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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSBA
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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 June 30, 2000, 5,243,000
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
SELECTED NOTES TO FINANCIAL STATEMENTS....................................9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION..........................................................10
Background...............................................................10
Financial Condition and Results of Operations............................11
PART II.......................................................................13
ITEM 1. LEGAL PROCEEDINGS..........................................13
ITEM 2. CHANGES IN SECURITIES......................................13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS....................................................14
ITEM 5. OTHER INFORMATION..........................................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...........................14
SIGNATURES....................................................................15
2
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PART I
ITEM 1. FINANCIAL STATEMENTS
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Balance Sheet
June 30, 2000
Unaudited
Assets
Current assets
Cash $ 31,350
Accounts receivable, less allowance for doubtful
accounts of $19,649 583,251
Inventories 423,546
Prepaid expenses 118,738
-----------
Total current assets 1,156,885
-----------
Property and equipment
Furniture and fixtures 104,102
Molds, dies, and artwork 352,673
Vehicles 34,709
-----------
491,484
Accumulated depreciation (199,364)
-----------
Net property and equipment 292,120
-----------
Other assets
Patents and trademarks, net of
accumulated amortization of $3,498 31,547
Other 10,411
-----------
Total other assets 41,958
-----------
Total assets $ 1,490,963
===========
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Balance Sheet
June 30, 2000
Unaudited
Liabilities and Stockholders' equity
Current liabilities
Due to factor $ 437,251
Accounts payable-trade 108,725
Accounts payable-related parties 33,214
Accrued payroll tax withholdings 114,750
Accrued expenses-other 24,209
Current maturities of long-term debt 143,149
-----------
Total current liabilities 861,298
-----------
Long-term debt, less current maturities 21,799
-----------
Stockholders' equity
Common stock, $.001 par value; authorized
10,000,000 shares; issued and outstanding
5,243,000 shares 5,243
Additional paid-in capital 742,776
Retained earnings (deficit) (140,153)
-----------
Total stockholders' equity 607,866
-----------
Total liabilities and stockholders' equity $ 1,490,963
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Operations
For the Six Months Ended June 30, 2000 and 1999
Unaudited
June 30, June 30,
2000 1999
----------- -----------
Net sales $ 1,226,608 $ 1,013,190
Cost of sales 708,060 591,933
----------- -----------
Gross profit 518,548 421,257
----------- -----------
Operating expenses
Selling 69,967 83,818
General and administrative 307,104 255,784
----------- -----------
Total operating expenses 377,071 339,602
----------- -----------
Income from operations 141,477 81,655
----------- -----------
Other income (expense)
Interest expense (45,035) (40,640)
----------- -----------
Income (loss) before income tax expense 96,442 41,015
Provision for income taxes -- --
----------- -----------
Net income (loss) $ 96,442 $ 41,015
=========== ===========
Numerator - net income (loss) $ 96,442 $ 41,015
Denominator - weighted average number
of shares outstanding 5,082,637 4,919,790
----------- -----------
Basic earnings (loss) per share $ 0.02 $ 0.01
=========== ===========
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Cash Flows
For the Six Months Ended June 30, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 96,442 $ 41,015
Adjustments to reconcile net income to
net cash provided (used in) operating activities:
Depreciation 25,583 19,100
Amortization 970 900
Changes in assets and liabilities
Accounts receivable (129,867) (144,740)
Inventories (40,107) (13,316)
Prepaid expenses (94,213) (22,407)
Other assets (4,711) (3,005)
Accounts payable - trade (19,395) (22,691)
Accounts payable - related party (19,368) (48,296)
Accrued payroll tax withholdings 38,602 6,910
Accrued expenses other (2,891) (13,448)
--------- ---------
Net cash provided by (used in) operating activities (245,397) (240,993)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (20,641) (1,958)
Purchases of patents and trademarks -- (2,150)
--------- ---------
Net cash provided by (used) in investing activities (20,641) (4,108)
--------- ---------
Cash flows from financing activities
Increase (decrease) in due to factor 138,542 75,931
Proceeds on long-term debt 50,000
Payments on long-term debt (63,837) (13,003)
Proceeds from issuance of common stock 109,175 39,900
Payments on stock subscriptions receivable 2,632 --
--------- ---------
Net cash provided by (used in) financing activities 186,512 152,828
--------- ---------
Increase (decrease) in cash 16,916 (51,258)
Cash - beginning of period 14,434 68,042
--------- ---------
Cash - end of period $ 31,350 $ 16,784
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</TABLE>
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Operations
For the Three Months Ended June 30, 2000 and 1999
Unaudited
June 30, June 30,
2000 1999
----------- -----------
Net sales $ 645,230 $ 570,694
Cost of sales 365,765 331,409
----------- -----------
Gross profit 279,465 239,285
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Operating expenses
Selling 39,249 39,666
General and administrative 160,654 123,895
----------- -----------
Total operating expenses 199,903 163,561
----------- -----------
Income from operations 79,562 75,724
----------- -----------
Other income (expense)
Interest expense (21,974) (23,149)
----------- -----------
Income (loss) before income tax expense 57,588 52,575
Provision for income taxes -- --
Net income (loss) $ 57,588 $ 52,575
=========== ===========
Numerator - net income (loss) $ 57,588 $ 52,575
Denominator - weighted average number of
shares outstanding 5,128,412 5,013,540
Basic earnings (loss) per share $ 0.01 $ 0.01
=========== ===========
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
Statements of Cash Flows
For the Three Months Ended June 30, 2000 and 1999
Unaudited
<TABLE>
<CAPTION>
June 30, June 30,
2000 1990
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 57,588 $ 52,575
Adjustments to reconcile net income to
net cash provided (used in) operating activities:
Depreciation 13,153 9,550
Amortization 485 450
Changes in assets and liabilities
