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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
  o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
  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)
 
        o x
 o
 x o
 o
   LARGE ACCELERATED FILER o
    
    ACCELERATED FILER oNON-ACCELERATED
FILER o (Do not check if a smaller reporting company)
    
    SMALLER REPORTING COMPANY x
 o x




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##### 



PageFORWARD-LOOKING STATEMENT
    
    
    1PART I
    
    
    
    
    2ITEM 1
    
    BUSINESS
    
    
    2ITEM 1A
    
    RISK FACTORS
    
    
    12ITEM 1B
    
    UNRESOLVED STAFF COMMENTS
    
    
    17ITEM 2
    
    PROPERTIES
    
    
    17ITEM 3
    
    LEGAL PROCEEDINGS
    
    
    18ITEM 4
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    18PART II
    
    
    
    
    19ITEM 5
    
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    19ITEM 6
    
    SELECTED FINANCIAL DATA
    
    
    20ITEM 7
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    20ITEM 7A
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    24ITEM 8
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    24ITEM 9
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    24ITEM 9A
    
    CONTROLS AND PROCEDURES
    
    
    24ITEM 9A(T)
    
    CONTROLS AND PROCEDURES
    
    
    25ITEM 9B
    
    OTHER INFORMATION
    
    
    25PART III
    
    
    26ITEM 10
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    26ITEM 11
    
    EXECUTIVE COMPENSATION
    
    
    28ITEM 12
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    29ITEM 13
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    31ITEM 14
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    32PART IV
    
    
    33ITEM 15
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    33EX-31.1EX-31.2EX-32.1EX-32.2




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FORWARD-LOOKING STATEMENTS
  1




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PART I
 
 ITEM 1. BUSINESS
      ®
 2




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
    
    Increased penetration of our existing markets, particularly in
the gun cleaning market and accessories and the household cleaning market
    
    Development of new products for the hunting and camping
market and expanding into the household market
    
    Identification and development of products for new markets
in which the Company can be competitive due to its manufacturing
relationships
    
    Identification and recruitment of effective manufacturers
representatives to actively market these products on a national and
international basis
    
    Aggressive cost containment, both in operating expenses and
manufacturing costs
  3




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A. Introduction.
   (1)
    
    Gun Maintenance. We market over forty (40) different gun cleaning kits and rod
sets used to clean and maintain virtually any firearm on the market. The top of the
line kits are solid brass, and consist of either universal kits designed to fit a
variety of firearms, or caliber specific kits, or replacement items such as brushes,
mops, etc. These kits are also available in solid wood or aluminum cases, as well as
blister packed. We also carry a full line of replacement pieces for each kit.
Finally, we also market several kits that have been privately labeled for certain
customers. This product area accounted for 49% and 59% of sales in 2008 and 2007,
respectively.(2)
    
    Hunting and Camping.This category includes three meat-processing items,
Sportsmans Lighter, game processing kit, two aluminum camping tables and turkey
hunting seat. This product area accounted for 19% and 28% of sales in 2008 and 2007,
respectively(3)
    
    Household. This category includes a line of five household cleaning dusters
and a line of household fireplace screens, tools and accessories. The cleaner
dusters were first marketed during the fourth quarter of 2007, and the fireplace
equipment is a product line introduced inr 2008. This product area accounted for 23%
and 2% of
sales in 2008 and 2007, respectively.
 4




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(4)
    
    Gun Safety.We market twelve (12) different gun safety locks and five security
and specialty safes. The locks composition range from plastic to steel, and designed
to range from keyed trigger locks to cable locks. Our security safes are of
heavy-duty, all steel construction and are designed for firearms, jewelry and other
valuables. Eight of the Companys gun locks and two of the safes have been certified
for sale consistent with the firearms safety standards set out by the State of
California. These California firearms safety standards have been adopted by other
states and by a variety of gun manufacturers. This product area accounted for 9% and
11% of sales in 2008 and 2007, respectively.
    .
 5




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
    
    Gun Safety Master Lock (which presently controls 60%-70% of the market),
Smith & Wesson, Shot Lock, Sentry Safes, Pro-Loc and Gun Vault.
    
