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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 March 31, 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
    
    91107(Address of principal executive offices)
    
    (Zip Code)
   þ o
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##### 



EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
 INDEX
 PagePart I  Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Statements of Financial Position as of March 31, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2006 and March 31, 2005
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and March 31, 2005
    
    
    5Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended March 31, 2006 and the Year Ended December 31, 2005
    
    
    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
    
    
    14Part II  Other Information
    
    
    14Item 1. Legal Proceedings
    
    
    14Item 6. Exhibits and Other Reports on Form 8-K
    
    
    14Signature
    
    
    16CertificationsExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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##### Table of Contents



March 31, 2006(Unaudited)
    
    
    December 31, 2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    369,662
    
    
    $
    793,442Investment
    
    
    100,000
    
    
    
    100,000Accounts receivable, related parties, net
    
    
    507,817
    
    
    
    230,572Other receivable, related parties
    
    
    23,558
    
    
    
    5,229Prepaid expenses
    
    
    2,500
    
    
    
    407Total Current Assets
    
    
    1,003,537
    
    
    
    1,129,650Fixed AssetsProperty, furniture and equipment (net)
    
    
    774,042
    
    
    
    778,691Total Fixed Assets
    
    
    774,042
    
    
    
    778,691Other AssetsIntangible assets, net
    
    
    270,432
    
    
    
    274,521Deposits
    
    
    8,370
    
    
    
    8,370Total Other Assets
    
    
    278,802
    
    
    
    282,891Total Assets
    
    $
    2,056,381
    
    
    $
    2,191,232LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
    
    $
    118,514
    
    
    $
    99,282Other payable, related parties
    
    
    7,518
    
    
    
    44,476Total Current Liabilities
    
    
    126,032
    
    
    
    143,758Deposits payable
    
    
    4,100
    
    
    
    4,100Total Liabilities
    
    
    130,132
    
    
    
    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
    
    
    1,978,703
    
    
    
    1,973,203Retained earnings
    
    
    (73,354
    )
    
    
    49,271Total Stockholders Equity
    
    
    1,926,249
    
    
    
    2,043,374Total Liabilities and Stockholders Equity
    
    $
    2,056,381
    
    
    $
    2,191,232
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Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005Fee income
    
    $
    277,246
    
    
    $
    254,295Total revenue
    
    
    277,246
    
    
    
    254,295Cost of revenue
    
    
    271,927
    
    
    
    249,943Gross profit
    
    
    5,319
    
    
    
    4,352General and administrative expenses
    
    
    146,637
    
    
    
    46,503Income (loss) from operations
    
    
    (141,318
    )
    
    
    (42,151
    )Other (income) expenseInterest income
    
    
    (3,933
    )
    
    
    (660
    )Rental income
    
    
    (16,502
    )
    
    
    (13,587
    )Miscellaneous
    
    
    142
    
    
    
    532Total other (income) expense
    
    
    (20,293
    )
    
    
    (13,715
    )Income (loss) before income taxes
    
    
    (121,025
    )
    
    
    (28,436
    )Provision for income taxes
    
    
    1,600
    
    
    
    1,600Net Income (loss)
    
    ($
    122,625
    )
    
    ($
    30,036
    )Net loss per share (basic and diluted)Basic
    
    
    ($0.006
    )
    
    
    ($0.001
    )Diluted
    
    
    ($0.006
    )
    
    
    ($0.001
    )Weighted average number of shares (See note 7)Basic
    
    
    20,900,024
    
    
    
    20,900,024Diluted
    
    
    20,900,024
    
    
    
    20,900,024
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Three Months EndedMarch 31,
    
    
    March 31,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet Income (loss)
    
    
    ($122,625
    )
    
    
    ($30,036
    )Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    8,738
    
    
    
    18,022Stock options issued for services
    
    
    5,500
    
    
    
    5,500Translation adjustment
    
    
    0
    
    
    
    532Decrease (Increase) in receivables
    
    
    (277,245
    )
    
    
    (114,155
    )Decrease (Increase) in other receivables
    
    
    (18,329
    )
    
    
    23,421Decrease (Increase) in prepaid expenses
    
    
    (2,093
    )
    
    
    2,800(Decrease) Increase in accounts payable
and accrued expenses
    
    
    19,232
    
    
    
    (1,677
    )(Decrease) Increase in other payable
    
    
    (36,958
    )
    
    
    (27,894
    )Total Adjustments
    
    
    (301,155
    )
    
    
    (93,451
    )Net cash (used in) operations
    
    
    (423,780
    )
    
    
    (123,487
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets
    
    
    0
    
    
    
    (5,472
    )Increase in intangible assets
    
    
    0
    
    
    
    (6,989
    )Net cash (used in) investing activities
    
    
    0
    
    
    
    (12,461
    )Net change in cash and cash equivalents
    
    
    (423,780
    )
    
    
    (135,948
    )Cash and cash equivalents at beginning of year
    
    
    793,442
    
    
    
    828,091Cash and cash equivalents at end of period
    
    $
    369,662
    
    
    $
    692,143Supplemental cash flows disclosures:Income tax payments
    
    $
    1,600
    
    
    $
    1,600Non cash investing and financing activities:Stock issued for services
    
    $
    5,500
    
    
    $
    5,500
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March 31, 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
    
    
    5,500
    
    
    
    22,000Balance at end of period
    
    
    1,978,703
    
    
    
    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)
    
    
    (122,625
    )
    
    
    (193,073
    )Balance at end of period
    
    
    (73,354
    )
    
    
    49,271Total Stockholders Equity at end of period
    
    $
    1,926,249
    
    
    $
    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
 APB 17.
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Estimates
  Concentration of Credit Risk
  Stock Based Compensation
  Impairment of Long-Lived Assets
  Earnings Per Share
  Income Taxes
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Reclassification
  Note 2  Property and Equipment
  March 31, 2006
    
    
    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
    
    
    (677,009
    )
    
    
    (672,360
    )$
    774,042
    
    
    $
    778,691
 Note 3 Intangible Assets
  March 31, 2006
    
    
    December 31, 2005Patents and Trademark costs
    
    $
    528,295
    
    
    $
    528,295Less accumulated amortization
    
    
    (257,863
    )
    
    
    (253,774
    )$
    270,432
    
    
    $
    274,521
  Note 4  Compensated Absences
  Note 5  Concentration  Related Party Transactions
  Note 6  Common Stock
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Note 7  Earnings Per Share
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
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Results of Operations
 Three Months Ended March 31, 2006 Compared with Three Months Ended March 31, 2005
 March 31, 2006
    
    March 31, 2005Total Revenues
    
    $
    277,246
    
    
    $
    254,295Cost of Revenues
    
    
    271,927
    
    
    
    249,943Selling, General and Administrative Expense
    
    
    146,637
    
    
    
    46,503Income (Loss) from Operations
    
    
    ($141,318
    )
    
    
    ($42,151
    )
 Revenue from Fee Income
  Cost of Revenues
  General and Administrative Expenses
  Loss
from Operations
  Non
Operating income
  Net
Loss
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Liquidity and Capital Resources
   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
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TKE Controls Our Business
  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
  31.1
    
    Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934.
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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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SIGNATURES
  EUPA INTERNATIONAL CORPORATION
 (Registrant)
 Date: May 15, 2006
    
    /s/ Yuan-Chung TsaiYuan-Chung TsaiPresident and Chief Executive OfficerDate: May 15, 2006
    
    /s/ Kung-Chieh HuangKung-Chieh HuangChief Financial Officer