10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 000-29211
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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Florida
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65-0847852 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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12120 Colonel Glenn Road, Suite 6200 Little Rock, AR
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72210 |
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(Address of principal executive offices)
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(Zip Code) |
(Issuers telephone number)
Securities registered under Section 12(b) of the Act:
None
Name of each exchange on which registered
Not applicable
Securities registered under Section 12(g) of the Act:
Common Stock, par value $0.001
CHECK WHETHER THE REGISTRANT IS A WELL-KNOWN SEASONED ISSUER, AS DEFINED IN RULE 405 OF THE
SECURITIES ACT. YES o NO x
CHECK WHETHER THE ISSUER IS NOT REQUIRED TO FILE REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT. o
CHECK
WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PRECEDING 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.
YES x NO o
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF REGULATION S-K
IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE CONTAINED, TO THE BEST OF THE REGISTRANTS
KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. o
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A
NON-ACCELERATED FILER, OR A SMALLER REPORTING COMPANY.
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LARGE ACCELERATED FILER o
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ACCELERATED FILER o |
NON-ACCELERATED
FILER o (Do not check if a smaller reporting company)
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SMALLER REPORTING COMPANY x |
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12b-2 OF THE
EXCHANGE ACT YES o NO x
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES COMPUTED BY
REFERENCE TO THE PRICE AT WHICH THE STOCK WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH
STOCK, AS OF THE LAST BUSINESS DAY OF THE REGISTRANTS MOST RECENTLY COMPLETED SECOND FISCAL
QUARTER. THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES AS OF JUNE 30, 2008
WAS APPROXIMATELY $2,986,310.
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUERS
CLASS OF COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE. AS OF MARCH 19, 2009, 6,323,364 SHARES
OF COMMON STOCK ARE ISSUED AND 5,793,699 ARE OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
IF THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE, BRIEFLY DESCRIBE THEM AND IDENTIFY
THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO
SECURITY HOLDERS; (2) ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO
RULE 424(b) OF THE SECURITIES ACT OF 1933 (SECURITIES ACT). NOT APPLICABLE.
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS COMPANY, WE, US, AND OUR, REFER TO
DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
FORWARD-LOOKING STATEMENTS
This document includes forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, (the Securities Act) and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of
historical fact contained in this document, including, without limitation, the statements under
Managements Discussion and Analysis of Financial Condition and Results of Operations and
Liquidity and Sources of Capital regarding the Companys strategies, plans, objectives,
expectations, and future operating results are forward-looking statements. Such statements also
consist of any statement other than a recitation of historical fact and can be identified by the
use of forward-looking terminology, such as may, expect, anticipate, estimate, or
continue or the negative thereof or other variations thereon or comparable terminology. Although
the Company believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it can give no assurance that such expectations will prove to have been
correct. Actual results could differ materially based upon a number of factors including, but not
limited to, risks attending litigation and government investigation, inability to raise additional
capital or find strategic partners, leverage and debt service, governmental regulation, dependence
on key personnel, competition, including competition from other
manufacturers of products similar to those offered by the Company, costs and risks attending manufacturing, expansion of operations, market acceptance
of the Companys products, limited public market and liquidity, shares eligible for future sale,
the Companys common stock (Common Stock) being subject to penny stock regulation and other risks
detailed in the Companys filings with the United States Securities and Exchange Commission (SEC
or Commission).
1
PART I
ITEM 1. BUSINESS
(1) History and Business Development.
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). In September 1998, we purchased substantially all of the
assets of DAC Arkansas. DAC Arkansas, formed as an Arkansas corporation in 1993, may be deemed to
be a predecessor of our company. DAC Arkansas commenced operations with the manufacture of various
safety products, which were eventually acquired by us. Our principal owners and management held
similar positions with DAC Arkansas. We have continued the operations of DAC Arkansas without any
significant changes. In July 1999, we changed our name to DAC Technologies Group International,
Inc.
We have not been involved in any bankruptcy, receivership or similar proceeding. Except as
set forth herein, we have not been involved in any material reclassification, merger,
consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of
business.
Our primary business is the sale of gun maintenance and hunting and camping accessories,
household products, and to a lesser degree, gun safety. Our target consumer base is sportsmen,
hunters and outdoorsmen, and recreational enthusiasts.
(2) Business Plan
We are in the business of developing, outsourcing the manufacture and marketing of, various
consumer products, patented and non-patented. Our products were initially security related,
evolving from various personal, home and automotive electronic security devices, to firearm safety
devices such as gun and trigger locks, cable locks and safes. Beginning in 2003, with the
introduction of our line of GunMaster® gun cleaning kits, we have shifted our emphasis to gun
cleaning items and related gun maintenance accessories and away from gun locks and firearm safety
devices. This product line has continued to grow and now accounts for approximately 49% of the
Companys sales, whereas gun safety now accounts for only 9% of sales. The percentage decline is
not due to a numerical decline in the volume of gun lock sales but rather the increased sales
volume of other product areas, such as hunting and camping and household items, which accounted for
19% and 34% of sales in 2008.
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In 2005, we added a line of meat processing items, which is consistent with our business
philosophy of marketing products to sportsmen, hunters, outdoorsmen, and recreational enthusiasts.
We have continued to develop products in the hunting and camping area, adding a game processing kit
(knife set) in 2006, and an aluminum camping table and turkey hunting seat in 2007. In 2008,
hunting and camping accounted for approximately 19% of sales. In 2008, the Company added a new,
large roll-top camping table to this area.
In December 2007, the Company began shipping three new cleaning dusters as the first items in
the household cleaning area. The Company added new cleaning items in 2008, and continues to work
toward adding additional items in 2009.
Although a significant portion of our business is with the mass-market retailer Wal-Mart
(approximately 71%), we have been able to considerably increase our business with large sporting
goods retailers, distributors and catalog companies.
The majority of our products are manufactured and imported from mainland China and shipped to
a central location in Little Rock, Arkansas for distribution.
The Companys business plan and strategy for growth continues to focus on:
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Increased penetration of our existing markets, particularly in
the gun cleaning market and accessories and the household cleaning market |
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Development of new products for the hunting and camping
market and expanding into the household market |
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Identification and development of products for new markets
in which the Company can be competitive due to its manufacturing
relationships |
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Identification and recruitment of effective manufacturers
representatives to actively market these products on a national and
international basis |
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Aggressive cost containment, both in operating expenses and
manufacturing costs |
Management believes that continued growth would require the Company to continually innovate
and improve its existing line of products to meet consumer, industry and governmental demands. In
addition, we must continue to develop or acquire new and unique products that will appeal to gun
owners, as well as non-gun related products for the expansion of our sporting goods customer base.
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In addition to our traditional products, our management is actively pursuing initiatives which
may add complimentary business products. These initiatives are intended to broaden the base
of revenues to make us less dependent on particular products. By developing businesses which focus
on products and which compliment our current line of products, management hopes to leverage these
opportunities to not only develop new sources of revenue, but to strengthen the demand for our
existing products.
(3) Products
A. Introduction.
Our products were initially security related, evolving from various personal, home and
automotive electronic security devices, to firearm safety devices such as gunlocks, trigger locks,
cable locks and security safes. Beginning in 2003, we shifted our emphasis to gun cleaning and
maintenance items, and in 2005 began adding new items in the hunting and camping area.
Our products can be grouped into four main categories: (a) gun cleaning and maintenance, (b)
hunting and camping, (c) household, and (d) gun safety. In developing these products, we focus on
developing features, establishing patents, and formulating pricing to obtain a competitive edge.
We currently design and engineer our products with the assistance of our Chinese trading company
and manufacturers, who are responsible for the tooling, manufacture and packaging of our products.
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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. The top of the
line kits are solid brass, and consist of either universal kits designed to fit a
variety of firearms, or caliber specific kits, or replacement items such as brushes,
mops, etc. These kits are also available in solid wood or aluminum cases, as well as
blister packed. We also carry a full line of replacement pieces for each kit.
Finally, we also market several kits that have been privately labeled for certain
customers. This product area accounted for 49% and 59% of sales in 2008 and 2007,
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Hunting and Camping. This category includes three meat-processing items,
Sportsmans Lighter, game processing kit, two aluminum camping tables and turkey
hunting seat. This product area accounted for 19% and 28% of sales in 2008 and 2007,
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Household. This category includes a line of five household cleaning dusters
and a line of household fireplace screens, tools and accessories. The cleaner
dusters were first marketed during the fourth quarter of 2007, and the fireplace
equipment is a product line introduced inr 2008. This product area accounted for 23%
and 2% of
sales in 2008 and 2007, respectively. |
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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 designed
to range from keyed trigger locks to cable locks. Our security safes are of
heavy-duty, all steel construction and are designed for firearms, jewelry and other
valuables. Eight of the Companys gun locks and two of the safes have been certified
for sale consistent with the firearms safety standards set out by the State of
California. These California firearms safety standards have been adopted by other
states and by a variety of gun manufacturers. This product area accounted for 9% and
11% of sales in 2008 and 2007, respectively. |
(4) Manufacturing, Suppliers and Distribution.
Through our foreign and domestic manufacturing agents, we manufacture, design and build our
tooling, molds and products. Currently, at least 99% of our products are manufactured in mainland
China. We customarily develop our manufacturing through trading companies located in China. Our
principal agent is MDD Trading, Ltd., which is a trading company/agent that is responsible for
locating manufacturers for our products. These companies typically provide us with price lists for
the manufacture and tooling of our products, which we may or may not negotiate. The products are
then purchased from the manufacturers by the trading companies and sold to us at marked-up costs.
We believe our relationships with our suppliers and manufacturers are satisfactory.
Nonetheless, we are dependent upon our primary Chinese supplier continuing in business and its
ability to ship to the United States, but believe that we could replace this supplier, if required
to, at similar quality and terms. However, should any of the manufacturers cease providing for us,
we believe they can be replaced within 30 days, without difficulty, and at competitive cost, due to
the numerous manufacturing facilities in China capable of manufacturing our products.
Our administrative offices and warehouse facilities are located in Little Rock, Arkansas; our
executive office is located in Miami Beach, Florida. We distribute the majority of our domestic,
and certain of our international business out of our Little Rock facility. Most of our
international business is shipped directly to our customers direct from the Shanghai, China
location. Products are delivered to our Little Rock facility complete and ready for delivery to
our customers. Countries outside the U. S. where we have a presence include: Ireland/England,
France, Germany, Russia, Canada, New Zealand and Australia.
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We utilize both internal sales personnel and commissioned independent sales representatives.
We use sales promotions and sales development activities to provide assistance to the independent
sales representatives through the use of brochures, product samples and demonstration products.
We also utilize trade shows, both on a regional and national level to promote our products and to
attract qualified sales representatives.
Our management attempts to maintain sufficient inventory levels to meet customers demands,
but there can be no assurance that we will be successful in doing so. Turnaround time from the
date we place an order with our manufacturers until the product is received in our distribution
center is normally between four to six weeks. This quick turnaround time allows us to maintain
minimum inventory levels. However, since we outsource our manufacturing, a good portion of which
is done in China, it is difficult to predict the efficiency of our vendors. Outsourcing to a
foreign country also subjects our manufacturing to the risk of political instability, currency
fluctuation and reliability. See, Risk Factors.
