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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
 
 Commission File Number 000-29211
 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)
 
  þ o þ o
  Large accelerated filer o
    
    Accelerated filer oNon-accelerated filer o
    
    Smaller reporting company x
 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
    
    
    19ITEM 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
    
    
    21EX-31.1EX-31.2EX-32.1EX-32.2
   
 2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 .
 3




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 September 30, 2008 and December 31, 2007
 September 30
    
    
    December 312008
    
    
    2007(Unaudited)AssetsCurrent assetsCash
    
    $
    45,974
    
    
    $
    402,468Accounts receivable, less allowance for doubtful
accounts of $5,000 in 2008 and 2007
    
    
    750,015
    
    
    
    263,646Due from factor
    
    
    398,245
    
    
    
    765,510Inventories
    
    
    5,449,191
    
    
    
    4,925,275Prepaid expenses and deferred charges
    
    
    108,550
    
    
    
    115,686Income taxes receivable
    
    
    56,479
    
    
    
    153,870Current deferred income tax benefit
    
    
    35,815
    
    
    
    35,815Total current assets
    
    
    6,844,269
    
    
    
    6,662,270Property and equipmentLeasehold improvements
    
    
    55,323
    
    
    
    55,323Furniture and fixtures
    
    
    296,456
    
    
    
    278,322Molds, dies, and artwork
    
    
    536,809
    
    
    
    513,949888,588
    
    
    
    847,594Accumulated depreciation
    
    
    (609,971
    )
    
    
    (573,458
    )Net property and equipment
    
    
    278,617
    
    
    
    274,136Other assetsPatents and trademarks, net of accumulated
amortization of $115,809 and $104,208 in 2008 and 2007
    
    
    125,681
    
    
    
    133,762Deposits
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    30,692
    
    
    
    28,925Note receivable
Long-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Shareholder
    
    
    174,380
    
    
    
    178,465Total other assets
    
    
    440,622
    
    
    
    451,021Total assets
    
    $
    7,563,508
    
    
    $
    7,387,427
  4




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 September 30, 2008 and December 31, 2007
 September 30
    
    
    December 312008
    
    
    2007(Unaudited)Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    116,426
    
    
    $
    183,186Accounts payable
    
    
    2,494,707
    
    
    
    2,393,050Accrued payroll tax withholdings
    
    
    25,803
    
    
    
    25,338Accrued expenses-other
    
    
    32,843
    
    
    
    38,872Total current liabilities
    
    
    2,669,779
    
    
    
    2,640,446Deferred income tax liability
    
    
    53,100
    
    
    
    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
Sept. 30, 2008 and Dec. 31, 2007; 6,032,899
and 6,041,399 shares outstanding at Sept. 30, 2008
and Dec, 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
    
    
    3,185,151
    
    
    
    3,051,603Total stockholders equity
    
    
    4,840,629
    
    
    
    4,713,881Total liabilities and stockholders equity
    
    $
    7,563,508
    
    
    $
    7,387,427
  5




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Three Months Ended September 30, 2008 and 2007
 2008
    
    
    2007Net sales
    
    $
    3,920,460
    
    
    $
    3,380,969Cost of sales
    
    
    2,999,174
    
    
    
    2,415,100Gross profit
    
    
    921,286
    
    
    
    965,869Operating expensesSelling
    
    
    409,518
    
    
    
    373,260General and administrative
    
    
    279,278
    
    
    
    295,982Total operating expenses
    
    
    688,796
    
    
    
    669,242Income from operations
    
    
    232,490
    
    
    
    296,627Other income (expense)Interest expense
    
    
    (63,893
    )
    
    
    (73,619
    )Total other income (expense)
    
    
    (63,893
    )
    
    
    (73,619
    )Income before income tax provision
    
    
    168,597
    
    
    
    223,008Provision for income taxes
    
    
    85,113
    
    
    
    76,240Net income
    
    $
    83,484
    
    
    $
    146,768Basic and diluted earnings per share
    
    $
    0.01
    
    
    $
    0.02Weighted average number of common shares:Basic and diluted
    
    
    6,032,899
    
    
    
    6,108,045
  6




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Nine Months Ended September 30, 2008 and 2007
 2008
    
    
    2007Net sales
    
    $
    9,360,487
    
    
    $
    8,960,497Cost of sales
    
    
    7,029,159
    
    
    
    6,270,727Gross profit
    
    
    2,331,328
    
    
    
    2,689,770Operating expensesSelling
    
    
    1,061,411
    
    
    
    1,107,876General and administrative
    
    
    848,629
    
    
    
    970,076Total operating expenses
    
    
    1,910,040
    
    
    
    2,077,952Income from operations
    
    
    421,288
    
    
    
    611,818Other income (expense)Interest expense
    
    
    (170,349
    )
    
    
    (210,385
    )Total other income (expense)
    
    
    (170,349
    )
    
    
    (210,385
    )Income before income tax provision
    
    
    250,939
    
    
    
    401,433Provision for income taxes
    
    
    117,391
    
    
    
    156,247Net income
    
    $
    133,548
    
    
    $
    245,186Basic and diluted earnings per share
    
    $
    0.02
    
    
    $
    0.04Weighted average number of common shares:Basic and diluted
    
    
    6,033,985
    
    
    
    6,122,613
  7




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Cash Flows
 For the Three Months Ended September 30, 2008 and 2007
 2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    83,484
    
    
    $
    146,768Adjustments to reconcile net income to
net cash used by operating activities:Depreciation
    
    
    12,171
    
    
    
    13,356Amortization
    
    
    3,867
    
    
    
    3,871Deferred income tax liability
    
    
    20,000
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (175,136
    )
    
    
    123,729Due from factor
    
    
    (95,547
    )
    