    Gun Maintenance Outers and Hoppes
    
    Hunting and Camping  traditional manufacturers of hunting and camping equipment
  6




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Pediatrics
   
    
    National retail chains such as Wal-Mart and Kmart (representing 72% and 69% of sales in
2008 and 2007, respectively. Wal-Mart accounted for 71% and 66% of our total sales revenues);
    
    Distributors such as Acusport, RSR Group, Inc., Jerrys Sport Center, Inc., and Maurice
(representing 3% and 5% of sales in 2008 and 2007, respectively);
    
    Sporting goods retailers such as Cabelas, Academy Sports, Dicks Sporting Goods and
Sportsmans Guide (representing 16% and 15% of sales in 2008 and 2007, respectively);
 7




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
    
    Gun manufacturers such as Savage Arms, Browning, Marlin, Glock and SIG-Arms (representing
5% and 6% of sales in 2008 and 2007, respectively); and
    
    Regional retail chains and sole proprietors (representing 4% and 5% of sales).
     8




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Model
    
    Patent No.
    
    ExpirationTVP095 Trigger Lock
    
    Des. 375,342
    
    2009SWA 03 SWAT Steering Wheel Alarm
    
    Des. 365,774
    
    2009GWA 001 Glass/Window Alarm
    
    Des. 371,086
    
    2009Defense Spray and Flashlight
    
    Des. 375,994
    
    2009Gun Cleaning Kit
    
    7,020,994B2
    
    2024
  ®
   9




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District of Columbia vs. Heller
    10




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http://www.sec.gov
 11




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ITEM 1A. RISK FACTORS
  The current economic and financial downturn may cause a decline in consumer spending and may
adversely affect the Companys business, operations, liquidity, financial results and stock price.
   12




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If we are to expand our operations, we may need additional capital.
 Our growth program and future profitability remains uncertain.
 Our success depends on maintaining relationships with customers.
 13




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We depend on purchase orders and have no long-term contractual relationship with our
customers.
 We depend on foreign contract manufacturers for substantially all of our manufacturing
requirements.
  The increased cost of raw materials and manufacturing has adversely affected our profits.
  14




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While we manufacture a variety of products, we rely primarily on the sale of gun cleaning kits
and hunting and camping accessories as our major source of revenue.
 We may be unable to compete favorably in the highly competitive markets in which we operate.
 We may not be able to attract and retain the qualified personnel we need to succeed in the
future.
 We may be adversely affected by legislation and regulation over firearms.
 15




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We extend credit to our customers and should our customers default on their obligations to
us, we may be subject to credit risk.
 With the exception of Gunmaster we have not to date registered or trademarked any of our
product names. ®
 The Company has engaged in several related-party transactions, which were not effected in
arms-length transactions.
 We face risks associated with international trade and currency exchange.
 16




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We face risks associated with international activities.
 Ø
    
    Compliance with local laws and regulatory requirements as well as changes in those
laws and requirements;Ø
    
    Foreign exchange rate fluctuations;Ø
    
    Limitations on exports;Ø
    
    The possibility of appropriation of our assets without just compensation;Ø
    
    Overlap of tax issues;Ø
    
    Tariffs and duties;Ø
    
    The burdens and costs of compliance with a variety of foreign laws; andØ
    
    Political or economic instability in countries in which we conduct business, including
possible terrorist acts.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  17




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  18




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
  Quarter Ended
    
    High
    
    
    LowMarch 31, 2007
    
    $
    2.48
    
    
    $
    1.26June 30, 2007
    
    $
    1.47
    
    
    $
    1.10September 30, 2007
    
    $
    1.35
    
    
    $
    1.06December 31, 2007
    
    $
    1.33
    
    
    $
    0.82March 31, 2008
    
    $
    1.05
    
    
    $
    0.68June 30, 2008
    
    $
    0.92
    
    
    $
    0.75September 30, 2008
    
    $
    0.89
    
    
    $
    0.69December 31, 2008
    
    $
    0.75
    
    
    $
    0.27
     (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)Total Number
    
    
    Maximumof Shares
    
    
    Number ofPurchased as
    
    
    Shares thatPart of Publicly
    
    
    May Yet be2008
    
    Total Number
    
    
    Average
    
    
    Announced
    
    
    PurchasedCalendar
    
    of Shares
    
    
    Price Paid
    
    
    Plans or
    
    
    Under the PlansMonth
    
    Purchased
    
    
    per Share
    
    
    Programs
    
    
    or ProgramsJanuary
    
    
    8,500
    
    
    $
    0.80
    
    
    
    8,500
    
    
    
    97,300October
    
    
    36,000
    
    
    $
    0.50
    
    
    
    36,000
    
    
    
    61,300November
    
    
    5,000
    
    
    $
    0.44
    
    
    
    5,000
    
    
    
    56,300December
    
    
    108,900
    
    
    $
    0.35
    
    
    
    56,300
    
    
    
    0Total
    
    
    158,400
    
    
    $
    0.41
    
    
    
    105,800
  19




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ITEM 6.
    
