UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 10, 2007
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Acacia Automotive, Inc.
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(Exact name of small business issuer as specified in its charter)
Texas 1-14088 75-2095676
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(State or other jurisdiction (Commission File (I.R.S.Employer
of incorporation) Number) Identification No.)
3512 E. Silver Springs Boulevard - #243 34470
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code: (352) 502-4333
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(Former name, former address and former fiscal year, if changed since last
report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01. Completion of Acquisition or Disposition of Assets.
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 upon the same terms in
consideration of entering into a non-compete agreement.
The registrant's business is set forth in Item 1. Business. of the registrant's
annual report on Form 10-KSB for the year ended December 31, 2006.
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.
Competition
There are at least eleven auto auctions in operation in Georgia, and there are
another six or more in South Carolina. Comparatively Florida has at least 26
automotive auctions.
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. A smaller auction company, 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, some specializing in sales of damaged or "salvage"
units and perhaps one or more mobile auctions that will host on-site auctions at
dealerships.
1
Employees
The Auction employs eight full time and 17 part time people. The registrant plan
to increase the number of employees, both part time and full time, as it expands
its operations.
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 has obtained all permits necessary to function under the current
South Carolina regulations.
Management's Discussion and Analysis or Plan of Operation.
Information regarding registrant's Discussion and Analysis or Plan of Operation
is set forth in Item 6. Discussion and Analysis or Plan of Operation. of the
registrant's Annual Report on Form 10-KSB for the year ended December 31, 2006.
The acquisition of Augusta Auto Auction, Inc. is the first acquisition by the
registrant in its plan to acquire several automobile auctions. The registrant
closed a private placement of securities on June 25, 2007 in which the
registrant raised $1,025,000 cash. The registrant does not believe that this
amount is sufficient for its operations and additional acquisitions for the next
twelve months and plans to raise additional capital over that period.
Augusta Auto Auction.
Net loss of the Augusta auction decreased to approximately $14,000 in calendar
year 2006 compared to a net loss of approximately $130,151 in the prior year.
With operating expenses being essentially unchanged between the two years
($691,985 in 2006 compared to $696,366 in 2005) the decrease in the loss is
attributable to increased net fees earned. Net fees earned increased
approximately $110,000 or 20% from 2005 to 2006, the increase coming from larger
volume of sales through the auction and resultant buy/sell fees attached
thereto.
The Auction's net income increased almost $50,000 in the six month period ended
June 30, 2007 to $61,513 from $12,465 in the same period in 2006. Revenues in
the 2007 period were up approximately 20% to $454,385 compared to $377,508 in
the earlier period with most of the 2007 revenue growth coming in the first
quarter of this year, being $236,375 compared to $180,366 in the first quarter
of 2006. While cost of fees earned increased to $56,022 in the 2007 six month
period from $32,384 in the same period of 2006, an increase of approximately
73%, other operating expenses were, nonetheless, flat.
Description of Property
The registrant has entered into a twelve month lease on the location where the
Augusta Auto Auction has operated for several years. The lease term can be
extended and currently has a monthly lease rate of $2,700. The facility consists
of approximately five acres and houses two administrative buildings and a
two-lane auction arena. The compound is fenced, and the registrant has recently
installed an electrified security fence system as well as security systems in
its building and arena. In addition to the main auction facility, the registrant
also leases property which is used for additional customer parking and allows
for parking of approximately 200 customer vehicles on sale days. This property
is located directly across the street from the main facility and is leased on a
month-to month basis for $100 per week.
Information regarding registrant's other property is set forth in Item 2.
Description of Property on Form 10-KSB for the year ended December 31, 2006.
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of July 10, 2007, 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
2
Company, and (iii) all directors and officers as a group. Except as otherwise
indicated, each stockholder identified in the table possesses sole voting and
investment power with respect to its or his shares.
Shares Owned
Name and Address of No. of
Beneficial Owner Shares Percent
------------------- ---------- -------
Steven L. Sample (1) 7,000,000 58.3%
Danny Gibbs (2) 62,500 0.5%
Tony Moorby 500,000 4.2%
Patricia Ann Arnold (2) - -
James C. Hunter (2) - -
V. Weldon Hewitt (2) - -
David Bynum (2) - -
Gwendolyn G. Sample(2)(3) 1,707,000 14.2%
All directors and officers 7,562,500 63.0%
as a group (seven persons)
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(1) Excludes warrants to purchase 1,425,000 shares of common stock of which
425,000 are presently exercisable for $1.00 per share.
(2) Excludes options to acquire 10,000 shares of Common Stock each for Ms.
