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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 SEPTEMBER 30, 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 November 8, 2000,
5,143,000 shares of Common Stock are issued and outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [x]
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TABLE OF CONTENTS
PART I.................................................................3
ITEM 1. FINANCIAL STATEMENTS...........................................3
PART F/S ..............................................................10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
PLAN OF OPERATION.............................................11
Background...........................................11
Financial Condition and Results of Operations........12
Liquidity and Capital Resources......................12
Trends...............................................12
PART II .............................................................13
ITEM 1. LEGAL PROCEEDINGS.............................................13
ITEM 2. CHANGES IN SECURITIES.........................................13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...............................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........13
ITEM 5. OTHER INFORMATION.............................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..............................13
SIGNATURES............................................................14
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
Our financial statements are contained in pages 4 through 9 following.
3
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
BALANCE SHEET
SEPTEMBER 30, 2000
Unaudited
ASSETS
Current assets
Cash $ 5,139
Accounts receivable, less allowance for doubtful
accounts of $19,649 420,113
Inventories 391,021
Prepaid expenses 110,553
-----------
Total current assets 926,826
-----------
Property and equipment
Furniture and fixtures 108,871
Molds, dies, and artwork 355,173
Vehicles 34,709
-----------
498,753
Accumulated depreciation (212,879)
-----------
Net property and equipment 285,874
-----------
Other assets
Patents and trademarks, net of
accumulated amortization of $3,983 31,062
Other 10,411
-----------
Total other assets 41,473
-----------
Total assets $ 1,254,173
===========
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
BALANCE SHEET
SEPTEMBER 30, 2000
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Due to factor $ 268,222
Accounts payable-trade 66,581
Accrued payroll tax withholdings 114,431
Accrued expenses-other 18,949
Current maturities of long-term debt 48,675
-----------
Total current liabilities 516,858
-----------
Long-term debt, less current maturities 115,672
-----------
Stockholders' equity
Common stock, $.001 par value; authorized
10,000,000 shares; issued and outstanding
5,143,000 shares 5,143
Additional paid-in capital 722,876
Retained earnings (deficit) (106,376)
-----------
Total stockholders' equity 621,643
-----------
Total liabilities and stockholders' equity $ 1,254,173
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Unaudited
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Net sales $ 1,726,523 $ 1,655,405
Cost of sales 962,518 944,829
----------- -----------
Gross profit 764,005 710,576
----------- -----------
Operating expenses
Selling 116,170 146,307
General and administrative 453,719 388,106
----------- -----------
Total operating expenses 569,889 534,413
----------- -----------
Income from operations 194,116 176,163
----------- -----------
Other income (expense)
Interest expense (63,898) (61,543)
----------- -----------
Income (loss) before income tax expense 130,218 114,620
Provision for income taxes -- --
----------- -----------
Net income (loss) $ 130,218 $ 114,620
=========== ===========
Numerator - net income (loss) $ 130,218 $ 114,620
Denominator - weighted average number of shares outstanding 5,101,934 4,954,602
----------- -----------
Basic earnings (loss) per share $ 0.03 $ 0.02
=========== ===========
</TABLE>
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Unaudited
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 130,218 $ 114,620
Adjustments to reconcile net income to
net cash provided (used in) operating activities:
Depreciation 39,098 30,900
Amortization 1,455 1,100
Changes in assets and liabilities
Accounts receivable 33,271 (222,670)
Inventories (7,582) 26,084
Prepaid expenses (86,028) (37,111)
Other assets (4,711) (6,204)
Accounts payable - trade (61,539) (38,861)
Accounts payable - related party (52,582) (69,435)
Accrued payroll tax withholdings 38,284 18,108
Accrued expenses other (8,150) (22,021)
--------- ---------
Net cash provided by (used in) operating activities (108,484) (320,110)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (27,910) (4,458)
--------- ---------
Net cash provided by (used) in investing activities (27,910) (4,458)
--------- ---------
Cash flows from financing activities
Increase (decrease) in due to factor (30,487) 142,146
Proceeds on long-term debt 16,333
Payments on long-term debt (64,438) (51,343)
