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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 June 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 12120 Colonel Glenn Road, Suite 6200 Little Rock, AR
(Address of principal executive offices)
    
    72210
(Zip Code)
 
  þ o þ o
 o 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 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
    
    
    12Background
    
    
    13Financial Condition and Results of Operations
    
    
    14Liquidity and Capital Resources
    
    
    15Trends
    
    
    16Gun Legislation
    
    
    16Critical Accounting Estimates
    
    
    17Off-Balance Sheet Arrangements
    
    
    18ITEM 4 CONTROLS AND PROCEDURES
    
    
    18PART II OTHER INFORMATION
    
    
    19ITEM 1 LEGAL PROCEEDINGS
    
    
    19ITEM 1A  RISK FACTORS
    
    
    19ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    19ITEM 3 DEFAULTS UPON SENIOR SECURITIES
    
    
    19ITEM 5 OTHER INFORMATION
    
    
    19ITEM 6 EXHIBITS
    
    
    19SIGNATURESEX-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
 .
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 June 30, 2010 and December 31, 2009
 June 30
    
    
    December 312010
    
    
    2009(unaudited)AssetsCurrent assetsCash
    
    $
    263,382
    
    
    $
    430,436Accounts receivable, less allowance for doubtful
accounts of $20,000 in 2010 and 2009
    
    
    644,998
    
    
    
    929,082Due from factor
    
    
    450,184
    
    
    
    27,592Inventories
    
    
    4,041,280
    
    
    
    4,479,347Prepaid expenses and deferred charges
    
    
    95,192
    
    
    
    53,460Deferred tax asset
    
    
    135,243
    
    
    
    11,950Total current assets
    
    
    5,630,279
    
    
    
    5,931,867Property and equipmentLeasehold improvements
    
    
    57,232
    
    
    
    57,232Furniture and fixtures
    
    
    345,366
    
    
    
    333,161Molds, dies, and artwork
    
    
    581,057
    
    
    
    560,952983,655
    
    
    
    951,345Accumulated depreciation
    
    
    (700,897
    )
    
    
    (674,486
    )Net property and equipment
    
    
    282,758
    
    
    
    276,859Other assetsPatents and trademarks, net of accumulated
amortization of $145,397 and $135,434 in 2010 and 2009
    
    
    107,383
    
    
    
    117,346Deposits
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    48,729
    
    
    
    29,658Note receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Shareholder
    
    
    344,189
    
    
    
    216,377Total other assets
    
    
    610,170
    
    
    
    473,250Total assets
    
    $
    6,523,207
    
    
    $
    6,681,976
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Balance Sheet
 June 30, 2010 and December 31, 2009
 June 30
    
    
    December 312010
    
    
    2009(unaudited)Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    28,533
    
    
    $
    52,454Accounts payable
    
    
    1,034,958
    
    
    
    776,093Accrued payroll tax withholdings
    
    
    26,518
    
    
    
    27,780Accrued expenses-other
    
    
    33,361
    
    
    
    145,097Income taxes payable
    
    
    
    
    
    
    71,166Total current liabilities
    
    
    1,123,370
    
    
    
    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
June 30, 2010 and December 31, 2009;
5,776,799 shares outstanding at June 30, 2010
and December 31, 2009
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (411,114
    )
    
    
    (401,043
    )Retained earnings
    
    
    3,762,374
    
    
    
    3,961,852Total stockholders equity
    
    
    5,320,685
    
    
    
    5,530,234Total liabilities and stockholders equity
    
    $
    6,523,207
    
    
    $
    6,681,976
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Six Months Ended June 30, 2010 and 2009
 2010
    
    
    2009Net sales
    
    $
    4,043,602
    
    
    $
    6,676,498Cost of sales
    
    
    3,035,668
    
    
    
    4,656,934Gross profit
    
    
    1,007,934
    
    
    
    2,019,564Operating expensesSelling
    
    
    676,970
    
    
    
    845,140General and administrative
    
    
    611,441
    
    
    
    576,564Total operating expenses
    
    
    1,288,411
    
    
    
    1,421,704Income
(loss) from operations
    
    
    (280,477
    )
    
    
    597,860Other income (expense)Interest expense
    
    
    (41,360
    )
    
    
    (88,319
    )Other income
    
    
    
    
    
    
    14Total other income (expense)
    
    
    (41,360
    )
    
    
    (88,305
    )Income
(loss) before income tax provision
    
    
    (321,837
    )
    
    
    509,555Provision (benefit) for income taxes
    
    
    (122,359
    )
    
    
    196,690Net income (loss)
    
    $
    (199,478
    )
    
    $
    312,865Basic and diluted earnings (loss) per share
    
    $
    (0.03
    )
    
    $
    0.05Weighted average number of common shares:Basic and diluted
    
    
    5,788,164
    
    
    
    5,825,528
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Operations
 For The Three Months Ended June 30, 2010 and 2009
 2010
    
    
    2009Net sales
    
    $
    2,036,926
    
    
    $
    3,143,041Cost of sales
    
    
    1,567,748
    
    
    