Arnold and Messrs Gibbs, Hunter and Hewitt and 5,000 shares for Ms. Sample, all
of which may be acquired for $0.01 per share and options to acquire 10,000
shares of Common Stock which Mr. Bynum has the right to purchase for $0.875 per
share.
(3) Gwendolyn Sample is the spouse of Steven L. Sample who disclaims any
beneficial interest in the shares owned by Ms. Sample.
Unless otherwise indicated, the address for each of the above named
individuals is 3512 East Silver Springs Blvd. - #243, Ocala, FL 34470.
Directors and Executive Officers, Promoters and Control Persons.
Information regarding registrant's Directors and Executive Officers, Promoters
and Control Persons is set forth in Item 9. Directors, Executive Officers,
Promoters and Control Persons; Compliance With Section 16(a) of the Exchange
Act. of the registrant's annual report on Form 10-KSB for the year ended
December 31, 2006.
On May 16, 2007, the registrant named David Bynum to its board of directors.
Since 2006 Mr. Bynum has been a manager of Bynum Properties which is involved in
residential and commercial leasing and custom home construction. From October
2000 through April 2006, Mr. Bynum was employed by ADESA Corporation, a publicly
held national automobile auction company. Initially Mr. Bynum was a Regional
Vice President of Operations and in January 2004 was named National Director
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 Auction.
Executive Compensation
Information regarding Executive Compensation of the registrant is set forth in
Item 10. Executive Compensation. of the registrant's annual report on Form
10-KSB for the year ended December 31, 2006.
3
With the closing of the registrant's private placement, described in its Current
Report on Form 8-K filed July 5, 2007, the Company paid accrued salaries to its
executives.
Certain Relationships and Related Transactions and Director Independence.
Information regarding Certain Relationships and Related Transactions of the
registrant legal proceedings is set forth in Item 12. Certain Relationships and
Related Transactions. of the registrant's annual report on Form 10-KSB for the
year ended December 31, 2006.
Danny R. Gibbs, James C. Hunter, V. Weldon Hewitt, and David Bynum are
independent directors as defined in Section 121A of the Company Guide of the
American Stock Exchange.
Description of Securities
Information describing registrant's securities is set forth under the caption
"Description of Capital Stock" in the registrant's January 2007 definitive proxy
statement.
Holders of the registrant's Series A Preferred Stock have agreed to convert all
such shares to Common Stock and there will thereafter be no more shares of
Series A Preferred Stock or any other Preferred Stock issued and outstanding.
Following completion of the acquisition of the Augusta Auto Auction, there were
12,012,524 shares of Common Stock issued and outstanding. With respect to the
number of warrants and options outstanding, see Market Price of and Dividends on
the Registrant's Common Equity and Related Stockholder Matters; Summary of
Equity Compensation Plans below.
There are presently 45,000 shares reserved for issuance pursuant to the
registrant's stock option plan and 1,856,000 shares reserved for issuance
pursuant to warrants granted by the registrant. See Security Ownership of
Certain Beneficial Owners and Management and Market Price of and Dividends on
the Registrant's Common Equity and Related Stockholder Matter. herein.
Market Price of and Dividends on the Registrant's Common Equity and Related
Stockholder Matters.
Information regarding registrant's Market Price of and Dividends on the
Registrant's Common Equity and Related Stockholder Matters is set forth in Item
5. Market for Common Equity and Related Stockholder Matters. of the registrant's
annual report on Form 10-KSB for the year ended December 31, 2006.
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 quarters ending
March 31, 2007, and June 30, 2007, and does reflect the one for eight reverse
stock split effected February 19, 2007.
Closing Bid Closing Ask
High Low High Low
Quarters ending in 2007 ----- ------ ----- -----
Jan 3 thru Feb 19* $0.05 $0.015 $0.07 $0.03
Feb 20 thru Mar 30 1.50 0.30 2.00 0.75
June 30 1.80 0.55 2.00 0.58
*Effective February 19, 2007, the registrant effected a one for eight reverse
stock split.
The following table summarizes the number of shares issued under a variety of
plans to investors, executive officers and directors.
4
SUMMARY OF EQUITY COMPENSATION PLANS
Number of Weighted
Securities to be Average Number of
Issued Upon Exercise Price Securities
Exercise of of Remaining
Outstanding Outstanding Available for
Options and Options and Future
Plan Description Warrants Warrants Issuance
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Warrants not approved by stockholders 1,856,000 $2.08 1,856,000
Grants Under Compensation Plans Not
Approved by shareholders 55,000 $0.16 475,000
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Totals 1,951,000 $1.98 2,331,000
Legal Proceedings
Information regarding registrant's legal proceedings is set forth in Item 4.