(5) Competition
We operate in a very competitive industry, dominated by national and international companies
with well-established brands, all of whom are better capitalized, have more experience in our
industry and have established varying degrees of consumer loyalty. There are no assurances we will
ever be successful in establishing our brands or penetrating our target markets. Our products
compete with other competitors gun cleaning kits, gunlocks and hunting and camping accessories.
Many of these products are more widely known than the Companys products. While we believe that our
products are favorably priced to comparable products on the current market, we nevertheless expect
competitors to develop and market similar products at competitive prices, possibly reducing the
Companys sales or profit margins or both. (See, Risk Factors)
Some of our competitors in the business sectors which we operate in are:
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Gun Safety Master Lock (which presently controls 60%-70% of the market),
Smith & Wesson, Shot Lock, Sentry Safes, Pro-Loc and Gun Vault. |
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Gun Maintenance Outers and Hoppes |
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Hunting and Camping traditional manufacturers of hunting and camping equipment |
We are subject to competition that is expected to intensify in the future because we
believe that the number of competitors is increasing. There are no significant barriers to entry
into our markets. We feel our greatest difficulties in competing are due to our competitors
generally being bigger, better-known, and having greater resources including capital and personnel.
We realize it is
important to achieve brand name recognition in establishing a market share, which, in turn
generates additional market share, giving consumers preferences for brand names. We believe that
while brand names operate effectively in mainstream product distribution, there is significant
opportunity for lesser-known names with specific products and solutions that appeal to consumers.
The keys to our maintaining a competitive position are product design, pricing, and quality of the
product and the maintenance of favorable relationships with various mass merchandisers.
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(6) Market and Customers.
The ultimate users of our products include hunters, gun owners, sportsmen and outdoor
enthusiasts. Because of the uncertain size of the potential market for our products and the
number of competitors, we cannot state, with any degree of certainty, the size of our market
share. For example, a market report published by Cygnus Business Media, an international
budiness to business media company, states that nationally sales of hunting licenses, tags and
stamps in 2005 was approximately $724 million. The 2005 figures issued by the U.S. Fish and
Wildlife Service indicated that total sales rose 2.8 percent from the previous year, from 14.7
million to 14.5 million. More aggressive reports were published by the National Sporting Goods
Association, which estimated there are 20.6 million active hunters. The Outdoor Industry
Associations projection would add about six million to that figures. And a survey commissioned
by National Shooting Sports Foundation reported in 2009 that the number of hunters reached 18.5
million.
In an American Firearms Industry report published in 2008, it was reported that the number of
guns owned in the U.S. approximates 200 million (today estimated at 240,000,000), including 60-65
million handguns and approximately 60-65 million gun owners of which 30-35 million own handguns.
A 2005 report published in the Pediatrics online journal found that about 1.7 million children
lived in homes where there were unlocked and loaded guns. Most gun manufacturers already provide
some kind of lock with new firearms, but the practice is voluntary. The federal legislation that
would protect the firearm industry from lawsuits when guns are used to commit a crime includes an
amendment that would require locks, or another safety device, to be sold with every handgun. Seven
states, including California, already require that locks be sold with some firearms.
Although we sell our products both foreign and domestically, our U.S. sales account for 98% of
our overall revenues in 2008 and 2007.
Our primary customer base can be broken down as follows:
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National retail chains such as Wal-Mart and Kmart (representing 72% and 69% of sales in
2008 and 2007, respectively. Wal-Mart accounted for 71% and 66% of our total sales revenues); |
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Distributors such as Acusport, RSR Group, Inc., Jerrys Sport Center, Inc., and Maurice
(representing 3% and 5% of sales in 2008 and 2007, respectively); |
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Sporting goods retailers such as Cabelas, Academy Sports, Dicks Sporting Goods and
Sportsmans Guide (representing 16% and 15% of sales in 2008 and 2007, respectively); |
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Gun manufacturers such as Savage Arms, Browning, Marlin, Glock and SIG-Arms (representing
5% and 6% of sales in 2008 and 2007, respectively); and |
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Regional retail chains and sole proprietors (representing 4% and 5% of sales). |
While our arrangements with customers vary, we generally sell on the basis of purchase orders
rather than fixed contracts. A purchase order represents a written contract to purchase a
specified product(s) at a specified price. Any future orders from a particular customer would be
dependent upon that customers ability to sell the product and a desire to re-order. Some
customers do issue blanket purchase orders, which request delivery of a specified quantity over a
specified period of time.
Credit is extended to customers, generally on 30 or 60-day terms. Credit approval is
performed by the Companys factor. Any credit approved by the factor is on a non-recourse basis,
thus there is no risk of loss due to non-payment to the Company. For any customers whose credit is
not approved by the factor, the Company will make other arrangements, such as prepayment or COD
(Cash on Delivery).
The Company does have a limited warranty on most of its products, typically for one year from
date of purchase. The Company does accept return of defective products, and will either replace at
no charge or issue credit to the customer for the defective product. The cost to the Company for
defective products in 2007 and 2008 was approximately 1.7% of sales.
The Company maintains a standard price list for its customers, depending upon whether they are
a distributor or a dealer. This protects our distributor customers from having to compete with the
Company for our dealer customers. The Company does not set mandatory retail pricing for its
customers to use.
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(7) Intellectual Property.
We believe that protection of proprietary rights to our products is important because, as we
are in a highly competitive market, a patent provides us with a competitive advantage by limiting
or eliminating similarly designed competitive products. To this end, we have obtained U.S. patents
on certain of our products as follows:
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Patent No. |
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Expiration |
TVP095 Trigger Lock |
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Des. 375,342 |
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2009 |
SWA 03 SWAT Steering Wheel Alarm |
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Des. 365,774 |
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2009 |
GWA 001 Glass/Window Alarm |
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Des. 371,086 |
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Defense Spray and Flashlight |
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Des. 375,994 |
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2009 |
Gun Cleaning Kit |
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7,020,994B2 |
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2024 |
In October 2006, the Companys application to trademark the name GunMaster was granted by
the U. S. Trademark office under Registration Number 3,161,436.
To date, we have not registered or trademarked any of our product names except for the
(GunMaster®). (See Risk Factor) We rely primarily on our patents and licensing arrangements
with third parties to avoid infringing on the products of others. We also use the services of
patent attorneys to insure that our unlicensed and unpatented products do not infringe. We dont
patent or trademark all of our products because of the cost and we have been advised by patent
counsel that certain products are not patentable.
Depending upon the development of our business, we may also wish to develop and market
products, which incorporate patented or patent-pending formulations, as well as products covered by
design patents or other patent applications.
While we may seek to protect our intellectual property, in general, there can be no assurance
that our efforts to protect our intellectual property rights through copyright, trademark and trade
secret laws will be effective to prevent misappropriation of our products. See, Risk Factors.
Our failure or inability to protect our proprietary rights could have a material adverse affect on
our business, financial condition and results of operations. Moreover, inasmuch as we will often
seek to
manufacture products, which are similar to those manufactured by others, it is critical for us
to ensure that our manufactured products do not infringe upon existing patents of others.
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(8) Governmental Regulations.
Several federal laws, including the National Firearms Act (1934), Gun Control Act (1968),
Firearms Owners Protection Act (1986), Brady Handgun Violence Prevention Act (1993), the 1994
Omnibus Crime Control Act and other laws, regulate the ownership, purchase and use of handguns.
Notwithstanding these and other laws, there is not any federal law that requires the use of
gunlocks, despite numerous attempts in Congress to pass such legislation.
In March 2008, the U. S. Supreme Court decided the case of District of Columbia vs. Heller,
relating to the issue of whether the gun control laws of Washington, D. C. on non-government
persons violated the Second Amendment to the U. S. Constitution, the right to bear arms. The
District of Columbia law banned handgun possession by making it a crime to carry an unregistered
firearm and prohibiting the registration of handguns. The law separately provided that no person
may carry an unlicensed handgun, but authorizes the police chief to issue 1-year licenses; and
requires residents to keep lawfully owned firearms unloaded and disassembled or bound by a trigger
lock or similar device. The Supreme Court held the Second Amendment to the U.S. Constitution
protects an individual right to possess a firearm unconnected with service in a militia, and to use
that firearm for traditionally lawful purposes, such as self-defense within the home. The
Districts total ban on handgun possession in the home amounts to a prohibition on an entire class
of arms that Americans overwhelmingly choose for the lawful purpose of self-defense. The Court
also held the handgun ban and the trigger-lock requirement (as applied to self-defense) violate the
Second Amendment, finding the requirement that any lawful firearm in the home be disassembled or
bound by a trigger lock makes it impossible for citizens to use firearms for the core lawful
purpose of self-defense and is hence unconstitutional. It is unknown what impact, if any, this
ruling will have on our business.
In addition to federal gun laws, most states and some local jurisdictions have imposed their
own firearms restrictions. Some states have passed Child Access Prevention (or CAP) Laws which
hold gun owners responsible if they leave guns easily accessible to children and a child improperly
gains access to the weapon. Additionally, the State of California has enacted legislation that
establishes basic performance standards for firearm safety devices, lock-boxes and safes
California law also requires every gun to be sold with a state-approved child-safety lock to make
it easier for gun owners to lock up their weapons. The locks must be of sufficient quality to meet
state approval. The state contracts with independent laboratories to test gun locks to make sure
the locks will work and cannot be easily removed by unauthorized people.
The fact that gun safety laws are passed by federal, state, or local governments does not
ensure that the demand for our products will increase.
With the election of President Barack Obama his views on gun control may have an impact on our
sales of gun safety devices. While in the US Senate, Obama has supported several gun control
measures, including restricting the purchase of firearms at gun shows and the reauthorization of
the Federal Assault Weapons Ban. Obama voted against legislation protecting firearm manufacturers
from certain liability suits, which gun-rights advocates say are designed to bankrupt the firearms
industry. Obama did vote in favor of the 2006 Vitter Amendment to prohibit the confiscation of
lawful firearms during an emergency or major disaster, which passed. More recently, Obama
initially voiced support of Washington DCs handgun ban. Following the Supreme Court decision that
the ban was unconstitutional, he revised his position in support of the decision overturning the
law, saying and affirming that the Second Amendment protects the right of individuals to bear arms.
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(9) Research and Development.
We develop our products internally, utilizing the expertise of our manufacturers, input from
an engineering consulting firm and input from our customers. Since we do not design nor create
customized specifications, we do not directly generate Research and Development costs. The nature
of our relationship with our Chinese trading company does not require that they or our
manufacturers, disclose what, if any, R & D costs are sustained in connection with the manufacture
of our products. Any R & D cost incurred by our manufacturers is passed on to us in the pricing of
the tooling, molds and products and are thus subsumed in the pricing to our Company.
Consequently, to the extent, if any, that our manufacturers pass R & D costs to us, they are, in
turn, recaptured by us through the pricing to our customers.
(10) Environmental Laws.
We incur no costs and suffer no adverse effects by complying with environmental laws (federal,
state and local).
(11) Employees.
