##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
 x
  o
   DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
  Florida
    
    65-0847852(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
  
  
       o
 x o
 o
 o x




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##### 



FORWARD-LOOKING STATEMENT
    
    
    1PART I
    
    
    1ITEM 1.
    
    DESCRIPTION OF BUSINESS
    
    
    1ITEM 2.
    
    DESCRIPTION OF PROPERTY
    
    
    13ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    14ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15PART II
    
    
    15ITEM 5.
    
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    15ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    16ITEM 7.
    
    FINANCIAL STATEMENTS
    
    
    20ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    20ITEM 8A.
    
    CONTROLS AND PROCEDURES
    
    
    20ITEM 8B.
    
    OTHER INFORMATION
    
    
    21PART III
    
    
    21ITEM 9.
    
    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    
    
    21ITEM 10.
    
    EXECUTIVE COMPENSATION
    
    
    23ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS
    
    
    24ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    25ITEM 13.
    
    EXHIBITS
    
    
    26ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    26EX-10.3.1 Amended Employment ContractEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
   
 i




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FORWARD-LOOKING STATEMENTS
  
 PART
I
 
 ITEM 1. DESCRIPTION OF BUSINESS
     1




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®
      
    
    Increased penetration of our existing markets, particularly in
the gun cleaning market and accessories
    
    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
 2




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
    
    Aggressive cost containment, both in operating expenses and
manufacturing costs
    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. These kits are
solid brass, and consist of universal kits designed to fit a variety of firearms,
caliber specific kits, as well as replacement 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. We also market several kits that have
been privately labeled for certain customers. This product area accounts for 59% of
our business.(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 accounts for 28% of our business.(3)
    
    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 keyed
trigger locks to cable locks. The security safes are of heavy-duty, all steel
construction and are designed
 3




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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 standards set out by the
State of California. These California standards have been adopted by other states
and by a variety of gun manufacturers. This product area accounts for 11% of our
business.
 (4)
    
    Other Products.We market four (4) different electronic security devices
designed to protect the person. These include our Body Alarm, Key Alert, Glass Window
Alert and Patient Alarm. For 2007, the Companys household cleaning items are also
included in this category.
    .
   4




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
    
    Gun Safety Master Lock (which presently controls 60%-70% of the market),
Smith & Wesson, and Shot Lock.
    
    Gun Cleaning Kits  Outers and Hoppes
    
    Security Safes Sentry Safes, GunLocker and Gun Vault.
    5




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Pediatrics
   
    
    National retail chains such as Wal-Mart and Kmart (representing 67% of sales, Wal-Mart
accounted for 66% of our total sales revenues);
    
    Distributors such as Dicks Sporting Goods, RSR Group, Inc., Jerrys Sport Center, Inc,,
Acu-Sport Corp., and Cabelas Catalogue Co. (representing 17% of sales);
    
    Gun manufacturers such as Savage Arms, Browning, Marlin, Glock and SIG-Arms (representing
5% of sales); and
    
    Regional retail chains and sole proprietors (representing 11% of sales).
    6




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Model
    
    Patent No.
    
    
    ExpirationTVP095 Trigger Lock
    
    Des. 375,342
    
    
    2009SWA 03 SWAT Steering Wheel Alarm
    
    Des. 365,774
    
    
    2009KAL 201 Personal Safety Alarm
    
    Des. 355,863
    
    
    2008Key Chain Alarm
    
    
    5,475,368
    
    
    
    2008GWA 001 Glass/Window Alarm
    
    Des. 371,086
    
    
    2009Defense Spray and Flashlight
    
    Des. 375,994
    
    
    2009Gun Cleaning Kit
    
    
    7,020,994B2
    
    
    
    2024
  ®
   7




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District of Columbia vs.
Heller
      8




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http://www.sec.gov
   If we are to expand our operations, we may need additional capital.
 9




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Our growth program and future profitability remains uncertain.
 Our success depends on maintaining relationships with key customers.
 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.
  10




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The increased cost of raw materials and manufacturing has adversely affected our profits.
  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.
 11




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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.
 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.
 12




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We face risks associated with international activities.
 