Legal Proceeding. of the registrant's annual report on Form 10-KSB for the year
ended December 31, 2006.
Changes in and Disagreements with Accountants.
None.
Recent Sales of Unregistered Securities.
The securities issued in connection with the acquisition of the assets of
Augusta Auto Auction, Inc. are described in the first paragraph of this Item
2.01. The issuance of these shares was exempt from registration under the
Securities Act pursuant to Section 4(2) thereunder as transactions not involving
a public offering.
Indemnification of Directors and Officers.
Information regarding indemnification of the registrant's officers and directors
is set forth in under Item 5.01. Changes in Control of Registrants and in Part
II thereof under Item 5. Indemnification of Directors and Officers. of the
registrant's current report on Form 8-K filed December 8, 2006.
5
Augusta Auto Auction, Inc.
FINANCIAL STATEMENTS
December 31, 2006 AND 2005
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT ...........................................1
FINANCIAL STATEMENTS:
Balance Sheets .......................................................2
Statements of Operations and Retained Deficit ........................3
Statements of Cash Flows .............................................4
NOTES TO FINANCIAL STATEMENTS ..........................................5-6
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SEROTTA
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MADDOCKS
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EVANS & CO., CPA'S
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A Professional Corporation
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[GRAPHIC OMITTED][GRAPHIC OMITTED]
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701 Greene Street, Suite 200 / Augusta, GA 30901-2322 Telephone (706) 722-5337
Telefax (706) 724-FAXX (3299)
To the Board of Directors
Augusta Auto Auction, Inc.
Augusta, Georgia
We have audited the accompanying balance sheets of Augusta Auto Auction, Inc. as
of December 31, 2006 and 2005, and the related statements of operations and
retained deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Augusta Auto Auction, Inc. as
of December 31, 2006 and 2005 and the results of its operations and its cash
flows for the years then ended in conformity with accounting principals
generally accepted in the Unites States of America.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
SEROTTA MADDOCKS EVANS & CO., CPA'S
Augusta, Georgia
June 29, 2007
F- 1
AUGUSTA AUTO AUCTION, INC.
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
2006 2005
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ASSETS
CURRENT ASSETS
Accounts receivable, net of allowance for doubtful $ 38,933 $ 32,133
accounts of $12,790 for 2006 and $10,710 for 2005
Other receivables 5,363 6,120
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Total Current Assets 44,296 38,253
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 204,784 235,530
OTHER ASSETS
Organizational costs, net of amortization of $4,822
for 2006 and $3,770 for 2005 438 1,490
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$ 249,518 $ 275,273
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Overdraft $ 18,373 $ 82,742
Accounts payable and accrued expenses 32,240 755
Line of credit 24,000 -
Note payable - 2,983
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Total Current Liabilities 74,613 86,480
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STOCKHOLDERS' EQUITY
Common stock, $1 par value, 500 shares
authorized, 500 shares issued and outstanding 500 500
Additional paid-in capital 803,152 803,152
Retained deficit (628,747) (614,859)
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Total Stockholders' Equity 174,905 188,793
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$ 249,518 $ 275,273
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SEE NOTES TO THE FINANCIAL STATEMENTS
-2-
AUGUSTA AUTO AUCTION, INC.
STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
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FEES EARNED
Buyers fees $ 252,409 $ 212,936
Sellers fees 387,032 309,474
Storage fees 78,819 56,928
Other fees 38,850 31,778
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Total Revenue 757,110 611,116
COST OF FEES EARNED 79,013 44,901
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NET FEES EARNED 678,097 566,215
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OTHER OPERATING EXPENSES
Payroll and related 350,185 369,010
Security 61,466 52,974
Insurance 36,521 33,470
Rent 34,900 37,600
Depreciation and amortization 33,434 37,870
Travel and entertainment 28,090 24,019
Employee benefits 25,754 23,628
Utilities 25,197 22,348
Maintenance 23,019 31,071
Professional fees 16,517 13,606
Advertising and promotional 16,075 12,847
Bad debt 7,035 11,352
Tax and licenses 8,113 4,455
Office supplies 5,561 3,726
Dues and subscriptions 4,892 4,852
Other expenses 15,226 13,538
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Total Other Operating Expenses 691,985 696,366
Net Income (Loss) (13,888) (130,151)
Retained Deficit, beginning of year (614,859) (484,708)
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Retained Deficit, end of year $ (628,747) $ (614,859)
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SEE NOTES TO THE FINANCIAL STATEMENTS
-3-
AUGUSTA AUTO AUCTION, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
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Cash flows from operating activities
Net loss $ (13,888) $ (130,151)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 33,434 37,871
(Increase) decrease in trade receivables (8,123) (11,963)
Increase (decrease) in overdraft (64,369) (41,091)
Increase (decrease) in accounts payable 31,485 (216)
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Net cash used by operating activities (21,461) (145,550)
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Cash flows from investing activities
Payments for the purchase of equipment and
leasehold improvements (1,636) -
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Net cash used by investing activities (1,636) -
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Cash flows from financing activities
Net Increase (decrease) in line of credit 24,000 (9,351)
Payments on notes payable (2,983) (2,840)
Proceeds from additional paid-in capital - 75,000
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Net cash provided by financing activities 21,017 62,809
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Net increase (decrease) in cash and cash equivalents - -
Cash and cash equivalents, beginning of year - -
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Cash and cash equivalents, end of year $ - $ -
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SEE NOTES TO THE FINANCIAL STATEMENTS
-4-
AUGUSTA AUTO AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - The Company operates an auto auction in the Augusta,
Georgia area from a leased facility located in North Augusta, South Carolina.
CASH AND CASH EQUIVALENTS - For the purpose of the statement of cash flows, the
Company considers all short-term investment instruments purchased with a
maturity of three months or less to be cash equivalents.
DEPRECIATION - Depreciation of property and equipment is based upon the
estimated useful lives of the assets and is computed principally by the double
declining method. Estimated useful lives are 15 years for leasehold
improvements, 5-7 years for office equipment, 7-15 years for shop equipment, and
5-10 years for company vehicles.
Maintenance and repairs of property and equipment are charged to operations and
major improvements are capitalized. It is the Company's policy to capitalize all
items with an estimated useful life extending beyond one year.
INCOME TAXES - The Company has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions the
stockholder is liable for individual federal and state income taxes on the
Company's taxable income. Therefore no provision or liability for federal income
taxes has been included in the financial statements.
ACCOUNTS RECEIVABLE - Accounts receivable are reported at the amount management
expects to collect from outstanding balances. Differences between the amount due
and the amount management expects to collect are reported in the results of
operations of the year in which those differences are determined, with an
offsetting entry to a valuation allowance for trade accounts receivable.
Balances that are still outstanding after management has used reasonable
collection efforts are written off through a charge to the valuation allowance
and a credit to trade accounts receivable.
USE OF ESTIMATES - Management uses estimates and assumptions in preparing
financial statements. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
REVENUE RECOGNITION - Revenues are derived from collection of fees for a variety
of services provided to customers including buyer fees, seller fees, storage
fees, transport fees and others. The Company does not inventory or hold title to
the vehicles that are bought or sold through the auction process.
ADVERTISING - The Company expenses advertising costs as they are incurred.
Advertising expense was $16,075 and $12,847 for the periods ending December 31,
2006 and 2005, respectively.
-5-
NOTE 2 - RELATED PARTY TRANSCASTIONS
Some of the owners of the Company are also owners of Bobby Jones Ford, Inc. Fees
charged to Bobby Jones Ford, Inc. were $36,430 and $ 29,370 for the years ended
December 31, 2006 and 2005, respectively.
NOTE 3 - EQUIPMENT AND LEASEHOLD IMPROVEMENTS
At December 31, 2006 and 2005 equipment and leasehold improvements consist of
the following:
2006 2005
----------------- -----------------
Leasehold improvements $ 286,918 $ 286,918
Office equipment 83,075 83,075
Company vehicles 34,775 34,775
Shop equipment 9,260 7,625
--------------- ---------------
Total equipment and leasehold improvements 414,028 412,393
Less accumulated depreciation 209,244 176,863
--------------- ---------------
Net equipment and leasehold improvements $ 204,784 $ 235,530
=============== ===============
Depreciation expense was $32,381 for 2006 and $36,818 for 2005.
NOTE 4 - DEBT FINANCING
Debt at December 31, 2006 consisted of a line of credit with a local bank. The
line of credit is for $100,000 and bears interest at a rate of prime plus .75%.
The outstanding balance on the line was $24,000 at December 31, 2006. The line
of credit agreement was renegotiated in December 2006 and was extended until
December 31, 2007.
NOTE 5 - OPERATING LEASE AGREEMENTS
The Company rents its facilities from a third party. The lease is dated June 1,
2003, and terminates May 31, 2008. Rent expense for 2006 and 2005 was $32,400
and $32,400, respectively.