We currently employ twelve (12) employees, all of whom are full-time: President & Chief
Executive Officer, Chief Financial Officer, Vice President of Manufacturing, Sales Analyst,
Salesman, Information Systems Tech, accounting clerk, shipping manager and four full-time warehouse
workers. There are no collective bargaining agreements.
(12) Reports to Security Holders.
We file reports with the SEC as a smaller reporting company. Copies of this report, including
exhibits to the Report and other materials filed with the SEC that are not included herein, may be
inspected and copied, without charge, at the Public Reference Room, 100 F Street, N.E., Washington,
DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. Information on the
operation of the Public Reference Room may be obtained by calling the Commission at 1-800-SEC-0330.
In addition, the Commission maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
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ITEM 1A. RISK FACTORS
Historically, the Company has achieved growth by the development of new products. There can
be no assurance that the Company will be able to continue to develop new products, to sustain rates
of growth and profitability in future periods. Any future success that the Company may achieve
will depend upon many factors which may be beyond the control of the Company or which cannot be
predicted at this time. Although we believe that our expectations are based on reasonable
assumptions within the bounds of our knowledge of our business and operations, actual results may
differ materially from our expectations. Uncertainties and factors that could cause actual results
or events to differ materially from those set forth or implied, including without limitation:
The current economic and financial downturn may cause a decline in consumer spending and may
adversely affect the Companys business, operations, liquidity, financial results and stock price.
Our operating results are affected by the relative condition of the U.S. economy. Our business and
financial performance may be adversely affected by current and future economic conditions that
cause a decline in business and consumer spending, including a reduction in the availability of
credit, increased unemployment levels, higher energy and fuel costs, rising interest rates,
financial market volatility and recession. Additionally, we may experience difficulties in
operating and growing our operations to react to economic pressures in the U.S.
As a business that ultimately depends on consumer discretionary spending, the Company may face
a difficult 2009 because our customers may reduce their purchases due to job losses, foreclosures,
bankruptcies, higher consumer debt and interest rates, reduced access to credit, falling home
prices and lower consumer confidence. Decreases in comparable store sales, customer traffic or
average value per transaction negatively affect the Companys financial performance, and a
prolonged period of depressed consumer spending could have a material adverse effect on our
business. Promotional activities and decreased demand for consumer products, particularly
higher-end products, could affect profitability and margins. The potential effects of the economic
and financial crisis are difficult to forecast and mitigate. As a consequence, our sales, operating
and financial results for a particular period are difficult to
predict, and, therefore, it is difficult to forecast results to be expected in future periods. Any
of the foregoing could have a material adverse effect on our business, results of operations, and
financial condition and could adversely affect our stock price.
Additionally, many of the effects and consequences of the U.S. and global financial and
economic crises are currently unknown or unpredictable and could potentially have a material
adverse effect on the Companys liquidity and capital resources, including our ability to raise
additional capital if needed, and the ability of banks and factors to honor requests for credit, or
could otherwise negatively affect the Companys business and financial results. Although we
generally generate funds from our operations and our existing factoring facility to pay our
operating expenses and fund our capital expenditures, our ability to continue to meet these cash
requirements over the long-term may require access to additional sources of funds, including
capital and credit markets, and continuing market volatility, the impact of government intervention
in financial markets and general economic conditions may adversely affect the ability of the
Company to access capital and credit markets.
12
The global crisis may also adversely affect our manufacturers and suppliers access to capital
and liquidity with which to maintain their inventory, production levels and product quality and to
operate their businesses, all of which could adversely affect our supply chain. It may cause
manufacturers and suppliers to reduce their offerings of customer incentives and vendor allowances,
cooperative marketing expenditures and product promotions. The current crisis and market
instability make it difficult for us and our manufacturers and suppliers to accurately forecast
future product demand trends, which could cause us to carry too much or too little inventory in
various product categories.
If we are to expand our operations, we may need additional capital. Our ability to timely
expand our product operations and, in particular, the production and marketing of our products is
largely dependent upon our revenues or the acquisition of additional funding. In the event that
additional capital is not obtained or our revenues fall off, we may be unable to timely complete
and/or implement our plans to expand our operations. While we believe we have accurately identified
strategic and viable business opportunities to pursue, there is no assurance that these will become
profitable operations. Technology is a rapidly developing industry and our success is dependent on,
among other things, developing commercially acceptable products and pursuing the correct
distribution channels. Anti-gun sentiments and a weak economy are potential risk factors, as they
may inhibit consumer purchases of guns.
Our growth program and future profitability remains uncertain. We believe that operating
results will be adversely affected if start-up expenses associated with our new product lines are
incurred without sufficient revenues. Moreover, future events, including unanticipated expenses or
increased competition could have an adverse effect on our long-term operating margins and
results of operations. Consequently, there can be no assurance that our Companys growth program
will result in an increase in the profitability of our operations.
Our success depends on maintaining relationships with key customers. We have several
customers upon which we depend on for the sale of a large percentage of our products. For example,
more than 71% of our business is through Wal-Mart. Customer orders are dependent upon their markets
and may vary significantly in the future based upon the demand for our products. The loss of one
or more of such customers, or a declining market in which such customers reduce orders or request
reduced prices, could have a material adverse effect on our business.
13
We depend on purchase orders and have no long-term contractual relationship with our
customers. Our business relationship is based upon purchase orders with our customers. We have no
contracts, which require any of our customers to continue to purchase our products. Although we
have had long-term relationships with many of our customers, there can be no assurance that such
relationships will continue or that customers will continue ordering our products.
We depend on foreign contract manufacturers for substantially all of our manufacturing
requirements. During 2008 the Company purchased 99% of its products from one major supplier, who
in turn distributes the manufacturing to multiple companies in mainland China. We also rely on
contract manufacturers to procure components, assemble, and package our products. The inability of
our contract manufacturers to provide us with adequate supplies of high quality products or the
loss of any of our contract manufacturers would have an adverse effect on our business. Because
our major supplier and contract manufacturers are located in mainland China, we are exposed to
risks of political uncertainty, including United States foreign trade treaties and foreign laws.
Any disruption in our relationships with any of these vendors or reductions in the production
of the material supplied could, in each case, adversely affect our ability to obtain an adequate
supply of our products and could impose additional operational costs associated with sourcing raw
materials from new suppliers. Although the Company is dependent upon this supplier continuing in
business and its ability to ship to the United States, we believe that we could replace this
supplier, if required to, at similar quality and terms. Nevertheless, while we have no long-term
contract with our supplier or manufacturers, we have had long-term relationships with them and
believe such relationship is good, and do not currently anticipate any material shortages or
disruptions in supply from this vendor or manufacturers.
The increased cost of raw materials and manufacturing has adversely affected our profits.
Over the past year, we have experienced increased manufacturing costs due to the increase in the
cost of raw materials used in our products such as steel, plastic, wood and brass. The price and
availability of production materials for our products are affected by a wide variety of
interrelated economic and other factors, including alternative uses of materials and their
components, changes in production capacity, energy prices, commodity prices, and governmental
regulations. Specifically, our manufacturing experienced cost increases related to steel, brass and
plastic purchases. Industry competition and the timing of price increase by suppliers and
manufacturers limit to some extent our ability and the ability of other industry participants to
pass raw material cost increases on to customers. We are not advised of the source or availability
of the raw materials for our manufacturers. Although alternative sources exist from which we could
obtain such raw materials, we do not currently have supply relationships with any of these
alternative sources and cannot estimate with any certainty the length of time that would be
required to establish such a supply relationship, or the sufficiency of the quantity or quality of
materials that could be so obtained.
Since we have minimal control over the economics that dictate these price increases, we have
suffered a corresponding reduction in profit since we are not always able to pass the additional
cost on to our customers.
14
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. Although we sell a number of
different products, we rely primarily on two product lines gun cleaning kits and hunting and
camping accessories-which account for approximately 68% of our total revenues. Should our sales of
either of these product lines significantly decline due to the loss of customers, or a declining
market in which such customers reduce orders or request reduced prices, it could have a material
adverse effect on our business.
We may be unable to compete favorably in the highly competitive markets in which we operate. The
manufacture and sale of all of our products is highly competitive and there are no substantial
barriers to entry into the market. Most of our competitors are large, well-established companies
with considerably greater financial, marketing, sales and technical resources than those available
to us. Additionally, many of our present and potential competitors have research and development
capabilities that may allow such competitors to develop new or improved products that may compete
with our product lines. These companies may succeed in developing proposed products that are more
effective or less costly than our proposed products or such companies may be more successful in
manufacturing and marketing their proposed products. An increase in competition could result in a
loss of market share.
We may not be able to attract and retain the qualified personnel we need to succeed in the
future. At present the success of our company is highly dependent on our chief executive officer,
David A. Collins and our Chief Financial Officer, Robert Goodwin. Our future success will depend
in part on our ability to attract and retain qualified personnel to manage the development and
future growth of our company. There can be no assurance that we will be successful in attracting
and retaining such personnel.
We may be adversely affected by legislation and regulation over firearms. The business of all
producers and marketers of firearms and firearms parts is subject to thousands of federal, state
and local laws and governmental regulations and protocols. The basic federal laws are the National
Firearms Act, the Federal Firearms Act, and the Gun Control Act of 1968. These laws generally
prohibit the private ownership of fully automatic weapons and place certain restrictions on the
interstate sale of firearms unless certain licenses are obtained. From time to time, congressional
committees review proposed bills and various states enact laws relating to the regulation of
firearms. These proposed bills and enacted state laws generally seek either to restrict or ban the
sale and, in some cases, the ownership of various types of firearms. When such laws restrict the
ownership of guns, they will have a material adverse effect on our business since our major
products are gun and hunting related. Such laws, rules, regulations and protocols are subject to
change. There can be no assurance that the regulation of firearms will not become more restrictive
in the future and that any such restriction would not have a material adverse effect on the
business of the Company.
15
We extend credit to our customers and should our customers default on their obligations to
us, we may be subject to credit risk. The Company provides credit in the normal course of business
to its customers and performs ongoing credit evaluations of its customers. Approximately 91% of
these trade receivables were subject to a factoring agreement. These accounts are factored on a
non-recourse basis, which reduces the Companys exposure to credit risk. We also maintain
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
Companys customer base and its customers financial resources.
With the exception of Gunmaster we have not to date registered or trademarked any of our
product names. While we may seek to protect our intellectual property, and have trademarked the
GunMaster® name, there can be no assurance that our efforts to protect our intellectual property
rights through copyright, trademark and trade secret laws will be effective to prevent
misappropriation of our products. Our failure or inability to protect our proprietary rights could
have a material adverse affect on our business, financial condition and results of operations.
Among other things, it could foster more competition or create identical products sold under
different labels. Moreover, inasmuch as we will often seek to manufacture products that are similar
to those manufactured by others, it is critical for us to insure that our manufactured products do
not infringe upon existing patents of others. Patent and other type
intellectual property lawsuits are extremely expensive to prosecute or defend, and in either case
success cannot be assured.
The Company has engaged in several related-party transactions, which were not effected in
arms-length transactions. On occasion, we have engaged with related parties, including our chief
executive officer and certain shareholders in related party transactions. These transactions
include loans made by and to the Company, and were not arms-length. See, Certain Relationships and
Related Transaction at Item 13 below. There has been no independent evaluation of the
transactions, and therefore there can be no assurance that these transactions are fair to the
Company.
