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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-QSB x
  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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.
(Name of Small Business Issuer in its charter) 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)
 (501) 661-9100
(Issuers telephone number) Check whether the Issuer (1) has filed all reports required to be filed by the Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. (1)   Yes   x   No   
o State the number of shares outstanding of each of the issuers class of common equity, as of
the latest practicable date. As of May 2, 2005, 6,323,364 shares of Common Stock are issued and
6,193,364 are outstanding. Transitional
Small Business Disclosure Format:  
Yes   o   No   
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 PLAN OF OPERATIONBackground
    
    
    9Financial Condition and Results of Operations
    
    
    11Liquidity and Capital Resources
    
    
    13Trends
    
    
    13Critical Accounting Estimates
    
    
    14Off-Balance Sheet Arrangements
    
    
    14ITEM 3. CONTROLS AND PROCEDURES
    
    
    15Evaluation of Disclosure Controls and Procedures
    
    
    15Changes in Internal Controls
    
    
    15PART II
    
    
    15ITEM 1. LEGAL PROCEEDINGS
    
    
    15ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    16ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    16ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    16ITEM 5. OTHER INFORMATION
    
    
    16ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
    
    16SIGNATURES
    
    
    17CERTIFICATION OF DAVID A. COLLINS PURSUANT TO RULE 13a-14(a)/15d-14(a)CERTIFICATION OF ROBERT C. GOODWIN PURSUANT TO RULE 13a-14(a)/15d-14(a)CERTIFICATION OF DAVID A. COLLINS PURSUANT TO 18 U.S.C. SECTION 1350CERTIFICATION OF ROBERT C. GOODWIN PURSUANT TO 18 U.S.C. SECTION 1350
 2




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PART I 
 ITEM 1. FINANCIAL STATEMENTS Our financial statements are contained in pages 4 through 7 following. 3




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC. Balance Sheet (Consolidated) March 31, 2005 Unaudited
 AssetsCurrent assetsCash
    
    $
    179,308Accounts receivable, less allowance for doubtful
accounts of $7,500
    
    
    550,917Due from factor
    
    
    487,204Inventories
    
    
    1,898,927Prepaid expenses and deferred charges
    
    
    140,489Current deferred income tax benefit
    
    
    9,600Total current assets
    
    
    3,266,445Property and equipmentLeasehold improvements
    
    
    29,049Furniture and fixtures
    
    
    148,593Molds, dies, and artwork
    
    
    485,892663,534Accumulated depreciation
    
    
    (454,449
    )Net property and equipment
    
    
    209,085Other assetsPatents and trademarks, net of
Accumulated amortization of $60,445
    
    
    160,663Deposits
    
    
    1,435Advances to employees
    
    
    21,000Note receivable  related party
    
    
    72,518Note receivable  stockholder
    
    
    149,280Total other assets
    
    
    404,896Total assets
    
    $
    3,880,426
 4




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC. Balance Sheet (Consolidated) March 31, 2005 Unaudited
 Liabilities and Stockholders equityCurrent liabilitiesNotes payable
    
    $
    280,142Accounts payable
    
    
    664,267Accrued payroll tax withholdings
    
    
    22,394Accrued expenses-other
    
    
    23,940Income taxes payable
    
    
    95,017Total current liabilities
    
    
    1,085,760Deferred income tax liability
    
    
    15,500Stockholders equityCommon stock, $.001 par value; authorized
50,000,000 shares; 6,310,864 shares issued and
6,180,864 shares outstanding
    
    
    6,311Preferred stock, $.001 par value; authorized
10,000,000 shares; none issued and outstanding
    
    
    Additional paid-in capital
    
    
    1,930,489Treasury stock, at cost
    
    
    (101,400
    )Retained earnings
    
    
    943,766Total stockholders equity
    
    
    2,779,166Total liabilities and stockholders equity
    
    $
    3,880,426
 5




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC. Statements of Operations (Consolidated) For The Three Months Ended March 31, 2005 and 2004 Unaudited
 2005
    
    
    2004Net sales
    
    $
    2,263,078
    
    
    $
    1,337,452Cost of sales
    
    
    1,458,170
    
    
    
