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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended June 30, 2006
Commission file number 000-26539
 EUPA International Corporation
  Nevada
    
    88-0409450(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification Number)89 N. San Gabriel Boulevard, Pasadena, California
(Address of principal executive offices)
    
    91107
(Zip Code)
 
 þ o
 o þ




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
 INDEX
 PagePart I  Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Condensed Consolidated Statements of Changes in Stockholders Equity
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Controls and Procedures
    
    
    15Part II  Other Information
    
    
    15Item 1. Legal Proceedings
    
    
    15Item 6. Exhibits and Other Reports on Form 8-K
    
    
    15Signature
    
    
    16CertificationsEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
 2




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ASSETS
 June 30, 2006(Unaudited)
    
    
    December 31, 2005Current AssetsCash and cash equivalents
    
    $
    552,515
    
    
    $
    793,442Investment
    
    
    100,000
    
    
    
    100,000Accounts receivable, related parties, net
    
    
    122,984
    
    
    
    230,572Other receivable, related parties
    
    
    2,512
    
    
    
    5,229Prepaid expenses
    
    
    0
    
    
    
    407Total Current Assets
    
    
    778,011
    
    
    
    1,129,650Fixed AssetsProperty, furniture and equipment (net)
    
    
    769,392
    
    
    
    778,691Total Fixed Assets
    
    
    769,392
    
    
    
    778,691Other AssetsIntangible assets, net
    
    
    277,401
    
    
    
    274,521Deposits
    
    
    8,370
    
    
    
    8,370Total Other Assets
    
    
    285,771
    
    
    
    282,891Total Assets
    
    $
    1,833,174
    
    
    $
    2,191,232LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
    
    $
    181,121
    
    
    $
    99,282Other payable, related parties
    
    
    38,818
    
    
    
    44,476Total Current Liabilities
    
    
    219,939
    
    
    
    143,758Deposits payable
    
    
    4,100
    
    
    
    4,100Total Liabilities
    
    
    224,039
    
    
    
    147,858Stockholders EquityCommon stock, $.001 par value, 25,000,000
shares authorized, 20,900,000
issued and outstanding
    
    
    20,900
    
    
    
    20,900Additional paid in capital
    
    
    1,984,203
    
    
    
    1,973,203Retained earnings (deficit)
    
    
    (395,968
    )
    
    
    49,271Total Stockholders Equity
    
    
    1,609,135
    
    
    
    2,043,374Total Liabilities and Stockholders Equity
    
    $
    1,833,174
    
    
    $
    2,191,232
  3




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Fee income
    
    $
    145,562
    
    
    $
    219,763
    
    
    $
    422,808
    
    
    $
    474,058Total revenue
    
    
    145,562
    
    
    
    219,763
    
    
    
    422,808
    
    
    
    474,058Cost of revenue
    
    
    142,708
    
    
    
    213,934
    
    
    
    414,635
    
    
    
    463,877Gross profit
    
    
    2,854
    
    
    
    5,829
    
    
    
    8,173
    
    
    
    10,181General and administrative expenses
    
    
    341,730
    
    
    
    26,108
    
    
    
    488,367
    
    
    
    72,611Income (loss) from operations
    
    
    (338,876
    )
    
    
    (20,279
    )
    
    
    (480,194
    )
    
    
    (62,430
    )Other (income) expenseInterest income
    
    
    (708
    )
    
    
    (754
    )
    
    
    (4,641
    )
    
    
    (1,414
    )Rental income
    
    
    (15,838
    )
    
    
    (16,051
    )
    
    
    (32,340
    )
    
    
    (29,638
    )Miscellaneous
    
    
    284
    
    
    
    0
    
    
    
    426
    
    
    
    532Total other (income) expense
    
    
    (16,262
    )
    
    
    (16,805
    )
    
    
    (36,555
    )
    
    
    (30,520
    )Income (loss) before income taxes
    
    
    (322,614
    )
    
    
    (3,474
    )
    
