##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 x
  o
  DAC Technologies Group International, Inc.
  Florida
    
    65-0847852(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 
  x o x o
  o x




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TABLE OF CONTENTS
 PART IITEM 1. FINANCIAL STATEMENTS
    
    
    3PART F/S
    
    
    9ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12Background
    
    
    13Financial Condition and Results of Operations
    
    
    14Liquidity and Capital Resources
    
    
    16Trends
    
    
    16Gun Legislation
    
    
    16Critical Accounting Estimates
    
    
    17Off-Balance Sheet Arrangements
    
    
    18ITEM 3. CONTROLS AND PROCEDURES
    
    
    18Evaluation of Disclosure Controls and Procedures
    
    
    18Definition of Disclosure Controls
    
    
    18Limitations on the Effectiveness of Controls
    
    
    19Conclusions
    
    
    19Changes in Internal Controls
    
    
    19Sarbanes-Oxley Section 404 Compliance
    
    
    19PART IIITEM 1. LEGAL PROCEEDINGS
    
    
    20ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    21ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    21ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    21ITEM 5. OTHER INFORMATION
    
    
    21ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
    
    21SIGNATURES
    
    
    22Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFO
   
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PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 
 Condensed Balance Sheet (Consolidated)
 September 30, 2007
 AssetsCurrent assetsCash
    
    $
    106,947Accounts receivable, less allowance for doubtful
accounts of $5,000
    
    
    1,267,262Due from factor
    
    
    440,505Inventories
    
    
    6,204,907Prepaid expenses and deferred charges
    
    
    165,268Income taxes receivable
    
    
    214,570Current deferred income tax benefit
    
    
    35,815Total current assets
    
    
    8,435,274Property and equipmentLeasehold improvements
    
    
    55,323Furniture and fixtures
    
    
    260,767Molds, dies, and artwork
    
    
    511,233827,323Accumulated depreciation
    
    
    (559,845
    )Net property and equipment
    
    
    267,478Other assetsPatents and trademarks, net of
accumulated amortization of $100,272
    
    
    137,698Deposits
    
    
    17,351Advances to employees
    
    
    34,717Note receivable  long term
    
    
    20,000Note receivable  related party
    
    
    72,518Note receivable  stockholder
    
    
    172,428Total other assets
    
    
    454,712Total assets
    
    $
    9,157,464
  3




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Balance Sheet (Consolidated)
 September 30, 2007
 Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    218,274Accounts payable
    
    
    4,202,677Accrued payroll tax withholdings
    
    
    18,463Accrued expenses-other
    
    
    16,890Total current liabilities
    
    
    4,456,304Deferred income tax liability
    
    
    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 and
6,089,699 shares outstanding
    
    
    6,323Additional paid-in capital
    
    
    1,963,102Treasury stock, at cost
    
    
    (257,260
    )Retained earnings
    
    
    2,955,895Total stockholders equity
    
    
    4,668,060Total liabilities and stockholders equity
    
    $
    9,157,464
  4




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Operations (Consolidated)
 For The Nine Months Ended September 30, 2007 and 2006
  2007
    
    
    2006Net sales
    
    $
    8,960,497
    
    
    $
    9,416,561Cost of sales
    
    
    6,270,727
    
    
    
    6,373,054Gross profit
    
    
    2,689,770
    
    
    
    3,043,507Operating expensesSelling
    
    
    1,107,876
    
    
    
    1,163,956General and administrative
    
    
    970,076
    
    
    
    780,127Total operating expenses
    
    
    2,077,952
    
    
    
    1,944,083Income from operations
    
    
    611,818
    
    
    
    1,099,424Other income (expense)Interest expense
    
    
    (210,385
    )
    
    
    (190,645
    )Total other income (expense)
    
    
    (210,385
    )
    
    
    (190,645
    )Income before income tax provision
    
    
    401,433
    
    
    
    908,779Provision for income taxes
    
    
    156,247
    
    
    
    345,358Net income
    
    $
    245,186
    
    
    $
    563,421Basic and diluted earnings per share
    
    $
    0.04
    
    
    $
    0.09Weighted-average number of common shares:Basic and diluted
    
    
    6,122,613
    
    
    
    6,166,068
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Operations (Consolidated)
 For The Three Months Ended September 30, 2007 and 2006
  2007
    
    

2006Net sales
    
    $
    3,380,969
    
    
    $
    3,936,195Cost of sales
    
    
    2,415,100
    
    
    
    2,648,589Gross profit
    
    
    965,869
    
    
    
