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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, 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 April 22, 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 March 31, 2005 and December 31, 2004
    
    2Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and March 31, 2004
    
    3Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and March 31, 2004
    
    4Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended March 31,
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
    
    9Item 3. Controls and Procedures
    
    14Part II  Other Information
    
    14Item 1. Legal Proceedings
    
    14Item 6. Exhibits and Other Reports on Form 8-K
    
    14Signature
    
    15Certifications
    
    16Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION March 31, 2005(Unaudited)
    
    
    December 31, 2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    692,143
    
    
    $
    828,091Accounts receivable, related parties, net
    
    
    375,102
    
    
    
    260,947Other receivable, related parties
    
    
    6,235
    
    
    
    29,656Prepaid expenses
    
    
    8,940
    
    
    
    11,740Total Current Assets
    
    
    1,082,420
    
    
    
    1,130,434Fixed AssetsProperty, furniture and equipment (net)
    
    
    796,256
    
    
    
    800,610Total Fixed Assets
    
    
    796,256
    
    
    
    800,610Other AssetsIntangible assets, net
    
    
    371,919
    
    
    
    373,126Deposits
    
    
    8,370
    
    
    
    8,370Total Other Assets
    
    
    380,289
    
    
    
    381,496Total Assets
    
    $
    2,258,965
    
    
    $
    2,312,540LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued expenses
    
    $
    56,183
    
    
    $
    57,860Other payable, related parties
    
    
    8,239
    
    
    
    36,133Total Current Liabilities
    
    
    64,422
    
    
    
    93,993Deposits payable
    
    
    4,100
    
    
    
    4,100Total Liabilities
    
    
    68,522
    
    
    
    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
    
    
    1,956,703
    
    
    
    1,951,203Cumulative foreign-exchange translation adjustment
    
    
    0
    
    
    
    (532
    )Retained earnings
    
    
    212,840
    
    
    
    242,876Total Stockholders Equity
    
    
    2,190,443
    
    
    
    2,214,447Total Liabilities and Stockholders Equity
    
    $
    2,258,965
    
    
    $
    2,312,540
 See Accompanying Notes and Accountants Report 2




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS Three Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004Fee income
    
    $
    254,295
    
    
    $
    310,913Total revenue
    
    
    254,295
    
    
    
    310,913Selling expenses
    
    
    15,934
    
    
    
    39,872Gross profit
    
    
    238,361
    
    
    
    271,041General and administrative expenses
    
    
    280,512
    
    
    
    283,428Income (loss) from operations
    
    
    (42,151
    )
    
    
    (12,387
    )Other (income) expenseInterest income
    
    
    (660
    )
    
    
    (864
    )Rental income
    
    
    (13,587
    )
    
    
    (14,619
    )Penalty and interest
    
    
    0
    
    
    
    0Liquidation distribution
    
    
    0
    
    
    
    0Miscellaneous
    
    
    532
    
    
    
    (100
    )Total other (income) expense
    
    
    (13,715
    )
    
    
    (15,583
    )Income (loss) before income taxes
    
    
    (28,436
    )
    
    
    3,196Provision for income taxes
    
    
    1,600
    
    
    
    1,600Income from continuing operations
    
    
    (30,036
    )
    
    
    1,596Discontinued operations: (See note 8)Income from discontinued operations
    
    
    0
    
    
    
    79,141Net Income (loss)
    
    ($
    30,036
    )
    
    $
    80,737Net loss per share from continuing operations (basic and diluted)Basic
    
    ($
    0.001
    )
    
    $
    0.000Diluted
    
    ($
    0.001
    )
    
    $
    0.000Net loss per share (basic and diluted)Basic
    
    ($
    0.001
    )
    
    $
    0.004Diluted
    
    ($
    0.001
    )
    
    $
    0.004Weighted average number of shares (See note 7)Basic
    
    
    20,900,024
    
    
    
    20,900,024Diluted
    
    
    22,650,024
    
    
    
