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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
 For the quarterly period ended June 30, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
 For the transition period from  to
 Commission
File Number 000-29211
 DAC Technologies Group International, Inc.
  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)
 
  þ o þ o
  o þ




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TABLE OF CONTENTS
 PART I
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3PART F/S
    
    
    10ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONBackground
    
    
    12Financial Condition and Results of Operations
    
    
    14Liquidity and Capital Resources
    
    
    16Trends
    
    
    16Critical Accounting Estimates
    
    
    17Off-Balance Sheet Arrangements
    
    
    18ITEM 3. CONTROLS AND PROCEDURES
    
    
    18Evaluation of Disclosure Controls and Procedures
    
    
    18Definition of Disclosure Controls
    
    
    19Limitations on the Effectiveness of Controls
    
    
    19Conclusions
    
    
    19Changes in Internal Controls
    
    
    19Sarbanes-Oxley Section 404 Compliance
    
    
    20PART II
    
    
    20ITEM 1. LEGAL PROCEEDINGS
    
    
    20ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    21ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    21ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    21ITEM 5. OTHER INFORMATION
    
    
    21ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
    
    21SIGNATURES
    
    
    22Section 302 CEO CertificationSection 302 CFO CertificationSection 906 CEO CertificationSection 906 CEO Certification
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PART I
 
 ITEM 1. FINANCIAL STATEMENTS
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Balance Sheet (Consolidated)
 June 30, 2005
 AssetsCurrent assetsCash
    
    $
    212,542Accounts receivable, less allowance for doubtful
accounts of $7,500
    
    
    1,180,253Due from factor
    
    
    154,663Inventories
    
    
    2,129,765Prepaid expenses and deferred charges
    
    
    164,154Current deferred income tax benefit
    
    
    9,600Total current assets
    
    
    3,850,977Property and equipmentLeasehold improvements
    
    
    29,049Furniture and fixtures
    
    
    148,593Molds, dies, and artwork
    
    
    496,372674,014Accumulated depreciation
    
    
    (467,985
    )Net property and equipment
    
    
    206,029Other assetsPatents and
trademarks, net of accumulated amortization of $64,444
    
    
    156,664Deposits
    
    
    1,435Advances to employees
    
    
    22,496Note receivable  related party
    
    
    72,518Note receivable  stockholder
    
    
    135,761Total other assets
    
    
    388,874Total assets
    
    $
    4,445,880
 The accompanying selected notes are an integral part of these consolidated financial statements.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Balance Sheet (Consolidated)
 June 30, 2005
 Liabilities and Stockholders EquityCurrent liabilitiesNotes payable
    
    $
    266,749Accounts payable
    
    
    1,007,374Accrued payroll tax withholdings
    
    
    23,731Accrued expenses-other
    
    
    10,330Income taxes payable
    
    
    123,755Total current liabilities
    
    
    1,431,939Deferred income tax liability
    
    
    15,500Stockholders equityCommon stock, $.001 par value; authorized
50,000,000 shares; 6,323,364 shares issued and
6,193,364 shares outstanding
    
    
    6,323Preferred stock, $.001 par value; authorized
10,000,000 shares; none issued and outstanding
    
    
    Additional paid-in capital
    
    
    1,963,102Treasury stock, at cost
    
    
    (101,400
    )Retained earnings
    
    
    1,130,416Total stockholders equity
    
    
    2,998,441Total liabilities and stockholders equity
    
    $
    4,445,880
 The accompanying selected notes are an integral part of these consolidated financial statements.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Statements of Operations (Consolidated)
 For The Six Months Ended June 30, 2005 and 2004
 2005
    
    2004Net sales
    
    $
    4,527,240
    
    
    $
    2,957,521Cost of sales
    
    
    2,911,277
    
    
    
    1,802,328Gross profit
    
    
    1,615,963
    
    
    
    1,155,193Operating expensesSelling
    
    
    517,890
    
    
    
    367,058General and administrative
    
    
    443,319
    
    
    
    402,770Total operating expenses
    
    
    961,209
    
    
    
    769,828Income from operations
    
    
    654,754
    
    
    
    385,365Other income (expense)Interest expense
    
    
    (76,608
    )
    
    
    (62,690
    )Interest expense  stockholder notes
    
    
    
    
    
    
    (5,519
    )Other income
    
    
    
    
    
    
    335Total other income (expense)
    
    
    (76,608
    )
    
    
    (67,874
    )Income before income tax provision
    
    
    578,146
    
    
    
    317,491Provision for income taxes
    
    
    225,054
    
    
    
    6,267Net income
    
    $
    353,092
    
    
    $
    311,224Basic and diluted earnings per share
    
    $
    0.06
    
    
    $
    0.05Weighted-average number of common shares:Basic
    
    
    6,186,389
    
    
    