    
    (443,639
    )
    
    
    (31,910
    )Provision for income taxes
    
    
    0
    
    
    
    0
    
    
    
    1,600
    
    
    
    1,600Net Income (loss)
    
    
    ($322,614
    )
    
    
    ($3,474
    )
    
    
    ($445,239
    )
    
    
    ($33,510
    )Net loss per share (basic and diluted)Basic
    
    
    ($0.015
    )
    
    
    ($0.000
    )
    
    
    ($0.021
    )
    
    
    ($0.002
    )Diluted
    
    
    ($0.015
    )
    
    
    ($0.000
    )
    
    
    ($0.021
    )
    
    
    ($0.002
    )Weighted average number of shares (See note 7)Basic
    
    
    20,900,024
    
    
    
    20,900,024
    
    
    
    20,900,024
    
    
    
    20,900,024Diluted
    
    
    20,900,024
    
    
    
    20,900,024
    
    
    
    20,900,024
    
    
    
    20,900,024
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Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet Income (loss)
    
    
    ($445,239
    )
    
    
    ($33,510
    )Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    17,358
    
    
    
    35,072Stock options issued for services
    
    
    11,000
    
    
    
    11,000Translation adjustment
    
    
    0
    
    
    
    532Decrease (Increase) in receivables
    
    
    107,588
    
    
    
    43,674Decrease (Increase) in other receivables
    
    
    2,717
    
    
    
    25,720Decrease (Increase) in prepaid expenses
    
    
    407
    
    
    
    2,800(Decrease) Increase in accounts payable
and accrued expenses
    
    
    81,839
    
    
    
    28,374(Decrease) Increase in other payable
    
    
    (5,658
    )
    
    
    53,698Total Adjustments
    
    
    215,251
    
    
    
    200,870Net cash provided by (used in) operations
    
    
    (229,988
    )
    
    
    167,360CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets
    
    
    0
    
    
    
    (5,472
    )Increase in intangible assets
    
    
    (10,939
    )
    
    
    (13,335
    )Net cash used in investing activities
    
    
    (10,939
    )
    
    
    (18,807
    )Net change in cash and cash equivalents
    
    
    (240,927
    )
    
    
    148,553Cash and cash equivalents at beginning of period
    
    
    793,442
    
    
    
    828,091Cash and cash equivalents at end of period
    
    $
    552,515
    
    
    $
    976,644Supplemental cash flows disclosures:Income tax payments
    
    $
    1,600
    
    
    $
    1,600Non cash investing and financing activities:Stock issued for services
    
    $
    11,000
    
    
    $
    11,000
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June 30, 2006(Unaudited)
    
    
    December 31, 2005Common stock, number of shares outstandingBalance at beginning of period
    
    
    20,900,024
    
    
    
    20,900,024Balance at end of period
    
    
    20,900,024
    
    
    
    20,900,024Common stock, par value $.001 (thousands of shares)Balance at beginning of period
    
    $
    20,900
    
    
    $
    20,900Balance at end of period
    
    
    20,900
    
    
    
    20,900Additional paid in capitalBalance at beginning of period
    
    
    1,973,203
    
    
    
    1,951,203Issuance of stock options for service
    
    
    11,000
    
    
    
    22,000Balance at end of period
    
    
    1,984,203
    
    
    
    1,973,203Cumulative foreign-exchange translation adjustmentBalance at beginning of year
    
    
    0
    
    
    
    (532
    )Foreign currency translation
    
    
    0
    
    
    
    532Balance at end of period
    
    
    0
    
    
    
    0Retained earningsBalance at beginning of period
    
    
    49,271
    
    
    
    242,876Foreign currency translation
    
    
    0
    
    
    
    (532
    )Net income (loss)
    
    
    (445,239
    )
    
    
    (193,073
    )Balance at end of period
    
    
    (395,968
    )
    
