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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, 2005
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)
 626-793-2688 
  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 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 Yes þ No o. 20,900,024
shares of common stock, par value $0.001, were outstanding as of
August 12, 2005.




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES INDEX PagePart I  Financial Information
    
    2Item 1. Financial Statements (Unaudited)
    
    2Consolidated Statements of Financial Position as of June 30, 2005 and December 31, 2004
    
    2Consolidated Statements of Operations for the Three Months Ended June 30, 2005 and June 30, 2004
    
    3Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2005 and June 30, 2004
    
    4Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended June 30,
2005 and the Year Ended December 31, 2004
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    12Item 3. Controls and Procedures
    
    17Part II  Other Information
    
    17Item 1. Legal Proceedings
    
    17Item 6. Exhibits and Other Reports on Form 8-K
    
    17Signature
    
    18Certifications
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION June 30, 2005(Unaudited)
    
    
    December 31, 2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    976,644
    
    
    $
    828,091Accounts receivable, related parties, net
    
    
    217,273
    
    
    
    260,947Other receivable, related parties
    
    
    3,936
    
    
    
    29,656Prepaid expenses
    
    
    8,940
    
    
    
    11,740Total Current Assets
    
    
    1,206,793
    
    
    
    1,130,434Fixed AssetsProperty, furniture and equipment (net)
    
    
    786,706
    
    
    
    800,610Total Fixed Assets
    
    
    786,706
    
    
    
    800,610Other AssetsIntangible assets, net
    
    
    370,765
    
    
    
    373,126Deposits
    
    
    8,370
    
    
    
    8,370Total Other Assets
    
    
    379,135
    
    
    
    381,496Total Assets
    
    $
    2,372,634
    
    
    $
    2,312,540LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
    
    $
    86,234
    
    
    $
    57,860Other payable, related parties
    
    
    89,831
    
    
    
    36,133Total Current Liabilities
    
    
    176,065
    
    
    
    93,993Deposits payable
    
    
    4,100
    
    
    
    4,100Total Liabilities
    
    
    180,165
    
    
    
    98,093Stockholders EquityCommon stock, $.001 par value, 25,000,000
shares authorized, 20,900,000
issued and outstanding
    
    
    20,900
    
    
    
    20,900Additional paid in capital
    
    
    1,962,203
    
    
    
    1,951,203Cumulative foreign-exchange translation adjustment
    
    
    0
    
    
    
    (532
    )Retained earnings
    
    
    209,366
    
    
    
    242,876Total Stockholders Equity
    
    
    2,192,469
    
    
    
    2,214,447Total Liabilities and Stockholders Equity
    
    $
    2,372,634
    
    
    $
    2,312,540
 See Accompanying Notes and Accountants Report 2




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Fee income
    
    $
    219,763
    
    
    $
    202,453
    
    
    $
    474,058
    
    
    $
    513,366Total revenue
    
    
    219,763
    
    
    
    202,453
    
    
    
    474,058
    
    
    
    513,366Selling expenses
    
    
    36
    
    
    
    12,244
    
    
    
    15,970
    
    
    
    52,116Gross profit
    
    
    219,727
    
    
    
    190,209
    
    
    
    458,088
    
    
    
    461,250General and administrative expenses
    
    
    240,006
    
    
    
    275,417
    
    
    
    520,518
    
    
    
    558,845Income (loss) from operations
    
    
    (20,279
    )
    
    
    (85,208
    )
    
    
    (62,430
    )
    
    
    (97,595
    )Other (income) expenseInterest income
    
    
    (754
    )
    
    
    (502
    )
    
    
    (1,414
    )
    
    
    (1,366
    )Rental income
    
    
    (16,051
    )
    
    
    (15,057
    )
    
    
    (29,638
    )
    
    
    (29,676
    )Miscellaneous
    
    
    0
    
    
    
    (669
    )
    
    
    532
    
    
    
    (769
    )Total other (income) expense
    
    
    (16,805
    )
    