    1,287,606Operating expensesSelling
    
    
    373,260
    
    
    
    504,625General and administrative
    
    
    295,982
    
    
    
    270,015Total operating expenses
    
    
    669,242
    
    
    
    774,640Income from operations
    
    
    296,627
    
    
    
    512,966Other income (expense)Interest expense
    
    
    (73,619
    )
    
    
    (79,774
    )Total other income (expense)
    
    
    (73,619
    )
    
    
    (79,774
    )Income before income tax provision
    
    
    223,008
    
    
    
    433,192Provision for income taxes
    
    
    76,240
    
    
    
    159,269Net income
    
    $
    146,768
    
    
    $
    273,923Basic and diluted earnings per share
    
    $
    0.02
    
    
    $
    0.04Weighted average number of common shares:Basic and diluted
    
    
    6,108,045
    
    
    
    6,135,599
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Cash Flows (Consolidated)
 For the Nine Months Ended September 30, 2007 and 2006
 2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    245,186
    
    
    $
    563,421Adjustments to reconcile net income to
net cash provided (used) by operating activities:Depreciation
    
    
    37,379
    
    
    
    42,773Amortization
    
    
    11,807
    
    
    
    13,098Deferred income taxes
    
    
    
    
    
    
    (8,615
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (735,234
    )
    
    
    (680,047
    )Due from factor
    
    
    841,703
    
    
    
    698,952Inventories
    
    
    (3,074,082
    )
    
    
    (1,689,391
    )Advances to employees
    
    
    (10,610
    )
    
    
    (19,368
    )Prepaid expenses and deferred charges
    
    
    (56,303
    )
    
    
    (62,787
    )Income taxes receivable
    
    
    156,247
    
    
    
    (87,184
    )Deposits
    
    
    (5,916
    )
    
    
    Accounts payable
    
    
    2,562,232
    
    
    
    1,626,061Accrued payroll tax withholdings
    
    
    (6,481
    )
    
    
    (2,489
    )Accrued expenses other
    
    
    (30,662
    )
    
    
    23,350Income taxes payable
    
    
    
    
    
    
    (380,843
    )Net cash provided (used) by operating activities
    
    
    (64,734
    )
    
    
    36,931Cash flows from investing activitiesPurchases of property and equipment
    
    
    (93,249
    )
    
    
    (12,595
    )Payments for patents and trademarks
    
    
    (1,755
    )
    
    
    (7,246
    )Net advances on note receivable  related party
    
    
    
    
    
    
    (427
    )Net advances on note receivable  stockholder
    
    
    (41,897
    )
    
    
    24,917Purchase of treasury stock
    
    
    (55,927
    )
    
    
    (99,933
    )Net cash used by investing activities
    
    
    (192,828
    )
    
    
    (95,284
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    96,500
    
    
    
    Payments on notes payable
    
    
    (70,959
    )
    
    
    (33,382
    )Net cash provided (used) by financing activities
    
    
    25,541
    
    
    
    (33,382
    )Decrease in cash
    
    
    (232,021
    )
    
    
    (91,735
    )Cash  beginning of period
    
    
    338,968
    
    
    
    130,886Cash  end of period
    
    $
    106,947
    
    
    $
    39,151
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Cash Flows (Consolidated)
 For the Three Months Ended September 30, 2007 and 2006
  2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    146,768
    
    
    $
    273,923Adjustments to reconcile net income to
net cash provided (used) in operating activities:Depreciation
    
    
    13,356
    
    
    
    15,000Amortization
    
    
    3,871
    
    
    
    5,000Deferred income tax provision
    
    
    
    
    
    
    (2,872
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    123,729
    
    
    
    48,113Due from factor
    
    
    (117,789
    )
    
    
    (62,028
    )Inventories
    
    
    (1,044,915
    )
    
    
    (886,647
    )Advances to employees
    
    
    4,668
    
    
    
    (6,517
    )Prepaid expenses and deferred
charges
    
    
    (6,797
    )
    
    
    436Income taxes receivable
    
    
    76,240
    
    
    
    12,141Accounts payable
    
    
    910,171
    
    
    
    228,429Accrued payroll tax withholdings
    
    
    (6,643
    )
    
    
    (3,890
    )Accrued expenses other
    
    
    (3,928
    )
    
    
    43,751Net cash provided (used) in operating activities
    
    
    98,731
    
    
    
    (335,161
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (9,014
    )
    
    
    Net advances on notes receivable  stockholder
    
    
    356
    
    
    
