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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
 For the quarterly period ended September 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from ______ to ______
 Commission File Number 000-29211
 DAC Technologies Group International, Inc.
  Florida
    
    65-0847852(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)12120 Colonel Glenn Road, Suite 6200 Little Rock, AR
    
    72210(Address of principal executive offices)
    
    (Zip Code)
 
  þ o þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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TABLE OF CONTENTS
 PART I FINANCIAL INFORMATION
    
    3ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    10Background
    
    11Financial Condition and Results of Operations
    
    12Liquidity and Capital Resources
    
    14Trends
    
    15Gun Legislation
    
    15Critical Accounting Estimates
    
    16Off-Balance Sheet Arrangements
    
    17ITEM 4. CONTROLS AND PROCEDURES
    
    17PART II OTHER INFORMATION
    
    18ITEM 1. LEGAL PROCEEDINGS
    
    18ITEM 1A. RISK FACTORS
    
    18ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    18ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    18ITEM 5. OTHER INFORMATION
    
    18ITEM 6. EXHIBITS
    
    18SIGNATURES
    
    19EX-31.1EX-31.2EX-32.1EX-32.2EX-31.1EX-31.2EX-32.1EX-32.2
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PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheets
 Sept. 30
    
    
    December 312010
    
    
    2009(unaudited)AssetsCurrent assetsCash
    
    $
    162,094
    
    
    $
    430,436Accounts receivable, less allowance for doubtful
accounts of $20,000 in 2010 and 2009
    
    
    604,567
    
    
    
    929,082Due from factor
    
    
    452,059
    
    
    
    27,592Inventories
    
    
    4,594,740
    
    
    
    4,479,347Prepaid expenses and deferred charges
    
    
    73,797
    
    
    
    53,460Deferred tax asset
    
    
    128,975
    
    
    
    11,950Total current assets
    
    
    6,016,232
    
    
    
    5,931,867Property and equipmentLeasehold improvements
    
    
    57,232
    
    
    
    57,232Furniture and fixtures
    
    
    346,589
    
    
    
    333,161Molds, dies, and artwork
    
    
    595,493
    
    
    
    560,952999,314
    
    
    
    951,345Accumulated depreciation
    
    
    (714,689
    )
    
    
    (674,486
    )Net property and equipment
    
    
    284,625
    
    
    
    276,859Other assetsPatents and trademarks, net of accumulated
amortization of $150,378 and $135,434 in 2010 and
2009
    
    
    102,402
    
    
    
    117,346Deposits
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    45,060
    
    
    
    29,658Note receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Shareholder
    
    
    389,773
    
    
    
    216,377Total other assets
    
    
    647,104
    
    
    
    473,250Total assets
    
    $
    6,947,961
    
    
    $
    6,681,976
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheets
 Sept. 30
    
    
    December 312010
    
    
    2009(unaudited)Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    15,035
    
    
    $
    52,454Accounts payable
    
    
    1,460,992
    
    
    
    776,093Accrued payroll tax withholdings
    
    
    26,930
    
    
    
    27,780Accrued expenses-other
    
    
    42,924
    
    
    
    145,097Income taxes payable
    
    
    
    
    
    
    71,166Total current liabilities
    
    
    1,545,881
    
    
    
    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
September 30, 2010 and December 31, 2009;
5,765,771 shares outstanding at September 30, 2010
and 5,793,699 at December 31, 2009
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (416,113
    )
    
    
    (401,043
    )Retained earnings
    
    
    3,769,616
    
    
    
    3,961,852Total stockholders equity
    
    
    5,322,928
    
    
    
    5,530,234Total liabilities and stockholders equity
    
    $
    6,947,961
    
    
    $
    6,681,976
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Three Months Ended September 30, 2010 and 2009
 2010
    
    
    2009Net sales
    
    $
    2,643,380
    
    
    $
    3,098,202Cost of sales
    
    
    1,927,148
    
    
    
    2,221,830Gross profit
    
    
    716,232
    
    
    
    876,372Operating expensesSelling
    
    
    392,670
    
    
    
    408,310General and administrative
    
    
    291,156
    
    
    
    305,634Total operating expenses
    
    
    683,826
    
    
    
    713,944Income from operations
    
    
    32,406
    
    
    
    162,428Other income (expense)Interest expense
    
    
    (17,171
    )
    
    
    (41,668
    )Total other income (expense)
    
    
    (17,171
    )
    
    
    (41,668
    )Income before income tax provision
    
    
    15,235
    
    
    
    120,760Provision for income taxes
    
    
    7,993
    
    
    
    47,385Net income
    
    $
    7,242
    
    
    $
    73,375Basic and diluted earnings (loss) per share
    
    $
    
    
    
    $
    0.01Weighted average number of common shares:Basic and diluted
    
    
    5,771,511
    
    
    
    5,793,699
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Nine Months Ended September 30, 2010 and 2009
 2010
    
    
    2009Net sales
    
    $
    6,686,982
    
    
    $
    9,774,700Cost of sales
    
    
    4,962,817
    
    
    
    6,878,764Gross profit
    
    
    1,724,165
    
    
    
    2,895,936Operating expensesSelling
    
    
    1,069,641
    
    
    
    1,253,450General and administrative
    
    
    902,597
    
    
    
    882,198Total operating expenses
    
    
    1,972,238
    
    
    
    2,135,648Income (loss) from operations
    
    
    (248,073
    )
    
    
    760,288Other income (expense)Interest expense
    
    
    (58,530
    )
    