    
    (16,228
    )
    
    
    (30,520
    )
    
    
    (31,811
    )Income (loss) before income taxes
    
    
    (3,474
    )
    
    
    (68,980
    )
    
    
    (31,910
    )
    
    
    (65,784
    )Provision for income taxes
    
    
    0
    
    
    
    0
    
    
    
    1,600
    
    
    
    1,600Income from continuing operations
    
    
    (3,474
    )
    
    
    (68,980
    )
    
    
    (33,510
    )
    
    
    (67,384
    )Discontinued operations: (See note 8)Income from discontinued operations
    
    
    0
    
    
    
    1,337
    
    
    
    0
    
    
    
    80,478Net Income (loss)
    
    
    ($3,474
    )
    
    
    ($67,643
    )
    
    
    ($33,510
    )
    
    $
    13,094Net loss per share from continuing operations (basic and diluted)Basic
    
    
    ($0.000
    )
    
    
    ($0.003
    )
    
    
    ($0.002
    )
    
    
    ($0.003
    )Diluted
    
    
    ($0.000
    )
    
    
    ($0.003
    )
    
    
    ($0.002
    )
    
    
    ($0.003
    )Net loss per share (basic and diluted)Basic
    
    
    ($0.000
    )
    
    
    ($0.003
    )
    
    
    ($0.002
    )
    
    $
    0.001Diluted
    
    
    ($0.000
    )
    
    
    ($0.003
    )
    
    
    ($0.002
    )
    
    $
    0.001Weighted 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
    
    
    
    22,650,024
  3




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Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income (loss)
    
    
    ($33,510
    )
    
    $
    13,094Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    35,072
    
    
    
    43,258Stock options issued for services
    
    
    11,000
    
    
    
    11,000Translation adjustment
    
    
    532
    
    
    
    (2,420
    )Decrease (Increase) in receivables
    
    
    43,674
    
    
    
    (200,661
    )Decrease (Increase) in other receivables
    
    
    25,720
    
    
    
    44,998Decrease (Increase) in prepaid expenses
    
    
    2,800
    
    
    
    (7,560
    )(Decrease) Increase in accounts payable
and accrued expenses
    
    
    28,374
    
    
    
    48,478(Decrease) Increase in other payable
    
    
    53,698
    
    
    
    (47,228
    )(Decrease) Increase in income taxes payable
    
    
    0
    
    
    
    (84,636
    )Total Adjustments
    
    
    200,870
    
    
    
    (194,771
    )Net cash provided by (used in) operations
    
    
    167,360
    
    
    
    (181,677
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets
    
    
    (5,472
    )
    
    
    0Increase in intangible assets
    
    
    (13,335
    )
    
    
    (15,642
    )Net cash used in investing activities
    
    
    (18,807
    )
    
    
    (15,642
    )Net change in cash and cash equivalents
    
    
    148,553
    
    
    
    (197,319
    )Cash and cash equivalents at beginning of period
    
    
    828,091
    
    
    
    971,093Cash and cash equivalents at end of period
    
    $
    976,644
    
    
    $
    773,774Supplemental cash flows disclosures:Income tax payments
    
    $
    1,600
    
    
    $
    10,600Non cash investing and financing activities:Stock issued for services
    
    $
    11,000
    
    
    $
    11,000
  4




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June 30, 2005(Unaudited)
    
    
    December 31, 2004Common 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
    
    
    1,951,203
    
    
    
    1,929,203Issuance of stock options for service
    
    
    11,000
    
    
    
    22,000Balance at end of period
    
    
    1,962,203
    
    
    
    1,951,203Cumulative foreign-exchange translation adjustmentBalance at beginning of period
    
    
    (532
    )
    
    
    1,943Foreign currency translation
    
    
    532
    
    
    
    (2,475
    )Balance at end of period
    
    
    0
    
    
    
    (532
    )Retained earningsBalance at beginning of period
    
    
    242,876
    
    
    