    28,155Purchase of treasury stock
    
    
    (27,068
    )
    
    
    Net cash provided (used) by investing activities
    
    
    (35,726
    )
    
    
    28,155Cash flows from financing activitiesPayments on notes payable
    
    
    (34,484
    )
    
    
    (9,867
    )Net cash used in financing activities
    
    
    (34,484
    )
    
    
    (9,867
    )Increase (decrease) in cash
    
    
    28,521
    
    
    
    (316,873
    )Cash  beginning of period
    
    
    78,426
    
    
    
    356,024Cash  end of period
    
    $
    106,947
    
    
    $
    39,151
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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
  9




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.
 Use of Estimates
  Inventories
  Sept. 30, 2007Inventories consist of:Finished goods
    
    $
    4,586,807Inventory in transit
    
    
    1,595,133Parts
    
    
    22,967$
    6,204,907
 Due from Factor
  Sept. 30, 2007Accounts receivable factored
    
    $
    2,570,872Amounts advanced and outstanding
    
    
    2,130,367Due from factor
    
    $
    440,505
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Earnings per Share: Dilutive Effect
  Accounting Changes
    Treasury Stock Transactions
  11




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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.
  12




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Details
   :
 
    
    increased penetration of our existing markets, particularly in the gun cleaning
and accessories market;development of new products in new markets, such as camping and housewares;
    
    development of new products for the sporting goods market;
    
    identification and development of new markets for gun cleaning kits, i.e.
government, law enforcement and military;
    
    identification and recruitment of effective manufacturers representatives to
actively market these products on a national and international basis; and
    
    aggressive cost containment.
    Gun Maintenance.
 Hunting and camping.
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Gun Safety.
 Other Products.
 
  Results of Operations
  Increase
    
    
    Percent2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeNet sales
    
    $
    3,380,969
    
    
    $
    3,936,195
    
    
    $
    (555,226
    )
    
    
    (14
    %)Gross profit
    
    
    965,869
    
    
    
    1,287,606
    
    
    
    (321,737
    )
    
    
    (25
    %)Operating expenses
    
    
    669,242
    
    
    
    774,640
    
    
    
    (105,398
    )
    
    
    (14
    %)Income from operations
    
    
    296,627
    
    
    
    512,966
    
    
    
    (216,339
    )
    
    
    (42
    %)Net income
    
    
    146,768
    
    
    
    273,923
    
    
    
    (127,155
    )
    
    
    (46
    %)
    14




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Increase
    
    
    Percent2007
    
    
    2006
    
    
    (Decrease)
    
    
    ChangeNet sales
    
    $
    8,960,497
    
    
    $
    9,416,561
    
    
    $
    (456,064
    )
    
    
    (5
    %)Gross profit
    
    
    2,689,770
    
    
    
    3,043,507
    
    
    
    (353,737
    )
    
    
    (12
    %)Operating expenses
    
    
    2,077,952
    
    
    
    1,944,083
    
    
    
    133,869
    
    
    
    7
    %Income from operations
    
    
    611,818
    
    
    
    1,099,424
    
    
    
    (487,606
    )
    
    
    (44
    %)Net income
    
    
    245,186
    
    
    
    563,421
    
    
    
    (318,235
    )
    
    
    (56
    %)
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Financial Condition
  Sept. 30, 2007
    
    
    Dec. 31, 2006Accounts receivable
    
    $
    1,267,262
    
    
    $
    532,028Due from factor
    
    
    440,505
    
    
    
    1,282,208Inventories
    
    
    6,204,907
    
    
    
    3,130,825Total current assets
    
    
    8,435,274
    
    
    
    5,799,626Accounts payable
    
    
    4,202,677
    
    
    
    1,640,445Total current liabilities
    
    
    4,456,304
    
    
    
    1,905,674Working capital
    
    
    3,978,970
    
    
    
    3,893,952Stockholders equity
    
    
    4,668,060
    
    
    
    4,478,801
   
   
   
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Long-lived Assets
  Inventories.
 17




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Patents and Trademarks.
 
    
 ITEM 3. CONTROLS AND PROCEDURES
 
   
   18




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PART II
 
 ITEM 1. LEGAL PROCEEDINGS
      20




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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 AND REPORTS ON FORM 8-K
  Exhibits2
    
    
    Acquisition Agreement3
    (i)
    
    Articles of Incorporation3(ii)
    
    By-lawsExhibits required by Item 601 of Regulation S-B attached: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  22