    
    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 2. DESCRIPTION OF PROPERTY
    13




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ITEM 3. LEGAL PROCEEDINGS
      14




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART
II
 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
  Quarter Ended
    
    High
    
    LowMarch 31, 2006
    
    $
    2.42
    
    
    $
    2.10June 30, 2006
    
    $
    2.30
    
    
    $
    2.00September 30, 2006
    
    $
    2.05
    
    
    $
    1.73December 31, 2006
    
    $
    2.54
    
    
    $
    2.00March 31, 2007
    
    $
    2.48
    
    
    $
    1.26June 30, 2007
    
    $
    1.47
    
    
    $
    1.10September 30, 2007
    
    $
    1.35
    
    
    $
    1.06December 31, 2007
    
    $
    1.33
    
    
    $
    0.82
    15




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Equity Compensation Plan InformationNumber ofsecuritiesremaining availableNumber of securities
    
    
    
    for future issuanceto be issued upon
    
    Weighted-average
    
    under equityexercise of
    
    exercise price of
    
    compensation plansoutstanding options,
    
    outstanding options,
    
    (excluding securitieswarrants and rights
    
    warrants and rights
    
    reflected in column (a))Plan category
    
    (a)
    
    (b)
    
    (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 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  
  16




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2007
    
    
    2006Net sales
    
    $
    14,777,645
    
    
    $
    15,475,880Gross profit
    
    $
    3,938,674
    
    
    $
    4,490,316Operating expenses
    
    $
    3,054,455
    
    
    $
    2,959,983Income from operations
    
    $
    884,219
    
    
    $
    1,530,333Income before income taxes
    
    $
    557,841
    
    
    $
    1,224,968Net income
    
    $
    340,894
    
    
    $
    752,838Earnings per share
    
    $
    0.06
    
    
    $
    0.12
   Financial Condition
  2007
    
    
    2006Accounts receivable
    
    $
    263,646
    
    
    $
    532,028Due from factor
    
    $
    765,510
    
    
    $
    1,282,208Inventories
    
    $
    4,925,275
    
    
    $
    3,130,825Income taxes receivable
    
    $
    153,870
    
    
    $
    370,817Accounts payable-trade
    
    $
    2,393,050
    
    
    $
    1,640,445Total current assets
    
    $
    6,662,270
    
    
    $
    5,799,626Total current liabilities
    
    $
    2,640,446
    
    
    $
    1,905,674Net working capital
    
    $
    4,021,824
    
    
    $
    3,893,952Total assets
    
    $
    7,387,427
    
    
    $
    6,417,575Stockholders equity
    
    $
    4,713,881
    
    
    $
    4,478,801
 17




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Accounts receivable and due from factor
   2007
    
    
    2006Total accounts receivable
    
    $
    4,772,170
    
    
    $
    5,633,811Less: assigned receivables
    
    
    (4,508,524
    )
    
    
    (5,101,783
    )Net accounts receivables
    
    $
    263,646
    
    
    $
    532,028Assigned receivables
    
    $
    4,508,524
    
    
    $
    5,101,783Less: Funds advanced
    
    
    (3,743,014
    )
    
    
    (3,819,575
    )Due from factor
    
    $
    765,510
    
    
    $
    1,282,208
 Inventories
  Liabilities
  18




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Liquidity and Capital Resources
   Off-Balance Sheet Arrangements
   Trends
  Critical Accounting Estimates
  19




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Long-lived Assets
   Patents and Trademarks
  
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
      20




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ITEM 8B. OTHER INFORMATION
  
 PART
III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
   Name
    
    Age
    
    
    Position
    
    
    TermDavid A. Collins
    
    
    62
    
    
    President, CEO, Director
    
    
    2007-2008Robert C. Goodwin
    
    
    51
    
    
    CFO/Director
    
    
    2007-2008
 21




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Name
of Filer
    
    Form Type
    
    # Late Reports
    

# Late TransactionsDavid Collins
    
    Form 4
    
    two
    
    three
     22




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ITEM 10. EXECUTIVE COMPENSATION
  SUMMARY
COMPENSATION TABLE
 All OtherName and
    
    
    
    
    
    Salary
    
    
    Commission
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    $
    
    
    $
    
    
    $
    
    
    $David A. Collins, PEO
    
    
    2007
    
    
    
    70,000
    
    
    
    453,245
    
    
    
    66,000
    
    
    
    589,2452006
    
    
    
    120,000
    
    
    
    421,179
    
    
    
    66,000
    
    
    
    607,179Robert C. Goodwin,
PFO
    
    
    2007
    
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,4002006
    
    
    
    77,400
    
    
    
    
    
    
    
    
    
    
    
    77,400
     23




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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
   Name and Address of
    
    Number of Shares
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficially Owned
    
    of ClassCommon Stock
    
    Praetorian Capital Management LLC 
Miami Beach, FL
    
    
    1,215,000
    
    
    
    20.1
    %Common Stock
    
    David A. Collins
Miami Beach, FL
    
    
    500,500
    (1)
    