We face risks associated with international trade and currency exchange. Annually, we purchase
approximately $10-11 million of inventory from the Chinese manufacturers and suppliers. This
exposes us to risk from foreign exchange rate fluctuations. Political and economic conditions
abroad may result in increasing the cost of our foreign manufactured products, particularly those
manufactured in mainland China. Protectionist trade legislation in either the United States or
foreign countries, such as a change in the current tariff structures, export or import compliance
laws, or other trade policies, could reduce our ability to import our products from foreign
manufacturers and suppliers. While we transact business predominantly in U.S. dollars and bill and
collect most of our sales in U.S. dollars, our revenues result from goods that were manufactured or
purchased, in whole or in part, from Chinese manufacturers and suppliers in Renminbi currency,
thereby exposing us to some foreign exchange fluctuations.
16
We face risks associated with international activities. These activities expose us to various
economic, political, and other risks, including the following:
|
Ø |
|
Compliance with local laws and regulatory requirements as well as changes in those
laws and requirements; |
|
|
Ø |
|
Foreign exchange rate fluctuations; |
|
|
Ø |
|
Limitations on exports; |
|
|
Ø |
|
The possibility of appropriation of our assets without just compensation; |
|
|
Ø |
|
Overlap of tax issues; |
|
|
Ø |
|
Tariffs and duties; |
|
|
Ø |
|
The burdens and costs of compliance with a variety of foreign laws; and |
|
|
Ø |
|
Political or economic instability in countries in which we conduct business, including
possible terrorist acts. |
Changes in policies by the United States or foreign governments resulting in, among other
things, increased duties, higher taxation, currency conversion limitations, restrictions on the
transfer or repatriation of funds, or limitations on imports or exports also could have a material
adverse effect on us. Any actions by foreign countries to reverse policies that encourage foreign
trade also could adversely affect our operating results. In addition, U.S. trade policies, such as
most favored nation status and trade preferences, could affect the attractiveness of our services
to our U.S. customers.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are located at 12120 Colonel Glenn Road, Suite 6200, Little Rock,
Arkansas 72210. This location consists of approximately 7,500 square feet of office space. All of
the administrative and accounting functions are performed at this location, as well as some sales.
This space is leased at a monthly rent of $7,757 for four years, and expires January 31, 2011.
There is one four-year renewal option. The lease provides for a three percent increase each year
beginning in the third year.
17
The Companys distribution center is located at 3700 Old Shackleford Road, Little Rock,
Arkansas 72204. This facility consists of 102,000 square feet of warehouse space and
approximately 800 square feet of office space. This warehouse space is leased at a monthly rent of
$9,791.75, and expires December 31, 2010. There is one four-year renewal option. The lease
provides for an increase in the monthly rent of $425 beginning in the second year.
The Company also maintains an executive office in Miami Beach, Florida at the residence of its
president, David A. Collins. The Company pays a monthly office allowance to Mr. Collins, the
Companys President, of $5,500, for approximately 1200 square feet and secretarial support. There
is no lease agreement for these premises. This office arrangement was not the product of
arm-length negotiation; however, the Company has determined the arrangement to be competitive with
comparable office space and secretarial support.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There are no matters submitted during the fourth quarter of the fiscal year covered by this
report to a vote of security holders, through the solicitation of proxies or otherwise.
18
PART II
|
|
|
ITEM 5. |
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES. |
(1) Over the Counter Market. On June 19, 2000, our common stock began trading on the NASDAQ
Over-the-Counter Bulletin Board market under the trading symbol DAAT. The high and low bid
information for each quarter is presented below. These prices reflect inter-dealer prices, without
retail markup, markdown or commission and may not represent actual transactions.
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
High |
|
|
Low |
|
March 31, 2007 |
|
$ |
2.48 |
|
|
$ |
1.26 |
|
June 30, 2007 |
|
$ |
1.47 |
|
|
$ |
1.10 |
|
September 30, 2007 |
|
$ |
1.35 |
|
|
$ |
1.06 |
|
December 31, 2007 |
|
$ |
1.33 |
|
|
$ |
0.82 |
|
March 31, 2008 |
|
$ |
1.05 |
|
|
$ |
0.68 |
|
June 30, 2008 |
|
$ |
0.92 |
|
|
$ |
0.75 |
|
September 30, 2008 |
|
$ |
0.89 |
|
|
$ |
0.69 |
|
December 31, 2008 |
|
$ |
0.75 |
|
|
$ |
0.27 |
|
(2) Shareholders. As of March 19, 2009, there were approximately 65 holders of record,
excluding those held in street name, of our 5,793,699 shares of common stock outstanding. This
does not include owners of the Companys securities held in street name.
(3) Dividends. We have not paid a cash dividend on the common stock since inception. The
payment of dividends may be made at the discretion of our Board of Directors and will depend upon,
among other things, our operations, our capital requirements and our overall financial condition.
Although there is no restriction to pay dividends as of the date of this registration statement, we
have no present intention to declare dividends.
(4) Repurchases of Securities.
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
|
|
|
|
|
|
|
|
|
Total Number |
|
|
Maximum |
|
|
|
|
|
|
|
|
|
|
|
of Shares |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
Purchased as |
|
|
Shares that |
|
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
|
May Yet be |
|
2008 |
|
Total Number |
|
|
Average |
|
|
Announced |
|
|
Purchased |
|
Calendar |
|
of Shares |
|
|
Price Paid |
|
|
Plans or |
|
|
Under the Plans |
|
Month |
|
Purchased |
|
|
per Share |
|
|
Programs |
|
|
or Programs |
|
January |
|
|
8,500 |
|
|
$ |
0.80 |
|
|
|
8,500 |
|
|
|
97,300 |
|
October |
|
|
36,000 |
|
|
$ |
0.50 |
|
|
|
36,000 |
|
|
|
61,300 |
|
November |
|
|
5,000 |
|
|
$ |
0.44 |
|
|
|
5,000 |
|
|
|
56,300 |
|
December |
|
|
108,900 |
|
|
$ |
0.35 |
|
|
|
56,300 |
|
|
|
0 |
|
Total |
|
|
158,400 |
|
|
$ |
0.41 |
|
|
|
105,800 |
|
|
|
|
|
In May 2007, the Company announced a plan to repurchase up to 200,000 shares of its
common stock. In 2007, the Company repurchased 94,200 shares in connection with the
Plan. The Company has repurchased an additional 56,300 shares in the open-market
transactions since the completion of the repurchase plan.
19
|
|
|
ITEM 6. |
|
SELECTED FINANCIAL DATA |
Information not required.
|
|
|
ITEM 7. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following Management Discussion and Analysis of Financial Condition is qualified by
reference to and should be read in conjunction with, our Consolidated Financial Statements and the
Notes thereto as set forth at the end of this document. We include the following cautionary
statement in this Form 10-K 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 Companys expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including without limitations, managements
examination of historical operating trends, data contained in the Companys records and other data
available from third parties, but there can be no assurance that managements expectations, beliefs
or projections will result or be achieved or accomplished.
(1) Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
The Company reported net income of $356,694 on net sales of $17,042,361 for 2008 as compared
to net income of $340,894 on net sales of $14,777,645 for 2007. Net income increased $15,800, or
0.5%, while net sales increased $2,264,716, or 15%. Earnings per share remained unchanged at
$0.06.
The increase in net sales was due, primarily, to the addition of new products in the household
area. The Company first introduced items in this area in December 2007, so it was virtually an
entirely new product area for 2008. Net sales of household products in 2008 totaled $3,935,710, an
increase of $3,621,538 over 2007.
The Company continued to experience inflationary pressure on its gross margins due to rising
commodity prices during the fourth quarter, as it had during the first three quarters of 2008.
Gross margins decreased from 27% in 2007 to 23% in 2008. This decrease of 4% had a significant
affect on the Companys gross profit. With the decreases in global commodity prices that began in
the latter part of 2008, the Company has seen decreases in the prices it has paid for many of its
products it has ordered in 2008. If this trend continues, it will have a positive affect on gross
margins on existing products during 2009
Operating expenses remained virtually unchanged in 2008 as compared to 2007, despite the 15%
increase in net sales. Selling and shipping expenses only increased $10,023, or less than 1%.
General and administrative expenses decreased by $141,284 over 2007. Most of this decrease was due
to a one-time expense to settle a lawsuit with the Companys former insurance carrier in the amount
of $146,500 in 2007. Without this one-time expense in 2007, general and administrative expenses
would have increased $5,216, or less than 1%.
20
Financial Condition
A summary of the significant balance sheet items is summarized below:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Accounts receivable |
|
$ |
495,718 |
|
|
$ |
263,646 |
|
Due from factor |
|
$ |
1,542,918 |
|
|
$ |
765,510 |
|
Inventories |
|
$ |
2,742,563 |
|
|
$ |
4,925,275 |
|
Accounts payable-trade |
|
$ |
795,136 |
|
|
$ |
2,393,050 |
|
Total current assets |
|
$ |
5,483,389 |
|
|
$ |
6,662,270 |
|
Total current liabilities |
|
$ |
1,107,814 |
|
|
$ |
2,640,446 |
|
Net working capital |
|
$ |
4,375,575 |
|
|
$ |
4,021,824 |
|
Stockholders equity |
|
$ |
5,005,598 |
|
|
$ |
4,713,881 |
|
Accounts receivable and due from factor
The Company maintains a factoring agreement wherein it assigns its receivables (on a
non-recourse basis). The factor performs all credit and collection functions, and assumes all
risks associated with the collection of the receivables. The Company pays a fee of 65/100ths of 1%
of the face value of each receivable for this service. This fee is included in interest expense on
the Companys consolidated statements of income. In addition, in order to generate immediate cash
flow, the Company may borrow against the assigned receivables prior to their collection and is
charged interest on any such advances.
Accounts receivable on the Companys balance sheet represents those receivables that have not
yet been legally assigned to the factor. Due from factor represents the net equity the Company
has in its assigned receivables reduced by any funds advanced by the factor. At December 31,
2008 and 2007, these amounts are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Total accounts receivable |
|
$ |
5,220,636 |
|
|
$ |
4,772,170 |
|
Less: assigned receivables |
|
|
(4,724,918 |
) |
|
|
(4,508,524 |
) |
|
|
|
|
|
|
|
Net accounts receivables |
|
$ |
495,718 |
|
|
$ |
263,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assigned receivables |
|
$ |
4,724,918 |
|
|
$ |
4,508,524 |
|
Less: Funds advanced |
|
|
(3,182,000 |
) |
|
|
(3,743,014 |
) |
|
|
|
|
|
|
|
Due from factor |
|
$ |
1,542,918 |
|
|
$ |
765,510 |
|
|
|
|
|
|
|
|
21
Inventories
Inventories decreased $2,182,712, or 44% from 2007 to 2008. This decrease was the result
of a concentrated effort by management to reduce inventory to a reasonable level, preserve
liquidity, the result of which is to improve the Companys overall financial condition.
Liabilities
Accounts payable decreased $1,597,914, or 67% from 2007. This decrease is a direct result
of the decrease in inventory.
