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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
  DAC Technologies Group International, Inc.
  Florida
    
    65-0847852(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 12120 Colonel Glenn Road, Suite 6200 Little Rock, AR
    
    72210(Address of principal executive offices)
    
    (Zip Code)
 
  x o x o
 o o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller reporting company x
 o x




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TABLE OF CONTENTS
 PART I
    
    FINANCIAL INFORMATION
    
    1ITEM 1.
    
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    1PART F/S
    
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    9Background
    
    10Financial Condition and Results of Operations
    
    11Liquidity and Capital Resources
    
    12Trends
    
    13Gun Legislation
    
    13Critical Accounting Estimates
    
    14Off-Balance Sheet Arrangements
    
    15ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    15PART II
    
    OTHER INFORMATION
    
    16ITEM 1.
    
    LEGAL PROCEEDINGS
    
    16ITEM 1A.
    
    RISK FACTORS
    
    16ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    16ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    16ITEM 5.
    
    OTHER INFORMATION
    
    16ITEM 6.
    
    EXHIBITS
    
    16SIGNATURES
    
    17EX-31.1EX-31.2EX-32.1EX-32.2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  1




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 March 31, 2010 and December 31, 2009
 March 31
    
    
    December 312010
    
    
    2009(unaudited)AssetsCurrent assetsCash
    
    $
    278,899
    
    
    $
    430,436Accounts receivable, less allowance for doubtful
accounts of $20,000 in 2010 and 2009
    
    
    562,134
    
    
    
    929,082Due from factor
    
    
    46,829
    
    
    
    27,592Inventories
    
    
    3,968,241
    
    
    
    4,479,347Prepaid expenses and deferred charges
    
    
    116,685
    
    
    
    53,460Income tax benefit
    
    
    42,094
    
    
    
    Current deferred income tax benefit
    
    
    16,159
    
    
    
    11,950Total current assets
    
    
    5,031,041
    
    
    
    5,931,867Property and equipmentLeasehold improvements
    
    
    57,232
    
    
    
    57,232Furniture and fixtures
    
    
    337,654
    
    
    
    333,161Molds, dies, and artwork
    
    
    565,518
    
    
    
    560,952960,404
    
    
    
    951,345Accumulated depreciation
    
    
    (687,401
    )
    
    
    (674,486
    )Net property and equipment
    
    
    273,003
    
    
    
    276,859Other assetsPatents and trademarks, net of accumulated
amortization of $140,414 and $135,434 in 2010 and 2009
    
    
    112,366
    
    
    
    117,346Deposits
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    39,783
    
    
    
    29,658Note receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Shareholder
    
    
    282,710
    
    
    
    216,377Total other assets
    
    
    544,728
    
    
    
    473,250Total assets
    
    $
    5,848,772
    
    
    $
    6,681,976
  2




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 March 31, 2010 and December 31, 2009
 March 31
    
    
    December 312010
    
    
    2009(unaudited)Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    41,787
    
    
    $
    52,454Accounts payable
    
    
    203,171
    
    
    
    776,093Accrued payroll tax withholdings
    
    
    26,545
    
    
    
    27,780Accrued expenses-other
    
    
    41,709
    
    
    
    145,097Income taxes payable
    
    
    
    
    
    
    71,166Total current liabilities
    
    
    313,212
    
    
    
    1,072,590Deferred income tax liability
    
    
    79,152
    
    
    
    79,152Stockholders equityPreferred stock, $.001 par value; authorized
10,000,000 shares; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; authorized
50,000,000 shares; 6,323,364 shares issued at
March 31, 2010 and December 31, 2009;
5,793,699 shares outstanding at March 31, 2010
and December 31, 2009
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (401,043
    )
    
    
    (401,043
    )Retained earnings
    
    
    3,888,026
    
    
    
    3,961,852Total stockholders equity
    
    
    5,456,408
    
    
    
    5,530,234Total liabilities and stockholders equity
    
    $
    5,848,772
    
    
    $
    6,681,976
  3




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Three Months Ended March 31, 2010 and 2009
 2010
    
    
    2009Net sales
    
    $
    2,006,676
    
    
    $
    3,533,456Cost of sales
    
    
    1,467,920
    
    
    
    2,461,760Gross profit
    
    
    538,756
    
    
    
    1,071,696Operating expensesSelling
    
    
    334,361
    
    
    
    445,789General and administrative
    
    
    301,049
    
    
    
    278,049Total operating expenses
    
    
    635,410
    
    
    
    723,838Income (loss) from operations
    
    
    (96,654
    )
    
    
    347,858Other income (expense)Interest expense
    
    
    (22,541
    )
    
    
    (47,053
    )Other income
    
    
    
    
    
    
    14Total other income (expense)
    
    
    (22,541
    )
    
    
    (47,039
    )Income (loss) before income tax provision
    
    
    (119,195
    )
    
    
    300,819Provision (benefit) for income taxes
    
    
    (45,369
    )
    
    
    116,520Net income (loss)
    
    $
    (73,826
    )
    
    $
    184,299Basic and diluted earnings (loss) per share
    
    $
    (0.01
    )
    
    $
    0.03Weighted average number of common shares:Basic and diluted
    
    
    5,793,699
    
    
    
    5,857,710
  4




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Cash Flows
 For the Three Months Ended March 31, 2010 and 2009
 2010
    
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    (73,826
    )
    
    $
    184,299Adjustments to reconcile net income to
net cash used in operating activities:Depreciation
    
    
    12,915
    
    
    
    11,958Amortization
    
    
    4,980
    
    
    
    3,654Deferred income taxes
    
    
    (4,209
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    366,948
    
    
    
    (152,586
    )Due from factor
    
    
    (19,237
    )
    
