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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
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 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.)
  
  
       o þ
 o þ
 þ o
 o þ
 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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##### 



PageFORWARD-LOOKING STATEMENT
    
    
    2PART I
    
    
    3ITEM 1 BUSINESS
    
    
    3ITEM 1A RISK FACTORS
    
    
    14ITEM 1B UNRESOLVED STAFF COMMENTS
    
    
    20ITEM 2 PROPERTIES
    
    
    20ITEM 3 LEGAL PROCEEDINGS
    
    
    21ITEM 4 REMOVED AND RESERVED
    
    
    21PART II
    
    
    21ITEM 5 MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    21ITEM 6 SELECTED FINANCIAL DATA
    
    
    22ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    28ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    28ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    28ITEM 9A CONTROLS AND PROCEDURES
    
    
    29ITEM 9A (T) CONTROLS AND PROCEDURES
    
    
    30ITEM 9B OTHER INFORMATION
    
    
    31PART III
    
    
    31ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    31ITEM 11 EXECUTIVE COMPENSATION
    
    
    33ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    34ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    36ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    37PART IV
    
    
    38ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    38EX-10.3.2EX-31.1EX-31.2EX-32.1EX-32.2EX-10.3.2EX-31.1EX-31.2EX-32.1EX-32.2




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FORWARD-LOOKING STATEMENTS
  2




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ITEM 1. BUSINESS
 (1)
    
    History and Business Development.
     (2)
    
    Business Plan
  3




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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
our other established markets
    
    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
  4




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(3)
    
    Products
 A. Introduction.
   (a)
    
    Gun Cleaning and Maintenance. We market over fifty (50) 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 universal kits designed to fit a
variety of firearms, or caliber specific kits, or replacement items such as brushes,
mops, etc. These kits are 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 69% and 49% of sales in 2009 and 2008,
respectively.(b)
    
    Hunting and Camping.This category includes Sportsmans Lighter, two aluminum
camping tables and turkey hunting seat. The game processing items carried in 2008 were
eliminated in 2009. This product area accounted for 9% and
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19% of sales in 2009 and
2008, respectively.(c)
    
    Household. This category includes a line of five household cleaning dusters.
The line of household fireplace screens, tools and accessories were eliminated in
2009. This product area accounted for 7% and 23% of sales in 2009 and 2008,
respectively.(d)
    
    Gun Safety.We market twelve (12) different gun safety locks and five (5)
security and specialty safes. The locks composition range from plastic to steel, and
are 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 15% and
9% of sales in 2009 and 2008, respectively.
 (4)
    
    Manufacturing, Suppliers and Distribution.
    6




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.
     7




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
    
    Gun Safety- Master Lock (which presently controls 60%-70% of the market), Smith
& Wesson, Shot Lock, Sentry Safes, Pro-Lok and Gun Vault.
    
    Gun Cleaning Kits Outers and Hoppes
    
    Hunting and Camping traditional manufacturers of hunting and camping equipment
     8




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Pediatrics
    
    
    National retail chains such as Wal-Mart, which accounted for 55% and 71% of sales in 2009
and 2008, respectively
    
    Distributors such as Acusport, RSR Group, Inc., Jerrys Sport Center, Inc., and Maurice
(representing 6% and 3% of sales in 2009 and 2008, respectively);
    
    Sporting goods retailers such as Cabelas, Academy Sports, Dicks Sporting Goods and
Sportsmans Guide (representing 24% and 16% of sales in 2009 and 2008, respectively);
    
    Gun manufacturers such as Savage Arms, Browning, Marlin, Glock and SIG-Arms (representing
9% and 5% of sales in 2009 and 2008, respectively); and
    
    Regional retail chains and sole proprietors (representing 7% and 4% of sales).
 9




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Model
    
    Patent No.
    
