |
|
Loss on sale of assets
|
|
|
(761
|
) |
|
|
- |
|
|
Total Other Income (Expense)
|
|
|
(6,302
|
) |
|
|
113 |
|
|
Income Tax
|
|
|
- |
|
|
|
- |
|
|
Net loss
|
|
$ |
(37,444 |
) |
|
$ |
(545,359 |
) |
|
BASIC
AND DILUTED LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
12,017,524 |
|
|
|
11,997,524 |
|
|
Earnings
(Loss) per share
|
|
$ |
0.00 |
|
|
$ |
(0.05 |
) |
The
accompanying notes are an integral part of these financial
statements.
ACACIA
AUTOMOTIVE, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
THREE
MONTHS ENDED MARCH 31, 2009 AND 2008
(Unaudited)
| |
|
2009 |
|
|
2008 |
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(37,444 |
) |
|
$ |
(545,359 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
54,176 |
|
|
|
55,761 |
|
|
Stock options and warrants issued for services
|
|
|
16,177 |
|
|
|
321,438 |
|
|
Loss
on disposal of assets
|
|
|
761 |
|
|
|
- |
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
149,420 |
|
|
|
(102,629
|
) |
|
Deposits and prepaid expenses
|
|
|
1,681 |
|
|
|
15,000 |
|
|
Accounts payable
|
|
|
(94,764
|
) |
|
|
285,956 |
|
|
Accrued liabilities
|
|
|
33,732 |
|
|
|
89,106 |
|
|
Net cash provided by (used in) operating activities
|
|
|
123,739 |
|
|
|
119,273 |
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
Interest
withdrawal from CD
|
|
|
6,959 |
|
|
|
- |
|
|
Purchase of property and equipment
|
|
|
(5,013
|
) |
|
|
(6,985
|
) |
|
Net
cash provided (used) from investing activities
|
|
|
1,946 |
|
|
|
(6,985
|
) |
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
Escrow account
|
|
|
- |
|
|
|
(80,000
|
) |
|
Common stock subscription payable
|
|
|
- |
|
|
|
80,000 |
|
|
Shareholder
payables
|
|
|
1,511 |
|
|
|
(14,636
|
) |
|
Borrowings and repayments from/on line of credit
|
|
|
(89,000
|
) |
|
|
(41,000
|
) |
|
Capital lease payments
|
|
|
(1,584
|
) |
|
|
- |
|
|
Net cash provided (used) by financing activities
|
|
|
(89,073
|
) |
|
|
(55,636
|
) |
|
Net
increase in cash and cash equivalents
|
|
|
36,612 |
|
|
|
56,652 |
|
|
Cash,
beginning of period
|
|
|
5,586 |
|
|
|
203,077 |
|
|
Cash,
end of period
|
|
$ |
42,198 |
|
|
$ |
259,729 |
|
The
accompanying notes are an integral part of these financial
statements.
ACACIA
AUTOMOTIVE, INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2009 AND 2008
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 and Common stock
options. The Company records each of the securities issued on a fair
value basis up to the amount of the proceeds received. The Company
estimates the fair value of the warrants and options 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 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 or
that equity capital will be available. 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.
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
The
Company believes that vehicle auctions have historically shown that units they
sell do not generally decline substantially during a mild recession. We believe
this is attributable to, among other facts, that in a recession the overall
demand for used vehicles does not decline significantly, or at least declines
less than new car production would indicate, because some consumers that would
otherwise purchase new vehicles purchase used vehicles, acquiring vehicles
traditional purchasers of used vehicles may otherwise forgo or
delay. For those reasons and more, we believe that the auto auction
industry is more dependent upon the number of actual used vehicles in operation
(VIO) in the U.S., rather than upon retail vehicle sales and manufacturing
output. However, the current recession has proven to be quite severe, and has
resulted in a greater loss of units for sale or sold at most auto auctions than
in recent recessionary periods, even though our auction operations have actually
seen an increase in volumes in most instances.
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, especially at auctions. During previous periods of
economic downturns and recession, the automotive auction industry has
traditionally fared well compared to many other industries.
As is common with other auto auctions,
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.
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 through Q1 of 2009.
Operating
Results of the Auction
Three
months ended March 31, 2009
The
Auction incurred a profit of $ 62,952 on revenues of $321,000 for the three
months ended March 31, 2009. Of that profit, $53,073 represented non-cash
expenses for amortization and depreciation and $5,495 represented interest
charges, leaving the auction in a positive cash-flow posture for the
period.