    
    8.3
    %Common Stock
    
    Bruce M. Stachenfeld
New York, NY
    
    
    326,726
    
    
    
    5.4
    %
 
 (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. 24




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Name and Address of
    
    Number of Shares
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficially Owned
    
    of ClassCommon Stock
    
    Robert C. Goodwin
N. Little Rock, AR
    
    
    19,073
    
    
    
    0.31
    %Common Stock
    
    David A. Collins
Miami Beach, FL
    
    
    500,500
    
    
    
    8.3
    %
  
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     25




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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
  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. 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. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
       26




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SIGNATURES
  By:

/s/ David A. CollinsDavid A. Collins, Chairman,March 31, 2008
    
    CEO and Principal Executive Officer By:

/s/ Robert C. GoodwinRobert C. Goodwin, Principal AccountingMarch 31, 2008
    
    Officer and Principal Financial Officer 27




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DAC TECHNOLOGIES
 GROUP INTERNATIONAL, INC.
 December 31, 2007 and 2006
 Consolidated Financial Statements
 With
 Report of Independent
Registered Public Accounting Firm
 F-1




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Report of Independent Registered Public Accounting Firm
 
    
 
 F-2




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Balance Sheets
 December 31, 2007 and 2006
 2007
    
    
    2006AssetsCurrent assetsCash
    
    $
    402,468
    
    
    $
    338,968Accounts receivable, less allowance for doubtful accounts
of $5,000 in 2007 and 2006
    
    
    263,646
    
    
    
    532,028Due from factor
    
    
    765,510
    
    
    
    1,282,208Inventories
    
    
    4,925,275
    
    
    
    3,130,825Prepaid expenses and deferred charges
    
    
    115,686
    
    
    
    108,965Income taxes receivable
    
    
    153,870
    
    
    
    370,817Deferred income tax asset
    
    
    35,815
    
    
    
    35,815Total current assets
    
    
    6,662,270
    
    
    
    5,799,626Property and equipmentLeasehold improvements
    
    
    55,323
    
    
    
    1,121Furniture and fixtures
    
    
    278,322
    
    
    
    228,670Molds, dies and artwork
    
    
    513,949
    
    
    
    504,283847,594
    
    
    
    734,074Accumulated depreciation
    
    
    (573,458
    )
    
    
    (522,466
    )Net property and equipment
    
    
    274,136
    
    
    
    211,608Other assetsPatents and trademarks, net of accumulated amortization of
$104,208 and $88,465 in 2007 and 2006, respectively
    
    
    133,762
    
    
    
    147,750Deposit
    
    
    17,351
    
    
    
    11,435Advances to employees
    
    
    28,925
    
    
    
    24,107Note receivableLong-term
    
    
    20,000
    
    
    
    20,000Related party
    
    
    72,518
    
    
    
    72,518Stockholder
    
    
    178,465
    
    
    
    130,531Total other assets
    
    
    451,021
    
    
    
    406,341Total assets
    
    $
    7,387,427
    
    
    $
    6,417,575
 F-3




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2007
    
    

2006Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    183,186
    
    
    $
    192,733Accounts payable
    
    
    2,393,050
    
    
    
    1,640,445Accrued payroll tax withholdings
    
    
    25,338
    
    
    
    24,944Accrued expenses  other
    
    
    38,872
    
    
    
    47,552Total current liabilities
    
    
    2,640,446
    
    
    
    1,905,674Deferred income tax liability
    
    
    33,100
    
    
    
    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, 2007 and 2006;
6,041,399 and 6,135,599 shares outstanding at December 31,
2007 and 2006, respectively
    
    
    6,323
    
    
    
    6,323Additional paid-in capital
    
    
    1,963,102
    
    
    
    1,963,102Treasury stock, at cost
    
    
    (307,147
    )
    
    
    (201,333
    )Retained earnings
    
    
    3,051,603
    
    
    
    2,710,709Total stockholders equity
    
    
    4,713,881
    
    
    
    4,478,801Total liabilities and stockholders equity
    
    $
    7,387,427
    
    
    $
    6,417,575
  F-4




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Income
 For the Years Ended December 31, 2007 and 2006
 2007
    
    
    2006Sales, net of returns and allowances
    
    $
    14,777,645
    
    
    $
    15,475,880Cost of sales
    
    
    10,838,971
    
    
    
    10,985,564Gross profit
    
    
    3,938,674
    
    
    
    4,490,316Operating expensesSelling
    
    
    1,742,220
    
    
    
    1,866,453General and administrative
    
    
    1,312,235
    
    
    
    1,093,530Total operating expenses
    
    
    3,054,455
    
    
    