Future minimum lease payments are as follows:
2007 $ 32,400
2008 13,500
--------------
$ 45,900
-6-
Acacia Automotive, Inc.
(Formerly Gibbs Construction, Inc.)
Pro-Forma Financial Information
June 30, 2007 and December 31, 2006
Effective July 10, 2007, Acacia Automotive, Inc. acquired substantially all of
the operating assets and liabilities of Augusta Auto Auction, Inc. for a total
of 500,000 shares of its common stock and 50,000 stock warrants.
Augusta Auto Auction, Inc. operates an auto auction in the Augusta, Georgia area
from a leased facility located in North Augusta, South Carolina.
The June 30, 2007 pro-forma balance sheet assumes the merger took place on June
30, 2007. The June 30, 2007 statement of operations assumes the merger took
place on January 1, 2007 and the December 31, 2006 statement of operations
assumes the merger took place on January 1, 2006.
The accompanying pro-forma balance sheet of Acacia Automotive, Inc. as of June
30, 2007, and the related pro-forma statements of operations for the six months
ended June 30, 2007 and the year ended December 31, 2006 were not audited.
ACACIA AUTOMOTIVE, INC.
(FORMERLY GIBBS CONSTRUCTION, INC.)
CONSOLIDATED PRO-FORMA BALANCE SHEET
JUNE 30, 2007
UNAUDITED
Acacia
Augusta Auto Automotive, Combined Combining Consolidated
Auction, Inc. Inc. Totals Adjustments Balances
------------- -------------- ------------- ----------- ---------------
ASSETS
CURRENT ASSETS
Cash $ 120,579 $ 875,521 $ 996,100 a (120,579) $ 875,521
Accounts receivable, net 3,028 - 3,028 a (3,028) -
------------ ------------- ------------ ------------ --------------
Total Current Assets 123,607 875,521 999,128 875,521
PROPERTY AND
EQUIPMENT, net 191,823 24,983 216,806 b (157,017) 59,789
OTHER ASSETS
Organizational costs, net 219 - 219 a (219) -
Customer list - - - b 375,000 375,000
Goodwill - - - c 427,929 427,929
------------ ------------- ------------ ------------ --------------
$ 315,649 $ 900,504 $ 1,216,153 $ 1,738,239
============ ============= =========== =============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $ 77,821 $ 95,828 $ 173,649 a (71,648) $ 102,001
Accrued liabilities 1,409 414,894 416,303 a (1,409) 414,894
------------ ------------- ------------ --------------
Total Current Liabilities 79,230 510,722 589,952 516,895
------------ ------------- ------------ --------------
STOCKHOLDERS' EQUITY
Common stock 500 11,423 11,923 a (500) 11,923
d 500
Additional paid-in capital 803,152 8,176,692 8,979,844 a (803,152) 9,007,754
d 831,062
Retained deficit (567,233) (7,798,333) (8,365,566) e 567,233 (7,798,333)
------------ ------------- ------------ ------------ --------------
Total Stockholders' Equity 236,419 389,782 626,201 1,221,344
------------ ------------- ------------ --------------
$ 315,649 $ 900,504 $ 1,216,153 $ 1,738,239
============ ============= ============ =============
a Special distribution of assets and liabilities retained by Augusta Auto
Auction, Inc.
b Adjustment of purchased assets to fair market value
c Excess of purchase price over fair market value of assets and
liabilities assumed
d Issuance of stock and stock warrants to sellers
e Elimination of Augusta Auto Auction, Inc.'s prior retained deficit
ACACIA AUTOMOTIVE, INC.
(FORMERLY GIBBS CONSTRUCTION, INC.)