    SELECTED FINANCIAL DATA
  
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Results of Operations
     20




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Financial Condition
  2008
    
    
    2007Accounts receivable
    
    $
    495,718
    
    
    $
    263,646Due from factor
    
    $
    1,542,918
    
    
    $
    765,510Inventories
    
    $
    2,742,563
    
    
    $
    4,925,275Accounts payable-trade
    
    $
    795,136
    
    
    $
    2,393,050Total current assets
    
    $
    5,483,389
    
    
    $
    6,662,270Total current liabilities
    
    $
    1,107,814
    
    
    $
    2,640,446Net working capital
    
    $
    4,375,575
    
    
    $
    4,021,824Stockholders equity
    
    $
    5,005,598
    
    
    $
    4,713,881
 Accounts receivable and due from factor
   2008
    
    
    2007Total accounts receivable
    
    $
    5,220,636
    
    
    $
    4,772,170Less: assigned receivables
    
    
    (4,724,918
    )
    
    
    (4,508,524
    )Net accounts receivables
    
    $
    495,718
    
    
    $
    263,646Assigned receivables
    
    $
    4,724,918
    
    
    $
    4,508,524Less: Funds advanced
    
    
    (3,182,000
    )
    
    
    (3,743,014
    )Due from factor
    
    $
    1,542,918
    
    
    $
    765,510
 21




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Inventories
  Liabilities
  Liquidity and Capital Resources
    Off-Balance Sheet Arrangements
   22




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Trends
  Critical Accounting Estimates
  Long-lived Assets
   Patents and Trademarks
  23




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ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
       
    
    INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to properly
implement control procedures.
    
    LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANYS BOARD OF DIRECTORS: We do
not have a functioning audit committee or outside directors on the Companys Board of
Directors, resulting in ineffective oversight in the establishment and monitoring of
required internal controls and procedures.
       24




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ITEM 9A(T).
    
    CONTROLS AND PROCEDURES.
  
 ITEM 9B.
    
    OTHER INFORMATION
  25




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PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
   Name
    
    Age
    
    Position
    
    TermDavid A. Collins
    
    63
    
    President; CEO; Director
    
    2008-2009Robert C. Goodwin
    
    52
    
    CFO; Director
    
    2008-2009
     26




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27




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ITEM 11.
    
    EXECUTIVE COMPENSATION
   All OtherName and
    
    
    
    
    Salary
    
    
    Commission
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    
    Year
    
    $
    
    
    $
    
    
    $
    
    
    $David A. Collins,
PEO
    
    
    2008
    
    
    
    120,000
    
    
    
    423,747
    
    
    
    66,000
    
    
    
    609,7472007
    
    
    
    70,000
    
    
    
    453,245
    
    
    
    66,000
    
    
    
    589,245Robert C. Goodwin,
PFO
    
    
    2008
    
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,4002007
    
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,400
     28




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ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
   Name and Address of
    
    Number of Shares
    
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficially Owned
    
    
    of ClassCommon Stock
    
    Praetorian Capital Management LLC/
Praetorian Offshore Ltd.
Miami Beach, FL
    
    
    752,555
    
    
    
    12.9
    %Common Stock
    
    David A. Collins
    
    
    500,500
    [1]
    
    
    8.6
    %Miami Beach, FLCommon Stock
    
    Kennerman Associates
    
    
    785,020
    
    
    
    13.5
    %Saratoga Springs, NY
 
 [1] Includes 32,000 shares owned by the Collins Family Trust. David Collins acknowledges
beneficial ownership and control of the shares held in this Trust. The beneficiaries of
the Collins Family Trust are Payton P. Collins and David A. Collins, Jr. 29




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Name and Address of
    
    Number of Shares
    
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficially Owned
    
    
    of ClassCommon Stock
    
    Robert C. Goodwin
    
    
    19,073
    
    
    
    0.33
    %N. Little Rock, ARCommon Stock
    
    David A. Collins
    
    
    500,500
    
    
    
    8.6
    %Miami Beach, FL
   Equity Compensation Plan InformationNumber ofsecuritiesremaining availableNumber of
    
    
    
    for future issuancesecurities to be
    
    
    
    under equityissued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected in columnand rights
    
    and rights
    
    (a)Plan category
    
    (a)
    
    (b)
    
    (c)Equity compensation plans
    
    None  none
    
    zero   noneapproved by security holders
    
    outstanding
    
    outstanding
    
    
    1,000,000Equity compensation plans not
    
    None  none
    
    zero  noneapproved by security holders
    
    outstanding
    
    outstanding
    
    NoneTotal
    
    None
    
    None
    
    
    1,000,000
 30




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ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
     31




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ITEM 14.
    