    284,774Liquidation distribution
    
    
    0
    
    
    
    (517,061
    )Net income (loss)
    
    
    (33,510
    )
    
    
    475,163Balance at end of period
    
    
    209,366
    
    
    
    242,876Total Stockholders Equity at end of period
    
    $
    2,192,469
    
    
    $
    2,214,447
 5




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Note 1  Accounting Policies
 Unaudited Interim Financial Information
  Basis of Consolidation
  Revenue Recognition
  Cash and Cash Equivalents
  6




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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
  Estimates
  Concentration of Credit Risk
  7




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Stock Based Compensation
  Discontinued Operations
  Impairment of Long-Lived Assets
  Earnings Per Share
  8




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Income Taxes
  Foreign Currency Translation
  9




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Note 2  Property and Equipment
  June 30, 2005
    
    
    December 31, 2004Building and improvements
    
    $
    659,688
    
    
    $
    655,688Land
    
    
    400,000
    
    
    
    400,000Machinery and equipment
    
    
    218,537
    
    
    
    217,065Automobiles
    
    
    108,067
    
    
    
    108,067Furniture and fixtures
    
    
    64,759
    
    
    
    64,7591,451,051
    
    
    
    1,445,579Less accumulated depreciation
    
    
    (664,345
    )
    
    
    (644,969
    )$
    786,706
    
    
    $
    800,610
 Note 3 Intangible Assets
  June 30, 2005
    
    
    December 31, 2004Patents and Trademark costs
    
    $
    506,714
    
    
    $
    493,380Less accumulated amortization
    
    
    (135,949
    )
    
    
    (120,254
    )$
    370,765
    
    
    $
    373,126
 Note 4  Compensated Absences
  Note 5  Concentration  Related Party Transactions
  10




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Note 6  Common Stock
  Note 7  Earnings Per Share
  Note 8  Liquidating Distribution
  11




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Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations The following managements discussion and analysis of financial condition and results of
operations (MD&A) should be read in conjunction with the December 31, 2004 consolidated financial
statements and notes thereto (the 2004 Consolidated Financial Statements), along with the MD&A
included in EUPAs 2004 Annual Report on Form 10-KSB for the period ended December 31, 2004 and the
Quarterly Reports on Form 10-QSB for the periods ended June 30,
2004, September 30, 2004 and March 31, 2005, filed
separately with the SEC. The discussion of results, causes and trends should not be construed to
imply any conclusion that such results or trends will necessarily continue in the future. The information contained in this MD&A, other than historical information, contains forward
looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that
are based on managements current expectations and assumptions. This MD&A should be read in
conjunction with the sections entitled Additional Factors That May Affect Future Results and
Forward-Looking Statements. Overview EUPA, through its wholly-owned subsidiary, Tsann Kuen U.S.A., an Illinois corporation (TK
USA) provides sales and customer support, product design, research and development, and patent
administration services to Tsann Kuen Enterprise Co., Ltd., a corporation organized and existing in
the Republic of China (TKE) and owner of approximately 67% of EUPAs capital stock. TKE is a
major designer, manufacturer and marketer of small home and kitchen appliances, motor-driven
products, vacuum cleaners and other consumer electronic products for brand name distributors
worldwide. 12