    
    (393,377
    )Inventories
    
    
    511,106
    
    
    
    (1,184,965
    )Prepaid expenses and deferred charges
    
    
    (63,225
    )
    
    
    (56,539
    )Income tax benefit
    
    
    (42,094
    )
    
    
    Advances to employees
    
    
    (10,125
    )
    
    
    (3,775
    )Accounts payable
    
    
    (572,922
    )
    
    
    1,194,502Accrued payroll tax withholdings
    
    
    (1,235
    )
    
    
    765Accrued expenses other
    
    
    (103,388
    )
    
    
    (21,782
    )Income taxes payable
    
    
    (71,166
    )
    
    
    36,870Net cash used in operating activities
    
    
    (65,478
    )
    
    
    (380,976
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (9,059
    )
    
    
    (1,465
    )Payments for patents and trademarks
    
    
    
    
    
    
    (790
    )Net advances on notes receivable  stockholder
    
    
    (66,333
    )
    
    
    (50,506
    )Net cash used by investing activities
    
    
    (75,392
    )
    
    
    (52,761
    )Cash flows from financing activitiesPayments on notes payable
    
    
    (10,667
    )
    
    
    (12,134
    )Purchase of treasury stock
    
    
    
    
    
    
    (28,919
    )Net cash used in financing activities
    
    
    (10,667
    )
    
    
    (41,053
    )Net decrease in cash
    
    
    (151,537
    )
    
    
    (474,790
    )Cash  beginning of period
    
    
    430,436
    
    
    
    599,103Cash  end of period
    
    $
    278,899
    
    
    $
    124,313
  5




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PART F/S
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Forward-Looking Statements
  Nature of Business
    6




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Organization and Summary of Significant Accounting Policies
 Organization and Basis of Presentation
  Unaudited Interim Condensed Consolidated Financial Statements
 .
 Use of Estimates
  Cash and Cash Equivalents
  Inventories
  7




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Mar. 31, 2010
    
    
    Dec. 31, 2009Inventories consist of:Finished goods
    
    $
    3,893,286
    
    
    $
    3,972,207Inventory in transit
    
    
    45,827
    
    
    
    492,568Parts
    
    
    29,128
    
    
    
    14,572$
    3,968,241
    
    
    $
    4,479,347
 Due from Factor
  Mar. 31, 2010
    
    
    Dec. 31, 2009Accounts receivable factored
    
    $
    479,807
    
    
    $
    1,081,240Amounts advanced and outstanding
    
    
    432,978
    
    
    
    1,053,648Due from factor
    
    $
    46,829
    
    
    $
    27,592
  Adoption of New Accounting Guidance
   Subsequent Events Evaluation Date
  8




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    achieving planned revenue and profit growth in each of the Companys business units;
    
    renewal of purchase orders consistent with past experience;
    
    increasing price, products and services competition;
    
    emergence of new competitors or consolidation of existing competitors;
    
    the timing of orders and shipments;
    
    continuing availability of appropriate raw materials and manufacturing relationships;
    
    maintaining and improving current product mix;
    
    changes in customer requirements and in the volume of sales to principal customers;
    
    changes in governmental regulations in the various geographical regions where the
Company operates;
    
    general economic and political conditions;
    
    attracting and retaining qualified key employees;
    
    the ability of the Company to control manufacturing and operating costs; and
    
    continued availability of financing, and financial resources on the terms required to
support the Companys future business strategies.
 9




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Background
 ® ® ®
    Gun Cleaning & Maintenance.
 10




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Hunting and Camping.
 Gun Safety.
 Household Products.
 
 Financial Condition and Results of Operations
 Financial Condition
  IncreaseMar. 31, 2010
    
    
    Dec. 31, 2009
    
    
    (Decrease)Accounts receivable
    
    $
    562,134
    
    
    $
    929,082
    
    
    $
    (366,948
    )Inventories
    
    
    3,968,241
    
    
    
    4,479,347
    
    
    
    (511,106
    )Accounts payable
    
    
    203,171
    
    
    
    776,093
    
    
    
    (572,922
    )Accrued expenses-other
    
    
    41,709
    
    
    
    145,097
    
    
    
    (103,388
    )Income taxes benefit/(payable)
    
    
    42,094
    
    
    
    (71,166
    )
    
    
    (113,260
    )
  ®
  11




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Results of Operations
   ®
  
 Liquidity and Capital Resources
   12




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Trends
  
 Gun Legislation
  District of Columbia vs. Heller
  13




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gun shows Federal Assault Weapons Ban Vitter Amendment
 
 Critical Accounting Estimates
  Long-lived Assets
  Inventories.
 14




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Patents and Trademarks.
 
 Off-Balance Sheet Arrangements
   
 ITEM 4. CONTROLS AND PROCEDURES
   15




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  Exhibits2
    
    
    Acquisition Agreement3
    (i)
    
    Articles of Incorporation3(ii)
    
    By-laws
  Exhibits31.1
    
    
    Certification of David A. Collins Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    
    Certification of Robert C. Goodwin Pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    
    Certification of David A. Collins Pursuant to Rule 13a-14(b) or Rule
15d-14(c) of the Securities Exchange Act of 1934 and 18U.S.C. Section 135032.2
    
    
    Certification of Robert C. Goodwin Pursuant to Rule 13a-14(b) or Rule
15d-14(c) of the Securities Exchange Act of 1934 and 18U.S.C. Section 1350
 16




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SIGNATURES
  By:
    /s/ David A. CollinsDavid A. Collins, Chairman, CEO and Principal Executive Officer By:
    /s/ Robert C. GoodwinRobert C. Goodwin, Principal Accounting Officer and Principal Financial Officer  17