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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
   DAC Technologies Group International, Inc.
  Florida
    
    65-0847852(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1601 Westpark Drive #2 Little Rock, AR
(Address of principal executive offices)
    
    72204
(Zip Code)
 
  x o x o
  o x




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TABLE OF CONTENTS
 PART I
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3PART F/S
    
    
    8ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND     RESULTS OF OPERATIONS
    
    
    9Background
    
    
    10Financial Condition and Results of Operations
    
    
    12Liquidity and Capital Resources
    
    
    13Trends
    
    
    13Critical Accounting Estimates
    
    
    15Off-Balance Sheet Arrangements
    
    
    16ITEM 3. CONTROLS AND PROCEDURES
    
    
    16Evaluation of Disclosure Controls and Procedures
    
    
    16Definition of Disclosure Controls
    
    
    17Limitations on the Effectiveness of Controls
    
    
    17Conclusions
    
    
    17Changes in Internal Controls
    
    
    17Sarbanes-Oxley Section 404 Compliance
    
    
    18PART II
    
    
    18ITEM 1. LEGAL PROCEEDINGS
    
    
    18ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    19ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    19ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    20ITEM 5. OTHER INFORMATION
    
    
    20ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
    
    20SIGNATURES
    
    
    21Section 302 Certification of CEOSection 302 Certification of CFOSection 906 Certification of CEOSection 906 Certification of CFO




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PART I
 
 ITEM 1. FINANCIAL STATEMENTS
 .
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Balance Sheet (Consolidated)
 March 31, 2006
 AssetsCurrent assetsCash
    
    $
    46,578Accounts receivable, less allowance for doubtful
accounts of $5,000
    
    
    1,535,205Due from factor
    
    
    552,726Inventories
    
    
    2,575,625Prepaid expenses and deferred charges
    
    
    163,724Current deferred income tax benefit
    
    
    27,200Total current assets
    
    
    4,901,058Property and equipmentLeasehold improvements
    
    
    29,049Furniture and fixtures
    
    
    209,557Molds, dies, and artwork
    
    
    500,796739,402Accumulated depreciation
    
    
    (510,040
    )Net property and equipment
    
    
    229,362Other assetsPatents and trademarks, net of
accumulated amortization of $76,437
    
    
    155,813Deposits
    
    
    1,435Advances to employees
    
    
    25,487Note receivable  related party
    
    
    72,518Note receivable  stockholder
    
    
    92,758Total other assets
    
    
    348,011Total
assets
    
    $
    5,478,431
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Balance Sheet (Consolidated)
 March 31, 2006
 Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    225,313Accounts payable
    
    
    1,018,287Accrued payroll tax withholdings
    
    
    25,535Accrued expenses-other
    
    
    25,464Income taxes payable
    
    
    127,654Total current liabilities
    
    
    1,422,253Deferred income tax liability
    
    
    33,100Stockholders equityPreferred stock, $.001 par value; authorized
10,000,000 shares; none issued and outstanding
    
    
    Common stock, $.001 par value; authorized
50,000,000 shares; 6,323,364 shares issued and
6,193,364 shares outstanding
    
    
    6,323Additional paid-in capital
    
    
    1,963,102Treasury stock, at cost
    
    
    (101,400
    )Retained earnings
    
    
    2,155,053Total stockholders equity
    
    
    4,023,078Total liabilities and stockholders equity
    
    $
    5,478,431
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed Statements of Operations (Consolidated)
 For The Three Months Ended March 31, 2006 and 2005
 2006
    
    
    2005Net sales
    
    $
    2,763,197
    
    
    $
    2,263,078Cost of sales
    
    
    1,792,411
    
    
    
    1,458,170Gross profit
    
    
    970,786
    
    
    
    804,908Operating expensesSelling
    
    
    340,789
    
    
    
    276,818General and administrative
    
    
    246,269
    
    
    
    209,270Total operating expenses
    
    
    587,058
    
    
    
    486,088Income from operations
    
    
    383,728
    
    
    
    318,820Other income (expense)Interest expense
    
    
    (59,735
    )
    
    
    (46,061
    )Total other income (expense)
    
    
    (59,735
    )
    
    
    (46,061
    )Income before income tax provision
    
    
    323,993
    
    
    
    272,759Provision for income taxes
    
    
    126,811
    
    
    
    106,317Net income
    
    $
    197,182
    
    
    $
    166,442Basic and diluted earnings per share
    
    $
    0.03
    
    
    $
    0.03Weighted-average number of sharesBasic
    
    
    6,193,364
    
    
    
    6,180,864Diluted
    
    
    6,193,364
    
    
    
    6,260,378
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Condensed
Statements of Cash Flows (Consolidated)
 For the Three Months Ended March 31, 2006 and 2005
 2006
    
    
    2005Cash flows from operating activitiesNet income
    
    $
    197,182
    
    
    $
    166,442Adjustments to reconcile net income to
net cash provided (used) by operating activities:Depreciation
    
    
    13,773
    
    
    
    13,272Amortization
    
    
    3,998
    
    
    
    3,999Changes in operating assets and liabilitiesAccounts receivable
    
    
    (842,515
    )
    
    
    (73,767
    )Due from factor
    
    
    760,892
    
    
    
    774,276Inventories
    
    
    128,685
    
    
    
    34,185Advances to employees
    
    
    (10,704
    )
    
    
    (16,175
    )Prepaid expenses and deferred
charges
    
    
    (94,151
    )
    
    
    (80,319
    )Accounts payable
    
    
    37,245
    
    
    
    (494,295
    )Accrued payroll tax withholdings
    
    
    (3,928
    )
    