    801,844Gross profit
    
    
    804,908
    
    
    
    535,608Operating expensesSelling
    
    
    276,818
    
    
    
    163,011General and administrative
    
    
    209,270
    
    
    
    187,397Total operating expenses
    
    
    486,088
    
    
    
    350,408Income from operations
    
    
    318,820
    
    
    
    185,200Other income (expense)Interest expense
    
    
    (46,061
    )
    
    
    (35,361
    )Interest expense  stockholder notes
    
    
    
    
    
    
    (2,878
    )Other income
    
    
    
    
    
    
    335Total other income (expense)
    
    
    (46,061
    )
    
    
    (37,904
    )Income before income tax provision
    
    
    272,759
    
    
    
    147,296Provision for income taxes
    
    
    106,317
    
    
    
    28,240Net income
    
    $
    166,442
    
    
    $
    119,056Earnings per share:Numerator  net income
    
    $
    166,442
    
    
    $
    119,056Denominator  basic weighted average number of
shares outstanding
    
    
    6,180,864
    
    
    
    5,713,056Basic earnings per share
    
    $
    0.03
    
    
    $
    0.02Denominator  diluted weighted average number of
shares outstanding
    
    
    6,574,765
    
    
    
    5,713,056Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.02
 6




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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC. Statements of Cash Flows (Consolidated) For the Three Months Ended March 31, 2005 and 2004 Unaudited
 2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    166,442
    
    
    $
    119,056Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation
    
    
    13,272
    
    
    
    13,589Amortization
    
    
    3,999
    
    
    
    3,623Deferred income tax provision
    
    
    
    
    
    
    28,240Changes in operating assets and liabilitiesAccounts receivable
    
    
    (73,767
    )
    
    
    (243,404
    )Due from factor
    
    
    774,276
    
    
    
    117,635Inventories
    
    
    34,185
    
    
    
    (240,854
    )Note receivable
    
    
    
    
    
    
    44,665Advances to employees
    
    
    (16,175
    )
    
    
    Prepaid expenses and deferred charges
    
    
    (80,319
    )
    
    
    (67,261
    )Accounts payable
    
    
    (494,295
    )
    
    
    229,446Accrued payroll tax withholdings
    
    
    267
    
    
    
    6,316Accrued expenses other
    
    
    398
    
    
    
    6,421Income taxes payable
    
    
    (246,684
    )
    
    
    Net cash provided by operating activities
    
    
    81,599
    
    
    
    17,472Cash flows from investing activitiesPurchases of property and equipment
    
    
    (5,993
    )
    
    
    (1,632
    )Advances on note receivable  related party
    
    
    
    
    
    
    (34,409
    )Advances on note receivable  stockholder
    
    
    (50,880
    )
    
    
    Net cash used in investing activities
    
    
    (56,873
    )
    
    
    (36,041
    )Cash flows from financing activitiesRepayments on notes payable
    
    
    (13,264
    )
    
    
    (10,997
    )Repayments on notes payable  stockholders
    
    
    
    
    
    
    (14,265
    )Net cash used in financing activities
    
    
    (13,264
    )
    
    
    (25,262
    )Increase (decrease) in cash
    
    
    11,462
    
    
    
    (43,831
    )Cash  beginning of period
    
    
    167,846
    
    
    
