##### Table of Contents



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 September 30, 2006
Commission file number 000-26539
 EUPA International Corporation
  Nevada
(State or other jurisdiction of incorporation or organization)
    
    88-0409450
(IRS Employer Identification Number)89 N. San Gabriel Boulevard, Pasadena, California
(Address of principal executive offices)
    
    91107
(Zip Code)
 
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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
 INDEX
 PagePart I  Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance SheetsCondensed Consolidated Statements of OperationsCondensed Consolidated Statements of Cash FlowsCondensed Consolidated Statements of Changes in Stockholders EquityNotes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Controls and ProceduresPart II  Other InformationItem 1. Legal ProceedingsItem 6. Exhibits and Other Reports on Form 8-KSignatureCertificationsEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
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##### Table of Contents



September 30, 2006(Unaudited)
    
    
    December 31, 2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    531,885
    
    
    $
    793,442Investment
    
    
    0
    
    
    
    100,000Accounts receivable, related parties, net
    
    
    123,199
    
    
    
    230,572Other receivable, related parties
    
    
    24,599
    
    
    
    5,229Prepaid expenses
    
    
    5,532
    
    
    
    407Total Current Assets
    
    
    685,215
    
    
    
    1,129,650Fixed AssetsProperty, furniture and equipment (net)
    
    
    764,742
    
    
    
    778,691Total Fixed Assets
    
    
    764,742
    
    
    
    778,691Other AssetsIntangible assets, net
    
    
    273,430
    
    
    
    274,521Deposits
    
    
    8,370
    
    
    
    8,370Total Other Assets
    
    
    281,800
    
    
    
    282,891Total Assets
    
    $
    1,731,757
    
    
    $
    2,191,232LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
    
    $
    96,588
    
    
    $
    99,282Loan Payable
    
    
    4,445
    
    
    
    0Other payable, related parties
    
    
    82,672
    
    
    
    44,476Total Current Liabilities
    
    
    183,705
    
    
    
    143,758Deposits payable
    
    
    4,100
    
    
    
    4,100Total Liabilities
    
    
    187,805
    
    
    
    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
    
    
    1,989,703
    
    
    
    1,973,203Retained earnings (deficit)
    
    
    (466,651
    )
    
    
    49,271Total Stockholders Equity
    
    
    1,543,952
    
    
    
    2,043,374Total Liabilities and Stockholders Equity
    
    $
    1,731,757
    
    
    $
    2,191,232
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Fee income
    
    $
    152,079
    
    
    $
    175,466
    
    
    $
    574,887
    
    
    $
    649,524Total revenue
    
    
    152,079
    
    
    
    175,466
    
    
    
    574,887
    
    
    
    649,524Cost of revenue
    
    
    148,980
    
    
    
    172,911
    
    
    
    563,615
    
    
    
    636,788Gross profit
    
    
    3,099
    
    
    
    2,555
    
    
    
    11,272
    
    
    
    12,736General and administrative expenses
    
    
    92,423
    
    
    
    135,334
    
    
    
    580,790
    
    
    
    207,945Income (loss) from operations
    
    
    (89,324
    )
    
    
    (132,779
    )
    
    
    (569,518
    )
    
    
    (195,209
    )Other (income) expenseInterest income
    
    
    (4,949
    )
    
    
    (2,122
    )
    
    
    (9,590
    )
    
    
    (3,536
    )Rental income
    
    
    (13,692
    )
    
    
    (16,696
    )
    
    
    (46,032
    )
    
    
    (46,334
    )Miscellaneous
    
    
    0
    
    
    
    0
    
    
    
    426
    
    
    
    532Total other (income) expense
    
    
    (18,641
    )
    
    
    (18,818
    )
    
    
    (55,196
    )
    
    
    (49,338
    )Income (loss) before income
taxes
    
    
    (70,683
    )
    
    
    (113,961
    )
    
    
    (514,322
    )
    
    
    (145,871
    )Provision for income taxes
    
    
    0
    
    
    
    0
    
    
    
    1,600
    
    
    
    1,600Net Income (loss)
    
    ($
    70,683
    )
    
    ($
    113,961
    )
    
    ($
    515,922
    )
    
    ($
    147,471
    )Net loss per share (basic
and diluted)Basic
    
    ($
    0.003
    )
    
    ($
    0.005
    )
    
    ($
    0.025
    )
    
    ($
    0.007
    )Diluted
    
    ($
    0.003
    )
    