    5,728,478Diluted
    
    
    6,226,146
    
    
    
    5,728,478
 The accompanying selected notes are an integral part of these consolidated financial statements.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Statements of Operations (Consolidated)
 For The Three Months Ended June 30, 2005 and 2004
 2005
    
    2004Net sales
    
    $
    2,264,162
    
    
    $
    1,620,069Cost of sales
    
    
    1,453,107
    
    
    
    1,000,485Gross profit
    
    
    811,055
    
    
    
    619,584Operating expensesSelling
    
    
    241,072
    
    
    
    204,046General and administrative
    
    
    234,049
    
    
    
    215,373Total operating expenses
    
    
    475,121
    
    
    
    419,419Income from operations
    
    
    335,934
    
    
    
    200,165Other income (expense)Interest expense
    
    
    (30,547
    )
    
    
    (27,329
    )Interest expense  stockholder notes
    
    
    
    
    
    
    (2,641
    )Total other income (expense)
    
    
    (30,547
    )
    
    
    (29,970
    )Income before income tax provision
    
    
    305,387
    
    
    
    170,195Provision (benefit) for income taxes
    
    
    118,737
    
    
    
    (21,973
    )Net income
    
    $
    186,650
    
    
    $
    192,168Basic and diluted earnings per share
    
    $
    0.03
    
    
    $
    0.03Weighted-average number of common shares:Basic
    
    
    6,191,853
    
    
    
    5,743,900Diluted
    
    
    6,191,853
    
    
    
    5,743,900
 The accompanying selected notes are an integral part of these consolidated financial statements.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Statements of Cash Flows (Consolidated)
 For the Six Months Ended June 30, 2005 and 2004
 2005
    
    2004Cash flows from operating activitiesNet income
    
    $
    353,092
    
    
    $
    311,224Adjustments to reconcile net income tonet cash provided by operating activities:Issuance of common stock for services
    
    
    32,625
    
    
    
    Depreciation
    
    
    26,808
    
    
    
    28,471Amortization
    
    
    7,998
    
    
    
    7,245Imputed interest on note receivable
    
    
    
    
    
    
    (335
    )Deferred income tax provision
    
    
    
    
    
    
    6,267Changes in operating assets and liabilitiesAccounts receivable
    
    
    (703,103
    )
    
    
    (225,119
    )Due from factor
    
    
    1,106,817
    
    
    
    53,930Inventories
    
    
    (196,653
    )
    
    
    (750,088
    )Deposits
    
    
    
    
    
    
    (1,435
    )Advances to employees
    
    
    (17,671
    )
    
    
    Prepaid expenses and deferred charges
    
    
    (103,984
    )
    
    
    (50,930
    )Accounts payable
    
    
    (151,188
    )
    
    
    668,592Accrued payroll tax withholdings
    
    
    1,604
    
    
    
    13,213Accrued expenses other
    
    
    (13,212
    )
    
    
    8,629Income taxes payable
    
    
    (217,946
    )
    
    
    Net cash provided by operating activities
    
    
    125,187
    
    
    
    69,664Cash flows from investing activitiesPurchases of property and equipment
    
    
    (16,473
    )
    
    
    (29,204
    )Payments on notes receivable  stockholder
    
    
    
    
    
    
    773Advances on note receivable  stockholder
    
    
    (37,361
    )
    
    
    Advances on note receivable  related party
    
    
    
    
    
    
    (34,409
    )Payments on note receivable
    
    
    
    
    
    
    45,000Net cash used in investing activities
    
    
    (53,834
    )
    
    
    (17,840
    )Cash flows from financing activitiesIssuance of common stock
    
    
    
    
    
    
    714,156Repayments on notes payable
    
    
    (26,657
    )
    
    
    (23,486
    )Repayments on notes payable  stockholders
    
    
    
    
    
    
    (33,943
    )Net cash provided by (used in) financing activities
    
    
    (26,657
    )
    
    
    656,727Increase in cash
    
    
    44,696
    
    
    
    708,551Cash  beginning of period
    
    
    167,846
    
    
    
    104,376Cash  end of period
    
    $
    212,542
    
    
    $
    812,927
 The accompanying selected notes are an integral part of these consolidated financial statements.
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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
 Statements of Cash Flows (Consolidated)
 For the Three Months Ended June 30, 2005 and 2004
 2005
    
    2004Cash flows from operating activitiesNet income
    
    $
    186,650
    
    
    $
    192,168Adjustments
to reconcile net income to net cash provided by operating activities:Issuance of common stock for services
    