    
    267Accrued expenses other
    
    
    (5,074
    )
    
    
    398Income taxes payable
    
    
    (253,189
    )
    
    
    (246,684
    )Net cash provided (used) by operating activities
    
    
    (67,786
    )
    
    
    81,599Cash flows from investing activitiesPurchases of property and equipment
    
    
    (9,108
    )
    
    
    (5,993
    )Payments for patents and trademarks
    
    
    (3,280
    )
    
    
    Net payments (advances) on note receivable  stockholder
    
    
    6,773
    
    
    
    (50,880
    )Net cash used by investing activities
    
    
    (5,615
    )
    
    
    (56,873
    )Cash flows from financing activitiesPayments on notes payable
    
    
    (10,907
    )
    
    
    (13,264
    )Net cash used by financing activities
    
    
    (10,907
    )
    
    
    (13,264
    )Increase (decrease) in cash
    
    
    (84,308
    )
    
    
    11,462Cash  beginning of period
    
    
    130,886
    
    
    
    167,846Cash  end of period
    
    $
    46,578
    
    
    $
    179,308
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PART F/S
 DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Nature of Business
   Organization and Summary of Significant Accounting Policies
 Organization and basis of presentation
  Unaudited interim condensed consolidated financial statements
 .
 Inventories
 March 31,2006Inventories consist of:Finished goods
    
    $
    1,881,867Inventory in transit
    
    
    670,791Parts
    
    
    22,967$
    2,575,625
 Earnings per Share
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Three Months Ended2006
    
    
    2005Numerator:Net income
    
    $
    197,182
    
    
    $
    166,442Denominator:Weighted average common shares for basic
calculation
    
    
    6,193,364
    
    
    
    6,180,864Weighted average effect of dilutive securities:Warrants
    
    
    
    
    
    
    79,514Denominator for diluted calculation
    
    
    6,193,364
    
    
    
    6,260,378Earnings per share- basic
    
    $
    0.03
    
    
    $
    0.03Earnings per share- diluted
    
    $
    0.03
    
    
    $
    0.03
 New Accounting Pronouncements
    
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
    
    Achieving planned revenue and profit growth in each of the Companys business units;
    
    Renewal of purchase orders consistent with past experience;
    
    Increasing price, products and services competition;
    
    Emergence of new competitors or consolidation of existing competitors;
    
    The timing of orders and shipments;
    
    Continuing availability of appropriate raw materials and manufacturing relationships;
    
    Maintaining and improving current product mix;
    
    Changes in customer requirements and in the volume of sales to principal customers;
    
    Changes in governmental regulations in the various geographical regions where the
Company operates;
    
    General economic and political conditions;
    
    Attracting and retaining qualified key employees;
    
    The ability of the Company to control manufacturing and operating costs; and
    
    Continued availability of financing, and financial resources on the terms required to
support the Companys future business strategies.
  
  Summary
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Details
   :
 
    
    Increased penetration of our existing markets, particularly in the gun cleaning
and accessories market;
    
    Development of new products for the sporting goods market;
    
    Identification and development of new markets for gun cleaning kits, i.e.
government, law enforcement and military;
    
    Adoption of new technologies for safety and security products and
adoption of new product lines;
    
    Identification and recruitment of effective manufacturers
representatives to actively market these products on a national and
international basis; and
    
    Aggressive cost containment.
    Gun Maintenance.
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Gun Safety.
 Personal Security.
 Non-Security Products.
 www.dactec.com)
 
  Results of Operations
     Financial Condition
  Mar. 31, 2006
    
    
    Dec. 31, 2005Accounts receivable
    
    $
    1,535,205
    
    
    $
    692,690Due from factor
    
    
    552,726
    
    
    
    1,313,618Inventories
    
    
    2,575,625
    
    
    
    2,704,310Total current assets
    
    
    4,901,058
    
    
    
    4,920,677Accounts payable
    
    
    1,018,287
    
    
    
    981,042Total current liabilities
    
    
    1,422,253
    
    
    
    1,658,106Working capital
    
    
    3,478,805
    
    
    
    3,262,571
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Mar 31, 2006
    
    
    Dec. 31, 2005Total accounts receivable
    
    $
    3,263,232
    
    
    $
    5,512,193Less: assigned receivables
    
    
    (1,728,027
    )
    
    
    (4,819,503
    )Net accounts receivables
    
    $
    1,535,205
    
    
    $
    692,690Assigned receivables
    
    $
    1,728,027
    
    
    $
    4,819,503Less: Funds advanced
    
    
    (1,175,301
    )
    
    
    (3,505,885
    )Due from factor
    
    $
    552,726
    
    
    $
    1,313,618
 
   
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Long-lived Assets
  Patents and Trademarks.
 
    
 ITEM 3. CONTROLS AND PROCEDURES
 
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PART II
 
 ITEM 1. LEGAL PROCEEDINGS
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Legel v. DAC Technologies Group International, Inc., et al,
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
  Exhibits
 2
    
    Acquisition Agreement3(i)
    
    Articles of Incorporation3(ii)
    
    By-laws
  Exhibits
 31.1
    
    Certification of David A. Collins Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    Certification of Robert C. Goodwin Pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    Certification of David A. Collins Pursuant to Rule 13a-14(b) or Rule
15d-14(c) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 135032.2
    
    Certification of Robert C. Goodwin Pursuant to Rule 13a-14(b) or Rule 15d-14(c) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350
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SIGNATURES
  By:
    /s/ David A. CollinsDavid A. Collins, Chairman, CEO and Principal Executive OfficerBy:
    /s/ Robert C. GoodwinRobert C. Goodwin, Principal Accounting Officer and Principal Financial Officer  21