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
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o x
  o x




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TABLE OF CONTENTS
 PART I
    
    FINANCIAL INFORMATION
    
    
    3ITEM 1.
    
    FINANCIAL STATEMENTS
    
    
    3PART F/S
    
    
    10ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    13Background
    
    
    14Financial Condition and Results of Operations
    
    
    15Liquidity and Capital Resources
    
    
    16Trends
    
    
    17Gun Legislation
    
    
    17Critical Accounting Estimates
    
    
    18Off-Balance Sheet Arrangements
    
    
    18ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    19ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    19ITEM 4T.
    
    CONTROLS AND PROCEDURES
    
    
    19PART II
    
    OTHER INFORMATION
    
    
    20ITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    20ITEM 1A.
    
    RISK FACTORS
    
    
    20ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    20ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    20ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    20ITEM 5.
    
    OTHER INFORMATION
    
    
    20ITEM 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    
    20SIGNATURES
    
    
    21




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  3




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Balance Sheet (Consolidated)
June 30, 2008 and December 31, 2007
 June 30
    
    
    December 312008
    
    
    2007(Unaudited)AssetsCurrent assetsCash
    
    $
    68,945
    
    
    $
    402,468Accounts receivable, less allowance for doubtful
accounts of $5,000 in 2008 and 2007
    
    
    574,879
    
    
    
    263,646Due from factor
    
    
    302,698
    
    
    
    765,510Inventories
    
    
    4,361,584
    
    
    
    4,925,275Prepaid expenses and deferred charges
    
    
    156,076
    
    
    
    115,686Income taxes receivable
    
    
    121,592
    
    
    
    153,870Current deferred income tax benefit
    
    
    35,815
    
    
    
    35,815Total current assets
    
    
    5,621,589
    
    
    
    6,662,270Property and equipmentLeasehold improvements
    
    
    55,323
    
    
    
    55,323Furniture and fixtures
    
    
    294,026
    
    
    
    278,322Molds, dies, and artwork
    
    
    528,187
    
    
    
    513,949877,536
    
    
    
    847,594Accumulated depreciation
    
    
    (597,800
    )
    
    
    (573,458
    )Net property and equipment
    
    
    279,736
    
    
    
    274,136Other assetsPatents and trademarks, net of accumulated
amortization of $111,942 and $104,208 in 2008 and 2007
    
    
    129,548
    
    
    
    133,762Deposits
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    30,575
    
    
    
    28,925Note receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Shareholder
    
    
    173,722
    
    
    
    178,465Total other assets
    
    
    443,714
    
    
    
    451,021Total assets
    
    $
    6,345,039
    
    
    $
    7,387,427
  4




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Balance Sheet (Consolidated)
June 30, 2008 and December 31, 2007
 June 30
    
    
    December 312008
    
    
    2007(Unaudited)Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    127,951
    
    
    $
    183,186Accounts payable
    
    
    1,383,604
    
    
    
    2,393,050Accrued payroll tax withholdings
    
    
    25,351
    
    
    
    25,338Accrued expenses-other
    
    
    17,888
    
    
    
    38,872Total current liabilities
    
    
    1,554,794
    
    
    
    2,640,446Deferred income tax liability
    
    
    33,100
    
    
    
    33,100Stockholders 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
June 30, 2008 and December 31, 2007; 6,032,899
and 6,041,399 shares outstanding at June 30, 2008
and December 31, 2007, respectively
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (313,947
    )
    
    
    (307,147
    )Retained earnings
    
    
    3,101,667
    
    
    
    3,051,603Total stockholders equity
    
    
    4,757,145
    
    
    
    4,713,881Total liabilities and stockholders equity
    
    $
    6,345,039
    
    
    $
    7,387,427
  5




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Operations (Consolidated)
For The Three Months Ended June 30, 2008 and 2007
 2008
    
    
    2007Net sales
    
    $
    2,724,258
    
    
    $
    2,739,903Cost of sales
    
    
    2,043,077
    
    
    
    1,853,512Gross profit
    
    
    681,181
    
    
    
    886,391Operating expensesSelling
    
    
    336,131
    
    
    
    353,576General and administrative
    
    
    287,764
    
    
    
    266,374Total operating expenses
    
    
    623,895
    
    
    
    619,950Income from operations
    
    
    57,286
    
    
    
    266,441Other income (expense)Interest expense
    
    
    (43,579
    )
    
    
    (63,206
    )Total other income (expense)
    
    
    (43,579
    )
    
    
    (63,206
    )Income before income tax provision
    
    
    13,707
    
    
    
    203,235Provision for income taxes
    
    
    5,617
    
    
    
    87,615Net income
    
    $
    8,090
    
    
    $
    115,620Basic and diluted earnings per share
    
    $
    
    
    
    $
    0.02Weighted average number of common shares:Basic and diluted
    
    
    6,032,899
    
    
    
    6,124,498
  6




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.