The first
quarter of 2009 saw an 18.2% increase in the number of vehicles sold and an
increase of 24.3% in units entered at our Augusta Auto Auction operation versus
the same period in the previous year. The Company considered this as
a noteworthy result in consideration 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.
| |
|
|
2009
|
|
|
Units
Entered vs. Q1 2008
|
|
|
+24.3
|
% |
|
Units
Sold vs. Q1 2008
|
|
|
+18.2
|
% |
|
Conversion
Rate Q1 2008
|
|
|
54.90
|
% |
|
Conversion
Rate Q1 2009
|
|
|
52.25
|
% |
|
Change
in Buy/Sell Fee Revenues vs. Q1 2008
|
|
|
+53.7
|
% |
The
auction continues to display strong growth under Acacia’s management versus
previous periods despite a very weak general economy and poor
performance by auto manufacturers and retailers.
Discussion
Regarding the Parent Company’s Operating Results
Three
months ended March 31, 2009
The
auction’s Q1 net profit accounted for reducing the consolidated Q1 loss to the
parent company to $37,444 compared to a loss in the same period of 2008 of
$545,359. Of this loss $53,074 represented non-cash expenses for amortization
and depreciation at the auction and $1,102 was incurred as additional
depreciation and amortization by the parent company. The Company also incurred a
charge of $16,177 in non-cash operating expenses for options and warrants issued
under the Company’s 2007 Stock Incentive Plan as the ratable expense for Q1 2009
resulting from options and warrants issued in 2006, 2007, and 2008 but not yet
fully vested or exercised. As a result, the Company generated
$123,739 in cash flow from operations and a net cash flow of $36,612 for the
quarter. This marked the first time since its inception as an automotive concern
in 2006 that the Company registered a positive cash flow for the consolidated
entity.
We incur
expenses at the corporate level in addition to those incurred at our operations
at the Augusta auction. Our compensation for executives as shown under Employee
Compensation runs about $61,000 per quarter, and our option and warrant expense,
which is amortized, has averaged in the six month period ended June 30, 2009,
approximately $16,200 per quarter. For the six months ended June 30,
2009 we incurred a loss of $29,362. Corporate G&A expenses accounted for
approximately $250,000 in the first six months, and included legal and
accounting fees of approximately $5,300, office rental costs of approximately
$2,500, non-cash amortized warrant and option expenses of approximately $32,350,
and other traditional expenses for travel, convention expenses, equipment
lease/rental, postage and shipping, printing and office supplies, insurance,
telephone, light heat power, etc.
Liquidity
and Need for Additional Capital
We look
for our operations to provide the cash flow and cash return on our
investment. Presently, the cash flow from our Augusta operation is
sufficient to support those operations in the current manner, although we
anticipate having to move to a different, larger location as described
below. Nonetheless, our current operations do not provide sufficient
cash flow to cover fully our corporate activity on an ongoing basis, essentially
our executive officers, administrative overhead, and overhead that includes the
cost of lawyers and accountants required to be publicly held.
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’s liquidity in 2007 and 2008 was provided through the closing of private
placements of common stock in the amounts of $1,112,500 and $130,000
respectively, and from the Company's auction operations since July 10, 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 $150,000, 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.
Frequently,
when we hold an auction near the end of a quarter, our receivables and payables
will be large compared to prior quarters or as a ratio of receivables or
payables to revenues for that quarter and the other
quarters. Receivables and payables for a given auction are
substantially liquidated within days of the auction process, but appear
distorted when occurring close to the end of an accounting period.
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.
Financing
of Planned Expansions and Other Expenditures
The
Company plans to grow through acquisitions and anticipates that it will need to
raise additional capital to do so, probably through a private placement offering
of its Common stock.
Financial
Reporting and New Technologies
As part
of its commitment to improve our operating and reporting efficiencies, the
Company engaged a certified public accountant and is seeking a Controller and/or
Chief Financial Officer.
Item
4T. Controls and Procedures
Management’s
Report on Internal Control over Financial Reporting
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.
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).
Changes
in Internal Control over Financial Reporting
In the
course of conducting our audit for the fiscal year 2008, our auditor, Killman,
Murrell & Company, P.C. 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.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.
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.
PART
II OTHER INFORMATION
Item
5. Other Information.
None.
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.
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Acacia
Automotive, Inc. |
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Date:
November 16, 2009
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By:
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/s/
Steven L.
Sample
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Steven
L. Sample |
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Chief
Executive Officer and |
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Principal
Financial Officer |
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