    2,959,983Income from operations
    
    
    884,219
    
    
    
    1,530,333Other income (expense)Interest expense
    
    
    (326,473
    )
    
    
    (318,116
    )Other income
    
    
    95
    
    
    
    12,751Total other expense, net
    
    
    (326,378
    )
    
    
    (305,365
    )Income before income tax provision
    
    
    557,841
    
    
    
    1,224,968Provision for income taxes
    
    
    216,947
    
    
    
    472,130Net income
    
    $
    340,894
    
    
    $
    752,838Basic and diluted earnings per share
    
    $
    0.06
    
    
    $
    0.12Weighted-average number of common sharesBasic
    
    
    6,109,026
    
    
    
    6,158,388Diluted
    
    
    6,109,026
    
    
    
    6,158,388
  F-5




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Stockholders Equity
 For the Years Ended December 31, 2007 and 2006
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    Treasury Stock
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Cost
    
    
    Earnings
    
    
    TotalBalance  January 1, 2006
    
    
    6,323,364
    
    
    $
    6,323
    
    
    $
    1,963,102
    
    
    
    130,000
    
    
    $
    (101,400
    )
    
    $
    1,957,871
    
    
    $
    3,825,896Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,765
    
    
    
    (99,933
    )
    
    
    
    
    
    
    (99,933
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    752,838
    
    
    
    752,838Balance  December 31, 2006
    
    
    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
    
    
    $
    4,713,881
  F-6




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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2007 and 2006
 2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    340,894
    
    
    $
    752,838Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation
    
    
    50,992
    
    
    
    55,247Amortization
    
    
    15,743
    
    
    
    16,026Deferred income tax benefit
    
    
    
    
    
    
    (8,615
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    268,382
    
    
    
    160,662Due from factor
    
    
    516,698
    
    
    
    31,410Inventories
    
    
    (1,794,450
    )
    
    
    (426,515
    )Prepaid expenses and deferred charges
    
    
    (6,721
    )
    
    
    (39,392
    )Income taxes receivable
    
    
    216,947
    
    
    
    (370,817
    )Deposits
    
    
    (5,916
    )
    
    
    (10,000
    )Advances to employees
    
    
    (4,818
    )
    
    
    (9,324
    )Accounts payable
    
    
    752,605
    
    
    
    659,403Accrued payroll tax withholdings
    
    
    394
    
    
    
    (4,519
    )Accrued expenses other
    
    
    (8,680
    )
    
    
    17,014Income taxes payable
    
    
    
    
    
    
    (380,843
    )Net cash provided by operating activities
    
    
    342,070
    
    
    
    442,575Cash flows from investing activitiesPurchases of property and equipment
    
    
    (113,520
    )
    
    
    (32,828
    )Payments for patents and trademarks
    
    
    (1,755
    )
    
    
    (7,245
    )Net advances on note receivable
    
    
    
    
    
    
    (20,000
    )Net advances on note receivable  stockholder
    
    
    (47,934
    )
    
    
    (31,000
    )Purchase of treasury stock
    
    
    (105,814
    )
    
    
    (99,933
    )Net cash used by investing activities
    
    
    (269,023
    )
    
    
    (191,006
    )Cash flows from financing activitiesNet advances on notes payable
    
    
    96,500
    
    
    
    Payments on notes payable
    
    
    (106,047
    )
    
    
    (43,487
    )Net cash used by financing activities
    
    
    (9,547
    )
    
    
    (43,487
    )Net increase in cash
    
    
    63,500
    
    
    
    208,082Cash  beginning of year
    
    
    338,968
    
    
    
    130,886Cash  end of year
    
    $
    402,468
    
    
    $
    338,968Supplementary disclosures of cash flow informationCash paid during the year forInterest
    
    $
    326,662
    
    
    $
    317,219Taxes
    
    
    
    
    
    
    1,232,000
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 1.
    
    Organization and Nature of BusinessDAC Technologies Group International, Inc. (DAC) was originally incorporated under the
name DAC Technologies of America, Inc. In July 1999, the Company changed its name to DAC
Technologies Group International, Inc. DAC develops, manufactures and markets various patented
and unpatented consumer products that are designed to provide security for the consumer and
their property. In addition, DAC has developed a wide range of security and other consumer
products for the home, automobile and individual. The majority of DAC products are manufactured
and imported from mainland China and are shipped to DACs central warehouse facility in Little
Rock, Arkansas. These products, along with other items manufactured in the United States, are
sold primarily to major retail chains throughout the United States.In February 2001, DAC formed a wholly owned subsidiary, Summit Training International
(STI), an Arkansas corporation. STI was formed with the primary objective of providing
training to law enforcement agencies through courses, seminars and conferences. During the
early part of 2002, the Company decided not to pursue further development of STI due to changes
in the perceived market. In July 2002, the Company sold certain assets of STI, including its
name for $50,000, which consisted of $5,000 in cash and a $45,000 note, maturing no later than
eighteen (18) months from the date of the note. The Company had suspended operations of STI
earlier in 2002 due to unprofitability. In connection with this sale, the Company has entered
into a non-compete agreement related to educational or instructional services for a four-year
period, which has expired.
 2.
    