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Our
business has been structured around developing and promoting TKEs products in the United States
(U.S.). Our activities have included acting as the information center for TKE and its products,
conducting market research, designing products and enhancements, performing research and
development of products, cultivating and supporting relationships with brand name distributors and
other customers and increasing U.S. sales. We also provide sales and customer support services to
TKEs subsidiaries, Tsann Kuen China (Shanghai) Enterprises Ltd. (TKS), Tsann Kuen (Zhangzhou)
Enterprise Co. Ltd. (TKL) and Tsann Kuen (China) Enterprise Co., Ltd. (TKC), each of which are
corporations organized and existing in the Peoples Republic of China. We have sales and customer support service agreements with each of TKS, TKL and TKC. We charge
each of TKS, TKL and TKC sales and customer support fees based on the fully-burdened costs we incur
in providing these services plus a mark-up. Our fully-burdened costs include salaries and other
personnel expenses, such as travel and travel-related expenses, operating and overhead expenses,
such as office space, administrative services, office supplies and equipment. Our costs are
allocated among TKS, TKL and TKC on a reasonable cost allocation basis. We periodically review our
fee formula with each party to assure that it is consistent with industry standards and customs.
During the six months period ended June 30, 2005, our mark-up was 2% for each of TKS and TKL.
There was no mark-up for TKC, as no sales and customer support services were provided during the
six months ended June 30, 2005. During
the six month period ended June 30, 2005, sales and customer support fees charged to
TKS and TKL were $85,406 and $371,740, respectively. These fees are included in accounts
receivable. We carry relatively large accounts receivable, as the customer payment period is long,
approximately 90 days. We invoice each of TKE, TKS and TKL on a quarterly basis for services
provided during the preceding calendar quarter and payments are due 90 days after receipt of the
invoice. We also receive revenues for research and development services and patent fiduciary and
administration services we provide to TKE. We have a research and development services agreement
and a patent fiduciary and administration services agreement with TKE. Fees for these services are
calculated in the same manner as fees for sales and customer support services, on our
fully-burdened costs incurred in the provision of these services plus
a mark-up. During the six
months ended June 30, 2005, our mark-up was 5% for research and development services and 2% for
patent fiduciary and administration services. Fees charged to TKE
during the six months ended
June 30, 2005, were $0 for research and development services and
$16,805 for patent fiduciary and
administration services. These fees are included in accounts receivable, having the same customer
payment period as fees for sales and customer support services. Trends, Events and Uncertainties We
have been assessing business operations and
strategy. In light of the results of this assessment, we may consider
and implement a broad range of business initiatives and strategic
alternatives. These may include, without limitation, new business
initiatives, strategic transactions and other business efficiencies. Results of Operations Six
Months Ended June 30, 2005 Compared with Six Months Ended June 30, 2004 June 30, 2005
    
    

June 30, 2004Revenue
    
    $
    474,058
    
    
    $
    513,366Selling Expense
    
    
    15,970
    
    
    
    52,116General Expense
    
    
    520,518
    
    
    
    558,845Income (loss) from operations
    
    $
    (62,430
    )
    
    $
    (97,595
    )
 Revenue from Fee Income During
the six months ended June 30, 2005, revenue from fee income was
$474,058 down from
$513,366 in the second quarter of 2004. The decrease in fee income was attributed to the decrease in
the amount of sales and customer support, research and development and patent fiduciary
administration services provided to TKE. General and Administrative Expenses General
and administrative expenses were $520,518 for the six months ended June 30, 2005
compared with $558,845 in the second quarter of 2004. These expenses included accounting fees,
amortization and depreciation expenses, wages and salaries and legal professional service expenses.
The decrease in general and administrative expenses was largely attributed to the decrease in
general expenses incurred for services provided to TKE. The income (loss) from operations was
$(62,430) and $(97,595) for the six months ended June 30, 2005 and 2004, respectively, which was
a result of the decrease in the amount of selling expense and general
expense for the six months ended June 30, 2005. Non-operating
income for the six months ended June 30, 2005 was $30,520 compared with
$31,811 in the second quarter of 2004. Included in non-operating
income was $1,414 of interest income,
$29,638 of rental income, for the six 13