Accounts receivable (74,425) (35,332)
Inventories (60,366) (63,025)
Prepaid expenses (62,106) (10,904)
Other assets (4,711) --
Accounts payable - trade 26,055 27,589
Accounts payable - related party 1,180 (42,600)
Accrued payroll tax withholdings 21,776 14,836
Accrued expenses other (7,024) (1,224)
--------- ---------
Net cash provided by (used in) operating activities (145,983) (100,660)
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (6,023) --
Purchases of patents and trademarks -- (2,150)
--------- ---------
Net cash provided by (used) in investing activities (6,023) (2,150)
--------- ---------
Cash flows from financing activities
Increase (decrease) in due to factor 103,816 2,525
Payments on long-term debt (20,866) (13,003)
Proceeds from issuance of common stock 34,175 39,900
--------- ---------
Net cash provided by (used in) financing activities 117,125 29,422
--------- ---------
Increase (decrease) in cash 22,707 (20,813)
Cash - beginning of period 8,643 37,597
--------- ---------
Cash - end of period $ 31,350 $ 16,784
========= =========
</TABLE>
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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 six months ended
June 30, 2000 and 1999 and for the three months ended June 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. 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.
On May 1, 2000, the Company issued 37,500 shares of common
stock for consulting services to be rendered in connection with a
consulting agreement entered into on that date with Mr. Jim Pledger.
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 to Robert Goodwin 5,000
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 12, 2000, the Company entered into a consulting
agreement with International Equities Group to develop strategic plans
and find candidates for acquisitions and mergers and increase sales.
On June 16, 2000, as payment for services to be rendered to the
Company, 100,000 shares of restricted common stock were issued to
International Equity's President, Joseph Safina. Twenty Five thousand
of the shares were delivered to Joseph Safina and the remaining
seventy five thousand shares were held in escrow pending completion of
the services to be performed.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
CONTINUED
4. 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.
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 in this document. We
include the following cautionary statement in this Form 10QSBA 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
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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 May 1, 2000, the Company entered into a consulting agreement with
Jim Pledger. 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 a new fingerprint and combination safe for
handguns is underway. The Company is working to acquire two new patented gun
locks for semi-automatic handguns that can be used on loaded guns. Also,
marketing efforts have been stepped up for the Company's leather, horizontal
cell phone cases.
On June 19, 2000, the Company's common stock began trading on the
NASDAQ OTC Bulletin Board under the trading symbol "DAAT.
(b) Financial Condition and Results of Operations.
The Company had working capital of $295,587 at June 30, 2000, as
compared to working capital of $124,472 at December 31, 1999. This increase in
working capital of $171,115 was due, primarily, to an increase in accounts
receivable.
11
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Net income for the six months ended June 30, 2000 was $96,242, as
compared to $41,015 for the same period in the prior year. This increase of
$55,427, representing a 135% increase, was due primarily to an increase in net
sales of $213,418 (a 21% increase over prior year).
Net income for the three months ended June 30, 2000 was $57,588, as
compared to $52,575 for the same period in the prior year. This increase of
$5,013, was due primarily to an increase in sales of $74,536 (a 13% increase).
Operating expenses for both the six month and three month periods
ending June 30, 2000 increased over the same period of the preceding year. For
the six month period, the increase was $37,469 and for the three month period
was $36,342. These increases are due primarily to additional accounting, legal
and filing costs relating to the filing of the Company's Forms 10SBA, 10KSB and
10QSB with the Securities and Exchange Commission. Total expenses for these
items were $37,144 for the six month period and $28,195 for the three month
period ending June 30, 2000.
(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 June
30, 2000, we owed our factor approximately $437,251.
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%.
(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 six months of 2000 totaled $693,440 as compared to $324,996 for the first
six months of 1999.
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PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On May 1, 2000, pursuant to a consulting agreement entered into by the
Company with Jim Pledger, the Company issued 37,500 shares of common stock as
consideration for Mr. Pledger's services under the terms of the agreement. More
detailed information concerning this transaction is available in the Form S-8
filed with the Securities and Exchange Commission, which is incorporated herein
by reference.
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 to Robert Goodwin, 5,000 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, pursuant to a private placement offering, the Company
issued 75,000 shares of restricted common stock for $75,000 or $1.00 per share
to 5 investors who were either accredited or otherwise sophisticated and with
whom we had a pre-existing relationship and who had access to all material
information. The transaction was exempt under Rule 504 of Regulation D of the
Securities Act
On June 12, 2000, the Company entered into a consulting agreement with
International Equities Group to develop strategic plans and find candidates for
acquisitions and mergers and increase sales. On June 16, 2000, as payment for
services to be rendered to the Company,100,000 shares of restricted common stock
were issued to International Equitie's President, Joseph Safina. Twenty Five
thousand of the shares were delivered to Joseph Safina and the remaining seventy
five thousand shares were held in escrow pending completion of the services to
be performed.
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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
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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, President
Date: January 4, 2001
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