    PRINCIPAL ACCOUNTANTING FEES AND SERVICES
   (1)
    
    
    (2)
    
    
    (3)
    
    
    (4)Audit
    
    
    Audit
    
    
    TaxTotal
    
    
    Fees
    
    
    Related
    
    
    Compliance
    
    
    Other2008
    
    $
    88,330
    
    
    $
    85,526
    
    
    $
    -0-
    
    
    $
    2,804
    
    
    $
    -0 -2007
    
    $
    108,810
    
    
    $
    105,550
    
    
    $
    -0-
    
    
    $
    3,260
    
    
    $
    -0 -
 
 (1)
    
    Audit Fees.The aggregate fees billed for professional services related to the audit of our
annual financial statements, review of financial statements included in our Forms 10-Q, or other
services normally provided by Frost in connection with statutory and regulatory filings or
engagements for the fiscal years ended December 31, 2008 and 2007.(2)
    
    Audit-Related Fees.Audit related fees are for professional services for assurance and related
services by Frost that are reasonably related to the performance of the audit or review of our
financial statements and that are not reported above under Audit Fees for years ended December
31, 2008 and 2007. There were no such services provided during 2008 or 2007.(3)
    
    Tax Fees.The aggregate fees billed by Frost for professional services related to tax
compliance including preparation of federal and state tax returns. These services were approved in
advance by the Board of Directors.(4)
    
    All Other Fees.There were no other fees billed by Frost for the fiscal years ended December
31, 2008 and 2007.  32




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PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  Exhibit
    
    Description2
    
    
    Asset Purchase Agreement3.1
    
    
    Articles of Incorporation3.2
    
    
    Bylaws10.1
    
    
    Office Lease10.1.1
    
    
    Warehouse Lease10.2
    
    
    Factoring Agreement10.3.1
    
    
    Amended Employment contract of David A. Collins14.1
    
    
    Code of Business Conduct & Ethics31.1
    
    
    Certification of Principal Executive Officer pursuant to Rule
13a-14(a)/15d-14(a)*31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule
13a-14(a)/15d-14(a)*32.1
    
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C.
Section 1350*32.2
    
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C.
Section 1350*
 
 *
    
    These exhibits are enclosed within this filing. 33




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 December 31, 2008 and 2007
 Consolidated Financial Statements
 With
 Report of Independent Registered Public Accounting Firm




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Report of Independent Registered Public Accounting Firm




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Balance Sheets
 December 31, 2008 and 2007
 2008
    
    
    2007AssetsCurrent assetsCash
    
    $
    599,103
    
    
    $
    402,468Accounts receivable, less allowance for doubtful accounts
of $20,000 and $5,000 in 2008 and 2007, respectively
    
    
    495,718
    
    
    
    263,646Due from factor
    
    
    1,542,918
    
    
    
    765,510Inventories
    
    
    2,742,563
    
    
    
    4,925,275Prepaid expenses and deferred charges
    
    
    72,068
    
    
    
    115,686Income taxes receivable
    
    
    
    
    
    
    153,870Deferred income tax asset
    
    
    31,019
    
    
    
    35,815Total current assets
    
    
    5,483,389
    
    
    
    6,662,270Property and equipmentLeasehold improvements
    
    
    55,323
    
    
    
    55,323Furniture and fixtures
    
    
    297,356
    
    
    
    278,322Molds, dies and artwork
    
    
    536,809
    
    
    
    513,949889,488
    
    
    
    847,594Accumulated depreciation
    
    
    (623,477
    )
    
    
    (573,458
    )Net property and equipment
    
    
    266,011
    
    
    
    274,136Other assetsPatents and trademarks, net of accumulated amortization of
$119,772 and $104,208 in 2008 and 2007, respectively
    
    
    121,718
    
    
    
    133,762Deposit
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    28,617
    
    
    
    28,925Notes receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Stockholder
    
    
    170,382
    
    
    
    178,465Total other assets
    
    
    430,586
    
    
    
    451,021Total assets
    
    $
    6,179,986
    
    
    $
    7,387,427




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2008
    
    
    2007Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    104,609
    
    
    $
    183,186Accounts payable
    
    
    795,136
    
    
    
    2,393,050Accrued payroll tax withholdings
    
    
    25,519
    
    
    