    Summary of Significant Accounting Policies
 a.
    
    Basis of presentation 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, 2007 or 2006.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 2.
    
    Summary of Significant Accounting Policies(cont.)
 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, 2007 and 2006,
approximately 94% 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.Interest income associated with notes receivable is recognized in the period in which
it is earned based upon the terms of the note. At such time that management would deem a
note to be uncollectible, interest income would cease to be recognized. Based on
managements analysis, there were no conditions related to collectibility that existed in
the years ended December 31, 2007 or 2006 to indicate the need to discontinue accrual of
interest income.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 $82,926 at December 31, 2007 and 2006. 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 $50,992 and $55,247 was recognized during the years ended
December 31, 2007 and 2006, 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.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 2.
    
    Summary of Significant Accounting Policies(cont.)
 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
$383,477 and $488,427 for the years ended December 31, 2007 and 2006, 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. The
computations of basic earnings per share and diluted earnings per share are as follows:
 2007
    
    
    2006Net income
    
    $
    340,894
    
    
    $
    752,838Basic weighted-average shares
    
    
    6,109,026
    
    
    
    6,158,388Dilutive potential common shares
    
    
    6,109,026
    
    
    
    6,158,388Net earnings per shareBasic
    
    $
    0.06
    
    
    $
    0.12Diluted
    
    $
    0.06
    
    
    $
    0.12
 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.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 2.
    
    Summary of Significant Accounting Policies(cont.)
 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, 2007 and 2006.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, 2007 or 2006.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, 2007 or 2006.o.
    
    New accounting pronouncements In September 2006, the Financial Accounting Standards
Board (FASB) issued SFAS No. 157, Fair Value Measurements. This statement defines fair
value, establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP), and expands disclosures about fair value measurements. The Companys
management does not anticipate that this pronouncement will have a significant impact on
the consolidated financial statements.In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering the Effect of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108). SAB 108 requires that
registrants quantify errors using both a consolidated balance sheet and consolidated
statement of income approach and evaluate whether either approach results in a misstated
amount that, when all relevant quantitative and qualitative factors are considered, is
material. SAB 108 is effective for the Company in fiscal 2006 and did not have a material
impact on the Companys consolidated financial statements.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 2.
    
    Summary of Significant Accounting Policies(cont.)In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities. This statement permits entities to measure many
financial instruments and certain other items at fair value without being required to apply
complex hedge accounting provisions, but does not require fair value measurement. SFAS No.
159 is effective for financial statements issued for fiscal years beginning after November
15, 2007. The Company does not expect the adoption of SFAS No. 159 to have a material
effect on its consolidated financial statements.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements. SFAS No. 160 amends Accounting Research Bulletin No.
51, Consolidated Financial Statements, to establish accounting and reporting standards for
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This
statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity and should be reported as equity in the financial statements,
rather than in the liability or mezzanine section between liabilities and equity. SFAS No.
160 also requires consolidated net income be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. The impact of SFAS No. 160
will not have a material impact on the consolidated financial statements. SFAS No. 160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R
establishes principles and requirements for how an acquirer in a business combination: 1)
recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree; 2) recognizes and
measures the goodwill acquired in the business combination or a gain from a bargain
purchase; and 3) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business combination. SFAS
No. 141R is effective for business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15,
2008. The Company does not believe that the adoption of SFAS No. 141R will have a material
impact on the consolidated financial statements.3.
    
    Variable Interest EntitiesFASB Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest
Entities (FIN 46R), requires that if an enterprise is the primary beneficiary of a variable
interest entity, the assets, liabilities, and results of operations of the variable interest
entity should be included in the consolidated financial statements of the enterprise. The
Company holds a note receivable, which is a variable interest, from DAC Investment and
Consulting, Inc. (DAC Investment) of $72,518. Since 2001, DAC Investment has provided
consulting and sales services to the Company. For purposes of FIN 46R, management determined
that DAC Investment is a variable interest entity; however, the Company is not the primary
beneficiary. The balance of the note receivable represents the Companys maximum exposure to
loss as a result of its involvement with DAC Investment.
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 4.
    