Condensed Statements of Operations (Consolidated)
For The Six Months Ended June 30, 2008 and 2007


2008
    
    
    2007Net sales
    
    $
    5,440,027
    
    
    $
    5,579,528Cost of sales
    
    
    4,029,985
    
    
    
    3,855,627Gross profit
    
    
    1,410,042
    
    
    
    1,723,901Operating expensesSelling
    
    
    651,893
    
    
    
    734,616General and administrative
    
    
    569,351
    
    
    
    674,094Total operating expenses
    
    
    1,221,244
    
    
    
    1,408,710Income from operations
    
    
    188,798
    
    
    
    315,191Other income (expense)Interest expense
    
    
    (106,456
    )
    
    
    (136,766
    )Total other income (expense)
    
    
    (106,456
    )
    
    
    (136,766
    )Income before income tax provision
    
    
    82,342
    
    
    
    178,425Provision for income taxes
    
    
    32,278
    
    
    
    80,007Net income
    
    $
    50,064
    
    
    $
    98,418Basic and diluted earnings per share
    
    $
    0.01
    
    
    $
    0.02Weighted average number of common shares:Basic and diluted
    
    
    6,034,534
    
    
    
    6,130,018




7



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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Cash Flows (Consolidated)
For the Three Months Ended June 30, 2008 and 2007
 2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    8,090
    
    
    $
    115,620Adjustments to reconcile net income to
net cash provided (used) by operating activities:Depreciation
    
    
    12,171
    
    
    
    12,045Amortization
    
    
    3,867
    
    
    
    4,000Changes in operating assets and liabilitiesAccounts receivable
    
    
    (22,542
    )
    
    
    (438,315
    )Due from factor
    
    
    36,280
    
    
    
    131,143Inventories
    
    
    616,145
    
    
    
    (1,901,472
    )Prepaid expenses and deferred charges
    
    
    25,073
    
    
    
    (24,907
    )Income taxes receivable
    
    
    5,617
    
    
    
    87,615Deposits
    
    
    
    
    
    
    780Advances to employees
    
    
    (1,091
    )
    
    
    (3,006
    )Accounts payable
    
    
    (619,976
    )
    
    
    2,142,725Accrued payroll tax withholdings
    
    
    (166
    )
    
    
    (1,425
    )Accrued expenses other
    
    
    (16,909
    )
    
    
    (150,216
    )Net cash provided (used) by operating activities
    
    
    46,559
    
    
    
    (25,413
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (14,678
    )
    
    
    (21,053
    )Payments for patents and trademarks
    
    
    (3,520
    )
    
    
    Net payments (advances) on notes receivable  stockholder
    
    
    (4,459
    )
    
    
    2,748Net cash used by investing activities
    
    
    (22,657
    )
    
    
    (18,305
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    
    
    
    
    96,500Payments on notes payable
    
    
    (19,575
    )
    
    
    (26,145
    )Purchase of treasury stock
    
    
    
    
    
    
    (28,859
    )Net cash provided (used) by financing activities
    
    
    (19,575
    )
    
    
    41,496Net increase (decrease) in cash
    
    
    4,327
    
    
    
    (2,222
    )Cash  beginning of period
    
    
    64,618
    
    
    
    80,648Cash  end of period
    
    $
    68,945
    
    
    $
    78,426
  8




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Cash Flows (Consolidated)
 For the Six Months Ended June 30, 2008 and 2007
 2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    50,064
    
    
    $
    98,418Adjustments to reconcile net income to
net cash used by operating activities:Depreciation
    
    
    24,342
    
    
    
    24,023Amortization
    
    
    7,734
    
    
    
    7,936Changes in operating assets and liabilitiesAccounts receivable
    
    
    (311,233
    )
    