    25,338Accrued expenses  other
    
    
    92,850
    
    
    
    38,872Income taxes payable
    
    
    89,700
    
    
    
    Total current liabilities
    
    
    1,107,814
    
    
    
    2,640,446Deferred income tax liability
    
    
    66,574
    
    
    
    33,100Commitments and contingencies (Note 14)Stockholders equityPreferred stock, $.001 par value; authorized 10,000,000 shares;
no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; authorized 50,000,000 shares;
6,323,364 shares issued at December 31, 2008 and 2007;
5,882,999 and 6,041,399 shares outstanding at December 31,
2008 and 2007, respectively
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (372,124
    )
    
    
    (307,147
    )Retained earnings
    
    
    3,408,297
    
    
    
    3,051,603Total stockholders equity
    
    
    5,005,598
    
    
    
    4,713,881Total liabilities and stockholders equity
    
    $
    6,179,986
    
    
    $
    7,387,427




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Income
 For the Years Ended December 31, 2008 and 2007
 2008
    
    
    2007Sales, net of returns and allowances
    
    $
    17,042,361
    
    
    $
    14,777,645Cost of sales
    
    
    13,205,295
    
    
    
    10,838,971Gross profit
    
    
    3,837,066
    
    
    
    3,938,674Operating expensesSelling
    
    
    1,752,243
    
    
    
    1,742,220General and administrative
    
    
    1,170,951
    
    
    
    1,312,235Total operating expenses
    
    
    2,923,194
    
    
    
    3,054,455Income from operations
    
    
    913,872
    
    
    
    884,219Other income (expense)Interest expense
    
    
    (275,507
    )
    
    
    (326,473
    )Other income
    
    
    169
    
    
    
    95Total other expense, net
    
    
    (275,338
    )
    
    
    (326,378
    )Income before income tax provision
    
    
    638,534
    
    
    
    557,841Provision for income taxes
    
    
    281,840
    
    
    
    216,947Net income
    
    $
    356,694
    
    
    $
    340,894Basic and diluted earnings per share
    
    $
    0.06
    
    
    $
    0.06Weighted-average number of common sharesBasic
    
    
    6,020,485
    
    
    
    6,109,026Diluted
    
    
    6,020,485
    
    
    
    6,109,026




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Stockholders Equity
 For the Years Ended December 31, 2008 and 2007
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    Treasury Stock
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Cost
    
    
    Earnings
    
    
    TotalBalance  January 1, 2007
    
    
    6,323,364
    
    
    $
    6,323
    
    
    $
    1,963,102
    
    
    
    187,765
    
    
    $
    (201,333
    )
    
    $
    2,710,709
    
    
    $
    4,478,801Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,200
    
    
    
    (105,814
    )
    
    
    
    
    
    
    (105,814
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    340,894
    
    
    
    340,894Balance  December 31, 2007
    
    
    6,323,364
    
    
    
    6,323
    
    
    
    1,963,102
    
    
    
    281,965
    
    
    
    (307,147
    )
    
    
    3,051,603
    
    
    
    4,713,881Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158,400
    
    
    
    (64,977
    )
    
    
    
    
    
    
    (64,977
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356,694
    
    
    
    356,694Balance  December 31, 2008
    
    
    6,323,364
    
    
    $
    6,323
    
    
    $
    1,963,102
    
    
    
    440,365
    
    
    $
    (372,124
    )
    
    $
    3,408,297
    
    
    $
    5,005,598




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2008 and 2007
 2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    356,694
    
    
    $
    340,894Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation
    
    
    50,019
    
    
    
    50,992Amortization
    
    
    15,564
    
    
    
    15,743Deferred income taxes
    
    
    38,270
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (232,072
    )
    
    
    268,382Due from factor
    
    
    (777,408
    )
    
    
    516,698Inventories
    
    
    2,182,712
    
    
    
    (1,794,450
    )Prepaid expenses and deferred charges
    
    
    43,618
    
    
    
    (6,721
    )Income taxes receivable
    
    
    153,870
    
    
    
    216,947Deposits
    
    
    
    
    
    
    (5,916
    )Repayments (advances) to employees
    
    
    308
    
    
    
    (4,818
    )Accounts payable
    
    
    (1,597,914
    )
    
    
    752,605Accrued payroll tax withholdings
    
    
    181
    
    
    
    394Accrued expenses other
    
    
    53,978
    
    
    
    (8,680
    )Income taxes payable
    
    
    89,700
    
    
    
    Net cash provided by operating activities
    
    
    377,520
    
    
    