    104,376Cash  end of period
    
    $
    179,308
    
    
    $
    60,545
 7




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PART F/S DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.
SELECTED NOTES TO FINANCIAL STATEMENTS
 Nature of Business DAC Technologies Group International, Inc. (the Company), is in the business of developing,
marketing and outsourcing the manufacture of various consumer products, patented and non-patented.
The Companys primary business is gun safety and gun maintenance with a target consumer base of
sportsmen, hunters and outdoorsmen, and recreational enthusiasts. The Companys products have
historically been 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.
In 2003, the product line was expanded to include a line of gun cleaning kits and accessories. The majority of the Companys products are manufactured and imported from mainland China and
shipped to the Companys central warehouse facility in Little Rock, Arkansas for distribution.
These products, along with other items manufactured in the United States, are sold primarily to
mass merchants and sporting goods retailers throughout the United States and international
locations. Organization and Summary of Significant Accounting Policies Organization and basis of presentation The Company was incorporated as a Florida corporation in July 1998 under the name DAC
Technologies of America, Inc. In July 1999, the Company changed its name to DAC Technologies Group
International, Inc. Unaudited interim consolidated financial statements The accompanying consolidated financial statements of the Company as of and for the three
months ended March 31, 2005 and 2004 are unaudited, but, in the opinion of management, reflect the
adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of
such financial statements in accordance with accounting principles generally accepted in the United
States. The significant accounting policies applied to these interim consolidated financial
statements are consistent with those applied to the Companys December 31, 2004 audited financial
statements included in the Companys Form 10KSB. The results of operations for an interim period
are not necessarily indicative of the results for a full year. 8




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following Management Discussion and Analysis of Financial Condition is qualified by
reference to and should be read in conjunction with our 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 10QSB for any forward-looking statements made by, or on behalf of, the
Company. Forward-looking statements include statements concerning plans, objectives, goals,
strategies, expectations, future events or performances and underlying assumptions and other
statements which are other than statements of historical facts. Certain statements contained herein
are forward-looking statements and, accordingly, involve risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in the forward-looking
statements. The Companys expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without limitations, managements
examination of historical operating trends, data contained in the Companys records and other data
available from third parties, but there can be no assurance that managements expectations, beliefs
or projections will result or be achieved or accomplished. Factors that could cause actual results to differ from expectations include, without
limitations:  
    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. In evaluating these statements, you should consider various factors, including those
summarized above, and, from time to time, in other reports the Company files with the SEC. These
factors may cause the Companys actual results to differ materially from any forward-looking
statement. The Company disclaims any obligation to publicly update these statements, or disclose
any difference between its actual results and those reflected in these statements. The information
constitutes forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. 
 (a) Background The Company continued its significant growth in sales and profits during the first quarter of
2005. Net sales and net income increased 69% and 40%, respectively, over the first quarter of
2004. This growth is on target for the Company to reach its anticipated goals in sales of
$14,000,000-$16,000,000 and earning per share of $0.23-$0.26 for 2005. During the first quarter, the Company attended the annual SHOT Show in Las Vegas where over
thirty (30) new products were introduced, including meat processing equipment and three new
security safes, as well as new gun cleaning items. These new items will be ready for shipment in
the second and third quarters of 2005. The Company has received verbal nonbinding commitments from
Wal-Mart for ten (10) new items to be added as permanent additions in their July module set. The Company is also looking to expand its presence in Europe. The Company attended the IWA
and Outdoor Classic Show in Germany in February, and is working to develop the contacts made during
that show. 9




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Details We are in the business of developing, marketing and outsourcing the manufacture of various
consumer products, patented and non-patented, designed to enhance and provide security for the
consumer and for his property. We have placed particular emphasis on gun cleaning kits and gun
accessories as well as gun safety devices. In particular, our products consist of gun cleaning
kits and accessories, gunlocks, trigger locks, security safes, specialty safes, personal protection
devices and items for the health care industry. A significant portion of our business is with mass market retailers such as Wal-Mart and
Kmart, as well as gun manufacturers. With the addition of our Gunmaster gun cleaning kits, we
continue to increase our business with sporting goods retailers and distributors. The Companys business plan and strategy for growth focuses on:  
    increased penetration of our existing markets, particularly in the gun cleaning
and accessories market;
    development of new products for the sporting goods market;
    identify and develop 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. Management believes that continued growth will require the Company to continually innovate and
improve its existing line of products and services 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 and individuals involved in other outdoor activities. In addition to our traditional products, our management is actively pursuing initiatives which
may add complementary businesses, products and services. 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 services which complement our current line of products, and our current
customer base, management hopes to leverage these opportunities to not only develop new sources of
revenue, but to strengthen the demand for our existing products. Our products can be grouped into four main categories: (a) gun maintenance, (b) gun safety,
(c) personal security, and (d) non-security products. 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 and domestic
manufacturers, who are responsible for the tooling, manufacture and packaging of our products. Gun Maintenance.We market over thirty-five (35) different gun cleaning kits, rod sets, tools
and accessories used to clean and maintain virtually any firearm on the market. These kits are
solid brass, and consist of universal kits designed to fit a variety of firearms, caliber
specific kits, as well as replacement brushes, mops, etc. These kits are available in solid wood
or aluminum cases, as well as blister packed. 10