    
    (858,963
    )Due from factor
    
    
    462,812
    
    
    
    959,492Inventories
    
    
    563,691
    
    
    
    (2,029,167
    )Prepaid expenses and deferred charges
    
    
    (40,390
    )
    
    
    (49,506
    )Income taxes receivable
    
    
    32,278
    
    
    
    80,007Deposits
    
    
    
    
    
    
    (5,916
    )Advances to employees
    
    
    (1,650
    )
    
    
    (15,278
    )Accounts payable
    
    
    (1,009,446
    )
    
    
    1,652,061Accrued payroll tax withholdings
    
    
    13
    
    
    
    162Accrued expenses other
    
    
    (20,984
    )
    
    
    (26,734
    )Net cash used by operating activities
    
    
    (242,769
    )
    
    
    (163,465
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (29,942
    )
    
    
    (84,235
    )Payments for patents and trademarks
    
    
    (3,520
    )
    
    
    (1,755
    )Net payments (advances) on notes receivable  stockholder
    
    
    4,743
    
    
    
    (42,253
    )Net cash used by investing activities
    
    
    (28,719
    )
    
    
    (128,243
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    
    
    
    
    96,500Payments on notes payable
    
    
    (55,235
    )
    
    
    (36,475
    )Purchase of treasury stock
    
    
    (6,800
    )
    
    
    (28,859
    )Net cash provided (used) by financing activities
    
    
    (62,035
    )
    
    
    31,166Net decrease in cash
    
    
    (333,523
    )
    
    
    (260,542
    )Cash  beginning of period
    
    
    402,468
    
    
    
    338,968Cash  end of period
    
    $
    68,945
    
    
    $
    78,426
  9




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PART F/S
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Nature of Business
 ®
   Organization and Summary of Significant Accounting Policies
 Organization and basis of presentation
  Unaudited interim condensed consolidated financial statements
  10




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Use of Estimates
  Inventories
  June 30, 2008
    
    
    Dec. 31, 2007Inventories consist of:Finished goods
    
    $
    3,967,431
    
    
    $
    3,993,949Inventory in transit
    
    
    371,186
    
    
    
    908,359Parts
    
    
    22,967
    
    
    
    22,967$
    4,361,584
    
    
    $
    4,925,275
 Due from Factor
  June 30, 2008
    
    
    Dec. 31, 2007Accounts receivable factored
    
    $
    1,973,285
    
    
    $
    4,508,524Amounts advanced and outstanding
    
    
    1,670,587
    
    
    
    3,743,014Due from factor
    
    $
    302,698
    
    
    $
    765,510
 Earnings per Share: Dilutive Effect
  11




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Fair Value of Financial Instruments
  Accounting Changes
    Treasury Stock Transactions
  12




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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.
 13




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®
   Gun Maintenance.
 14




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Hunting and camping.
 Gun Safety.
 Household Products.
 
  Financial Condition
  June 30, 2008
    
    
    Dec. 31, 2007
    
    
    % ChangeAccounts receivable
    
    $
    574,879
    
    
    $
    263,646
    
    
    
    118
    %Due from factor
    
    
    302,698
    
    
    
    765,510
    
    
    
    (60
    %)Inventories
    
    
    4,361,584
    
    
    
    4,925,275
    
    
    
    (11
    %)Total current assets
    
    
    5,621,589
    
    
    
    6,662,270
    
    
    
    (16
    %)Accounts payable
    
    
    1,383,604
    
    
    
    2,393,050
    
    
    
    (42
    %)Total current liabilities
    
    
    1,554,794
    
    
    
    2,640,446
    
    
    
    (41
    %)Working capital
    
    
    4,066,795
    
    
    
    4,021,824
    
    
    
    1
    %Stockholders equity
    
    
    4,757,145
    
    
    
    4,713,881
    
    
    
    1
    %
    15




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Results of Operations
    
     
   16




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District of Columbia vs. Heller
  17




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Long-lived Assets
  Inventories.
 Patents and Trademarks.
 
    18




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
   
 Item 4T. CONTROLS AND PROCEDURES.
  19




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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 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
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SIGNATURES
  By:
    /s/ David A. CollinsDavid A. Collins, Chairman, CEO and Principal Executive OfficerBy:
    /s/ Robert C. GoodwinRobert C. Goodwin, Principal Accounting Officer and Principal Financial Officer  21