    342,070Cash flows from investing activitiesPurchases of property and equipment
    
    
    (41,894
    )
    
    
    (113,520
    )Payments for patents and trademarks
    
    
    (3,520
    )
    
    
    (1,755
    )Net repayments (advances) on note receivable  stockholder
    
    
    8,083
    
    
    
    (47,934
    )Net cash used by investing activities
    
    
    (37,331
    )
    
    
    (163,209
    )Cash flows from financing activitiesAdvances on notes payable
    
    
    
    
    
    
    96,500Payments on notes payable
    
    
    (78,577
    )
    
    
    (106,047
    )Purchase of treasury stock
    
    
    (64,977
    )
    
    
    (105,814
    )Net cash used by financing activities
    
    
    (143,554
    )
    
    
    (115,361
    )Net increase in cash
    
    
    196,635
    
    
    
    63,500Cash  beginning of year
    
    
    402,468
    
    
    
    338,968Cash  end of year
    
    $
    599,103
    
    
    $
    402,468Supplementary disclosures of cash flow informationCash paid during the year forInterest
    
    $
    275,808
    
    
    $
    326,662Taxes
    
    
    
    
    
    
    




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Organization and Nature of Business
  Summary of Significant Accounting Policies
 a.
    
    Principles of consolidation The accompanying consolidated financial statements
include the accounts of DAC Technologies Group International, Inc. and its wholly owned
subsidiary, Summit Training International (collectively, the Company). All material
intercompany accounts and transactions have been eliminated in the consolidation.b.
    
    Revenue recognition The Company recognizes sales revenue when the following criteria
are met: persuasive evidence of an agreement exists, which is an invoice, risk of loss has
been transferred which is generally F.O.B shipping point, the Companys price to the buyer
is fixed and determinable, and collectibility is reasonably assured.c.
    
    Cash equivalents The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash equivalents. The
Company held no cash equivalents at December 31, 2008 or 2007.d.
    
    Accounts and notes receivable The majority of the Companys receivables are factored
pursuant to a factoring agreement as described in Note 6. At December 31, 2008 and 2007,
approximately 91% and 94%, respectively, of the Companys accounts receivable, gross of the
balance due to factor, was covered by this agreement. For receivables which are not
covered under this agreement, the Company evaluates customer accounts on a periodic basis
and records an allowance for amounts estimated to be uncollectible. Past due status is
determined based upon contractual terms. Amounts that are determined to be uncollectible
are written off against this allowance when collection attempts on the accounts have been
exhausted. Management uses significant judgment in estimating uncollectible accounts. In
estimating uncollectible amounts, management considers factors such as current overall
economic conditions, industry-specific economic conditions, historical customer performance
and anticipated customer performance. While management believes the Companys processes
effectively address its exposure to doubtful accounts, changes in economic, industry or specific customer conditions may require
adjustment to the allowance recorded by the Company.




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Summary of Significant Accounting Policies (cont.)
 e.
    
    Inventories Inventories are stated at the lower of weighted-average cost or market.
Costs include freight and applicable customs fees. Market is determined based on net
realizable value. Appropriate consideration is given to obsolescence, excessive levels,
deterioration and other factors in evaluating net realizable value. Inventories are shown
net of a valuation reserve of $61,011 and $82,926 at December 31, 2008 and 2007,
respectively. The Company receives inventory from overseas at terms of F.O.B. shipping
point, bearing the risk of loss at that point in time. During the time period prior to
receipt in the warehouse, inventory is classified and recorded as inventory in transit.
Inventory held in the warehouse is classified as finished goods.f.
    
    Property and equipment Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the following useful lives:
 Leasehold improvements
    
    8
    yearsFurniture and fixtures
    
    10
    yearsMolds, dies and artwork
    
    10
    years
  g.
    
    Patents and trademarks Costs incurred in connection with the acquisition of patents
and trademarks are capitalized and amortized over their estimated useful lives, which range
from five to seventeen years.h.
    
    Income taxes The Company utilizes the liability method of accounting for deferred
income taxes. The liability method requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences between tax
basis and financial reporting basis of assets and liabilities as of the year end date at
the presently enacted tax rates. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount that is expected to be realized.i.
    
    Shipping and handling All shipping and handling costs are included in selling
expense in the accompanying consolidated statements of income. These costs totaled
$353,019 and $383,477 for the years ended December 31, 2008 and 2007, respectively.




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Summary of Significant Accounting Policies (cont.)
 j.
    