    22,650,024
 See Accompanying Notes and Accountants Report 3




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months EndedMarch 31,
    
    
    March 31,2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIESNet Income (loss)
    
    ($
    30,036
    )
    
    $
    80,737Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    18,022
    
    
    
    21,451Stock options issued for services
    
    
    5,500
    
    
    
    5,500Translation adjustment
    
    
    532
    
    
    
    0Decrease (Increase) in receivables
    
    
    (114,155
    )
    
    
    (38,407
    )Decrease (Increase) in other receivables
    
    
    23,421
    
    
    
    44,945Decrease (Increase) in prepaid expenses
    
    
    2,800
    
    
    
    (4,360
    )(Decrease) Increase in accounts payable
and accrued expenses
    
    
    (1,677
    )
    
    
    (3,458
    )(Decrease) Increase in other payable
    
    
    (27,894
    )
    
    
    (30,916
    )(Decrease) Increase in income taxes payable
    
    
    0
    
    
    
    (84,636
    )Total Adjustments
    
    
    (93,451
    )
    
    
    (89,881
    )Net cash provided by (used in) operations
    
    
    (123,487
    )
    
    
    (9,144
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of fixed assets
    
    
    (5,472
    )
    
    
    0Increase in intangible assets
    
    
    (6,989
    )
    
    
    (4,063
    )Net cash used in investing activities
    
    
    (12,461
    )
    
    
    (4,063
    )Effect of exchange rate change on cash
    
    
    0
    
    
    
    (23,349
    )Net change in cash and cash equivalents
    
    
    (135,948
    )
    
    
    (36,556
    )Cash and cash equivalents at beginning of year
    
    
    828,091
    
    
    
    971,093Cash and cash equivalents at end of year
    
    $
    692,143
    
    
    $
    934,537Supplemental cash flows disclosures:Income tax payments
    
    $
    1,600
    
    
    $
    10,600Non cash investing and financing activities:Stock issued for services
    
    $
    5,500
    
    
    $
    5,500
 See Accompanying Notes and Accountants Report 4




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY March 31, 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
    
    
    5,500
    
    
    
    22,000Write-off of stock subscription receivable
    
    
    0
    
    
    
    0Balance at end of period
    
    
    1,956,703
    
    
    
    1,951,203Cumulative foreign-exchange translation adjustmentBalance at beginning of year
    
    
    (532
    )
    
    
    1,943Foreign currency translation
    
    
    532
    
    
    
    (2,475
    )Balance at end of year
    
    
    0
    
    
    
    (532
    )Retained earningsBalance at beginning of period
    
    
    242,876
    
    
    
    284,774Liquidation distribution
    
    
    0
    
    
    
    (517,061
    )Net income (loss)
    
    
    (30,036
    )
    
    
    475,163Balance at end of period
    
    
    212,840
    
    
    
    242,876Total Stockholders Equity at end of period
    
    $
    2,190,443
    
    
    $
    2,214,447
 See Accompanying Notes and Accountants Report 5




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005 Note 1  Accounting Policies Unaudited Interim Financial Information We have prepared the accompanying consolidated financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting.
As used herein, EUPA, the Company, we, our, and similar terms include EUPA International
Corporation and its wholly-owned subsidiaries, unless the context indicates otherwise. These
consolidated financial statements are unaudited and, in our opinion, include all adjustments,
consisting of normal recurring adjustments and accruals necessary for a fair presentation of the
consolidated balance sheets, operating results, and cash flows for the periods presented. Operating
results for the periods presented are not necessarily indicative of the results that may be
expected for the year ending December 31, 2005. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States (GAAP) have been omitted in accordance with the rules and
regulations of the SEC. These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in our Annual Report
on Form 10-KSB for the year ended December 31, 2004. Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation. Revenue Recognition We recognize revenue from three major sources, sales and customer support services, patent
fiduciary and administration services and research and development services. Each of these services
is provided on an on-going contractual basis. We recognize revenues from these services at the end
of each calendar quarter for services performed during that calendar quarter. Cash and Cash Equivalents Cash equivalents are stated at cost. Our cash equivalents are highly liquid investments
readily convertible into cash with original maturities of three months or less and time deposits
with commercial banks. Fixed Assets Property and equipment are stated at cost less accumulated depreciation. Expenditures for
major additions and improvements are capitalized and minor replacements, maintenance and repairs
are charged to expense as incurred. Whenever an asset is retired or disposed of, its cost and
accumulated depreciation or amortization is removed from the respective accounts and the resulting
gain or loss is credited or charged to income. Depreciation is computed using the straight-line and declining-balance methods over the
following estimated useful lives: Buildings and improvements
    