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Gun Safety.We market ten (10) different gun safety locks and five (5) security and specialty
safes. The gun-locks composition ranges from plastic to steel and from keyed trigger locks to
cable locks. The security safes are of heavy duty, all steel construction and are designed for
firearms, jewelry and other valuables. Nine of the Companys gun-locks and three safes have been
certified for sale consistent with the standards set out by the State of California. Personal Security.We market seven (7) different electronic security devices designed to
protect the person. These include the Body Alarm, Key Alert, SWAT Steering Wheel Alarm, SWAT
Talking Car Alarm, Warning Module, Glass Window Alert and Patient Alarm. We also market
non-electronic security devices such as pepper spray and tear gas. Non-SecurityProducts.We market through Wal-Mart and other customers nationwide, the
Sportsmans Cigarette/Cigar Lighter, a windproof, water-resistant refillable butane lighter. We
also market two licensed exclusive products, the Clampit Cupholder and Plateholder. Our website (www.dactec.com) has been redesigned. All of our products are available
via e-commerce on this new site. Our web site is intended to be the only direct link by the
Company to the retail market. 
 (b) Financial Condition and Results of Operations Results of Operations For the three months ended March 31, 2005, the Company had net income of $166,442 on net sales
of $2,263,078, as compared to net income of $119,056 on net sales of $1,337,452 for the same period
in 2004. These represent increases of $47,386 (40%) in net income, and $925,626 (69%) on net
sales, respectively. Sales of the Companys line of GunMaster gun cleaning kits continue to grow significantly.
Sales of these kits increased from $772,184 for the first quarter of 2004 to $1,621,198 for the
first quarter 2005, an increase of $849,014, or 110%. Gross profit margins decreased from 40% for the three months ended March 31, 2004 to 36% for
the same period ended March 31, 2005. The Company experienced a price increase from its overseas
manufacturers, due to increases in commodity prices in 2004, particularly for brass and steel,
which are the primary components of our safes and gun-cleaning kits. These increases first
affected the Companys gross profit margins during the later half of 2004 and into the first
quarter of 2005. The Company expects gross profit margins to remain in the 36% to 37% range for
the rest of 2005. Operating expenses for the three months ended March 31, 2005 were $486,088 as compared to
$350,408 for the same period in the prior year, an increase of $135,680, or 39%. This increase was
expected, and the Company believes the increase is reasonable when compared to the 69% increase in
sales. Most of the increase is due to the increases in variable expenses such as sales commissions
and shipping costs, which fluctuate based on sales volumes. As a percentage of net sales,
operating expenses actually decreased from 26% in the first quarter of 2004 as compared to 21% in
the first quarter of 2005. 11




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Income from operations increased from $185,200 in the first quarter of 2004 to $318,820 in the
first quarter of 2005, an increase of $133,620, or 72%. This increase is due to the increase in
sales of 69%, while at the same time operating expenses increased 39%. During the first two quarters of 2004, the Company benefited from the affects of net operating
loss carry forwards for tax purposes, resulting in an income tax provision of only 19% for the
first quarter of 2004. These net operating loss carry forwards were completely utilized in 2004.
For 2005, the Company will be subjected to an effective tax rate for federal and state purposes of
38%. Financial Condition A summary of the significant balance sheet items at March 31, 2005 as compared to year-end
December 31, 2004 is presented below: March 31,2005
    
    
    Dec. 31, 2004Accounts receivable
    
    $
    550,917
    
    
    $
    477,150Due from factor
    
    
    487,204
    
    
    
    1,261,480Total current assets
    
    
    3,266,445
    
    
    
    3,909,358Accounts payable
    
    
    664,267
    
    
    
    1,158,562Income taxes payable
    
    
    95,017
    
    
    
    341,701Total current liabilities
    
    
    1,085,760
    
    
    
