UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from ______ to ______
Commission File Number 000-29211
DAC Technologies Group International, Inc.
(Name of Small Business Issuer in its charter)
Florida 65-0847852
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3200 N. Ocean Blvd., Suite 1006, Ft. Lauderdale, FL 33308
- ---------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(954) 375-0119
(Issuer's telephone number)
Check whether the Issuer (1) has filed all reports required to be filed
by the Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
(1) Yes [x] No [ ] (2) Yes [ ] No [x]
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date. As of May 15, 2000, 5,099,500
shares of Common Stock are issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [x]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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PART I...................................................................................................3
ITEM 1. FINANCIAL STATEMENTS.............................................................................3
PART F/S ................................................................................................8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
PLAN OF OPERATION...............................................................................9
Background.............................................................................9
Financial Condition and Results of Operations..........................................11
Liquidity and Capital Resources........................................................11
Trends.................................................................................11
PART II ................................................................................................11
ITEM 1. LEGAL PROCEEDINGS................................................................................11
ITEM 2. CHANGES IN SECURITIES............................................................................11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................12
ITEM 5. OTHER INFORMATION................................................................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................................12
SIGNATURES...............................................................................................13
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
Our financial statements are contained in pages 4 through 7
following.
3
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Balance Sheet
March 31, 2000
Unaudited
Assets
------
<TABLE>
<CAPTION>
<S> <C>
Current assets
Cash $ 8,643
Accounts receivable, less allowance for doubtful
accounts of $19,649 508,826
Inventories 363,180
Prepaid expenses 56,632
-----------
Total current assets 937,281
-----------
Property and equipment
Furniture and fixtures 100,805
Molds, dies, and artwork 349,947
Vehicles 34,709
-----------
485,461
Accumulated depreciation (186,211)
-----------
Net property and equipment 299,250
-----------
Other assets
Patents and trademarks, net of
accumulated amortization of $3,013 32,031
Other 5,700
-----------
Total other assets 37,731
-----------
Total assets $ 1,274,262
===========
</TABLE>
4
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Balance Sheet
March 31, 2000
Unaudited
<TABLE>
<CAPTION>
Liabilities and Stockholders' equity
------------------------------------
<S> <C>
Current liabilities
Due to factor $ 333,435
Accounts payable-trade 82,670
Accounts payable-related parties 32,034
Accrued payroll tax withholdings 92,974
Accrued expenses-other 31,233
Current maturities of long-term debt 161,169
-----------
Total current liabilities 733,515
-----------
Long-term debt, less current maturities 24,645
-----------
Stockholders' equity
Common stock, $.001 par value; authorized
10,000,000 shares; issued and outstanding
5,099,500 shares 5,098
Additional paid-in capital 708,746
Retained earnings (deficit) (197,742)
-----------
Total stockholders' equity 516,102
-----------
Total liabilities and stockholders' equity $ 1,274,262
===========
</TABLE>
5
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Operations
For the Three Months Ended March 31, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
March 31, March 31,
2,000 1,999
----- -----
<S> <C> <C>
Net sales $ 581,378 $ 442,496
Cost of sales 342,295 260,524
----------- -----------
Gross profit 239,083 181,972
----------- -----------
Operating expenses
Selling 30,718 44,152
General and administrative 146,450 131,889
----------- -----------
Total operating expenses 177,168 176,041
----------- -----------
Income from operations 61,915 5,931
----------- -----------
Other income (expense)
Interest expense (23,061) (17,491)
----------- -----------
Income (loss) before income tax expense 38,854 (11,560)
Provision for income taxes -- --
----------- -----------
Net income (loss) $ 38,854 ($ 11,560)
=========== ===========
Numerator - net income (loss) $ 38,854 ($ 11,560)
Denominator - weighted average number of shares outstanding 5,036,728 4,825,000
----------- -----------
Basic earnings (loss) per share $ 0.01 ($ 0.00)
=========== ===========
</TABLE>
6
<PAGE>
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Cash flows
For the Three Months Ended March 31, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
March 31, March 31,
2,000 1,999
----- -----
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 38,854 ($ 11,560)
Adjustments to reconcile net income to
net cash provided (used in) operating activities:
Depreciation 12,430 9,550
Amortization 485 450
Changes in assets and liabilities
Accounts receivable (55,442) (109,408)
Inventories 20,259 49,709
Prepaid expenses (32,107) (11,503)
Other assets -- (3,005)
Accounts payable - trade (45,450) (50,280)
Accounts payable - related party (20,549) (5,696)
Accrued payroll tax withholdings 16,826 (7,926)
Accrued expenses other 4,133 (12,224)
--------- ---------
Net cash provided by (used in) operating activities (99,415) (140,333)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (14,618) (1,958)
--------- ---------
Net cash provided by (used) in investing activities (14,618) (1,958)
--------- ---------
Cash flows from financing activities
Increase (decrease) in due to factor 34,726 73,406
Proceeds on long-term debt -- 50,000
Payments on long-term debt (42,970) --
Proceeds from issuance of common stock 75,000 --
Payments on stock subscription receivable 2,632 --
--------- ---------
Net cash provided by (used in) financing activities 69,388 123,406
--------- ---------
Increase (decrease) in cash (5,791) (30,445)
Cash - beginning of period 14,434 68,042
--------- ---------
Cash - end of period $ 8,643 $ 37,597
========= =========
</TABLE>
7
<PAGE>
PART F/S
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
o Nature of Business
------------------
Dac Technologies Group International, Inc. (the "Company"), a
Florida corporation, is in the business of developing, manufacturing
and marketing various consumer products, patented and unpatented, which
are designed to provide security for the consumer and their property.