    ExpirationTVP 095 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
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11




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District of Columbia vs. Heller
    12




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13




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http://www.sec.gov
 
 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.
  14




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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 key customers.
 15




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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.
  In the past the increased cost of raw materials and manufacturing has adversely affected our
profits.
 16




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Demand for our products and our financial results are dependent on the successful development
of new products and processes .
 While we manufacture a variety of products, we rely primarily on the sale of gun cleaning kits
and gun safety products 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.
 17




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We may be adversely affected by legislation and regulation over firearms.
 We extend credit to our customers and should our customers default on their obligations to
us, we may be subject to credit risk.
 We Need Liquidity to Operate Our Business.
 The inability to secure and maintain rights to intellectual property could adversely affect
our business.
 18




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The sale of our licensed products depends on the goodwill associated with the name and brand
and the success of our licensors.
 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.
 19




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We face risks associated with international activities.These activities expose us to
various economic, political, and other risks, including the following:
 
    
    Compliance with local laws and regulatory requirements as well as changes in those
laws and requirements;
    
    Foreign exchange rate fluctuations;
    
    Limitations on exports;
    
    The possibility of appropriation of our assets without just compensation;
    
    Overlap of tax issues;
    
    Tariffs and duties;
    
    The burdens and costs of compliance with a variety of foreign laws; and
political or economic instability in countries in which we conduct
business, including possible terrorist acts.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  20




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. REMOVED AND RESERVED
 
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
  21




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Quarter Ended
    
    High
    
    
    LowMarch 31, 2008
    
    $
    1.05
    
    
    $
    0.68June 30, 2008
    
    $
    0.92
    
    
    $
    0.75September 30, 2008
    
    $
    0.89
    
    
    $
    0.69December 31, 2008
    
    $
    0.75
    
    
    $
    0.27March 31, 2009
    
    $
    0.39
    
    
    $
    0.25June 30, 2009
    
    $
    0.80
    
    
    $
    0.29September 30, 2009
    
    $
    0.94
    
    
    $
    0.65December 31, 2009
    
    $
    0.96
    
    
    $
    0.68
     
 ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  22




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Results of Operations
     23




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Financial Condition
  2009
    
    
    2008Accounts receivable
    
    $
    929,082
    
    
    $
    495,718Due from factor
    
    $
    27,592
    
    
    $
    1,542,918Inventories
    
    $
    4,479,347
    
    
    $
    2,742,563Accounts payable-trade
    
    $
    776,093
    
    
    $
    795,136Total current assets
    
    $
    5,931,867
    
    
    $
    5,483,389Total current liabilities
    
    $
    1,072,590
    
    
    $
    1,107,814Net working capital
    
    $
    4,859,277
    
    
    $
    4,375,575Stockholders equity
    
    $
    5,530,234
    
    
    $
    5,005,598
 Accounts receivable and due from factor
   2009
    
    
    2008Total accounts receivable
    
    $
    2,010,322
    
    
    $
    5,220,636Less: assigned receivables
    
    
    (1,081,240
    )
    
    
    (4,724,918
    )Net accounts receivables
    
    $
    929,082
    
    
    $
    495,718Assigned receivables
    
    $
    1,081,240
    
    
    $
    4,724,918Less: Funds advanced
    
    
    (1,053,648
    )
    
    
    (3,182,000
    )Due from factor
    
    $
    27,592
    
    
    $
    1,542,918
  24




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Inventories
  Liabilities
  Liquidity and Capital Resources
  25




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Off-Balance Sheet Arrangements
  26




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Trends
  Critical Accounting Estimates
  27




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Long-lived Assets
   Patents and Trademarks
  
 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
  28




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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.
 29




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ITEM 9A(T). CONTROLS AND PROCEDURES.
  30




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ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
   Name
    
    Age
    
    Position
    
    TermDavid A. Collins
    
    64
    
    President, CEO, Director
    
    2009-2010Robert C. Goodwin
    
    53
    
    CFO/Director
    
    2009-2010
   31




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ITEM 11. EXECUTIVE COMPENSATION
   All OtherName and Principal Position
    
    Year
    
    Salary
    
    Commission
    
    Compensation
    
    TotalDavid A. Collins,
PEO
    
    2009
    
    $
    120,000
    
    
    $
    450,443
    
    
    $
    66,000
    
    
    $
    636,4432008
    
    
    120,000
    
    
    
    423,747
    
    
    
    66,000
    
    
    
    609,747Robert C. Goodwin,
PFO
    
    2009
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,4002008
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,400
     33




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
   34




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Number of Shares
    
    PercentTitle of Class
    
    Name and Address of Beneficial Owner
    
    Beneficially Owned
    
    of ClassCommon Stock
    
    Kennerman Associates
    
    785,020
    
    13.5%Saratoga Springs, NYCommon Stock
    
    Praetorian Capital Management LLCMiami Beach, FL
    
    575,255
    
    9.9%Common Stock
    
    David A. Collins
    
    500,500 [1]
    