    1,839,338Working capital
    
    
    2,180,685
    
    
    
    2,070,020
 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. 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 Companys 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 March 31, 2005 and
year end December 31, 2004, these amounts were calculated as follows: Mar. 31,2005
    
    
    Dec. 31,2004Total accounts receivable
    
    $
    1,736,096
    
    
    $
    3,669,863Less: assigned receivables
    
    
    (1,185,179
    )
    
    
    (3,192,713
    )Net accounts receivables
    
    $
    550,917
    
    
    $
    477,150Assigned receivables
    
    $
    1,185,179
    
    
    $
    3,192,713Less: Funds advanced
    
    
    (697,975
    )
    
    
    (1,931,233
    )Due from factor
    
    $
    487,204
    
    
    $
    1,261,480
 12




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Accounts receivable, assigned receivables, funds advanced by factor and due from factor have
all decreased since December 31, 2004. This is due to the seasonal nature of the Companys
business, which is
related to the fall and winter hunting and holiday seasons. The fourth quarter 2004 sales were
$4,298,955 as compared to $2,263,078 for the first quarter of 2005. This decrease in sales results
in decreases in all of these items. Accounts payable at March 31, 2005 were $664,267 as compared to $1,158,562 at year end
December 31, 2004. This decrease of $494,295 is again related to the large sales volume in the
fourth quarter of 2004 as compared to the first quarter of 2005. Since inventory has
correspondingly decreased, the amount owed to the Companys manufacturer also decreased. Income taxes payable at year-end December 31, 2004 represented the total taxes owed for the
entire year of 2004. These taxes were paid during the first quarter of 2005. At March 31, 2005,
income taxes payable represent only those taxes owed on the first quarters income. 
 (c) Liquidity and Capital Resources Our primary 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. 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 March 31, 2005, our factor had advanced us
$697,975. 
 (d) Trends Handgun safety remains a major concern and interest to the American public, particularly in
light of accidental and intentional shootings involving children. Moreover, the tragic terrorist
attack against the United States on September 11, 2001 continues to have many Americans concerned
about their personal security. As a result, many people are purchasing firearms to maintain for
home defense purposes. While they are purchasing handguns, many are also concerned with the safe
storage and maintenance of the firearm in the home and want to purchase affordable gun safes to
increase security and cleaning kits for gun care. The focus continues to be one of gun safety rather than legislative attempts to ban guns
possibly due to the strong gun lobby and the nature of politics. Gun safety issues have been moving
from the federal level to the state level through the introduction of mandatory gun-lock
legislation, while those at the federal level are seemingly in accord with the approach being taken
by the Consumer Products Safety Commission to set measurable standards of performance for
gun-locking devices. The Company, with developed products that address preventive handgun safety,
anticipates that it will be in a position to benefit from this trend, although this, of course,
cannot be guaranteed. We believe that the continued focus on handgun safety, the use of gun-locks
by law enforcement agencies, and the litigation aimed at gun manufacturers as well as the gun
legislation will hopefully will enhance our product line revenues. 13




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Although gun legislation could positively affect revenue, it could also affect expenditures.
Recently, state legislation has been effective in increasing gun safety and minimizing gun
violence. One way of accomplishing this is to require gun manufacturers to incorporate safety
devices similar to the Companys products into all handguns sold. The first regulation of this kind
was passed by the Maryland state legislature in early April 2000. This legislation required gun
manufacturers to incorporate safety devices similar to the Companys products into all handguns
sold. The State of California enacted legislation to establish performance standards for firearm safety
devices, lock-boxes, and safes. These standards prevent an attack on the gun-lock or safe with
hand tools, such as hammers, screwdrivers, electric drills, screw and hack saws. This legislation
requires manufacturers to have their products tested by an independent testing laboratory in order
to be listed as an approved device. This testing has resulted in significant expenditures to the
Company. We anticipate that similar standards will be adopted throughout the United States in the
next few years. 
 (e) Critical Accounting Estimates The Company prepares its consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. The Companys significant
accounting policies are discussed in detail in Note 2 to the December 31, 2004 audited consolidated
financial statements included in the Companys Form 10KSB. 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. 14