    ($
    0.005
    )
    
    ($
    0.025
    )
    
    ($
    0.007
    )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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Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet Income (loss)
    
    
    ($515,922
    )
    
    
    ($147,471
    )Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    25,979
    
    
    
    47,768Stock options issued for services
    
    
    16,500
    
    
    
    16,500Translation adjustment
    
    
    0
    
    
    
    532Decrease (Increase) in receivables
    
    
    107,373
    
    
    
    170,655Decrease (Increase) in other receivables
    
    
    (19,370
    )
    
    
    29,636Decrease (Increase) in prepaid expenses
    
    
    (5,125
    )
    
    
    (3,874
    )(Decrease) Increase in accounts payable
and accrued expenses
    
    
    (2,694
    )
    
    
    (6,155
    )(Decrease) Increase in other payable
    
    
    38,196
    
    
    
    52,296Total Adjustments
    
    
    160,859
    
    
    
    307,358Net cash provided by (used in) operations
    
    
    (355,063
    )
    
    
    159,887CASH FLOWS FROM INVESTING ACTIVITIESProceed from sales of investment
    
    
    100,000
    
    
    
    0Purchase of fixed assets
    
    
    0
    
    
    
    (5,472
    )Increase in intangible assets
    
    
    (10,939
    )
    
    
    (18,938
    )Net cash
provided by (used in) investing activities
    
    
    89,061
    
    
    
    (24,410
    )CASH FLOWS FROM FINANCING ACTIVITIESProceed from loan payable
    
    
    4,445
    
    
    
    0Net cash
provided by financing activities
    
    
    4,445
    
    
    
    0Net change in cash and cash equivalents
    
    
    (261,557
    )
    
    
    135,477Cash and cash equivalents at beginning of period
    
    
    793,442
    
    
    
    828,091Cash and cash equivalents at end of period
    
    $
    531,885
    
    
    $
    963,568Supplemental cash flows disclosures:Income tax payments
    
    $
    1,600
    
    
    $
    1,600Non cash investing and financing activities:Stock issued for services
    
    $
    16,500
    
    
    $
    16,500
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September 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
    
    
    16,500
    
    
    
    22,000Balance at end of period
    
    
    1,989,703
    
    
    
    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)
    
    
    (515,922
    )
    
    
    (193,073
    )Balance at end of period
    
    
    (466,651
    )
    
    
    49,271Total Stockholders Equity at end of period
    
    $
    1,543,952
    
    
    $
    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
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Intangible Assets
    Estimates
  Concentration of Credit Risk
  Stock Based Compensation
  Impairment of Long-Lived Assets
  Earnings Per Share
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Income Taxes
  Reclassification
  Note 2  Property and Equipment
  September 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
    
    
    (686,309
    )
    
    
    (672,360
    )$
    764,742
    
    
    $
    778,691
 Note 3 Intangible Assets
  September 30, 2006Unaudited
    
    
    December 31, 2005Patents and Trademark costs
    
    $
    539,235
    
    
    $
    528,295Less accumulated amortization
    
    
    (265,805
    )
    
    
    (253,774
    )$
    273,430
    
    
    $
    274,521
  Note 4  Compensated Absences
  Note 5  Concentration  Related Party Transactions
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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
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Results of Operations
 Nine Months Ended September 30, 2006 Compared with Nine Months Ended September 30, 2005
 September 30, 2006
    
    September 30, 2005Total Revenues
    
    $
    574,887
    
    
    $
    649,524Cost of Revenues
    
    
    563,615
    
    
    
    636,788Selling, General and Administrative Expense
    
    
    580,790
    
    
    
    207,945Income (Loss) from Operations
    
    $
    (569,518
    )
    
    $
    (195,209
    )
 Revenue from Fee Income
  Cost of Revenues
  General and Administrative Expenses
  Loss from Operations
  Non-Operating income
  Net Loss
  Liquidity and Capital Resources
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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
  TKE Controls Our Business
  We Are Dependent On TKE for Our Sales and Other Revenues and Capital Requirements
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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 1934.31.2
    
    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.None.
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SIGNATURES
  EUPA INTERNATIONAL CORPORATION
 (Registrant)
 Date:
November 7, 2006
    
    /s/ Yuan-Chung TsaiYuan-Chung TsaiPresident and Chief Executive OfficerDate: November 7, 2006
    
    /s/ Kung-Chieh HuangKung-Chieh HuangChief Financial Officer
 16