In addition, the Company has developed a wide range of security and
non-security products for the home, automobile and individual. The
majority of the Company's products are manufactured and imported from
mainland China and are shipped to the Company'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 in the United States and Germany.
o Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
o Organization and basis of presentation - The
Company was incorporated as a Florida corporation in July 1998
under the name DAC Technologies of America, Inc. In July 1999,
the Company changed its name to DAC Technologies Group
International, Inc.
o Unaudited interim financial statements - The
accompanying financial statements of the Company for the three
months ended March 31, 2000 and 1999 are unaudited, but, in
the opinion of management, reflect the adjustments, all of
which are of a normal recurring nature, necessary for a fair
presentation of such financial statements in accordance with
generally accepted accounting principles. The significant
accounting policies applied to these interim financial
statements are consistent with those applied to the Company's
December 31, 1999 audited financial statements included in the
Company's Form 10KSB. The results of operations for an interim
period are not necessarily indicative of the results for a
full year.
o Equity Transactions
-------------------
On March 17, 2000, pursuant to a private placement offering,
the Company raised $75,000 and issued 75,000 shares of common
stock, primarily to business associates of existing
shareholders.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
The following Management Discussion and Analysis of Financial Condition
is qualified by reference to and should be read in conjunction with our
Financial Statements and the Notes thereto as set forth at the end of this
document. We include the following cautionary statement in this Form 10QSB for
any forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, expectations, future events or performances and underlying
assumptions and other statements which are other than statements of historical
facts. Certain statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements. The Company's expectations, beliefs and projections are expressed in
good faith and are believed by the Company to have a reasonable basis, including
without limitations, management's examination of historical operating trends,
data contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations, beliefs
or projections will result or be achieved or accomplished.
(a) Background
We were incorporated as a Florida corporation in July 1998, under the
name DAC Technologies of America, Inc. for the purpose of succeeding to the
interest of DAC Technologies of America, Inc. an Arkansas corporation ("DAC
Arkansas"). DAC Arkansas was formed in 1993, and sold its first product, the
Body Alarm, a small, beeper sized, 130 decibel, electronic personal security
alarm, for under $10. In 1994, we brought to market our patented Key Alert, a
110 decibel hand held alarm with key chain and built-in flashlight. Other
products followed over the next few years, including the patented SWAT Steering
Wheel Alarm, SWAT II Talking Car Alarm, and the patented Clampit Cupholder and
Plateholder.
In 1994, we developed our patented Trigger Lock, an inexpensive,
plastic trigger lock for handguns. Recognizing the public's and government's
concern for gun safety, we have developed a new metal Trigger Lock, a steel Gun
Lock, and a Lever Hammer Lock for lever action rifles. All of these gun safety
devices are currently carried by Wal Mart and K Mart. We have devoted a
significant amount of time and effort the past year in establishing ourselves in
the area of gun safety.
9
<PAGE>
o Develop a National Sales Force
We have in the past utilized national and regional manufacturing sales
representatives, with varied success. We believe use of such sales
representatives is a cost- effective method of reaching mid-sized and regional
retail outlets as well as national distributors. To properly monitor and
motivate these sales representatives, we intend to hire a national sales
manager.
o Develop New Products
Our success has been due, in part, to our ability to continue
developing new consumer products. We currently offer over thirty products in
personal, home and automotive security, gun safety, and non-security products
such as our patented Clampit Cupholder and Plateholder. In addition to the Metal
Trigger Lock, we have also recently completed development of a leather
horizontal cell phone case. This new product is now available. We believe that
with our relationships with major retailers such as Wal Mart, K Mart, and
Walgreens, and the capabilities of our manufacturers, we can continue to
identify consumer products that we can produce that are of high quality and
competitively priced.
o Internet
We have not yet ventured into what we see as the ever-expanding
opportunities available through the Internet. There are some distributors and
retail chains that offer our products through their own Web sites. In
anticipation of making use of the Internet to market our products, we have
acquired the rights to several Internet domain names such as "trigger-lock.com"
and "gun-lock.net. We intend to pursue the Internet potential early in 2000.
o Direct Mailings
We have had success in identifying specific target groups and utilizing
mass mailings and faxing. Sales of our Patient Alert, used by nursing homes and
hospitals to alert staff when confined patients attempt to get out of their bed
or wheelchair, has been developed and continues to increase as a result of this
type of advertisement. We have begun similar efforts to leading gun
manufacturers and distributors with regards to our gun safety locks. We intend
to continue to use direct mailings whenever specific target groups can be
identified as potential purchasers of any of our products.
o Expansion/Upgrade of Accounting and Management Systems
Current accounting and management systems have been satisfactory in
maintaining accurate accounting data and in aiding management decisions. With
anticipated growth in sales and products, it will be necessary to upgrade these
systems to insure accurate data and to properly control costs, manage inventory,
track cash flows, as well as provide timely information required for quarterly
SEC filings.