Liquidity and Capital Resources
Our primarily source of cash is funds from our operations. We believe that external
sources of liquidity could 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.
Repayment of 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 December
31, 2008, our factor had advanced to us $3,182,000.
The Company has not experienced any issues with its factor in regards to the availability
of credit, despite the apparent problems in the credit markets. The Company has been assured by
its factor that the continued availability of advanced funds will not be an issue.
The Company has two balloon demand notes with a local bank guaranteed by our CEO, David
Collins. The loans bear interest at 7.25% and mature in 2010. The total principal balance
of these loans on December 31, 2008 totaled $104,609. We believe our revenues will be
sufficient to pay these obligations. If not, we will seek to refinance them or request our
shareholder to pay his guarantees.
Off-Balance Sheet Arrangements
The Company is a party to a lease arrangement for its executive offices. Information
pertaining to this arrangement is present in Item 2 Description of Property and Item 13
Certain Relationships and Related Transactions. The Company does not believe that this arrangement
has, or is reasonably likely to have, a material effect on our financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures, or
resources.
We do not have any transactions, arrangements, or other relationships with unconsolidated
entities that are reasonably likely to affect our liquidity or capital resources. We have no
special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or
market or credit risk support that engage in leasing, hedging, research and development services,
or other relationships that expose us to liability that is not reflected on the face of the
financial statements.
22
Trends
Despite recent declines , our business faces the issues of increased manufacturing costs and
margin erosion as a result of raw material, fuel and other utility price increases, and a weak
dollar. This has put pressure on our margins and overhead costs, and, although we have not yet
done so, wherever possible, these increases will be passed on through sales price increases. Any
strengthening of the US dollar would impact favorably on the business, as this would ease the
pressure on margins and increase our competitiveness. Current trends have seen a decrease in raw
material and fuel prices, which, if continues, will have a positive affect on our gross margins.
Critical Accounting Estimates
The Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America. The Companys
significant accounting policies are discussed in detail in Note 2 to the consolidated financial
statements. Certain of these accounting policies, as discussed below, require management to make
estimates and assumptions about future events that could materially affect the reported amounts of
assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities.
Accounting estimates and assumptions discussed in this section are those that we consider to be the
most critical to an understanding of our consolidated financial statements because they inherently
involve
significant judgments and uncertainties. For all of these estimates, we caution that future
events rarely develop exactly as forecast, and the best estimates routinely require adjustment.
Long-lived Assets
Depreciation expense is based on the estimated useful lives of the underlying property and
equipment. Although the Company believes it is unlikely that any significant changes to the useful
lives of its property and equipment will occur in the near term, an increase or decrease in the
estimated useful lives would result in changes to depreciation expense.
The Company continually reevaluates the carrying value of its long-lived assets, for events or
changes in circumstances, which indicate that the carrying value may not be recoverable. As part
of this reevaluation, if impairment indicators are present, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposal. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less than the carrying
value of the asset, an impairment loss is recognized to reduce the carrying value of the long-lived
asset to the estimated fair value of the asset.
Patents and Trademarks
Amortization expense is based on the estimated economic useful lives of the underlying patents
and trademarks. Although the Company believes it is unlikely that any significant changes to the
useful lives of its patents and trademarks will occur in the near term, rapid changes in technology
or changes in market conditions could result in revisions to such estimates that could materially
affect the carrying value of these assets and the Companys future consolidated operating results.
23
|
|
|
ITEM 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Information not required for smaller reporting companies.
|
|
|
ITEM 8. |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Our
consolidated financial statements are contained in pages F-1 through
F-21 following.
|
|
|
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None
|
|
|
ITEM 9A. |
|
CONTROLS AND PROCEDURES |
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act, for the Company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of its management and directors; and (3)provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of
internal control, and accordingly, even effective internal control can provide only reasonable
assurance with respect to financial statement preparation and may not prevent or detect material
misstatements. In addition, effective internal control at a point in time may become ineffective in
future periods because of changes in conditions or due to deterioration in the degree of compliance
with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, that
results in there being a more than remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, management conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of December 31, 2008 (Evaluation Date) based on the framework set forth in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on its evaluation under this framework, management concluded that our
internal control over financial reporting was not effective as of the Evaluation Date.
Management assessed the effectiveness of the Companys internal control over
financial reporting as of Evaluation Date and identified the following material weaknesses:
|
|
|
INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personnel to properly
implement control procedures. |
|
|
|
|
LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS ON THE COMPANYS BOARD OF DIRECTORS: We do
not have a functioning audit committee or outside directors on the Companys Board of
Directors, resulting in ineffective oversight in the establishment and monitoring of
required internal controls and procedures. |
Management is committed to improving its internal controls and will (1) increase the frequency of
independent reconciliations of significant accounts
which will mitigate the lack of segregation of duties until there are sufficient personnel and (2)
may consider appointing outside directors and audit committee members in the future.
Management, including our Chief Executive Officer and Chief Financial Officer, has discussed the
material weakness noted above with our independent registered public accounting firm. Due to the
nature of this material weakness, there is a more than remote likelihood that misstatements which
could be material to the annual or interim financial statements could occur that would not be
prevented or detected. The material weaknesses identified did not result in the restatement of any
previously reported financial statements or any other financial statement disclosure.
This Annual Report does not include an attestation report of our registered public accounting firm
regarding internal control over financial reporting.
Managements report was not subject to attestation by the our registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only managements report in this
annual report.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the Evaluation Date.
24
MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.
Our internal control system was designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes, in
accordance with generally accepted accounting principles. Because of inherent limitations, a system
of internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
|
|
|
ITEM 9A(T). |
|
CONTROLS AND PROCEDURES. |
Information not required.
|
|
|
ITEM 9B. |
|
OTHER INFORMATION |
There was no information reportable on Form 8K for the 2008 fourth quarter, which has not
otherwise been reported.
25
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
(1) Officers & Directors
The following sets forth the names and ages of our executive officers and directors.
Directors are typically elected at annual meetings of stockholders, and serve for the term for
which they are elected and until their successors are duly elected and qualified. The Company,
however, has not held an annual meeting for the election of its directors. Our officers are
appointed by the board of directors and serve at the boards discretion.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
|
Term |
|
|
|
|
|
|
|
David A. Collins |
|
63 |
|
President; CEO; Director |
|
2008-2009 |
|
|
|
|
|
|
|
Robert C. Goodwin |
|
52 |
|
CFO; Director |
|
2008-2009 |
David A. Collins is a founder of the Company and it predecessors, and previously served as its
President, CEO and Director from inception in 1993 until July 11, 2001. From July 2001 until May
2002, Mr. Collins served as a consultant to the Company, particularly in the areas of sales and
marketing. In May 2002, Mr. Collins was reappointed as President, CEO and Chairman upon the
resignation of James R. Pledger.
Robert C. Goodwin has served as the Companys CFO since its inception in July 1998, as well as
DAC Arkansas continuously since 1993. In July 1998, Mr. Goodwin was elected to the Companys
board.
(2) Compliance with Section 16(a) of the Securities Act of 1934
Section 16(a) of the Exchange Act requires the Companys directors, executive officers and
persons who own more than 10% of the Companys Common Stock (collectively, Reporting Persons) to
file with the SEC initial reports of ownership and changes in ownership of the Companys Common
Stock. Reporting Persons are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports they file. To the Companys knowledge, based solely on its review of the
copies of such reports received or written representations from certain Reporting Persons that no
other reports were required, the Company believes that during its fiscal year ended December 31,
2008; all Reporting Persons complied with all applicable filing requirements.
26
(3) Code of Ethics
Effective March 30, 2007, our Companys board of directors adopted a Code of Business
Conduct and Ethics that applies to all of our Companys officers, directors and employees. Our
Code of Business Conduct and Ethics and Compliance Program were filed with the Securities and
Exchange Commission as Exhibit 14.1 to our Form 10KSB for the year ended December 31, 2006,
filed on April 2, 2007. We will provide a copy of the Code of Business Conduct and Ethics and
Compliance Program to any person without charge, upon request. Requests can be sent to: Robert
C. Goodwin, CFO, DAC Technologies Group International, Inc., 12120 Colonel Glenn Road, Suite
6200 Little Rock, AR 72210.
(4) Committees of the Board
Our board of directors is of the view that it is appropriate for us not to have a standing
compensation or nominating committees because there are currently only two directors on our board
of directors, who are in frequent communication with each other as to all matters that would
ordinarily be handled by such committees. These directors have performed and will perform
adequately the functions of nominating and compensation committees. There has not been any defined
policy or procedure requirements for stockholders to submit recommendations or nomination for
directors. Our board of directors does not believe that a defined policy with regard to the
consideration of candidates recommended by stockholders is necessary at this time because we
believe that, given the stage of our development, a specific nominating policy would be premature
and of little assistance until our business operations are at a more advanced level. The process
of
identifying and evaluating nominees for directors is conducted by our board of directors. Based on
the information gathered, our board of directors then makes a decision on whether to recommend the
candidates as nominees for director. We do not pay any fee to any third party or parties to
identify or evaluate or assist in identifying or evaluating potential nominees.
The Board of Directors also acts as the audit committee. None of our directors are
independent.
27
|
|
|
ITEM 11. |
|
EXECUTIVE COMPENSATION |
The following table sets forth summary information concerning the compensation received for
services rendered to us during the past two (2) fiscal years.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
Name and |
|
|
|
|
Salary |
|
|
Commission |
|
|
Compensation |
|
|
Total |
|
Principal Position |
|
|
Year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
David A. Collins,
PEO |
|
|
2008 |
|
|
|
120,000 |
|
|
|
423,747 |
|
|
|
66,000 |
|
|
|
609,747 |
|
|
|
|
2007 |
|
|
|
70,000 |
|
|
|
453,245 |
|
|
|
66,000 |
|
|
|
589,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert C. Goodwin,
PFO |
|
|
2008 |
|
|
|
77,400 |
|
|
|
|
|
|
|
|
|
|
|
77,400 |
|
|
|
|
2007 |
|
|
|
77,400 |
|
|
|
|
|
|
|
|
|
|
|
77,400 |
|
Board of Directors. Our directors do not receive compensation in any form for their services
as Directors.
Employment Contracts and Other Compensation.
David A. Collins serves in the capacity of Chairman and CEO under a five (5) year Employment
Agreement commencing December 1, 2005, and unless terminated according to its terms, is renewable
for three additional five-year terms. This Agreement may not be terminated by the Company except
for cause, defined as a felony conviction, or violation of the non-compete or
confidentiality provisions. If cause is found, Mr. Collins will cease to receive
compensation. Furthermore, Mr. Collins may terminate his agreement at any time upon 30 days
advance written notice to the Company; should he elect to do so, the Company will discontinue
payment of benefits, except that any stock options already granted will remain in force. Should
Mr. Collins be terminated from his position with the Company, he agrees not to compete with the
Company for a period of twelve (12) months following the date of termination. Mr. Collins is
compensated both with salary and commissions on all sales generated by the accounts/customers of
Mr. Collins of between 3%-5%. In addition, for the years 2007 and 2008, David A. Collins leased a
portion of his home in Miami, Florida to the Company, which serves as the Companys executive
office. The Company pays a monthly office allowance to Mr. Collins of $5,500, for approximately
1200 square feet and secretarial support. There is no lease agreement for these premises. This
office arrangement was not the product of arm-length negotiations; however, the Company has
determined the arrangement to be competitive with comparable office space and secretarial support.