    InventoriesInventories consist of the following:
 2007
    
    
    2006Finished goods
    
    $
    3,993,949
    
    
    $
    2,551,464Inventory in transit
    
    
    908,359
    
    
    
    556,394Parts
    
    
    22,967
    
    
    
    22,967$
    4,925,275
    
    
    $
    3,130,825
 5.
    
    Intangible AssetsIntangible assets consist of the following:
 2007
    
    
    2006Finite-livedPatents and trademarks, net of accumulated
amortization of $104,208 and $88,465 in 2007
and 2006, respectively
    
    $
    133,762
    
    
    $
    147,750
 Aggregate amortization expense related to finite-lived intangible assets was $15,743 and
$16,026 for the years ended December 31, 2007 and 2006, respectively. Future finite-lived
intangible asset amortization expenses are as follows:
 2008
    
    $
    15,0002009
    
    
    13,7392010
    
    
    12,7532011
    
    
    12,7532012
    
    
    12,753Thereafter
    
    
    66,764$
    133,762
 During 2007 and 2006, the Company acquired patents which pertain to technology incorporated
into certain of the Companys products. The Company paid $1,755 and $7,245, respectively, for
these patents. The fair value of these patents is being amortized over the weighted-average
expected lives of 17 years.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 6.
    
    Due From FactorThe Company factors a majority of its receivables without recourse under a credit risk
factoring agreement, which is renewable annually. This agreement
provides for factoring fees of .65% to 1.8% monthly, depending on the creditworthiness and location of an account (domestic or
foreign). An additional fee of .25% is charged for each 30-day period, or part thereof, when
the terms of sale exceed 90 days. Fees are calculated on the gross face value of each invoice.
Additionally, this agreement provides for advances of funds on the factored receivable.
Interest is charged at a greater of 4% or 0.50% above prime, which was 7.25% at December 31,
2007, on the outstanding funds in use. The amounts borrowed are collateralized by the
outstanding accounts receivable, and are reflected as a reduction to accounts receivable in the
accompanying consolidated balance sheets.These amounts are as follows:
 2007
    
    
    2006Accounts receivable factored
    
    $
    4,508,524
    
    
    $
    5,101,783Amounts advanced and outstanding
    
    
    3,743,014
    
    
    
    3,819,575Due from factor
    
    $
    765,510
    
    
    $
    1,282,208
 7.
    
    Notes PayableNotes payable consist of the following:
 2007
    
    
    2006Note payable to a bank; interest at 7.70%; payable
on demand or if no demand, November 1, 2008;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders
    
    $
    82,524
    
    
    $
    105,762Note payable to a bank; interest at 7.70%; payable
on demand or if no demand, November 12, 2008;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders
    
    
    67,852
    
    
    
    86,971Note 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
    
    
    
    $
    183,186
    
    
    $
    192,733
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 7.
    
    Notes Payable(cont.)The weighted-average interest
rates on short-term borrowings, including notes payable  stockholders for the years ended December 31, 2007 and 2006 were 7.28% and 7.69%, respectively.
The Company recognized interest expense of approximately $18,500 and $17,000 for the years ended
December 31, 2007 and 2006, respectively, on notes payable.8.
    
    EquityDuring 2007, the Company
purchased 94,200 shares of common stock for $105,814. These shares are accounted for as treasury stock in the accompanying consolidated financial
statements.On May 4, 2006, the
Company purchased 57,765 shares of common stock for $99,933. These shares are accounted for as treasury stock in the accompanying consolidated financial
statements.On June 24, 2004, the Company issued 467,808 shares of common stock through private
placement valued at $681,892. In addition to the shares, investors were also issued 233,904
warrants, which upon exercise, will be able to purchase an additional 233,904 shares at a price
of $2.57 per share. The placement agent received a $69,000 fee and was issued 160,000 warrants
that will allow it to purchase up to 160,000 shares of the Companys common stock at a price of
$2.57 per share. Additionally, legal expenses incurred related to the private placement were
$16,844. The warrant holders have until June 28, 2009 to exercise the warrants.9.
    