10
<PAGE>
(b) Financial Condition and Results of Operations.
The Company had working capital of $202,950 at March 31 2000, as
compared to a working capital deficit of $121,373 at March 31, 1999. This
increase in working capital of $324,323 was due, primarily, to an increase in
accounts receivable and inventories.
Net income for the three months ended March 31, 2000, wa $38,854 as
compared to a net loss of $11,560 for the three months ended March 31, 1999.
This increase in net income of $50,414 was due to an increase in sales of
$138,882. This increase in sales was due to sales of the Company's new metal
trigger lock, which was not available for sale until late in the fourth quarter
of 1999.
(c) Liquidity and Capital Resources
Our primary source of cash is funds from our operations. We believe
that external sources of liquidity could easily be obtained in the form of bank
loans, letters of credit, etc. We maintain an account receivable factoring
arrangement in order to insure an immediate cash flow. The factor may also, at
its discretion, advance funds prior to the collection of our accounts. Advances
are payable to the factor on demand. Should our sales revenues significantly
decline, it could affect our short-term liquidity. For the period ending March
31, 2000, we owed our factor approximately $333,435.
(d) Trends
The recent flurry of publicity involving firearms has caused gun safety
to become a prominent issue nationally. Gun violence, especially in schools has
prompted the President, as well as national and state legislators, to debate
legislation requiring gun safety locks on all firearms. Threatened litigation
against gun manufacturers has caused them to seriously consider placing gun
safety locks on the guns they manufacture. We believe sales revenues in this
area will grow significantly. Sales of our gun safety products for the first
quarter of 2000 totaled $317,824 as compared to $113,185 for the first quarter
of 1999.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On March 17, 2000, pursuant to a private placement offering, the
Company sold 75,000 shares of common stock for $75,000. The Company relied upon
the exemption
11
<PAGE>
provided by Section.4(2) of the Securities Act, for "transactions by an issuer
not involving any public offering." The proceeds of the offering are to be used
for working capital. The shares were sold to the following persons:
Name of Shareholder Shares Purchased Purchase Price
------------------- ---------------- --------------
Warren Overton 25,000 $25,000
Dennis Young 5,000 $ 5,000
Orin Whited 10,000 $10,000
Joseph Safina 25,000 $25,000
Scott Kanadle 10,000 $10,000
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 -K
The following documents are incorporated by reference from Registrant's
Form 10SB filed with the Securities and Exchange Commission (the " Commission"),
File No. 000-29211, on January 28, 2000:
Exhibits
--------
2 Acquisition Agreement
3(i) Articles of Incorporation
3(ii) By-laws
The following documents are filed herewith:
Exhibits
--------
23 Consent of Allan M. Lerner, P.A.
27 Financial Data Schedule
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized
DAC Technologies Group International, Inc.
By: /s/ David A. Collins
------------------------
David A. Collins, President
Date: May 17, 2000
13
Law Offices
ALLAN M. LERNER
A Professional Association
Telephone: (954)563-8111
2888 East Oakland Park Boulevard Facsimile: (954)563-8522
Fort Lauderdale, Florida 33306 e.mail: [email protected]
--------------
May 19, 2000
DAC Technologies Group International, Inc.
3200 North Ocean Boulevard
Suite 1006
Fort Lauderdale, Florida 33308
Re: Filing of 10QSB for DAC Technologies Group International, Inc.
--------------------------------------------------------------
Gentlemen:
I hereby consent to the inclusion of my name with the Form 10Q-SB being filed on
behalf of DAC Technologies Group International, Inc. with the U.S. Securities
and Exchange Commission.
Very truly yours,
Allan M. Lerner, P.A.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,643
<SECURITIES> 0
<RECEIVABLES> 528,475
<ALLOWANCES> 19,649
<INVENTORY> 363,180
<CURRENT-ASSETS> 937,281
<PP&E> 485,461
<DEPRECIATION> 186,211
<TOTAL-ASSETS> 1,274,262
<CURRENT-LIABILITIES> 733,515
<BONDS> 0
0
0
<COMMON> 5,098
<OTHER-SE> 511,004
<TOTAL-LIABILITY-AND-EQUITY> 1,274,262
<SALES> 581,378
<TOTAL-REVENUES> 581,378
<CGS> 342,295
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 38,854
<INCOME-TAX> 0
<INCOME-CONTINUING> 61,915
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,854
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