    Earnings per share Basic earnings per share has been calculated using the
weighted-average number of common shares outstanding for each year. The dilutive effect of
potential common shares outstanding is included in diluted earnings per share. The
computations of basic earnings per share and diluted earnings per share are as follows:
 2008
    
    
    2007Net income
    
    $
    356,694
    
    
    $
    340,894Basic weighted-average shares
    
    
    6,020,485
    
    
    
    6,109,026Dilutive potential common shares
    
    
    6,020,485
    
    
    
    6,109,026Net earnings per shareBasic
    
    $
    0.06
    
    
    $
    0.06Diluted
    
    $
    0.06
    
    
    $
    0.06
 k.
    
    Estimates The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.l.
    
    Fair value of financial instruments The fair values of cash and cash equivalents,
accounts receivables and notes payable approximate their carrying values due to the
short-term nature of the instruments. The fair value of notes receivable, which is based
on discounted cash flows using current interest rates, approximates the carrying value at
December 31, 2008 and 2007.m.
    
    Impairment of long-lived assets Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires that
long-lived assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts of any asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount the carrying amount of the assets
exceeds the fair value of the assets. Based upon managements assessment of the impairment
indicators, no impairment testing was necessary during the years ended December 31, 2008 or
2007.




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Summary of Significant Accounting Policies (cont.)
 n.
    
    Impairment of patents and trademarks SFAS No. 144 requires that separate intangible
assets that have finite lives be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of any asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is measured by the
amount the carrying amount of the assets exceeds the fair value of the assets. Based on
managements assessment of the impairment indicators, no impairment testing was necessary
during the years ended December 31, 2008 or 2007.o.
    
    New accounting pronouncements In September 2006, the Financial Accounting Standards
Board (FASB) issued SFAS No. 157, Fair Value Measurements, which provides enhanced
guidance for using fair value to measure assets and liabilities. Under the new standard,
fair value refers to the price that would be received to sell an asset or the price paid to
transfer a liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. The standard provides a fair value hierarchy wherein
quoted prices in active markets are assigned the highest priority is assigned and the
lowest priority to unobservable data. The standard is effective for the financial
statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Company adopted the provisions of SFAS No. 157 on January
1, 2008. There was no impact on the consolidated financial statements as a result of the
adoption of the standard.




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Summary of Significant Accounting Policies (cont.)
  Variable Interest Entities
  Inventories
  2008
    
    
    2007Finished goods
    
    $
    2,314,319
    
    
    $
    3,993,949Inventory in transit
    
    
    415,102
    
    
    
    908,359Parts
    
    
    13,142
    
    
    
    22,967$
    2,742,563
    
    
    $
    4,925,275




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Intangible Assets
  2008
    
    
    2007Finite-livedPatents and trademarks, net of accumulated
amortization of $119,772 and $104,208 in
2008 and 2007, respectively
    
    $
    121,718
    
    
    $
    133,762
  2009
    
    $
    13,9462010
    
    
    12,9602011
    
    
    12,9602012
    
    
    12,9602013
    
    
    12,960Thereafter
    
    
    55,932$
    121,718
  Due From Factor




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Due From Factor (cont.)
  2008
    
    
    2007Accounts receivable factored
    
    $
    4,724,918
    
    
    $
    4,508,524Amounts advanced and outstanding
    
    
    3,182,000
    
    
    
    3,743,014Due from factor
    
    $
    1,542,918
    
    
    $
    765,510
 Notes Payable
  2008
    
    
    2007Note payable to a bank; interest at 7.25%; payable
on demand or if no demand, November 1, 2010;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders.
    
    $
    57,411
    
    
    $
    82,524Note payable to a bank; interest at 7.25%; payable
on demand or if no demand, November 12, 2010;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders.
    
    
    47,198
    
    
    
    67,852Note payable to an insurance company; interest
at 6.00%; payable in monthly installments of
$8,305, including interest, with remaining principal
and interest due May 15, 2008; unsecured.
    