    8.6%Miami Beach, FLCommon Stock
    
    Midsouth Investor Fund LP
    
    370,000
    
    6.4%Nashville, TN
 
 [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.  Number of Shares
    
    PercentTitle of Class
    
    Name and Address of 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
   35




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Equity Compensation Plan Information
 Plan category
    
    Number of securities to be issued upon exercise of outstanding options, warrants and rights


(a)
    
    Weighted-average exercise price of outstanding options, warrants and rights


(b)
    
    Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))


(c)Equity compensation
plans approved by security holders
    
    None none outstanding
    
    zero none outstanding
    
    1,000,000Equity compensation
plans not approved by security holders
    
    Nonenone outstanding
    
    zeronone outstanding
    
    NoneTotal
    
    None
    
    None
    
    1,000,000
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
   36




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ITEM 14. PRINCIPAL ACCOUNTANTING FEES AND SERVICES
   (1)
    
    (2)
    
    (3)Audit
    
    Audit
    
    Tax
    
    (4)Total
    
    Fees
    
    Related
    
    Compliance
    
    Other2009
    
    $
    72,680
    
    
    $
    70,254
    
    
    $
    -0-
    
    
    $
    2,426
    
    
    $
    -0-2008
    
    $
    88,330
    
    
    $
    85,526
    
    
    $
    -0-
    
    
    $
    2,804
    
    
    $
    -0-
 37




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(1)    Audit Fees.
 (2)    Audit-Related Fees.
 (3)    Tax Fees.
 (4)     All Other Fees.
    
 PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 38




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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. Collins10.3.2
    
    Amended Employment contract of David A. Collins*14.1
    
    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. 39




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 December 31, 2009 and 2008
 Consolidated Financial Statements
 With
 Report of Independent Registered Public Accounting Firms
 F-1




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Report of Independent Registered Public Accounting Firm
 
    
 
 F-2




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Report of Independent Registered Public Accounting Firm
 
    
 
 F-3




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Balance Sheets
 December 31, 2009 and 2008
 2009
    
    
    2008AssetsCurrent assetsCash
    
    $
    430,436
    
    
    $
    599,103Accounts receivable, less allowance for doubtful accounts
of $20,000 in 2009 and 2008
    
    
    929,082
    
    
    
    495,718Due from factor
    
    
    27,592
    
    
    
    1,542,918Inventories
    
    
    4,479,347
    
    
    
    2,742,563Prepaid expenses and deferred charges
    
    
    53,460
    
    
    
    72,068Deferred income tax asset
    
    
    11,950
    
    
    
    31,019Total current assets
    
    
    5,931,867
    
    
    
    5,483,389Property and equipmentLeasehold improvements
    
    
    57,232
    
    
    
    55,323Furniture and fixtures
    
    
    333,161
    
    
    
    297,356Molds, dies and artwork
    
    
    560,952
    
    
    
    536,809951,345
    
    
    
    889,488Accumulated depreciation
    
    
    (674,486
    )
    
    
    (623,477
    )Net property and equipment
    
    
    276,859
    
    
    
    266,011Other assetsPatents and trademarks, net of accumulated amortization of
$135,434 and $119,772 in 2009 and 2008, respectively
    
    
    117,346
    
    
    
    121,718Deposit
    
    
    17,351
    
    
    
    17,351Advances to employees
    
    
    29,658
    
    
    
    28,617Notes receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Stockholder
    
    
    216,377
    
    
    
    170,382Total other assets
    
    
    473,250
    
    
    
    430,586Total assets
    
    $
    6,681,976
    
    
    $
    6,179,986
 F-4




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2009
    
    
    2008Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    52,454
    
    
    $
    104,609Accounts payable
    
    
    776,093
    
    
    
    795,136Accrued payroll tax withholdings
    
    
    27,780
    
    
    
    25,519Accrued expenses  other
    
    
    145,097
    
    
    
    92,850Income taxes payable
    
    
    71,166
    
    
    
    89,700Total current liabilities
    
    
    1,072,590
    
    
    
    1,107,814Deferred income tax liability
    
    
    79,152
    
    
    
    66,574Commitments and contingencies (Note 13)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, 2009 and 2008;
5,793,699 and 5,882,999 shares outstanding at December 31,
2009 and 2008, respectively
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (401,043
    )
    