    
    (129,987
    )Other income
    
    
    
    
    
    
    14Total other income (expense)
    
    
    (58,530
    )
    
    
    (129,973
    )Income (loss) before income tax provision
    
    
    (306,603
    )
    
    
    630,315Provision (benefit) for income taxes
    
    
    (114,367
    )
    
    
    244,075Net income (loss)
    
    $
    (192,236
    )
    
    $
    386,240Basic and diluted earnings (loss) per share
    
    $
    (0.03
    )
    
    $
    0.07Weighted average number of common shares:Basic and diluted
    
    
    5,782,552
    
    
    
    5,814,802
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Cash Flows
 For the Nine Months Ended September 30, 2010 and 2009
 2010
    
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    (192,236
    )
    
    $
    386,240Adjustments to reconcile net income to
net cash used in operating activities:Depreciation
    
    
    40,203
    
    
    
    37,350Amortization
    
    
    14,944
    
    
    
    11,746Deferred income taxes
    
    
    (117,025
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    324,515
    
    
    
    (186,761
    )Due from factor
    
    
    (424,467
    )
    
    
    1,538,005Inventories
    
    
    (115,393
    )
    
    
    (3,760,233
    )Prepaid expenses
and deferred
charges
    
    
    (20,337
    )
    
    
    (1,027
    )Income taxes
receivable
    
    
    
    
    
    
    Advances to
employees
    
    
    (15,402
    )
    
    
    (5,306
    )Accounts payable
    
    
    684,899
    
    
    
    1,379,700Accrued payroll tax
withholdings
    
    
    (850
    )
    
    
    1,271Accrued expenses
other
    
    
    (102,173
    )
    
    
    (45,902
    )Income taxes payable
    
    
    (71,166
    )
    
    
    105,925Net cash (used) provided by operating activities
    
    
    5,512
    
    
    
    (538,992
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (47,969
    )
    
    
    (37,698
    )Payments for patents and trademarks
    
    
    
    
    
    
    (11,290
    )Net payments (advances) on notes receivable  stockholder
    
    
    (173,396
    )
    
    
    (82,881
    )Net cash used by investing activities
    
    
    (221,365
    )
    
    
    (131,869
    )Cash flows from financing activitiesNet (payments) proceeds on notes payable
    
    
    (37,419
    )
    
    
    313,002Purchase of treasury stock
    
    
    (15,070
    )
    
    
    (28,919
    )Net cash (used) provided by financing activities
    
    
    (52,489
    )
    
    
    284,083Net decrease in cash
    
    
    (268,342
    )
    
    
    (386,778
    )Cash  beginning of period
    
    
    430,436
    
    
    
    599,103Cash  end of period
    
    $
    162,094
    
    
    $
    212,325Supplementary disclosures of cash flow informationCash paid during the period for:Interest
    
    $
    58,546
    
    
    $
    129,608Taxes
    
    
    1,724
    
    
    
    138,150
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(UNAUDITED)
 1. Forward-Looking Statements
  2. Nature of Business and Organization
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3. Basis of Presentation
  4. Significant Accounting Policies
  5. Inventories
  Sept. 30, 2010
    
    
    Dec. 31, 2009Inventories consist of:Finished goods
    
    $
    3,837,455
    
    
    $
    3,972,207Inventory in transit
    
    
    730,931
    
    
    
    492,568Parts
    
    
    26,354
    
    
    
    14,572$
    4,594,740
    
    
    $
    4,479,347
 6. Due from Factor
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Sept. 30, 2010
    
    
    Dec. 31, 2009Accounts receivable factored
    
    $
    692,063
    
    
    $
    1,081,240Amounts advanced and outstanding
    
    
    (240,004
    )
    
    
    (1,053,648
    )Due from factor
    
    $
    452,059
    
    
    $
    27,592
  7. Adoption of New Accounting Guidance
  8. Treasury Stock Transactions
  
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
    
    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.
  
  ® ® ®
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Gun Cleaning & Maintenance.
 Hunting and Camping.
 Gun Safety.
 Household Products.
 
  Financial Condition
  IncreaseSept. 30, 2010
    
    Dec. 31, 2009
    
    (Decrease)Accounts receivable
    
    $
    604,567
    
    
    $
    929,082
    
    
    $
    (324,515
    )Due from factor
    
    
    452,059
    
    
    
    27,592
    
    
    
    424,467
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IncreaseSept. 30, 2010
    
    Dec. 31, 2009
    
    (Decrease)Inventories
    
    
    4,594,740
    
    
    
    4,479,347
    
    
    
    115,393Deferred tax asset
    
    
    128,975
    
    
    
    11,950
    
    
    
    117,025Accounts payable
    
    
    1,460,992
    
    
    
    776,093
    
    
    
    684,899Accrued expenses-other
    
    
    42,924
    
    
    
    145,097
    
    
    
    (102,173
    )Income taxes payable
    
    
    
    
    
    
    71,166
    
    
    
    (71,166
    )
    ®
 Results of Operations
   ®
  13




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®
     ®
  
    14




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District of Columbia vs. Heller
  15




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Federal
Assault Weapons Ban Vitter Amendment
 
   Long-lived Assets
  16




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Inventories.
 Patents and Trademarks.
 
    
 ITEM 4. CONTROLS AND PROCEDURES
   17




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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. REMOVED AND RESERVED
 
 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)
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Exhibits31.2
    
    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
 
 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  20