    
    (117,789
    )Inventories
    
    
    (1,087,607
    )
    
    
    (1,044,915
    )Prepaid expenses and deferred charges
    
    
    47,526
    
    
    
    (6,797
    )Income taxes receivable
    
    
    65,113
    
    
    
    76,240Advances to employees
    
    
    (117
    )
    
    
    4,668Accounts payable
    
    
    1,111,103
    
    
    
    910,171Accrued payroll tax withholdings
    
    
    452
    
    
    
    (6,643
    )Accrued expenses other
    
    
    14,955
    
    
    
    (3,928
    )Net cash provided by operating activities
    
    
    264
    
    
    
    98,731Cash flows from investing activitiesPurchases of property and equipment
    
    
    (11,052
    )
    
    
    (9,014
    )Net payments (advances) on notes receivable  shareholder
    
    
    (658
    )
    
    
    356Net cash used by investing activities
    
    
    (11,710
    )
    
    
    (8,658
    )Cash flows from financing activitiesPayments on notes payable
    
    
    (11,525
    )
    
    
    (34,484
    )Purchase of treasury stock
    
    
    
    
    
    
    (27,068
    )Net cash used by financing activities
    
    
    (11,525
    )
    
    
    (61,552
    )Net increase (decrease) in cash
    
    
    (22,971
    )
    
    
    28,521Cash  beginning of period
    
    
    68,945
    
    
    
    78,426Cash  end of period
    
    $
    45,974
    
    
    $
    106,947
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Cash Flows
 For the Nine Months Ended September 30, 2008 and 2007
 2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    133,548
    
    
    $
    245,186Adjustments to reconcile net income to
net cash used by operating activities:Depreciation
    
    
    36,513
    
    
    
    37,379Amortization
    
    
    11,601
    
    
    
    11,807Deferred income tax liability
    
    
    20,000
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (486,369
    )
    
    
    (735,234
    )Due from factor
    
    
    367,265
    
    
    
    841,703Inventories
    
    
    (523,916
    )
    
    
    (3,074,082
    )Prepaid expenses and deferred charges
    
    
    7,136
    
    
    
    (56,303
    )Income taxes receivable
    
    
    97,391
    
    
    
    156,247Deposits
    
    
    
    
    
    
    (5,916
    )Advances to employees
    
    
    (1,767
    )
    
    
    (10,610
    )Accounts payable
    
    
    101,657
    
    
    
    2,562,232Accrued payroll tax withholdings
    
    
    465
    
    
    
    (6,481
    )Accrued expenses other
    
    
    (6,029
    )
    
    
    (30,662
    )Net cash used by operating activities
    
    
    (242,505
    )
    
    
    (64,734
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (40,994
    )
    
    
    (93,249
    )Payments for patents and trademarks
    
    
    (3,520
    )
    
    
    (1,755
    )Net payments (advances) on notes receivable  shareholder
    
    
    4,085
    
    
    
    (41,897
    )Net cash used by investing activities
    
    
    (40,429
    )
    
    
    (136,901
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    
    
    
    
    96,500Payments on notes payable
    
    
    (66,760
    )
    
    
    (70,959
    )Purchase of treasury stock
    
    
    (6,800
    )
    
    
    (55,927
    )Net cash used by financing activities
    
    
    (73,560
    )
    
    
    (30,386
    )Net decrease in cash
    
    
    (356,494
    )
    
    
    (232,021
    )Cash  beginning of period
    
    
    402,468
    
    
    
    338,968Cash  end of period
    
    $
    45,974
    
    
    $
    106,947
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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
  Sept. 30, 2008
    
    
    Dec. 31, 2007Inventories consist of:Finished goods
    
    $
    3,969,385
    
    
    $
    3,993,949Inventory in transit
    
    
    1,456,839
    
    
    
    908,359Parts
    
    
    22,967
    
    
    
    22,967$
    5,449,191
    
    
    $
    4,925,275
 Due from Factor
  Sept. 30, 2008
    
    
    Dec. 31, 2007Accounts receivable factored
    
    $
    2,465,843
    
    
    $
    4,508,524Amounts advanced and outstanding
    
    
    2,067,598
    
    
    
    3,743,014Due from factor
    
    $
    398,245
    
    
    $
    765,510
 Earnings per Share: Dilutive Effect
  11




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Fair Value of Financial Instruments
  Accounting Changes
     12




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Treasury Stock Transactions
  
 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;
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
    
    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.
  
   ®
   Gun Maintenance.
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Hunting and camping.
 Gun Safety.
 Household Products.
 
  Financial Condition
  Sept. 30, 2008
    
    
    Dec. 31, 2007%
    
    
    ChangeAccounts receivable
    
    $
    750,015
    
    
    $
    263,646
    
    
    
    184
    %Due from factor
    
    
    398,245
    
    
    
    765,510
    
    
    
    (48
    %)Inventories
    
    
    5,449,191
    
    
    
    4,925,275
    
    
    
    11
    %Total current assets
    
    
    6,844,269
    
    
    
    6,662,270
    
    
    
    3
    %Accounts payable
    
    
    2,494,707
    
    
    
    2,393,050
    
    
    
    4
    %Total current liabilities
    
    
    2,669,779
    
    
    
    2,640,446
    
    
    
    1
    %Working capital
    
    
    4,174,490
    
    
    
    4,021,824
    
    
    
    4
    %Stockholders equity
    
    
    4,840,629
    
    
    
    4,713,881
    
    
    
    3
    %
    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.
 18




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Patents and Trademarks.
 
    
 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 Officer By:
    /s/ Robert C. GoodwinRobert C. Goodwin, Principal Accounting Officer and Principal Financial Officer  21