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months ended June 30,
2005. During the six months ended June 30, 2004, there was $1,366 of
interest income, $29,676 of rental income, and $769 of other income. There was $1,600 income tax
expenses recognized on our pre-tax income for both the six months ended June 30, 2005 and 2004. For
the six months ended June 30, 2005 we realized a net loss of
$(33,510) compared to a
net income of $13,094 for the six months ended June 30, 2004.
The increase in net loss was a
result of the decrease in income from discontinued operations. Liquidity and Capital Resources Our
primary source of liquidity as of June 30, 2005 is our cash on
hand. Net cash provided by
operations for the six months ended June 30, 2005 was $167,360, as compared to net cash used
in operations of $(181,677) during the same period in 2004. The
increase in net cash provided by operating activities was a result of
the significant decrease in accounts receivable. Our cash and
cash equivalents were $976,644 and $828,091 as of June 30, 2005
and December 31, 2004, respectively. Our
current assets totaled $1,206,793 and $1,130,434 on June 30,
2005 and December 31, 2004, respectively. Our current liabilities
were $176,065 and $93,993 on June 30, 2005 and December 31,
2004, respectively. Working capital was $1,030,728 and $1,036,441 as of June 30, 2005 and
December 31, 2004, respectively. Net
cash used in investing activities totaled $(18,807), for the six months ended June 30,
2005, which consisted of the costs associated with obtaining patent rights and fixed assets,
compared with $(15,642) for the six months ended June 30, 2004. The net cash change was
$148,533 and $(197,319) for the second quarter of 2005 and 2004, respectively. Cash Flow Our cash needs are currently met by our cash on hand, primarily because of the long lag time
for payment of our accounts receivable. We believe we will be able to continue to meet our
anticipated working capital requirements through a combination of cash on hand and revenues from
service fees as our accounts receivable are paid. From time to time, primarily because of our
accounts receivable lag time, our daily operations are supported by advances from TKE. These
advances are offset from our fee revenues. We believe that our current financial resources are
sufficient to finance our operations for at least the next twelve months. Our actual working
capital needs will depend upon numerous factors, including our operating results, competition, and
the availability of monies from TKE, none of which can be predicted with certainty. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet financing arrangements and have not established
any special purpose entities. We have not guaranteed any debt or commitments of other entities or
entered into any options on non-financial assets. Additional Factors That May Affect Future Results The following risk factors and other information included in this report should be carefully
considered. The risks and uncertainties described below are not the only ones we face. Additional
risks and uncertainties not presently known to us or which we currently deem immaterial also may
impair our business operations. If any of the following risks occur, our business, financial
condition, operating results, and cash flows could be materially adversely affected. Risks Relating to
Resignation of Tsan-Kuen Wu On
March 11, 2005, Tsan-Kuen Wu resigned from his positions as our
President, Chief Executive Officer and Chairman of the Board of
Directors, amidst two criminal proceedings involving alleged
securities law violations and fraud in Taiwan. Mr. Wu is also
the founder and Chairman of TKE. In one proceeding, Mr. Wu was
convicted, on December 31, 2004, of manipulating the stock price
of Sunfar Computer Co., Ltd. and sentenced to prison for
11⁄2 years. Mr. Wus prison sentence was suspended
pending the outcome of a final appeal. In the second on-going
proceeding, on November 11, 2004, Mr. Wu was indicted on
charges of publicly offering shares of common stock of EUPA without
first obtaining the necessary governmental approvals and securities
fraud. We believe that the resolution of these legal proceedings, and
resulting negative publicity, may negatively impact our business.
However, Mr. Wu currently has no plans to resign from his
position as chairman of TKE, and, as TKEs management is not
dependent on Mr. Wu, we do not expect the impact of
Mr. Wus indictment to significantly impact EUPAs
business. 14