    2,195,174Gross profit
    
    
    469,178
    
    
    
    947,867Operating expensesSelling
    
    
    342,609
    
    
    
    399,352General and administrative
    
    
    310,392
    
    
    
    298,514Total operating expenses
    
    
    653,001
    
    
    
    697,866Income (loss) from operations
    
    
    (183,823
    )
    
    
    250,001Other income (expense)Interest expense
    
    
    (18,819
    )
    
    
    (41,265
    )Total other income (expense)
    
    
    (18,819
    )
    
    
    (41,265
    )Income (loss) before income tax provision
    
    
    (202,642
    )
    
    
    208,736Provision (benefit) for income taxes
    
    
    (76,990
    )
    
    
    80,170Net income (loss)
    
    $
    (125,652
    )
    
    $
    128,566Basic and diluted earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.02Weighted average number of common shares:Basic and diluted
    
    
    5,782,690
    
    
    
    5,793,699
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Consolidated Statements of Cash Flows
 For the Six Months Ended June 30, 2010 and 2009
 2010
    
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    (199,478
    )
    
    $
    312,865Adjustments to reconcile net income to
net cash used in operating activities:Depreciation
    
    
    26,411
    
    
    
    24,672Amortization
    
    
    9,963
    
    
    
    7,306Deferred income taxes
    
    
    (123,293
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    284,084
    
    
    
    (115,120
    )Due from factor
    
    
    (422,592
    )
    
    
    1,018,748Inventories
    
    
    438,067
    
    
    
    (2,656,519
    )Prepaid expenses and deferred charges
    
    
    (41,732
    )
    
    
    (36,116
    )Advances to employees
    
    
    (19,071
    )
    
    
    (6,394
    )Accounts payable
    
    
    258,865
    
    
    
    1,043,058Accrued payroll tax withholdings
    
    
    (1,262
    )
    
    
    1,141Accrued expenses other
    
    
    (111,736
    )
    
    
    (49,229
    )Income taxes payable
    
    
    (71,166
    )
    
    
    58,540Net cash (used) provided by operating activities
    
    
    27,060
    
    
    
    (397,048
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (32,310
    )
    
    
    (28,604
    )Payments for patents and trademarks
    
    
    
    
    
    
    (790
    )Net payments (advances) on notes receivable  stockholder
    
    
    (127,812
    )
    
    
    (50,262
    )Net cash used by investing activities
    
    
    (160,122
    )
    
    
    (79,656
    )Cash flows from financing activitiesPayments on notes payable
    
    
    (23,921
    )
    
    
    (24,454
    )Purchase of treasury stock
    
    
    (10,071
    )
    
    
    (28,919
    )Net cash used in financing activities
    
    
    (33,992
    )
    
    
    (53,373
    )Net decrease in cash
    
    
    (167,054
    )
    
    
    (530,077
    )Cash  beginning of period
    
    
    430,436
    
    
    
    599,103Cash  end of period
    
    $
    263,382
    
    
    $
    69,026
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
  June 30, 2010
    
    
    Dec. 31, 2009Inventories consist of:Finished goods
    
    $
    3,619,025
    
    
    $
    3,972,207Inventory in transit
    
    
    395,901
    
    
    
    492,568Parts
    
    
    26,354
    
    
    
    14,572$
    4,041,280
    
    
    $
    4,479,347
 6. Due from Factor
  10




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June 30, 2010
    
    
    Dec. 31, 2009Accounts receivable factored
    
    $
    501,446
    
    
    $
    1,081,240Amounts advanced and outstanding
    
    
    (51,262
    )
    
    
    (1,053,648
    )Due from factor
    
    $
    450,184
    
    
    $
    27,592
  7. Adoption of New Accounting Guidance
    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.
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® ® ®
    Gun Cleaning & Maintenance.
 Hunting and Camping.
 Gun Safety.
 13




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Household Products.
 
  Financial Condition
  IncreaseJune 30, 2010
    
    
    Dec. 31, 2009
    
    
    (Decrease)Accounts receivable
    
    $
    644,998
    
    
    $
    929,082
    
    
    $
    (284,084
    )Inventories
    
    
    4,041,280
    
    
    
    4,479,347
    
    
    
    (438,067
    )Accounts payable
    
    
    1,034,958
    
    
    
    776,093
    
    
    
    258,865Accrued expenses-other
    
    
    33,361
    
    
    
    145,097
    
    
    
    (111,736
    )Deferred tax
asset
    
    
    135,243
    
    
    
    11,950
    
    
    
    123,293Income taxes
payable
    
    
    
    
    
    
    71,166
    
    
    
    (71,166
    )
  ®
  Results of Operations
    14




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®
     ®
  
   15




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District of Columbia vs. Heller
 16




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Federal Assault Weapons Ban Vitter Amendment
 
   Long-lived Assets
  17




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Inventories.
 Patents and Trademarks.
 
    
 ITEM 4. CONTROLS AND PROCEDURES
   18




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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
  19




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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
 
 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