CONSOLIDATED PRO-FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2007
UNAUDITED
Acacia
Augusta Auto Automotive, Combined Combining Consolidated
Auction, Inc. Inc. Totals Adjustments Balances
------------- -------------- ------------- ----------- ---------------
REVENUES
Buyers fees $ 169,150 $ - $ 169,150 $ 169,150
Sellers fees 239,354 - 239,354 239,354
Other revenues 46,503 2,944 49,447 49,447
------------ ------------- ------------ --------------
Total Revenues 455,007 2,944 457,951 457,951
COST OF FEES EARNED 56,022 - 56,022 56,022
------------ ------------- ------------ --------------
Net Revenues Earned 398,985 2,944 401,929 401,929
------------ ------------- ------------ --------------
OPERATING EXPENSES
Employee compensation 125,767 1,221,765 1,347,532 1,347,532
General and administrative 198,523 87,061 285,584 285,584
Depreciation and amortization 13,181 3,644 16,825 12,500 29,325
Beneficial conversion
of Preferred Stock - 500,000 500,000 500,000
------------ ------------- ------------ --------------
Total Operating Expenses 337,471 1,812,470 2,149,941 2,162,441
------------ ------------- ------------ --------------
Net income (loss) before taxes 61,514 (1,809,526) (1,748,012) (1,760,512)
Income tax expense - - - -
------------ ------------- ------------ --------------
Net income (loss) $ 61,514 $ (1,809,526) $ (1,748,012) $ (1,760,512)
============ ============= ============ ==============
PRO-FORMA EARNINGS PER SHARE
Pro-forma net loss $ (1,760,512)
Pro-forma weighted average
shares outstanding 10,861,808
--------------
Pro-forma basic and diluted earnings per share $ (0.16)
==============
ACACIA AUTOMOTIVE, INC.
(FORMERLY GIBBS CONSTRUCTION, INC.)
CONSOLIDATED PRO-FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006
UNAUDITED
Acacia
Augusta Auto Automotive, Combined Combining Consolidated
Auction, Inc. Inc. Totals Adjustments Balances
------------- -------------- ------------- ----------- ---------------
REVENUES
Buyers fees $ 252,409 $ - $ 252,409 $ 252,409
Sellers fees 387,032 - 387,032 387,032
Other revenues 117,669 - 117,669 117,669
------------ ------------- ------------ --------------
Total Revenues 757,110 - 757,110 757,110
COST OF FEES EARNED 79,013 - 79,013 79,013
------------ ------------- ------------ --------------
Net Revenues Earned 678,097 - 678,097 678,097
------------ ------------- ------------ --------------
OPERATING EXPENSES
Employee compensation 242,357 215,570 457,927 457,927
General and administrative 416,194 695,134 1,111,328 1,111,328
Depreciation and amortization 33,434 2,869 36,303 25,000 61,303
Non-employee services - 31,400 31,400 31,400
------------ ------------- ------------ --------------
Total Operating Expenses 691,985 944,973 1,636,958 1,661,958
------------ ------------- ------------ --------------
Net loss before taxes (13,888) (944,973) (958,861) (983,861)
Income tax expense - - - -
------------ ------------- ------------ --------------
Net loss $ (13,888) $ (944,973) $ (958,861) $ (983,861)
============ ============= ============ ==============
PRO-FORMA EARNINGS PER SHARE
Pro-forma net loss $ (983,861)
Pro-forma weighted average shares outstanding 4,923,000
--------------
Pro-forma basic and diluted earnings per share $ (0.20)
=========
NOTE 1 - 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 of the Buyer in order to expand
operations in the automotive industry. Augusta Auto Auction, Inc. operates an
auto auction in the Augusta, Georgia area from a leased facility located in
North Augusta, South Carolina. The purchase was accounted for under the purchase
method of accounting.
The following table summarizes the amounts assigned to the assets acquired and
the liabilities assumed at the date of acquisition:
Property and equipment $ 34,806
Customer list 375,000
Goodwill 427,929
-------------
Total assets acquired 837,735
-------------
Current liabilities (6,173)
-------------
Total liabilities assumed (6,173)
-------------
Net assets acquired $ 831,562
=============
NOTE 2 - SIGNIFICANT ASSUMPTIONS
VALUATION OF ASSETS AND LIABILITIES ASSUMED - The values of assets and
liabilities assumed as part of the above purchase were valued at estimated fair
market value on the date of acquisition, July 10, 2007. These values were
provided by management based on their experience and knowledge of the automotive
industry.
VALUATION OF STOCK - As part of the above business combination, the Seller
received shares of the Buyer's common stock. The value of the Buyer's common
stock was calculated using an average stock price based on the stock price ten
days of volume before, and nine days of volume after the actual date of
purchase, July 10, 2007.
VALUATION OF STOCK WARRANTS - As part of the above business combination, stock
warrants of the Buyer were issued to the Seller. The value of these warrants was
calculated using the modified Black-Scholes-Merton model. The volatility used in
this calculation was based on an average volatility of the Buyer's common stock
price and that of several competitors. Assumptions used in the calculation
included the following:
Estimated volatility 46.59%
Expected life (years) 2.5
Expected dividend yield 0.00%
Risk-free rate of return 5.00%
Augusta Auto Auction, Inc.