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Negative Publicity May Adversely Affect Our Business As
a result of the criminal proceedings against Mr. Wu, TKE and EUPA could become the subject of
negative publicity. This negative publicity could bring regulatory scrutiny upon EUPA. Continuing
negative publicity for TKE, as well as for EUPA, could have a material adverse effect on our results
of operations and liquidity and the market price of our publicly traded securities. TKE Controls Our Business TKE owns more than 50% of our outstanding capital stock. As a result, TKE is able to control
our business and affairs and our board of directors. The interests of TKE may not necessarily be
consistent with the interests of our other shareholders. We Are Dependent On TKE for Our Sales and Other Revenues and Capital Requirements As TKE is our sole customer, any changes in its business, financial condition or liquidity
could have a material impact on our ability to operate our business.
The market segments in which TKE competes are intensely competitive,
and TKE has many
competitors in the manufacturing and retail services industries. Many
of TKEs current and potential competitors have longer operating histories, larger customer
bases, greater brand recognition, and significantly greater financial, marketing, and other
resources than TKE. They may be able to secure comparable merchandise from vendors on more
favorable terms and may be able to adopt more aggressive pricing policies. Competitors in the
manufacturing industry may be able to devote more resources to new product introductions, features
and enhancements, and research and development than we or TKE do. Competitors in the retail industry also
may be able to devote more resources to sales and marketing than we
or TKE do. Many of Our Employees Also Perform Services for TKE Which Could Result In Their Attention Being
Diverted From Our Business Our success will depend, to some degree, on the efforts of our employees. Many of our officers
and employees are also employed by TKE. As a result, their full time, attention and energies are
not directed exclusively to our business. If the attention of our officers is diverted from our
business, we may not be able to realize our full potential. The Loss of Key Senior Management Personnel Could Negatively Affect Our Business We depend on the continued services and performance of our senior management and other key
personnel. The loss of any of our executive officers or other key employees could harm our
business. If We Do Not Develop and Introduce New TKE Products, Our Ability to Grow Will Be Limited We believe that our future success will depend in part upon our ability to continue to develop
innovative designs in the products manufactured by TKE and to develop and market new products. We
may not be successful in introducing or supplying any new products or product innovations to TKEs
which will satisfy customer needs or achieve market acceptance. The failure to develop products and
introduce them successfully and in a timely manner could harm our ability to grow our business. A Slowdown in the Retail Industry Will Likely Have an Adverse Effect on Our Results TKE products are ultimately sold to consumers through major retail channels, primarily mass
merchandisers, department stores, specialty stores and mail order catalogs. Changes in general
economic conditions will cause reductions in demand among consumers and retailers. As a result, our
business and financial results will fluctuate with the financial condition of retail customers and
the retail industry. Compliance with Governmental Regulations Could Increase Our Operating Costs and Interfere with Our
Business Efforts Most federal, state and local authorities require certification by Underwriters Laboratory,
Inc., an independent, not-for-profit corporation engaged in the testing of products for compliance
with certain public safety standards, or other safety regulation certification prior to marketing
electrical appliances. Foreign jurisdictions also have regulatory authorities overseeing the safety
of consumer products. TKE products, or additional electrical appliances which we may develop, may
not meet the specifications required by these authorities. A determination that our products are
not in compliance with these rules and regulations could result in the 15