    
    (372,124
    )Retained earnings
    
    
    3,961,852
    
    
    
    3,408,297Total stockholders equity
    
    
    5,530,234
    
    
    
    5,005,598Total liabilities and stockholders equity
    
    $
    6,681,976
    
    
    $
    6,179,986
  F-5




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Income
 For the Years Ended December 31, 2009 and 2008
 2009
    
    
    2008Sales, net of returns and allowances
    
    $
    14,680,709
    
    
    $
    17,042,361Cost of sales
    
    
    10,546,557
    
    
    
    13,205,295Gross profit
    
    
    4,134,152
    
    
    
    3,837,066Operating expensesSelling
    
    
    1,800,138
    
    
    
    1,752,243General and administrative
    
    
    1,229,859
    
    
    
    1,170,951Total operating expenses
    
    
    3,029,997
    
    
    
    2,923,194Income from operations
    
    
    1,104,155
    
    
    
    913,872Other income (expense)Interest expense
    
    
    (201,102
    )
    
    
    (275,507
    )Other income
    
    
    29
    
    
    
    169Total other expense, net
    
    
    (201,073
    )
    
    
    (275,338
    )Income before income tax provision
    
    
    903,082
    
    
    
    638,534Provision for income taxes
    
    
    349,527
    
    
    
    281,840Net income
    
    $
    553,555
    
    
    $
    356,694Basic and diluted earnings per share
    
    $
    0.10
    
    
    $
    0.06Weighted-average number of common sharesBasic
    
    
    5,809,483
    
    
    
    6,020,485Diluted
    
    
    5,809,483
    
    
    
    6,020,485
  F-6




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Stockholders Equity
 For the Years Ended December 31, 2009 and 2008
 Common StockShares
    
    
    AmountBalance  January 1, 2008
    
    $
    6,323,364
    
    
    $
    6,323Purchase of treasury stock
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    Balance  December 31, 2008
    
    
    6,323,364
    
    
    
    6,323Purchase of treasury stock
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    Balance  December 31, 2009
    
    $
    6,323,364
    
    
    $
    6,323
 F-7




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AdditionalPaid-in
    
    
    Treasury Stock
    
    
    RetainedCapital
    
    
    Shares
    
    
    Cost
    
    
    Earnings
    
    
    TotalBalance  January 1, 2008
    
    $
    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
    
    
    1,963,102
    
    
    
    440,365
    
    
    
    (372,124
    )
    
    
    3,408,297
    
    
    
    5,005,598Purchase of treasury stock
    
    
    
    
    
    
    89,300
    
    
    
    (28,919
    )
    
    
    
    
    
    
    (28,919
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    553,555
    
    
    
    553,555Balance  December 31, 2009
    
    $
    1,963,102
    
    
    $
    529,665
    
    
    $
    (401,043
    )
    
    $
    3,961,852
    
    
    $
    5,530,234
  F-8




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##### Table of Contents



DAC TECHNOLOGIES
 GROUP INTERNATIONAL, INC.
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2009 and 2008
 2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    553,555
    
    
    $
    356,694Adjustments
to reconcile net income to net cash provided by operating activitiesDepreciation
    
    
    51,009
    
    
    
    50,019Amortization
    
    
    15,662
    
    
    
    15,564Deferred income taxes
    
    
    31,647
    
    
    
    38,270Changes in operating assets and liabilitiesAccounts receivable
    
    
    (433,364
    )
    
    
    (232,072
    )Due from factor
    
    
    1,515,326
    
    
    
    (777,408
    )Inventories
    
    
    (1,736,784
    )
    
    
    2,182,712Prepaid expenses and deferred charges
    
    
    18,608
    
    
    
    43,618Income taxes receivable
    
    
    
    
    
    
    153,870Repayments (advances) to employees
    
    
    (1,041
    )
    
    
    308Accounts payable
    
    
    (19,043
    )
    
    
    (1,597,914
    )Accrued payroll tax withholdings
    
    
    2,261
    
    
    
    181Accrued expenses other
    
    
    52,247
    
    
    
    53,978Income taxes payable
    
    
    (18,534
    )
    
    
    89,700Net cash provided by operating activities
    
    
    31,549
    
    
    