All other officers and employees serve at the discretion of the Board of Directors, and do not
have employment contracts.
28
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS. |
The following table sets forth certain information regarding the beneficial ownership
of our common stock as of March 19, 2009 by (a) each person known by us to be the beneficial owner
of five (5) percent or more of the outstanding common stock and (b) all executive officers and
directors both individually and as a group. Included are any securities that any person or group
identified has the right to acquire within sixty (60) days pursuant to options, warrants, and
conversion privileges or other rights. Unless otherwise indicated in the footnotes to this table
and subject to community property laws where applicable, we believe that each of the shareholders
named in this table has sole or shared voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based upon 5,793,699 shares of common
stock outstanding.
(1) Security Ownership of Certain Beneficial Owners.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Address of |
|
Number of Shares |
|
|
Percent |
|
Title of Class |
|
Beneficial Owner |
|
Beneficially Owned |
|
|
of Class |
|
Common Stock |
|
Praetorian Capital Management LLC/
Praetorian Offshore Ltd.
Miami Beach, FL |
|
|
752,555 |
|
|
|
12.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
David A. Collins
|
|
|
500,500 |
[1] |
|
|
8.6 |
% |
|
|
Miami Beach, FL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Kennerman Associates
|
|
|
785,020 |
|
|
|
13.5 |
% |
|
|
Saratoga Springs, NY |
|
|
|
|
|
|
|
|
|
|
|
|
|
[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. |
29
(2) Security Ownership of Management
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Address of |
|
Number of Shares |
|
|
Percent |
|
Title of Class |
|
Beneficial Owner |
|
Beneficially Owned |
|
|
of Class |
|
Common Stock |
|
Robert C. Goodwin
|
|
|
19,073 |
|
|
|
0.33 |
% |
|
|
N. Little Rock, AR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
David A. Collins
|
|
|
500,500 |
|
|
|
8.6 |
% |
|
|
Miami Beach, FL |
|
|
|
|
|
|
|
|
There are no arrangements, which may result in a change in control of the Company.
We have an Equity Compensation Plan in place in order to promote the interests of the
Company by enabling us to motivate, attract, and retain the services of persons upon whose
judgment, efforts, and contributions the success of the Companys business depends. The maximum
number of shares that can be granted under this Plan is 1,000,000 shares of common stock.
|
|
|
|
|
|
|
|
|
Equity Compensation Plan Information |
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
securities |
|
|
|
|
|
|
|
remaining available |
|
|
|
Number of |
|
|
|
for future issuance |
|
|
|
securities to be |
|
|
|
under equity |
|
|
|
issued upon |
|
Weighted-average |
|
compensation plans |
|
|
|
exercise of |
|
exercise price of |
|
(excluding |
|
|
|
outstanding |
|
outstanding |
|
securities |
|
|
|
options, warrants |
|
options, warrants |
|
reflected in column |
|
|
|
and rights |
|
and rights |
|
(a) |
|
Plan category |
|
(a) |
|
(b) |
|
(c) |
|
Equity compensation plans |
|
None none |
|
zero none |
|
|
|
|
approved by security holders |
|
outstanding |
|
outstanding |
|
|
1,000,000 |
|
Equity compensation plans not |
|
None none |
|
zero none |
|
|
|
|
approved by security holders |
|
outstanding |
|
outstanding |
|
None |
Total |
|
None |
|
None |
|
|
1,000,000 |
|
30
|
|
|
ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE. |
At December 31, 2008 and 2007, the Company has a non-interest bearing note receivable of
$178,465 and $130,531, respectively, from David A. Collins, Chairman and CEO. This note is due
December 31, 2009. This note was not negotiated in an arms-length transaction, and the Company
has not undertaken any independent evaluation to determine the fairness of the transaction.
At December 31, 2008 and 2007, the Company has a non-interest bearing note receivable
of $72,518 and $72,518, respectively, from DAC Investment and Consulting, Inc., a company
wholly-owned by David A. Collins, our Chairman and CEO. This note is due December 31, 2009. This
note was not negotiated in an arms-length transaction, and the Company has not undertaken any
independent evaluation to determine the fairness of the transaction.
David A. Collins, Chairman and CEO, has personally guaranteed two loans obtained by the
Company from a local Arkansas bank. The total of these loans at December 31, 2008 and 2007 was
$104,609 and $150,376, respectively. The notes are due on various dates in 2010. The Company
intends to refinance the loans when they mature; in the event they cannot be refinanced the Company
believes it will have adequate resources to pay off the loans. Mr. Collins has also personally
guaranteed repayment of funds borrowed by the Company under its factoring agreement. The amounts
borrowed under this factoring agreement at December 31, 2008 and 2007 were $3,182,000 and
$3,743,014, respectively. Although the Company has not undertaken any independent evaluation
to determine the fairness of the transaction, management believes that the terms of this
transaction, which was negotiated at arms-length, are at least as favorable as the terms the
Company could have obtained from an unaffiliated third party.
For the years 2008 and 2007, our Chief Executive Officer, David Collins, leased a portion of
his home in Miami, Florida to the Company, which serves as the Companys executive office. The
Company pays a monthly office allowance to Mr. Collins, the Companys President of $5,500, for
approximately 1200 square feet and secretarial support. There is no lease agreement for these
premises. This office arrangement was not the product of arm-length negotiation; however the
Company has determined the arrangement to be is competitive with comparable office space and
secretarial support.
31
|
|
|
ITEM 14. |
|
PRINCIPAL ACCOUNTANTING FEES AND SERVICES |
(1) Audit Fees
The Company incurred the following fees to Frost, PLLC, the Companys independent
auditors, for services rendered during the fiscal years ending December 31, 2008 and December 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
|
|
|
|
|
Audit |
|
|
Audit |
|
|
Tax |
|
|
|
|
|
|
Total |
|
|
Fees |
|
|
Related |
|
|
Compliance |
|
|
Other |
|
2008 |
|
$ |
88,330 |
|
|
$ |
85,526 |
|
|
$ |
-0- |
|
|
$ |
2,804 |
|
|
$ |
-0 - |
|
2007 |
|
$ |
108,810 |
|
|
$ |
105,550 |
|
|
$ |
-0- |
|
|
$ |
3,260 |
|
|
$ |
-0 - |
|
|
|
|
(1) |
|
Audit Fees. The aggregate fees billed for professional services related to the audit of our
annual financial statements, review of financial statements included in our Forms 10-Q, or other
services normally provided by Frost in connection with statutory and regulatory filings or
engagements for the fiscal years ended December 31, 2008 and 2007. |
|
(2) |
|
Audit-Related Fees. Audit related fees are for professional services for assurance and related
services by Frost that are reasonably related to the performance of the audit or review of our
financial statements and that are not reported above under Audit Fees for years ended December
31, 2008 and 2007. There were no such services provided during 2008 or 2007. |
|
(3) |
|
Tax Fees. The aggregate fees billed by Frost for professional services related to tax
compliance including preparation of federal and state tax returns. These services were approved in
advance by the Board of Directors. |
|
(4) |
|
All Other Fees. There were no other fees billed by Frost for the fiscal years ended December
31, 2008 and 2007. |
Audit committee. The Company does not have a standing Audit Committee of its Board of
Directors.
32
PART IV
|
|
|
ITEM 15. |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
The following documents are incorporated by reference from the Registrants Form 10-SB filed
with the Securities and Exchange Commission (the commission) file #000-29211, on January 28, 2000
and the 2004 10KSB.
|
|
|
|
|
Exhibit |
|
Description |
|
|
2 |
|
|
Asset Purchase Agreement |
|
|
|
|
|
|
3.1 |
|
|
Articles of Incorporation |
|
|
|
|
|
|
3.2 |
|
|
Bylaws |
|
|
|
|
|
|
10.1 |
|
|
Office Lease |
|
|
|
|
|
|
10.1.1 |
|
|
Warehouse Lease |
|
|
|
|
|
|
10.2 |
|
|
Factoring Agreement |
|
|
|
|
|
|
10.3.1 |
|
|
Amended Employment contract of David A. Collins |
|
|
|
|
|
|
14.1 |
|
|
Code of Business Conduct & Ethics |
|
|
|
|
|
|
31.1 |
|
|
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. |
33
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
December 31, 2008 and 2007
Consolidated Financial Statements
With
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
DAC Technologies Group International, Inc.