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imposition of fines or awards of damages to private litigants. We May Experience Significant Fluctuations in Our Operating Results and Rate of Growth Due to our limited operating history, our evolving business model, and the unpredictability of
TKEs business, we may not be able to accurately forecast our rate of growth. We base our current and
future expense levels and our investment plans on estimates of future net sales and rate of growth.
Our expenses and investments are to a large extent fixed. We may not be able to adjust our spending
quickly enough if our or TKEs net sales fall short of our expectations. Our revenue and operating profit growth depends on the continued growth of demand for the
products offered by TKE, and our business is affected by general economic and business conditions
throughout the world. A softening of demand, whether caused by changes in consumer preferences or a
weakening of the U.S. or global economies, may result in decreased revenue or growth. Terrorist
attacks and armed hostilities create economic and consumer uncertainty that could adversely affect
our revenue or growth. Such events could create delays in, and increase the cost of, product
shipments, which may decrease demand. Revenue may not be sustainable and may decrease in the
future. Our sales and operating results will also fluctuate for many other reasons, including our
ability to retain and increase sales to existing customers, attract new customers, and satisfy our
customers demands; the introduction by our competitors of products, services, or improvements; and
seasonal fluctuations in the retail industry. We May Not Be Able to Adequately Protect Our Intellectual Property Rights or May Be Accused of
Infringing Intellectual Property Rights of Third Parties We regard our patents, trade secrets, proprietary technology, and similar intellectual
property as critical to our success, and we rely on patent law, trade secret protection, and
confidentiality agreements with our employees, TKE, and other rights granted to us under
international, federal and state statutory and common law, to protect our proprietary rights. We
may be unable to prevent third parties from infringing upon or diminish the value of our
proprietary rights. Policing unauthorized use of our proprietary rights is inherently difficult, and we may not be
able to determine the existence or extent of any such unauthorized use. The protection of our
intellectual property may require the expenditure of significant financial and managerial
resources. Moreover, we cannot be certain that the steps we take to protect our intellectual
property will adequately protect our rights or that others will not independently develop or
otherwise acquire equivalent or superior technology or other intellectual property rights. Other parties may claim that we infringed their proprietary rights. Such claims, whether or
not meritorious, may result in the expenditure of significant financial and managerial resources,
injunctions against us or the imposition of damages that we must pay. We may need to obtain
licenses from third parties who allege that we have infringed their rights, but such licenses may
not be available on terms acceptable to us or at all. We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We
Sell Some of the products we sell may expose us to product liability claims relating to personal
injury, death, or property damage caused by such products, and may require us to take actions such
as product recalls. Although we maintain liability insurance, we cannot be certain that our
coverage will be adequate for liabilities actually incurred or that insurance will continue to be
available to us on economically reasonable terms, or at all. Forward-Looking Statements This quarterly report on Form 10-QSB includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements other than statements of
historical fact, made in this quarterly report on Form 10-QSB are forward-looking. We use words
such as anticipates, believes, expects, future, intends, and similar expressions to
identify forward-looking statements. Forward-looking statements reflect managements current
expectations and are inherently uncertain. 16




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Actual results could differ materially for a variety of reasons, including, among others, the
rate of growth of the economy in general, customer spending patterns, changes in customer demand
for TKEs products, effectiveness of marketing programs, our success in designing and developing
products, our research and development costs, the length of development and product acceptance
cycles, world events, the amount that we invest in new business opportunities and the timing of
those investments, competition, the degree to which we enter into commercial agreements and
strategic transactions and maintain and develop commercial relationships, foreign exchange risks,
seasonality, international growth and expansion and changes in laws and regulations. These risks
and uncertainties, as well as other risks and uncertainties that could cause our actual results to
differ significantly from managements expectations, are described in greater detail in Additional
Factors That May Affect Future Results, which, along with the previous discussion, describes some,
but not all, of the factors that could cause actual results to differ significantly from
managements expectations. 
 Item 3.Controls and Procedures Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated
our disclosure controls and procedures and internal control over financial reporting and concluded
that (i) our disclosure controls and procedures were effective as of June 30, 2005, and (ii) no
change in internal control over financial reporting occurred during the quarter ended June 30,
2005, that has materially affected, or is reasonably likely to materially affect, such internal
control over financial reporting. 
 Part II  Other Information 
 Item 1.Legal Proceedings EUPA is a party to a product liability lawsuit which has arisen in the ordinary course of business. We believe
that the outcome of such lawsuit will not have a material adverse effect on our business, financial
condition or results of operations. We have product liability and general liability insurance
policies in amounts we believe to be reasonable given our current level of business. Although
historically we have not had to pay any material product liability claims, it is conceivable that
we could incur claims for which we are not insured. 
 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. (b) Reports on Form 8-K. We
filed a Form 8-K on July 26, 2005 reporting an event pursuant to Item 5.02, Departure of
Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. 17




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SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EUPA INTERNATIONAL CORPORATION (Registrant) Date:
August 15, 2005 /s/ Yuan-Chung TsaiYuan-Chung TsaiPresident and Chief Executive Officer Date:
August 15, 2005 /s/ Kung-Chieh HuangKung-Chieh HuangChief Financial Officer 18