Balance Sheets
March 31, 2007 and 2006
Mar 31, 07 Mar 31, 06
------------------ ------------------
ASSETS
Current Assets
Cash $ 761 $ (78,817)
Accounts receivable, net 27,668 47,388
Other Current Assets 3,190 90
---------------- ----------------
Total Current Assets 31,619 (31,339)
Equipment and leasehold improvements, net 198,303 227,493
Other Assets
Organizational costs, net of amortization of
$4,931 for 2007 and $4,033 for 2006 329 1,227
---------------- ----------------
TOTAL ASSETS $ 230,250 $ 197,382
================ ================
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable and accrued expenses 27,038 2,621
---------------- ----------------
Total Current Liabilities 27,038 2,621
Long Term Liabilities - 1,912
---------------- ----------------
Total Liabilities 27,038 4,533
Equity
Capital Stock 500 500
Additional Paid In Capital 803,152 803,152
Retained Deficit (628,747) (614,860)
Net Income 28,307 4,056
---------------- ----------------
Total Equity 203,213 192,848
---------------- ----------------
TOTAL LIABILITIES & EQUITY $ 230,250 $ 197,382
================ ================
Q - 1
Augusta Auto Auction, Inc.
Statements of Operations
Quarter Ended March 31, 2007 and 2006
Jan - Mar 07 Jan - Mar 06
Ordinary Income/Expense
Income
Buyer's Fees $ 89,325 $ 61,706
Seller's Fees 125,483 91,829
Storage Fees 16,650 18,993
Other Fees 4,917 7,838
----------- -----------
Total Income 236,375 180,366
Cost of Fees Earned 26,736 12,277
----------- -----------
Net Fees Earned 209,638 168,089
Expense
Salaries & Wages 41,556 38,078
Advertising 500 213
Amortization Expense 110 263
Automobile Expense 1,742 2,481
Bank Service Charges 835 891
Computer Maintenance 2,593 2,821
Contributions 500 -
Contract Labor 21,330 22,432
Depreciation Expense 6,481 8,037
Dues & Subscriptions 1,121 1,012
Employee Benefits - 287
Employee Health Insurance 6,710 6,194
Equipment Maint. & Rental 1,267 1,206
Insurance Expense 10,423 7,909
Interest Expense 340 95
Legal & Accounting 3,085 4,655
Meals & Entertainment 2,127 2,594
Miscellaneous 568 3,251
Office Supplies 1,880 383
Payroll Service 979 948
Payroll Taxes 5,501 5,210
Pest Control 112 56
Postage 1,021 382
Promotional Expense 2,796 2,048
Rent Expense 9,400 9,400
Repairs & Maint. - Buildings 1,232 1,256
Security 19,619 10,673
Supplies 3,719 292
Taxes & Licenses 1,064 919
Telephone Expense 3,034 2,701
Travel Expense 2,724 1,842
Vehicle Maintenance Exp. 2,282 350
Uniforms 345 383
Utilities 3,333 3,759
----------- -----------
Total Expense 160,331 143,034
----------- -----------
Net Ordinary Income 49,307 25,056
Q - 2
Other Income/Expense
Other Expense
Officer's Salary 21,000 21,000
----------- -----------
Total Other Expense 21,000 21,000
----------- -----------
Net Other Income (21,000) (21,000)
----------- -----------
Net Income $ 28,307 $ 4,056
=========== ===========
Q-3
Augusta Auto Auction, Inc.
Balance Sheets
June 30, 2007 and 2006
Jun 30, 07 Jun 30, 06
ASSETS
Current Assets
Cash $ 120,579 $ (11,596)
Accounts Receivable 2,938 40,567
Other Current Assets 90 90
---------------- ----------------
Total Current Assets 123,607 29,061
Equipment and leasehold improvements, net 191,823 219,456
Organizational costs, net of amortization of
$5,041 for 2007 and $4,296 for 2006 219 964
---------------- ----------------
TOTAL ASSETS $ 315,649 $ 249,482
================ ================
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable and accrued expenses 77,821 46,230
Other Current Liabilities 1,409 82
---------------- ----------------
Total Current Liabilities 79,230 46,312
Long Term Liabilities - 1,912
---------------- ----------------
Total Liabilities 79,230 48,224
Equity
Capital Stock 500 500
Additional Paid In Capital 803,152 803,152
Retained Deficit (628,747) (614,860)
Net Income 61,514 12,465
---------------- ----------------
Total Equity 236,419 201,258
---------------- ----------------
TOTAL LIABILITIES & EQUITY $ 315,649 $ 249,482
================ ================
Q-4
Augusta Auto Auction, Inc.