Little Rock, Arkansas
We have audited the accompanying consolidated balance sheets of DAC Technologies Group
International, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of
income, stockholders equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement. The Company has determined that it is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of DAC Technologies Group International,
Inc. as of December 31, 2008 and 2007, and the consolidated results of its operations and its cash
flows for the years then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/
Frost, PLLC
Independent Registered Public Accounting Firm
Little Rock, Arkansas
March 30, 2009
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Consolidated Balance Sheets
December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
599,103 |
|
|
$ |
402,468 |
|
Accounts receivable, less allowance for doubtful accounts
of $20,000 and $5,000 in 2008 and 2007, respectively |
|
|
495,718 |
|
|
|
263,646 |
|
Due from factor |
|
|
1,542,918 |
|
|
|
765,510 |
|
Inventories |
|
|
2,742,563 |
|
|
|
4,925,275 |
|
Prepaid expenses and deferred charges |
|
|
72,068 |
|
|
|
115,686 |
|
Income taxes receivable |
|
|
|
|
|
|
153,870 |
|
Deferred income tax asset |
|
|
31,019 |
|
|
|
35,815 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
5,483,389 |
|
|
|
6,662,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
55,323 |
|
|
|
55,323 |
|
Furniture and fixtures |
|
|
297,356 |
|
|
|
278,322 |
|
Molds, dies and artwork |
|
|
536,809 |
|
|
|
513,949 |
|
|
|
|
|
|
|
|
|
|
|
889,488 |
|
|
|
847,594 |
|
Accumulated depreciation |
|
|
(623,477 |
) |
|
|
(573,458 |
) |
|
|
|
|
|
|
|
Net property and equipment |
|
|
266,011 |
|
|
|
274,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Patents and trademarks, net of accumulated amortization of
$119,772 and $104,208 in 2008 and 2007, respectively |
|
|
121,718 |
|
|
|
133,762 |
|
Deposit |
|
|
17,351 |
|
|
|
17,351 |
|
Advances to employees |
|
|
28,617 |
|
|
|
28,925 |
|
Notes receivable |
|
|
|
|
|
|
|
|
Long-term |
|
|
20,000 |
|
|
|
20,000 |
|
Related party |
|
|
72,518 |
|
|
|
72,518 |
|
Stockholder |
|
|
170,382 |
|
|
|
178,465 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
430,586 |
|
|
|
451,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
6,179,986 |
|
|
$ |
7,387,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
104,609 |
|
|
$ |
183,186 |
|
Accounts payable |
|
|
795,136 |
|
|
|
2,393,050 |
|
Accrued payroll tax withholdings |
|
|
25,519 |
|
|
|
25,338 |
|
Accrued expenses other |
|
|
92,850 |
|
|
|
38,872 |
|
Income taxes payable |
|
|
89,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,107,814 |
|
|
|
2,640,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liability |
|
|
66,574 |
|
|
|
33,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
|
|
Preferred 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, 2008 and 2007;
5,882,999 and 6,041,399 shares outstanding at December 31,
2008 and 2007, respectively |
|
|
6,323 |
|
|
|
6,323 |
|
Additional paid-in capital |
|
|
1,963,102 |
|
|
|
1,963,102 |
|
Treasury stock, at cost |
|
|
(372,124 |
) |
|
|
(307,147 |
) |
Retained earnings |
|
|
3,408,297 |
|
|
|
3,051,603 |
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
5,005,598 |
|
|
|
4,713,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
6,179,986 |
|
|
$ |
7,387,427 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Consolidated Statements of Income
For the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Sales, net of returns and allowances |
|
$ |
17,042,361 |
|
|
$ |
14,777,645 |
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
13,205,295 |
|
|
|
10,838,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
3,837,066 |
|
|
|
3,938,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Selling |
|
|
1,752,243 |
|
|
|
1,742,220 |
|
General and administrative |
|
|
1,170,951 |
|
|
|
1,312,235 |
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
2,923,194 |
|
|
|
3,054,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
913,872 |
|
|
|
884,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(275,507 |
) |
|
|
(326,473 |
) |
Other income |
|
|
169 |
|
|
|
95 |
|
|
|
|
|
|
|
|
Total other expense, net |
|
|
(275,338 |
) |
|
|
(326,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax provision |
|
|
638,534 |
|
|
|
557,841 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
281,840 |
|
|
|
216,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
356,694 |
|
|
$ |
340,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares |
|
|
|
|
|
|
|
|
Basic |
|
|
6,020,485 |
|
|
|
6,109,026 |
|
Diluted |
|
|
6,020,485 |
|
|
|
6,109,026 |
|
The accompanying notes are an integral part of these consolidated financial statements.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Consolidated Statements of Stockholders Equity
For the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Paid-in |
|
|
Treasury Stock |
|
|
Retained |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Shares |
|
|
Cost |
|
|
Earnings |
|
|
Total |
|
|
Balance January 1, 2007 |
|
|
6,323,364 |
|
|
$ |
6,323 |
|
|
$ |
1,963,102 |
|
|
|
187,765 |
|
|
$ |
(201,333 |
) |
|
$ |
2,710,709 |
|
|
$ |
4,478,801 |
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,200 |
|
|
|
(105,814 |
) |
|
|
|
|
|
|
(105,814 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340,894 |
|
|
|
340,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007 |
|
|
6,323,364 |
|
|
|
6,323 |
|
|
|
1,963,102 |
|
|
|
281,965 |
|
|
|
(307,147 |
) |
|
|
3,051,603 |
|
|
|
4,713,881 |
|
Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,400 |
|
|
|
(64,977 |
) |
|
|
|
|
|
|
(64,977 |
) |
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
356,694 |
|
|
|
356,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008 |
|
|
6,323,364 |
|
|
$ |
6,323 |
|
|
$ |
1,963,102 |
|
|
|
440,365 |
|
|
$ |
(372,124 |
) |
|
$ |
3,408,297 |
|
|
$ |
5,005,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial
statements.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2008 and 2007
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
356,694 |
|
|
$ |
340,894 |
|
Adjustments to reconcile net income to net cash
provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation |
|
|
50,019 |
|
|
|
50,992 |
|
Amortization |
|
|
15,564 |
|
|
|
15,743 |
|
Deferred income taxes |
|
|
38,270 |
|
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(232,072 |
) |
|
|
268,382 |
|
Due from factor |
|
|
(777,408 |
) |
|
|
516,698 |
|
Inventories |
|
|
2,182,712 |
|
|
|
(1,794,450 |
) |
Prepaid expenses and deferred charges |
|
|
43,618 |
|
|
|
(6,721 |
) |
Income taxes receivable |
|
|
153,870 |
|
|
|
216,947 |
|
Deposits |
|
|
|
|
|
|
(5,916 |
) |
Repayments (advances) to employees |
|
|
308 |
|
|
|
(4,818 |
) |
Accounts payable |
|
|
(1,597,914 |
) |
|
|
752,605 |
|
Accrued payroll tax withholdings |
|
|
181 |
|
|
|
394 |
|
Accrued expenses other |
|
|
53,978 |
|
|
|
(8,680 |
) |
Income taxes payable |
|
|
89,700 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
377,520 |
|
|
|
342,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(41,894 |
) |
|
|
(113,520 |
) |
Payments for patents and trademarks |
|
|
(3,520 |
) |
|
|
(1,755 |
) |
Net repayments (advances) on note receivable stockholder |
|
|
8,083 |
|
|
|
(47,934 |
) |
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(37,331 |
) |
|
|
(163,209 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Advances on notes payable |
|
|
|
|
|
|
96,500 |
|
Payments on notes payable |
|
|
(78,577 |
) |
|
|
(106,047 |
) |
Purchase of treasury stock |
|
|
(64,977 |
) |
|
|
(105,814 |
) |
|
|
|
|
|
|
|
Net cash used by financing activities |
|
|
(143,554 |
) |
|
|
(115,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
196,635 |
|
|
|
63,500 |
|
|
|
|
|
|
|
|
|
|
Cash beginning of year |
|
|
402,468 |
|
|
|
338,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash end of year |
|
$ |
599,103 |
|
|
$ |
402,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosures of cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the year for |
|
|
|
|
|
|
|
|
Interest |
|
$ |
275,808 |
|
|
$ |
326,662 |
|
Taxes |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
1. Organization and Nature of Business
DAC Technologies Group International, Inc. (DAC) develops, manufactures and markets
various patented and unpatented consumer products that are designed to provide security for the
consumers 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 DACs 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.
2. Summary of Significant Accounting Policies
|
a. |
|
Principles of consolidation The accompanying consolidated financial statements
include the accounts of DAC Technologies Group International, Inc. and its wholly owned
subsidiary, Summit Training International (collectively, the Company). All material
intercompany accounts and transactions have been eliminated in the consolidation. |
|
|
b. |
|
Revenue recognition The Company recognizes sales revenue when the following criteria
are met: persuasive evidence of an agreement exists, which is an invoice, risk of loss has
been transferred which is generally F.O.B shipping point, the Companys 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, 2008 or 2007. |
|
|
d. |
|
Accounts and notes receivable The majority of the Companys receivables are factored
pursuant to a factoring agreement as described in Note 6. At December 31, 2008 and 2007,
approximately 91% and 94%, respectively, of the Companys 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 Companys 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
managements analysis, there were no conditions related to collectibility that existed to
indicate the need to discontinue accrual of interest income during the years ended December
31, 2008 or 2007.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
2. Summary of Significant Accounting Policies (cont.)
|
e. |
|
Inventories Inventories are stated at the lower of weighted-average cost or market.
Costs include freight and applicable customs fees. Market is determined based on net
realizable value. Appropriate consideration is given to obsolescence, excessive levels,
deterioration and other factors in evaluating net realizable value. Inventories are shown
net of a valuation reserve of $61,011 and $82,926 at December 31, 2008 and 2007,
respectively. The Company receives inventory from overseas at terms of F.O.B. shipping
point, bearing the risk of loss at that point in time. During the time period prior to
receipt in the warehouse, inventory is classified and recorded as inventory in transit.
Inventory held in the warehouse is classified as finished goods. |
|
|
f. |
|
Property and equipment Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the following useful lives: |
|
|
|
|
|
Leasehold improvements |
|
8 |
years |
Furniture and fixtures |
|
10 |
years |
Molds, dies and artwork |
|
10 |
years |
Depreciation expense of $50,019 and $50,992 was recognized during the years ended
December 31, 2008 and 2007, respectively. Maintenance and repairs are charged to expense as
incurred. Major additions and improvements of existing facilities are capitalized. For
retirements or sales of property, the Company removes the original cost and the related
accumulated depreciation from the accounts and the resulting gain or loss is reflected in
other income (expense), net, in the accompanying consolidated statements of income.
|
g. |
|
Patents and trademarks Costs incurred in connection with the acquisition of patents
and trademarks are capitalized and amortized over their estimated useful lives, which range
from five to seventeen years. |
|
|
h. |
|
Income taxes The Company utilizes the liability method of accounting for deferred
income taxes. The liability method requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences between tax
basis and financial reporting basis of assets and liabilities as of the year end date at
the presently enacted tax rates. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount that is expected to be realized. |
|
|
i. |
|
Shipping and handling All shipping and handling costs are included in selling
expense in the accompanying consolidated statements of income. These costs totaled
$353,019 and $383,477 for the years ended December 31, 2008 and 2007, respectively. |
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
2. Summary of Significant Accounting Policies (cont.)
|
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: |
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
356,694 |
|
|
$ |
340,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares |
|
|
6,020,485 |
|
|
|
6,109,026 |
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares |
|
|
6,020,485 |
|
|
|
6,109,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
k. |
|
Estimates The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. |
|
|
l. |
|
Fair value of financial instruments The fair values of cash and cash equivalents,
accounts receivables and notes payable approximate their carrying values due to the
short-term nature of the instruments. The fair value of notes receivable, which is based
on discounted cash flows using current interest rates, approximates the carrying value at
December 31, 2008 and 2007. |
|
|
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 managements assessment of the impairment
indicators, no impairment testing was necessary during the years ended December 31, 2008 or
2007. |
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
2. Summary of Significant Accounting Policies (cont.)
|
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
managements assessment of the impairment indicators, no impairment testing was necessary
during the years ended December 31, 2008 or 2007. |
|
|
o. |
|
New accounting pronouncements In September 2006, the Financial Accounting Standards
Board (FASB) issued SFAS No. 157, Fair Value Measurements, which provides enhanced
guidance for using fair value to measure assets and liabilities. Under the new standard,
fair value refers to the price that would be received to sell an asset or the price paid to
transfer a liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. The standard provides a fair value hierarchy wherein
quoted prices in active markets are assigned the highest priority is assigned and the
lowest priority to unobservable data. The standard is effective for the financial
statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. The Company adopted the provisions of SFAS No. 157 on January
1, 2008. There was no impact on the consolidated financial statements as a result of the
adoption of the standard. |
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities, which includes an amendment to the guidance in SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities. This statement
permits entities to choose to measure many financial instruments and certain other items at
fair value in order to allow entities to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. The statement applies to all entities, including nonprofit entities;
however, most of the provisions apply only to those entities electing the fair value option.
The standard is effective for consolidated financial statements issued for fiscal years
beginning after November 15, 2007, provided the entity also elects to apply the provisions
of SFAS No. 157, Fair Value Measurements. SFAS No. 159 became effective January 1, 2008
and the Company has elected not to measure any financial instruments or certain other items
at fair value.