    
    
    
    
    
    32,810$
    104,609
    
    
    $
    183,186




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Equity
   Treasury Stock
  Stock Option Plan




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Warrants
  Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Warrants
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Exercisable
    
    
    PriceOutstanding  January 1, 2007
    
    
    393,901
    
    
    $
    2.57
    
    
    
    
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2007
    
    
    393,901
    
    
    
    2.57
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2008
    
    
    393,901
    
    
    $
    2.57
    
    
    
    
    
    
    $
    
  Income Taxes
  2008
    
    
    2007Current provision
    
    $
    243,570
    
    
    $
    216,947Deferred provision
    
    
    38,270
    
    
    
    $
    281,840
    
    
    $
    216,947




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Income Taxes (cont.)
  2008
    
    
    2007Income taxes computed at federal statutory
tax rate
    
    $
    217,103
    
    
    $
    189,666State tax provision, net of federal benefits
    
    
    27,393
    
    
    
    23,931Nondeductible expenses and other
    
    
    37,344
    
    
    
    3,350Provision for income taxes
    
    $
    281,840
    
    
    $
    216,947
  2008
    
    
    2007Allowance for doubtful accounts
    
    $
    7,658
    
    
    $
    1,915Allowance for excess inventory
    
    
    38,125
    
    
    
    38,125Accumulated tax depreciation in excess of
book depreciation
    
    
    (78,874
    )
    
    
    (35,467
    )Accumulated tax amortization in excess of
book amortization
    
    
    (2,464
    )
    
    
    (1,858
    )Net deferred tax asset (liability)
    
    $
    (35,555
    )
    
    $
    2,715




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Related Party Transactions
      Commitments and Contingencies
 a.
    
    In December 2006, the Company leased new office and warehouse space. The office space
lease agreement provides for rent at a rate of $7,757 per month and expires on January 31,
2011, with a renewal option through January 31, 2015. The warehouse space lease agreement
provides for
rent at a rate of $9,366 per month and expires on December 31, 2010, with a renewal option
through December 31, 2014.
   2009
    
    $
    218,9122010
    
    
    215,8292011
    
    
    8,229$
    442,970




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Commitments and Contingencies (cont.)
 b.
    
    The Company is involved in various legal actions arising in the normal course of
business. In the opinion of management, the ultimate resolution of these matters will not
have a material adverse effect on the Companys consolidated financial position or results
of operations.c.
    
    During 1998, the Company entered into an asset purchase agreement, wherein it acquired
certain assets and assumed certain liabilities of DAC Technologies of America, Inc. in a
combination that was accounted for in a manner similar to a pooling of interest. Assets
and liabilities that were not included in this transaction consisted of a receivable from a
major stockholder and president, certain bridge loans, stockholder advances, an automobile,
certain accounts payable, accrued commissions and accrued payroll totaling $200,488. The
Company could be held liable in the event of litigation, for the outstanding balances of
certain unsecured liabilities of DAC Technologies of America, Inc. totaling approximately
$119,000. No accrual has been made for this contingency.
 Major Customers and Suppliers
   Concentrations of Credit Risk




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Financial Information by Business Segment
   2008
    
    
    2007RevenuesGun cleaning and maintenance
    
    $
    8,369,446
    
    
    $
    8,659,456Hunting and camping
    
    
    3,236,058
    
    
    
    4,159,113Household
    
    
    3,935,710
    
    
    
    314,172Gun safety
    
    
    1,490,196
    
    
    
    1,622,982Other
    
    
    10,951
    
    
    
    21,922Total revenues
    
    $
    17,042,361
    
    
    $
    14,777,645Income before income tax provisionGun cleaning and maintenance
    
    $
    791,945
    
    
    $
    595,363Hunting and camping
    
    
    (319,239
    )
    
    
    (173,213
    )Household
    
    
    52,706
    
    
    
    37,625Gun safety
    
    
    127,797
    
    
    
    88,464Other
    
    
    (14,675
    )
    
    
    9,602Income before income tax provision
    
    $
    638,534
    
    
    $
    557,841




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2008 and 2007
 Financial Information by Business Segment (cont.)
 2008
    
    
    2007Identifiable assetsGun cleaning and maintenanceUnited States
    
    $
    1,135,498
    
    
    $
    2,627,085Hunting and campingUnited States
    
    
    720,555
    
    
    
    1,623,617HouseholdUnited States
    
    
    554,351
    
    
    
    158,365Gun safetyUnited States
    
    
    389,944
    
    
    
    489,935China
    
    
    10,753
    
    
    
    19,477OtherUnited States
    
    
    62,948
    
    
    
    134,421China
    
    
    6,225
    
    
    
    31,595Corporate
    
    
    3,299,712
    
    
    
    2,302,932Total identifiable assets
    
    $
    6,179,986
    
    
    $
    7,387,427




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##### Table of Contents



SIGNATURES
  By:
    /s/ David A. CollinsDavid A. CollinsChairman, CEO and Principal Executive Officer  By:
    /s/ Robert C. GoodwinRobert C. GoodwinPrincipal Accounting Officer and Principal Financial Officer  34