    377,520Cash flows from investing activitiesPurchases of property and equipment
    
    
    (61,857
    )
    
    
    (41,894
    )Payments for patents and trademarks
    
    
    (11,290
    )
    
    
    (3,520
    )Net repayments (advances) on note receivable  stockholder
    
    
    (45,995
    )
    
    
    8,083Net cash used by investing activities
    
    
    (119,142
    )
    
    
    (37,331
    )Cash flows from financing activitiesPayments on notes payable
    
    
    (52,155
    )
    
    
    (78,577
    )Purchase of treasury stock
    
    
    (28,919
    )
    
    
    (64,977
    )Net cash used by financing activities
    
    
    (81,074
    )
    
    
    (143,554
    )Net increase (decrease) in cash
    
    
    (168,667
    )
    
    
    196,635Cash  beginning of year
    
    
    599,103
    
    
    
    402,468Cash  end of year
    
    $
    430,436
    
    
    $
    599,103Supplementary disclosures of cash flow informationCash paid during the year forInterest
    
    $
    201,491
    
    
    $
    275,808Taxes
    
    
    336,414
    
    
    
    
  F-9




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 1.
    
    Organization and Nature of Business
  2.
    
    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, 2009 or 2008.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, 2009 and 2008,
approximately 53% and 91%, 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.
 F-10




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 2.
    
    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 $11,211 and $61,011 at December 31, 2009 and 2008,
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
 Depreciation expense of $51,009 and $50,019 was recognized during the years ended
December 31, 2009 and 2008, respectively. Maintenance and repairs are charged to expense as
incurred. Major additions and improvements of existing facilities are capitalized. For
retirements or sales of property, the Company removes the original cost and the related
accumulated depreciation from the accounts and the resulting gain or loss is reflected in
other income (expense), net, in the accompanying consolidated statements of income.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
$342,977 and $353,019 for the years ended December 31, 2009 and 2008, respectively.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.
 F-11




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 2.
    
    Summary of Significant Accounting Policies(cont.)
  2009
    
    
    2008Net income
    
    $
    553,555
    
    
    $
    356,694Weighted-average shares outstanding,basic and diluted
    
    
    5,809,483
    
    
    
    6,020,485Net earnings per shareBasic
    
    $
    0.10
    
    
    $
    0.06Diluted
    
    $
    0.10
    
    
    $
    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, 2009 and 2008.m.
    
    Impairment of long-lived assets The Company reviews the carrying value of long-lived
assets for impairment whenever triggering 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 excess of the carrying amount
over the fair value of the assets. No triggering events were identified by management for
the years ended December 31, 2009 or 2008.n.
    
    Impairment of patents and trademarks The Company reviews the carrying value of
intangible assets that have finite lives for impairment whenever triggering 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 excess of the carrying amount over the fair value of the assets. No
triggering events were identified by management for the years ended December 31, 2009 or
2008.
 F-12




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 2.
    
    Summary of Significant Accounting Policies(cont.)
 o.
    
    New accounting pronouncements The Company has adopted Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC). ASC is the single official
source of authoritative, nongovernmental generally accepted accounting principles. The
adoption of ASC did not have any impact on the consolidated financial statements included
herein.
   3.
    
    Variable Interest Entities
  F-13




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 4.
    
    Inventories
  2009
    
    
    2008Finished goods
    
    $
    3,972,207
    
    
    $
    2,314,319Inventory in transit
    
    
    492,568
    
    
    
    415,102Parts
    
    
    14,572
    
    
    
    13,142$
    4,479,347
    
    
    $
    2,742,563
 5.
    
    Intangible Assets
  2009
    
    
    2008Finite-livedPatents and trademarks, net of accumulated
amortization of $135,434 and $119,772 in
2009 and 2008, respectively
    
    $
    117,346
    
    
    $
    121,718
  2010
    
    $
    15,2582011
    
    
    15,2582012
    
    
    15,2562013
    
    
    13,4432014
    
    
    12,071Thereafter
    
    
    46,060$
    117,346
  F-14




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 6.
    
    Due From Factor
   2009
    
    
    2008Accounts receivable factored
    
    $
    1,081,240
    
    
    $
    4,724,918Amounts advanced and outstanding
    
    
    1,053,648
    
    
    
    3,182,000Due from factor
    
    $
    27,592
    
    
    $
    1,542,918
 7.
    