In January 2008, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements (as amended). The objective of this statement is to
improve the relevance, comparability and transparency of the financial information that a
reporting entity provides in its consolidated financial statements by establishing
accounting and reporting standards for the noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. This pronouncement is effective for fiscal years
beginning after December 15, 2008 with earlier adoption prohibited. The Companys
management does not anticipate this pronouncement will have a significant impact on the
consolidated financial statements.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
2. Summary of Significant Accounting Policies (cont.)
In March 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities. This statement amends and expands the disclosure requirements of
SFAS No. 133 with the intent to provide users of financial statements with an enhanced
understanding of: how and why an entity uses derivative instruments; how derivative
instruments and related hedged items are accounted for under SFAS No. 133 and its related
interpretations; and how derivative instruments and related hedged items affect an entitys
financial position, financial performance and cash flows. To meet those objectives, this
statement requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. This pronouncement is effective for consolidated financial
statements issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. The Companys management does not anticipate this
pronouncement will have a significant impact on the consolidated financial statements.
3. Variable Interest Entities
FASB Interpretation No. 46 (FIN 46 R) (Revised December 2003), Consolidation of Variable
Interest Entities, 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 Companys maximum exposure to
loss as a result of its involvement with DAC Investment.
4. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
2,314,319 |
|
|
$ |
3,993,949 |
|
Inventory in transit |
|
|
415,102 |
|
|
|
908,359 |
|
Parts |
|
|
13,142 |
|
|
|
22,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,742,563 |
|
|
$ |
4,925,275 |
|
|
|
|
|
|
|
|
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
5. Intangible Assets
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Finite-lived |
|
|
|
|
|
|
|
|
Patents and trademarks, net of accumulated
amortization of $119,772 and $104,208 in
2008 and 2007, respectively |
|
$ |
121,718 |
|
|
$ |
133,762 |
|
|
|
|
|
|
|
|
Aggregate amortization expense related to finite-lived intangible assets was $15,564 and
$15,743 for the years ended December 31, 2008 and 2007, respectively. Future finite-lived
intangible asset amortization expenses are as follows:
|
|
|
|
|
2009 |
|
$ |
13,946 |
|
2010 |
|
|
12,960 |
|
2011 |
|
|
12,960 |
|
2012 |
|
|
12,960 |
|
2013 |
|
|
12,960 |
|
Thereafter |
|
|
55,932 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
121,718 |
|
|
|
|
|
During 2008 and 2007, the Company acquired patents which pertain to technology incorporated
into certain of the Companys products. The Company paid $3,520 and $1,755, respectively, for
these patents. The fair value of these patents is being amortized over the weighted-average
expected lives of 17 years.
6. Due From Factor
The 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% on the gross face amount of invoice, 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 prime, which was 3.25% at
December 31, 2008, 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.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
6. Due From Factor (cont.)
These amounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Accounts receivable factored |
|
$ |
4,724,918 |
|
|
$ |
4,508,524 |
|
Amounts advanced and outstanding |
|
|
3,182,000 |
|
|
|
3,743,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from factor |
|
$ |
1,542,918 |
|
|
$ |
765,510 |
|
|
|
|
|
|
|
|
7. Notes Payable
Notes payable consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Note payable to a bank; interest at 7.25%; payable
on demand or if no demand, November 1, 2010;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders. |
|
$ |
57,411 |
|
|
$ |
82,524 |
|
|
|
|
|
|
|
|
|
|
Note payable to a bank; interest at 7.25%; payable
on demand or if no demand, November 12, 2010;
collateralized by the Companys inventories,
property and equipment, and personal guarantees
of the Companys major stockholders. |
|
|
47,198 |
|
|
|
67,852 |
|
|
|
|
|
|
|
|
|
|
Note 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
104,609 |
|
|
$ |
183,186 |
|
|
|
|
|
|
|
|
The weighted-average interest rates on short-term borrowings were 7.15% and 7.28% for the
years ended December 31, 2008 and 2007, respectively. The Company recognized interest expense
of approximately $12,000 and $18,500 for the years ended December 31, 2008 and 2007,
respectively, on notes payable.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
8. Equity
During the years ended December 31, 2008 and 2007, the Company purchased 158,400 and 94,200
shares of common stock for $64,977 and $105,814, respectively. 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 Companys 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 Stock
In 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.
10. Stock Option Plan
During 2000, the Company adopted the 2000 Equity Incentive Plan (the Plan), a
nonqualified stock option plan. Under the terms of the Plan, officers, directors, employees and
other individuals may be granted options to purchase the Companys common stock at exercise
prices determined by the Companys 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, 2008, the Company had
granted no options pursuant to this Plan.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
11. Warrants
A summary of warrant activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Exercise |
|
|
Warrants |
|
|
Exercise |
|
|
|
Warrants |
|
|
Price |
|
|
Exercisable |
|
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding January 1, 2007 |
|
|
393,901 |
|
|
$ |
2.57 |
|
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2007 |
|
|
393,901 |
|
|
|
2.57 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2008 |
|
|
393,901 |
|
|
$ |
2.57 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, all warrants outstanding have an exercise price of $2.57 and expire
on June 28, 2009.
12. Income Taxes
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Current provision |
|
$ |
243,570 |
|
|
$ |
216,947 |
|
Deferred provision |
|
|
38,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
281,840 |
|
|
$ |
216,947 |
|
|
|
|
|
|
|
|
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
12. Income Taxes (cont.)
Reconciliations of the differences between income taxes computed at the federal statutory
tax rates and the provision for income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Income taxes computed at federal statutory
tax rate |
|
$ |
217,103 |
|
|
$ |
189,666 |
|
State tax provision, net of federal benefits |
|
|
27,393 |
|
|
|
23,931 |
|
Nondeductible expenses and other |
|
|
37,344 |
|
|
|
3,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
281,840 |
|
|
$ |
216,947 |
|
|
|
|
|
|
|
|
Temporary differences that give rise to significant deferred tax assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
7,658 |
|
|
$ |
1,915 |
|
Allowance for excess inventory |
|
|
38,125 |
|
|
|
38,125 |
|
Accumulated tax depreciation in excess of
book depreciation |
|
|
(78,874 |
) |
|
|
(35,467 |
) |
Accumulated tax amortization in excess of
book amortization |
|
|
(2,464 |
) |
|
|
(1,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability) |
|
$ |
(35,555 |
) |
|
$ |
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, 2008. 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.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
13. Related Party Transactions
During the years ended December 31, 2008 and 2007, the Company made periodic advances to
certain employees of the Company. At December 31, 2008 and 2007, the outstanding balances of
advances to these individuals were $28,617 and $28,925, respectively.
At December 31, 2008 and 2007, the Company held a note receivable of $170,382 and $178,465,
respectively, due from an individual, who is both an employee and a stockholder, which is due on
December 31, 2009. This note is unsecured and noninterest bearing.
At December 31, 2008 and 2007, 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, 2009. This note is unsecured and noninterest bearing. The note receivable has been
classified as noncurrent in the accompanying consolidated balance sheets because repayment is
not anticipated during the next year.
For the years ended December 31, 2008 and 2007, consulting service fees in the amount of
$60,000 and $10,000, 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 Companys outstanding
borrowings with a bank at December 31, 2008 and 2007.
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 was $282,559
and $274,971 for the years ended December 31, 2008 and 2007, respectively.
At December 31, 2008, future minimum rental commitments under noncancelable operating
leases in excess of one year are as follows:
|
|
|
|
|
2009 |
|
$ |
218,912 |
|
2010 |
|
|
215,829 |
|
2011 |
|
|
8,229 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
442,970 |
|
|
|
|
|
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
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 Companys 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 Suppliers
During the year ended December 31, 2008, the Company recognized aggregate sales to two
customers in the amount of approximately $12,135,000 and $1,736,000, which represented 71.2% and
10.2% of total net sales, respectively. During 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. Accounts receivable related to the sales were factored
without recourse (Note 6).
During the years ended December 31, 2008 and 2007, 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 Risk
Financial 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 nonrecourse basis which reduces the Companys exposure to credit
risk. Approximately 91% and 94% of the Companys accounts receivable at December 31, 2008 and
2007, 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 Companys
customer base and its customers financial resources.
At December 31, 2008 and 2007 and at various times throughout these years, the Company
maintained cash balances with financial institutions in excess of the federally insured limit.
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
17. Financial Information by Business Segment
During the year ended December 31, 2007, the Company operated in four primary business
segments delineated by products or services. These segments were gun cleaning and maintenance,
hunting and camping, gun safety and other products. During the year ended December 31, 2008,
the Company has added a new segment for household items. Certain 2007 amounts have been
reclassified from Other to Household to conform with the 2008 presentation. The accounting
policies of the Companys segments are the same as those described in Note 2. The Companys
long-lived assets are located in the United States and China.
Information concerning operations in these segments of business is as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Revenues |
|
|
|
|
|
|
|
|
Gun cleaning and maintenance |
|
$ |
8,369,446 |
|
|
$ |
8,659,456 |
|
Hunting and camping |
|
|
3,236,058 |
|
|
|
4,159,113 |
|
Household |
|
|
3,935,710 |
|
|
|
314,172 |
|
Gun safety |
|
|
1,490,196 |
|
|
|
1,622,982 |
|
Other |
|
|
10,951 |
|
|
|
21,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
17,042,361 |
|
|
$ |
14,777,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax provision |
|
|
|
|
|
|
|
|
Gun cleaning and maintenance |
|
$ |
791,945 |
|
|
$ |
595,363 |
|
Hunting and camping |
|
|
(319,239 |
) |
|
|
(173,213 |
) |
Household |
|
|
52,706 |
|
|
|
37,625 |
|
Gun safety |
|
|
127,797 |
|
|
|
88,464 |
|
Other |
|
|
(14,675 |
) |
|
|
9,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax provision |
|
$ |
638,534 |
|
|
$ |
557,841 |
|
|
|
|
|
|
|
|
DAC TECHNOLOGIES
GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
17. Financial Information by Business Segment (cont.)
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Identifiable assets |
|
|
|
|
|
|
|
|
Gun cleaning and maintenance |
|
|
|
|
|
|
|
|
United States |
|
$ |
1,135,498 |
|
|
$ |
2,627,085 |
|
Hunting and camping |
|
|
|
|
|
|
|
|
United States |
|
|
720,555 |
|
|
|
1,623,617 |
|
Household |
|
|
|
|
|
|
|
|
United States |
|
|
554,351 |
|
|
|
158,365 |
|
Gun safety |
|
|
|
|
|
|
|
|
United States |
|
|
389,944 |
|
|
|
489,935 |
|
China |
|
|
10,753 |
|
|
|
19,477 |
|
Other |
|
|
|
|
|
|
|
|
United States |
|
|
62,948 |
|
|
|
134,421 |
|
China |
|
|
6,225 |
|
|
|
31,595 |
|
Corporate |
|
|
3,299,712 |
|
|
|
2,302,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total identifiable assets |
|
$ |
6,179,986 |
|
|
$ |
7,387,427 |
|
|
|
|
|
|
|
|
Molds used to manufacture the Companys security products and gun locks are located in
China (Note 1).
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, CEO and Principal Executive Officer |
|
|
March 31, 2009
|
|
|
|
|
|
|
|
|
By: |
/s/ Robert C. Goodwin
|
|
|
|
Robert C. Goodwin |
|
|
|
Principal Accounting Officer and Principal Financial Officer |
|
|
March 31, 2009
34