Statement of Operations
Quarter Ended June 30, 2007 and 2006
Apr - Jun 07 Apr - Jun 06
Ordinary Income/Expense
Income
Buyer's Fees $ 79,825 $ 62,870
Seller's Fees 113,870 97,585
Storage Fees 15,522 20,895
Other Fees 8,793 15,792
------------- -----------
Total Income 218,010 197,142
Cost of Fees Earned 29,286 20,107
------------- -----------
Net Fees Earned 188,724 177,035
Expense
Salaries & Wages 42,211 38,501
Advertising - 384
Amortization Expense 110 263
Automobile Expense 2,418 1,272
Bank Service Charges 149 415
Computer Maintenance 3,365 1,945
Contributions - 50
Contract Labor 22,713 19,157
Depreciation Expense 6,481 8,037
Dues & Subscriptions 496 635
Employee Health Insurance 6,710 6,195
Equipment Maint. & Rental 1,282 1,494
Insurance Expense 2,066 10,722
Legal & Accounting 1,635 1,485
Meals & Entertainment 2,409 3,311
Miscellaneous 1,327 3,247
Office Supplies 146 2,998
Payroll Service 935 864
Payroll Taxes 4,941 4,175
Pest Control 84 84
Postage 766 463
Promotional Expense 4,586 6,261
Rent Expense 9,400 9,400
Repairs & Maint. - Buildings 841 1,542
Security 8,473 16,360
Supplies 901 27
Taxes & Licenses 60 631
Telephone Expense 2,851 2,329
Travel Expense 2,801 1,557
Vehicle Maintenance Exp. 1,531 63
Uniforms 356 346
Utilities 3,094 3,414
------------- -----------
Total Expense 135,139 147,626
------------- -----------
Net Ordinary Income 53,586 29,409
Other Income/Expense
Other Income
Other Income 620 -
------------- -------------
Total Other Income 620 -
Q-5
Other Expense
Officer's Salary 21,000 21,000
------------- -----------
Total Other Expense 21,000 21,000
------------- -----------
Net Other Income (20,380) (21,000)
------------- -----------
Net Income $ 33,205 $ 8,409
============= ===========
Q-6
Augusta Auto Auction, Inc.
Statement of Operations
Six Months Ended June 30, 2007 and 2006
Jan - Jun 07 Jan - Jun 06
Ordinary Income/Expense
Income
Buyer's Fees $ 169,150 $ 124,576
Seller's Fees 239,353 189,414
Storage Fees 32,172 39,888
Other Fees 13,710 23,630
------------- -----------
Total Income 454,385 377,508
Cost of Fees Earned 56,021 32,384
Expense
Salaries & Wages 83,767 76,580
Advertising 500 598
Amortization Expense 219 526
Automobile Expense 4,160 3,753
Bank Service Charges 984 1,307
Computer Maintenance 5,958 4,766
Contributions 500 50
Contract Labor 44,042 41,589
Depreciation Expense 12,962 16,074
Dues & Subscriptions 1,617 1,647
Employee Benefits - 287
Employee Health Insurance 13,421 12,389
Equipment Maint. & Rental 2,549 2,701
Insurance Expense 12,490 18,632
Interest Expense 340 95
Legal & Accounting 4,720 6,140
Meals & Entertainment 4,537 5,905
Miscellaneous 1,895 6,498
Office Supplies 2,026 3,381
Payroll Service 1,915 1,812
Payroll Taxes 10,442 9,385
Pest Control 196 140
Postage 1,786 846
Promotional Expense 7,382 8,309
Rent Expense 18,800 18,800
Repairs & Maint. - Buildings 2,073 2,798
Security 28,092 27,033
Supplies 4,621 319
Taxes & Licenses 1,124 1,550
Telephone Expense 5,886 5,031
Travel Expense 5,525 3,400
Vehicle Maintenance Exp. 3,814 413
Uniforms 701 730
Utilities 6,427 7,173
------------- -------------
Total Expense 295,470 290,660
------------- -------------
Net Ordinary Income 102,894 54,464
Other Income/Expense
Other Income
Q-7
Other Income 620 -
------------- -------------
Total Other Income 620 -
Other Expense
Officer's Salary 42,000 42,000
------------- -------------
Total Other Expense 42,000 42,000
------------- -------------
Net Other Income (41,380) (42,000)
------------- -------------
Net Income $ 61,514 $ 12,465
======== ========
Q-8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf, thereby
duly authorized.
Date: August 23, 2007
Acacia Automotive, Inc.
/s/ Steven L. Sample
------------------------------------------
Steven L. Sample, Chief Executive Officer
Q-9