UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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)

(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

TABLE OF CONTENTS

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PART I

ITEM 1. FINANCIAL STATEMENTS

     Our financial statements are contained in pages 4 through 7 following.

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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.

Balance Sheet (Consolidated)

March 31, 2005

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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.

Balance Sheet (Consolidated)

March 31, 2005

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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.

Statements of Operations (Consolidated)

For The Three Months Ended March 31, 2005 and 2004

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DAC TECHNOLOGIES GROUP INTERNATIONAL, INC.

Statements of Cash Flows (Consolidated)

For the Three Months Ended March 31, 2005 and 2004

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PART F/S

     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.

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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:

     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.

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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:

     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.

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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.

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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:

     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:

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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.

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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.

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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.

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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

Exhibits required by Item 601 of Regulation S-B attached:

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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:

Dated: May 16, 2005

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