Proceeds from notes payable, related parties 0 3,000
Proceeds from sale of common stock 89,174 39,900
Payments on stock subscriptions receivable 2,632 999
--------- ---------
Net cash provided by (used in) financing activities (3,119) 151,035
--------- ---------
Increase (decrease) in cash (9,295) (58,913)
Cash - beginning of period 14,434 68,042
--------- ---------
Cash - end of period $ 5,139 $ 9,129
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</TABLE>
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Unaudited
<TABLE>
<CAPTION>
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Net sales $ 499,916 $ 642,215
Cost of sales 254,458 352,897
----------- -----------
Gross profit 245,458 289,318
----------- -----------
Operating expenses
Selling 46,203 62,488
General and administrative 148,415 132,322
----------- -----------
Total operating expenses 194,618 194,810
----------- -----------
Income from operations 50,840 94,508
----------- -----------
Other income (expense)
Interest expense (18,863) (20,903)
----------- -----------
Income (loss) before income tax expense 31,977 73,605
Provision for income taxes -- --
----------- -----------
Net income (loss) $ 31,977 $ 73,605
=========== ===========
Numerator - net income (loss) $ 31,977 $ 73,605
Denominator - weighted average number of shares outstanding 5,143,000 5,024,500
----------- -----------
Basic earnings (loss) per share $ 0.01 $ 0.01
=========== ===========
</TABLE>
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Unaudited
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 31,977 $ 73,605
Adjustments to reconcile net income to
net cash provided (used in) operating activities:
Depreciation 13,515 11,900
Amortization 485 1,100
Changes in assets and liabilities
Accounts receivable 163,138 (77,930)
Inventories 32,525 39,400
Prepaid expenses (11,815) (15,754)
Other assets 0 --
Accounts payable - trade (42,144) (16,170)
Accounts payable - related party (33,214) (21,138)
Accrued payroll tax withholdings (319) 11,198
Accrued expenses other (5,260) (8,573)
--------- ---------
Net cash provided by (used in) operating activities 116,911 (75,967)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (7,269) (3,500)
--------- ---------
Net cash provided by (used) in investing activities (7,269) (3,500)
--------- ---------
Cash flows from financing activities
Increase (decrease) in due to factor (169,029) 66,215
Payments on long-term debt (601) (69,007)
Payments on stock subscriptions receivable 999
Proceeds from issuance of common stock 1,800 0
--------- ---------
Net cash provided by (used in) financing activities (167,830) (1,793)
--------- ---------
Increase (decrease) in cash (26,211) (7,655)
Cash - beginning of period 31,350 16,784
--------- ---------
Cash - end of period $ 5,139 $ 9,129
========= =========
</TABLE>
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PART F/S
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
1. 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.
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. 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.
b. UNAUDITED INTERIM FINANCIAL STATEMENTS - The accompanying
financial statements of the Company for the nine months ended
September 30, 2000 and 1999 and for the three months ended
September 30, 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.
3. LONG-TERM DEBT
On July 21, 2000, the Company refinanced its bank loan in the
principal amount of $145,473.28. The new note is for a term of five
years, with an initial floating interest rate of 9.50%. The note is
secured by inventory and personal guarantees.
On October 30, 2000, the Company secured a $250,000 working
capital line of credit with a local bank. Interest is due monthly at
9.75% on any advances made under the line of credit. Principal is due
April 30, 2001.
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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, a Lever Hammer Lock for lever action rifles, and a cable lock. The new
metal trigger locks 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.
These efforts have included targeting law enforcement agencies and
community service and civic groups as gun safety customers. This effort has
resulted in the sales of gun locks to over thirty new law enforcement agencies
and civic groups such as the Rotary Club.
On September 15, 2000, Mr. Jim Pledger joined the Company as President
and as a member of the Board of Directors. Mr. Pledger is the former National
Sales Manager for Glock, Inc., one of the leading gun manufacturers, and is also
a former senior executive for the Federal Bureau of Investigation. The Company
believes Mr. Pledger's expertise, experience and contacts in the gun safety
industry will be invaluable in enabling the Company to develop a strong presence
in the gun safety market.
Additional developments include:
Internet - The Company's website, WWW.DACTEC.COM, is now operational.
This website provides information about the Company and its products, as well as
investor and stock information. Negotiations are currently underway with several
servers to provide e-commerce capabilities to our website.