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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 Companys future
consolidated operating results. 
 (f) Off-Balance Sheet Arrangements. The Company is a party to a lease agreement for its corporate headquarters. The Company does
not use affiliation with special purpose entities, variable interest entities or synthetic leases
to finance its operations. Additionally, the Company has not entered into any arrangement
requiring it to guarantee payment of third party debt or to fund losses of an unconsolidated
special purpose entity. 
 ITEM 3. CONTROLS AND PROCEDURES 
 (a) Evaluation of Disclosure Controls and Procedures The Companys management, with the participation of the Principal Executive Officer and
Principal Financial Officer, has evaluated the effectiveness of the Companys disclosure controls
and procedures as of the end of the period covered by this quarterly report. Based on that
evaluation, the Companys Principal Executive Officer and Principal Financial Officer have
concluded that, as of March 31, 2005, such controls and procedures were effective. 
 (b) Changes in Internal Controls The Companys management, with the participation of the Principal Executive Officer and
Principal Financial Officer, have evaluated any changes in the Companys internal control over
financial reporting that occurred during the period covered by this quarterly report, and they have
concluded that there was no material change to the Companys internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting. 
 PART II 
 ITEM 1. LEGAL PROCEEDINGS We instituted suit along with The Collins Family Trust, our affiliate in which David Collins,
our Chairman claims a beneficial interest, and DAC Technologies of America, Inc., our predecessor,
against Larry Legel, our former CPA, Director and the Trustee of The Collins Family Trust. The
suit, commenced in March 2001 alleged a transfer of 180,000 shares of our common stock for services
which the Defendant did not provide. The suit also alleges that the Defendant breached an
agreement not to sell his shares before certain private investors had recouped their investment.
In October 2002, the Arkansas Court ordered the transfer rescinded and the stock returned to David
Collins. Larry Legel appealed the Courts Order and then dismissed his appeal. 15




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Subsequent to the Arkansas action, an amended Complaint was filed in February 2003 in Broward
County, Florida by Larry Legel and his wife, seeking damages against the Company and others for
breach of duty pursuant to § 678.4011 Fla. Stat. for failing to register and transfer to him and
his wife securities of the Company and the failure by the Company and its officers to permit the
sale of his shares of the Company, which were the same shares that were the subject of the Arkansas
action. The Court stayed the Florida action pending the Arkansas action. Upon the appeal being
dismissed in the Arkansas action, Legel had the stay lifted. Plaintiffs have demanded that the
Company along with David Collins and Florida Atlantic pay the Plaintiffs the difference between the
maximum amount Plaintiffs could have received from the public sale of the 177,400 shares at any
time since October 1, 2000 and the amount they receive when, and if, the sale occurs. Thereafter,
the Company filed a Counterclaim, seeking final judgments determining Legels lack of ownership
rights over the shares in question as well as costs and attorneys fees. Finally, an Answer was
filed on October 2, 2004 in response to Legels Amended Complaint, wherein all allegations are denied and DAC
Technologies requests a dismissal of Legels Complaint as well as costs and fees. This case has
been set for trial for September 2005. It is impossible at this
time to ascertain the ultimate legal and financial liability or
whether this action will have a material adverse effect on the
Companys financial condition and results of operation. 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5. OTHER INFORMATION None. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K The following documents are incorporated by reference from Registrants Form 10SB filed with
the Securities and Exchange Commission (the Commission), File No. 000-29211, on January 28, 2000: Exhibits 2
    
    Acquisition Agreement3(i)
    
    Articles of Incorporation3(ii)
    
    By-laws
 Exhibits required by Item 601 of Regulation S-B attached: 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 18 U.S.C. Section 135032.2
    
    Certification of Robert C. Goodwin Pursuant to 18 U.S.C. Section 1350
 16




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SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, hereunto duly authorized: By:
    /s/ David A. CollinsDavid A. Collins
Chairman, CEO and Principal Executive Officer By:
    /s/ Robert C. GoodwinRobert C. Goodwin
Principal Accounting Officer and
Principal Financial Officer Dated: May 16, 2005 17