    Treasury StockIn August 2000, the Company filed suit against a former manufacturer alleging breach of a
manufacturing contract and seeking damages and rescission of 165,000 shares of its common stock
as part of the amounts which had been previously paid to the manufacturer. During 2003, a jury
awarded the Company damages in the amount of $1,650,560, which included the value of the
returned shares of common stock. The treasury stock was received during 2003 at a
court-mandated value of $0.78 per share. Of the total shares, 35,000 were paid to legal counsel
as consideration for legal fees. The remaining 130,000 shares are reflected as treasury stock
in the accompanying consolidated balance sheets at the $0.78 per share, or $101,400. The
Company is attempting to collect the remainder of the award, $1,521,860, by suit filed in
October 2003 against the owners of the former manufacturer. As collection of this award is
uncertain, this gain contingency has not been recorded in the accompanying consolidated
statements of income.
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 10.
    
    Stock Option PlanDuring 2000, the Company adopted the 2000 Equity Incentive Plan (the Plan), a
non-qualified stock option plan. Under the terms of the Plan, officers, directors, employees
and other individuals may be granted options to purchase the Companys common stock at exercise
prices determined by the Companys Board of Directors. The terms and conditions of any options
granted under the Plan, to include vesting period and restrictions or limitations on the
options, will be determined by the Board of Directors. The maximum number of shares that can be
granted under this Plan is one million shares of stock. At December 31, 2007, the Company had
granted no options pursuant to this Plan.11.
    
    WarrantsA summary of warrant activity is as follows:
 Weighted-
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Warrants
    
    
    ExerciseWarrants
    
    
    Price
    
    
    Exercisable
    
    
    PriceOutstanding  January 1, 2006
    
    
    393,901
    
    
    $
    2.57
    
    
    
    
    
    
    $
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2006
    
    
    393,901
    
    
    
    2.57
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding  December 31, 2007
    
    
    393,901
    
    
    $
    2.57
    
    
    
    
    
    
    $
    
 At December 31, 2007, all warrants outstanding have an exercise price of $2.57 and expire
on June 28, 2009.
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 12.
    
    Income TaxesThe provision (benefit) for income taxes consists of the following:
 2007
    
    
    2006Current provision
    
    $
    216,947
    
    
    $
    480,745Deferred benefit
    
    
    
    
    
    
    (8,615
    )$
    216,947
    
    
    $
    472,130
 Reconciliations of the differences between income taxes computed at the federal statutory
tax rates and the provision for income taxes is as follows:
 2007
    
    
    2006Income taxes computed at federal statutory
tax rate
    
    $
    189,666
    
    
    $
    416,489State tax provision, net of federal benefits
    
    
    23,931
    
    
    
    52,551Nondeductible expenses and other
    
    
    3,350
    
    
    
    3,090Provision for income taxes
    
    $
    216,947
    
    
    $
    472,130
 Temporary differences that give rise to significant deferred tax assets are as follows:
 2007
    
    
    2006Allowance for doubtful accounts
    
    $
    1,915
    
    
    $
    1,915Allowance for excess inventory
    
    
    38,125
    
    
    
    38,125Accumulated tax depreciation in excess of
book depreciation
    
    
    (35,467
    )
    
    
    (35,467
    )Accumulated tax amortization in excess of
book amortization
    
    
    (1,858
    )
    
    
    (1,858
    )Net deferred tax assets
    
    $
    2,715
    
    
    $
    2,715
 The Company adopted FASB
Interpretation No. 48 (FIN 48), Accounting for
Uncertainty in Income Taxes, effective January 1, 2007. FIN 48
clarifies the accounting for income taxes by prescribing the minimum
recognition threshold a tax position is required to meet before being
recognized in the consolidated financial statements. FIN 48 also
provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. The Company had no significant unrecognized tax benefits
at the date of adoption or at December 31, 2007. Accordingly, the
Company does not have any interest or penalties related to uncertain
tax positions. However, if interest or penalties were to be incurred
related to uncertain tax positions, such amounts would be recognized
in income tax expense. Tax periods for all years after 2003 remain
open to examination by the federal and state taxing jurisdictions
to which it is subject.13.
    
    Related Party TransactionsDuring the years ended December 31, 2007 and 2006, the Company made periodic advances to
certain employees of the Company. At December 31, 2007 and 2006, the outstanding balances of
advances to these individuals were $28,925 and $24,107, respectively.
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DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 13.
    
    Related Party Transactions(cont.)At December 31, 2007 and 2006, the Company held a note receivable of $178,465 and $130,531,
respectively, due from an individual, who is both an employee and a stockholder, which is due on
December 31, 2008. This note is unsecured and non-interest bearing.At December 31, 2007 and 2006, the Company held a note receivable of $72,518 due from a
related party entity, which is owned by the individual discussed above, which is due on December
31, 2008. This note is unsecured and non-interest bearing. The note receivable has been
classified as non-current in the accompanying consolidated balance sheets because repayment is
not anticipated during the next year.For the years ended December 31, 2007 and 2006, consulting service fees in the amount of
$10,000 and $60,000, respectively, were paid to a related party entity, which is owned by the
individual discussed above. The related party provides consulting services to the Company on an
ongoing basis.Certain stockholders of the Company have personally guaranteed the Companys outstanding
borrowings with a bank at December 31, 2007 and 2006.14.
    