    
    49,271Total Stockholders Equity at end of period
    
    $
    1,609,135
    
    
    $
    2,043,374
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Note 1  Accounting Policies
 Unaudited Interim Financial Information
  Basis of Consolidation
  Revenue Recognition
  Cash Equivalents and Short-Term Investments
  Fixed Assets
   Buildings and improvements
    
    
    15 to 60 yearsAutomobiles
    
    
    4 to 6 yearsMachinery and equipment
    
    
    5 to 12 yearsFurniture and Fixtures
    
    7 years
 Intangible Assets
  7




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Estimates
  Concentration of Credit Risk
  Stock Based Compensation
  Impairment of Long-Lived Assets
  Earnings Per Share
  Income Taxes
  8




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Reclassification
  Note 2  Property and Equipment
  June 30, 2006Unaudited
    
    
    December 31, 2005Building and improvements
    
    $
    659,688
    
    
    $
    659,688Land
    
    
    400,000
    
    
    
    400,000Machinery and equipment
    
    
    218,537
    
    
    
    218,537Automobiles
    
    
    108,067
    
    
    
    108,067Furniture and fixtures
    
    
    64,759
    
    
    
    64,7591,451,051
    
    
    
    1,451,051Less accumulated depreciation
    
    
    (681,659
    )
    
    
    (672,360
    )$
    769,392
    
    
    $
    778,691
 Note 3 Intangible Assets
  June 30, 2006Unaudited
    
    
    December 31, 2005Patents and Trademark costs
    
    $
    539,235
    
    
    $
    528,295Less accumulated amortization
    
    
    (261,834
    )
    
    
    (253,774
    )$
    277,401
    
    
    $
    274,521
  Note 4  Compensated Absences
  Note 5  Concentration  Related Party Transactions
  9




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Note 6  Common Stock
  Note 7  Earnings Per Share
  Note 8  Line of Credit
  Note 9  Stock Split
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  10




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Overview
       11




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Results of Operations
 Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2005
 June 30, 2006
    
    June 30, 2005Total Revenues
    
    $
    422,808
    
    
    $
    474,058Cost of Revenues
    
    
    414,635
    
    
    
    463,877Selling, General and Administrative Expense
    
    
    488,367
    
    
    
    72,611Income (Loss) from Operations
    
    $
    (480,194
    )
    
    $
    (62,430
    )
 Revenue from Fee Income
  Cost of Revenues
  General and Administrative Expenses
  Loss from Operations
  Non-Operating income
  Net Loss
  Liquidity and Capital Resources
  12




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Cash Flow
  Off-Balance Sheet Arrangements
  Additional Factors That May Affect Future Results
  Risks Relating to Resignation of Tsan-Kun Wu
  Negative Publicity May Adversely Affect Our Business
  TKE Controls Our Business
  13




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We Are Dependent On TKE for Our Sales and Other Revenues and Capital Requirements
  Many of Our Employees Also Perform Services for TKE Which Could Result In Their Attention Being
Diverted From Our Business
  The Loss of Key Senior Management Personnel Could Negatively Affect Our Business
  If We Do Not Develop and Introduce New TKE Products, Our Ability to Grow Will Be Limited
  A Slowdown in the Retail Industry Will Likely Have an Adverse Effect on Our Results
  Compliance with Governmental Regulations Could Increase Our Operating Costs and Interfere with Our
Business Efforts
  We May Experience Significant Fluctuations in Our Operating Results and Rate of Growth
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We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We
Sell
  Forward-Looking Statements
   
 Item 3. Controls and Procedures
  
 Part II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits and Reports On Form 8-K
 (a)
    
    Exhibits.
 31.1
    
    Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
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(b)
    
    Reports on Form 8-K.
    
 SIGNATURES
  EUPA INTERNATIONAL CORPORATION
 (Registrant)
 Date: August 14, 2006
    /s/ Yuan-Chung TsaiYuan-Chung TsaiPresident and Chief Executive OfficerDate: August 14, 2006
    /s/ Kung-Chieh HuangKung-Chieh HuangChief Financial Officer 16