    
    32,625
    
    
    
    Depreciation
    
    
    13,536
    
    
    
    14,882Amortization
    
    
    3,999
    
    
    
    3,622Deferred income tax provision
    
    
    
    
    
    
    (21,973
    )Changes in operating assets and liabilitiesAccounts receivable
    
    
    (629,336
    )
    
    
    18,285Due from factor
    
    
    332,541
    
    
    
    (63,705
    )Inventories
    
    
    (230,838
    )
    
    
    (509,234
    )Deposits
    
    
    
    
    
    
    (1,435
    )Advances to employees
    
    
    (1,496
    )
    
    
    Prepaid expenses and deferred charges
    
    
    (23,665
    )
    
    
    16,331Accounts payable
    
    
    343,107
    
    
    
    439,146Accrued payroll tax withholdings
    
    
    1,337
    
    
    
    6,897Accrued expenses other
    
    
    (13,610
    )
    
    
    2,208Income taxes payable
    
    
    28,738
    
    
    
    Net cash provided by operating activities
    
    
    43,588
    
    
    
    97,192Cash flows from investing activitiesPurchases of property and equipment
    
    
    (10,480
    )
    
    
    (27,572
    )Payments on notes receivable  stockholder
    
    
    13,519
    
    
    
    773Net cash provided by (used in) investing activities
    
    
    3,039
    
    
    
    (26,799
    )Cash flows from financing activitiesIssuance of common stock
    
    
    
    
    
    
    714,156Repayments on notes payable
    
    
    (13,393
    )
    
    
    (12,489
    )Repayments on notes payable  stockholders
    
    
    
    
    
    
    (19,678
    )Net cash provided by (used in) financing activities
    
    
    (13,393
    )
    
    
    681,989Increase in cash
    
    
    33,234
    
    
    
    752,382Cash  beginning of period
    
    
    179,308
    
    
    
    60,545Cash  end of period
    
    $
    212,542
    
    
    $
    812,927
 The accompanying selected notes are an integral part of these consolidated financial statements.
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PART
F/S
 DAC
TECHNOLOGIES GROUP INTERNATIONAL, INC.
 SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Nature of Business
   Organization and Summary of Significant Accounting Policies
 Organization and basis of presentation
  Unaudited interim consolidated financial statements
 .
 Equity transactions
  Earnings per Share
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Three Months Ended
    
    Six Months Ended2005
    
    2004
    
    2005
    
    2004Numerator:Net income
    
    $
    186,650
    
    
    $
    192,168
    
    
    $
    353,092
    
    
    $
    311,224Denominator:Weighted
average
common
shares for
basic
calculation
    
    
    6,191,853
    
    
    
    5,743,900
    
    
    
    6,186,389
    
    
    
    5,728,478Weighted average
effect of dilutive
securities:Warrants
    
    
    
    
    
    
    
    
    
    
    39,757
    
    
    
    Denominator for
diluted calculation
    
    
    6,191,853
    
    
    
    5,743,900
    
    
    
    6,226,146
    
    
    
    5,728,478Earnings per
share-basic
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05Earnings per
share-diluted
    
    $
    0.03
    
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.05
 
 ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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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.
  
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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.
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Gun Maintenance.
 Gun Safety.
 Personal Security.
 Non-Security Products.
 www.dactec.com)
 
  Results of Operations
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Financial Condition
  June 30, 2005
    
    Dec. 31, 2004Accounts receivable
    
    $
    1,180,253
    
    
    $
    477,150Due from factor
    
    
    154,663
    
    
    
    1,261,480Total current assets
    
    
    3,850,977
    
    
    
    3,909,358Accounts payable
    
    
    1,007,374
    
    
    
    1,158,562Income taxes payable
    
    
    123,755
    
    
    
    341,701Total current liabilities
    
    
    1,431,939
    
    
    
    1,839,338Working capital
    
    
    2,419,038
    
    
    
    2,070,020
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June 30, 2005
    
    Dec. 31, 2004Total accounts receivable
    
    $
    2,000,379
    
    
    $
    3,669,863Less: assigned receivables
    
    
    (   820,126
    )
    
    
    (3,192,713
    )Net accounts receivables
    
    $
    1,180,253
    
    
    $
    477,150Assigned receivables
    
    $
    820,126
    
    
    $
    3,192,713Less: Funds advanced
    
    
    (   665,463
    )
    
    
    (1,931,233
    )Due from factor
    
    $
    154,663
    
    
    $
    1,261,480
    
   
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renminbi









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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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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 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
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Exhibits31.1
    
    
    Certification of David A. Collins Pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    
    Certification of Robert C. Goodwin Pursuant 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
 
 SIGNATURES
       22