    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.Additionally, the Company leases space from a shareholder for office space for $5,500
per month under no formal lease agreement. Total rent expense for the Company for the years
ended December 31, 2007 and 2006 was $274,971 and $238,433, respectively.At December 31, 2007, future minimum rental commitments under non-cancelable operating
leases in excess of one year are as follows:
 2008
    
    $
    211,0112009
    
    
    218,9122010
    
    
    215,8292011
    
    
    8,229$
    653,981
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##### Table of Contents



DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
 Notes to Consolidated Financial Statements
 December 31, 2007 and 2006
 14.
    
    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.
 15.
    
    Major Customers and SuppliersDuring the year ended December 31, 2007, the Company recognized aggregate sales to one
customer in the amount of approximately $9,687,000, which represented 65.6% of total net sales.
During the year ended December 31, 2006, the Company recognized aggregate sales to two customers
in the amount of approximately $9,612,000 and $1,715,000, which represented 62.1% and 11.1% of
total net sales, respectively. Accounts receivable related to the sales were factored without
recourse (Note 6).During the years ended December 31, 2007 and 2006, the Company purchased 99.9% of its
products from one major supplier. The Company is dependent upon this supplier continuing in
business and its ability to ship to the United States, but believes that it could replace this
supplier, if required to, at similar quality and terms.16.
    
    Concentrations of Credit RiskFinancial instruments which potentially subject the Company to concentrations of credit
risk consist primarily of trade accounts receivable with a variety of customers. As discussed
in Note 6, the Company factors a majority of its receivables under a factoring agreement. These
accounts are factored on a non-recourse basis which reduces the Companys exposure to credit
risk. Approximately 94% and 91% of the Companys accounts receivable at December 31, 2007 and
2006, respectively, were factored. The Company also provides credit in the normal course of
business to certain of its customers and performs ongoing credit evaluations of these customers.
It maintains allowances for doubtful accounts and provisions for returns and credits based on
factors surrounding the specific customers and circumstances. The Company generally does not
require collateral from its customers. Credit risk is considered by management to be limited
due to the Companys customer base and its customers financial resources.At December 31, 2007 and 2006 and at various times throughout these years, the Company
maintained cash balances with financial institutions in excess of the federally insured limit.
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##### Table of Contents



17.
    
    Financial Information by Business SegmentDuring the years ended December 31, 2007 and 2006, the Company operates in four primary
business segments delineated by products or services. These segments are security products, gun
locks, safes and non-security products. The accounting policies of the Companys segments are
the same as those described in Note 2. The Companys long-lived assets are located in the
United States and China.Information concerning operations in these segments of business is as follows:
 2007
    
    
    2006RevenuesGun cleaning and maintenance
    
    $
    8,659,456
    
    
    $
    10,872,871Hunting and camping
    
    
    4,159,113
    
    
    
    2,700,191Gun safety
    
    
    1,622,982
    
    
    
    1,867,427Other
    
    
    336,094
    
    
    
    35,391Total revenues
    
    $
    14,777,645
    
    
    $
    15,475,880Income before income tax provisionGun cleaning and maintenance
    
    $
    595,363
    
    
    $
    1,215,318Hunting and camping
    
    
    (173,213
    )
    
    
    (124,433
    )Gun safety
    
    
    88,464
    
    
    
    149,395Other
    
    
    47,227
    
    
    
    (15,312
    )Income before income tax provision
    
    $
    557,841
    
    
    $
    1,224,968Identifiable assetsGun cleaning and maintenanceUnited States
    
    $
    2,627,085
    
    
    $
    2,033,062Hunting and campingUnited States
    
    
    1,623,617
    
    
    
    627,222Gun safetyUnited States
    
    
    489,935
    
    
    
    484,854China
    
    
    19,477
    
    
    
    28,829OtherUnited States
    
    
    292,786
    
    
    
    108,441China
    
    
    31,595
    
    
    
    34,889Corporate
    
    
    2,302,932
    
    
    
    3,100,278Total identifiable assets
    
    $
    7,387,427
    
    
    $
    6,417,575
 Molds used to manufacture the Companys security products and gun locks are located in
China (Note 1).
 F-20