The Company continues its efforts to develop new and innovative
consumer products. Development of several new handgun safes is continuing, with
certain models in the final pre-production stage. These safes will combine high
security storage capabilities with unique operating features which we believe
will be very popular with consumers. Distributor and consumer interest is high
for these items which we hope to begin shipping in the first and second quarters
of 2001.
The Company has also been in negotiations to acquire several new
patented gun locks, and, on October 26, 2000, entered into an exclusive
licensing agreement for one of these patents. Development of this locking device
for semiautomatic pistols is in the final stages and this product is also slated
for distribution in the first quarter of 2001. This unique lock has generated
considerable interest among law enforcement and civilian customers and we
believe this product will generate strong revenues.
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During this quarter, the Company began to reposition itself away from some of
its former suppliers and began relationships with other manufacturers and
suppliers to increase the quality of the products and also increase gross
margins. This is true for the electronics market as well as for gun locks. In
addition, these new suppliers have potential to bring new products to market in
a much quicker manner.
Additional costs have been incurred this quarter for development expenses of
these new products and additional tooling and mold costs. Also, as a result of
the repositioning of suppliers to the Company, some sales opportunities and
purchase orders were deferred into future quarters to take advantage of the
improvement in the quality of various products and the increased operating
margins.
(b) Financial Condition and Results of Operations.
Net income for the nine months ended September 30, 2000 was $130,218,
as compared to $114,620 for the same period in the prior year. This increase of
$15,598 was due primarily to an increase in net sales of $71,118, offset by a
decrease in operating expenses of $35,476.
Net income for the three months ended September 30, 2000 was $31,977,
as compared to $73,605 for the same period in the prior year. This decrease of
$41,628, was due primarily to a decrease in sales due to deferral of certain
sales opportunities and purchase orders into the fourth quarter of 2000 and
first quarter of 2001, particularly in the Company's electronic safety devices.
This deferral was made to take advantage of increased operating margins
available from new suppliers now coming online. Sales decreased $142,299 for the
same period in 1999 for the reasons previously stated. Gross profit margins
increased from 45% to 49% as a result of the Company bringing new suppliers and
manufacturers on line for its gun safety products at substantially reduced
prices. The Company has just begun to realize a portion of these savings in the
third quarter and will see increasing results in subsequent quarters.
The improvement in the quality, features and operating margins for
existing products, as well as the development and introduction of new products,
will put the Company in a very strong competitive position in the marketplace.
The Company continues to be responsive to increasing regulation of firearms and
the emphasis being place on gun safety in communities nationwide. We are alert
for opportunities to provide our products to eliminate or lessen gun violence
and the unauthorized use of firearms by children and others.
(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 accounts 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
September 30, 2000, we owed our factor approximately $268,222.
On July 21, 2000, the Company refinanced its bank loan in the principal
amount of $145,473.28. The new note is for a five year term with an initial
floating interest rate of 9.50%.
On October 30, 2000, the Company obtained a $250,000 line of credit with
a local bank to help fund its working capital needs. Interest is due monthly at
9.75% on any advances made under the line of credit, with principal due April
30, 2001. As of November 8, 2000, the Company has obtained $70,000 from this
line of credit.
(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 continue to believe sales revenues
in this area will grow significantly. Sales of our gun safety products for the
first nine months of 2000 totaled $979,654 as compared to $662,512 for the first
nine months of 1999.
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PART II
ITEM 1. LEGAL PROCEEDINGS
On August 15, 2000, the Company and its predecessor filed a
lawsuit in The Circuit Court of Pulaski County, Arkansas against one of the
Company's previous manufacturers. The lawsuit alleges breach of contract, most
specifically in the amounts charged to the Company for the manufacture of its
products. The complaint seeks rescinding of the transfer of 165,000 shares of
the Company's stock to the Defendant and an amount in damages as yet to be
determined.
ITEM 2. CHANGES IN SECURITIES
On June 5, 2000, the Company issued to Allan M. Lerner, P.A.
1,000 shares of restricted common stock as payment for services rendered to the
Company. The shares were issued in reliance on Section 4(2) of the Securities
Act of 1933.
On June 5, 2000, the Company issued 5,000 shares of
restricted common stock to Robert C. Goodwin as payment for services rendered
to the Company. The shares were issued in reliance on Section 4(2) of the
Securities Act of 1933.
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
27 Financial Data Schedule
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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, Chairman
Date: November 14, 2000
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