    Notes Payable
  2009
    
    
    2008Note 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.
    
    $
    27,722
    
    
    $
    57,411Note 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.
    
    
    24,732
    
    
    
    47,198$
    52,454
    
    
    $
    104,609
 F-15




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 7.
    
    Notes Payable(cont.)
   8.
    
    Equity
   9.
    
    Stock Option Plan
  F-16




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 10.
    
    Warrants
  Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Warrants
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Exercisable
    
    
    PriceOutstanding  January 1, 2008
    
    $
    393,901
    
    
    $
    3
    
    
    $
    
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2008
    
    
    393,901
    
    
    
    3
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    (393,901
    )
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  11.
    
    Income Taxes
  2009
    
    
    2008Current provision
    
    $
    317,880
    
    
    $
    243,570Deferred provision
    
    
    31,647
    
    
    
    38,270$
    349,527
    
    
    $
    281,840
  2009
    
    
    2008Income taxes computed at federal statutory
tax rate
    
    $
    307,049
    
    
    $
    217,103State tax provision, net of federal benefits
    
    
    38,742
    
    
    
    27,393Nondeductible expenses and other
    
    
    3,736
    
    
    
    37,344Provision for income taxes
    
    $
    349,527
    
    
    $
    281,840
 F-17




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 11.
    
    Income Taxes(cont.)
  2009
    
    
    2008Allowance for doubtful accounts
    
    $
    7,658
    
    
    $
    7,658Allowance for excess inventory
    
    
    4,292
    
    
    
    38,125Accumulated tax depreciation in excess of
book depreciation
    
    
    (76,127
    )
    
    
    (78,874
    )Accumulated tax amortization in excess of
book amortization
    
    
    (3,025
    )
    
    
    (2,464
    )Net deferred tax asset (liability)
    
    $
    (67,202
    )
    
    $
    (35,555
    )
  12.
    
    Related Party Transactions
    F-18




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 12.
    
    Related Party Transactions(cont.)
   13.
    
    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.
     2010
    
    $
    226,8992011
    
    
    10,997$
    237,896
 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.
 F-19




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 14.
    
    Major Customers and Suppliers
   15.
    
    Concentrations of Credit Risk
   16.
    
    Financial Information by Business Segment
  F-20




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 16.
    
    Financial Information by Business Segment(cont.)
  2009
    
    
    2008RevenuesGun cleaning and maintenance
    
    $
    10,124,011
    
    
    $
    8,369,446Hunting and camping
    
    
    1,378,694
    
    
    
    3,236,058Household
    
    
    1,046,201
    
    
    
    3,935,710Gun safety
    
    
    2,128,381
    
    
    
    1,490,196Other
    
    
    3,422
    
    
    
    10,951Total revenues
    
    $
    14,680,709
    
    
    $
    17,042,361Income before income tax provisionGun cleaning and maintenance
    
    $
    769,677
    
    
    $
    791,945Hunting and camping
    
    
    (55,779
    )
    
    
    (319,239
    )Household
    
    
    25,923
    
    
    
    52,706Gun safety
    
    
    163,680
    
    
    
    127,797Other
    
    
    (419
    )
    
    
    (14,675
    )Income before income tax provision
    
    $
    903,082
    
    
    $
    638,534Identifiable assetsGun cleaning and maintenanceUnited States
    
    $
    2,471,813
    
    
    $
    1,135,498Hunting and campingUnited States
    
    
    760,039
    
    
    
    720,555HouseholdUnited States
    
    
    612,443
    
    
    
    554,351Gun safetyUnited States
    
    
    666,077
    
    
    
    389,944China
    
    
    5,280
    
    
    
    10,753OtherUnited States
    
    
    76,872
    
    
    
    62,948China
    
    
    4,123
    
    
    
    6,225Corporate
    
    
    2,085,329
    
    
    
    3,299,712Total identifiable assets
    
    $
    6,681,976
    
    
    $
    6,179,986
  F-21




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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 17.
    
    Subsequent Events Evaluation Date
  F-22




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##### Table of Contents



SIGNATURES
  By:
    
    /s/ David A. CollinsDavid A. Collins, Chairman, CEO and
Principal Executive Officer March 31, 2010By:
    
    /s/ Robert C. GoodwinRobert C. Goodwin, Principal Accounting Officer and 
Principal Financial Officer March
31, 2010