    15 to 60 yearsAutomobiles
    
    4 to 6 yearsMachinery and equipment
    
    5 to 12 yearsFurniture and Fixtures
    
    7 years
 6




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued
MARCH 31, 2005 Intangible Assets Trademarks and other intangible assets determined to have indefinite useful lives are not
amortized. We test such trademarks and other intangible assets with indefinite useful lives for
impairment annually, or more frequently if events or circumstances indicate that an asset might be
impaired. Trademarks and other intangible assets determined to have definite lives are amortized
over their useful lives or the life of the trademark and other intangible asset, whichever is less. Estimates The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities in the consolidated
financial statements and accompanying notes. Estimates are used for, but not limited to,
depreciable lives, receivables valuation, accrued expenses, recoverability of intangible assets and
income taxes. Actual results could differ materially from those estimates. Concentration of Credit Risk There is concentration of credit risk in our cash equivalents and trade accounts receivable.
Our cash equivalents are concentrated in select financial institutions and, at times, cash balances
exceed the FDIC insured levels. Our trade accounts receivable are concentrated with related parties
in Asia. Stock Based Compensation We account for stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees, and comply with the disclosure provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Under APB No. 25,
compensation cost is recognized over the vesting period based on the difference, if any, on the
date of grant between the fair value of our stock and the amount an employee must pay to acquire
the stock. Discontinued Operations Results of discontinued operations of a segment of the business are shown separately from
continuing operations. Amounts for prior periods have also been shown separately for comparative
purposes. We have met the requirements to classify our wholly-owned subsidiary, Union Channel
Limited, a Hong Kong corporation (Union), as discontinued operations at the end of 2003. Union
was previously included in our financial statements. During the three months ended March 31, 2005,
there was no income from discontinued operations. Impairment of Long-Lived Assets We evaluate long-lived assets, in accordance with SFAS No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets, for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. If the estimated future cash
flows, undiscounted and without interest charges, from the use of an asset are less than the
carrying value, a write-down would be recorded to reduce the related asset to its estimated fair
value. There have been no such impairments to date. Earnings Per Share We use SFAS No. 128 Earnings Per Share for calculating the basic and diluted earnings (loss)
per share. Basic earnings (loss) per share are computed by dividing net income (loss) attributable
to common stockholders by the weighted average number of shares of common stock outstanding.
Diluted earnings per share are computed similar to basic earnings per share except that the
denominator is increased to include common stock equivalents as if the potential shares of common
stock had been issued. 7




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued
MARCH 31, 2005 Income Taxes Income taxes have been provided based upon the tax laws and rates in the countries in which
operations are conducted and income is earned. The income tax rates imposed by the taxing
authorities vary. Taxable income may vary from pre-tax income for financial accounting purposes.
There is no expected relationship between the provision for income taxes and income before income
taxes because the countries have different taxation rules, which vary not only to nominal rates but
also in terms of available deductions, credits and other benefits. Deferred tax assets and
liabilities are recognized for the anticipated future tax effects of temporary differences between
the financial statement basis and the tax basis of the Companys assets and liabilities using the
applicable tax rates in effect at year end as prescribed by SFAS No. 109 Accounting for Income
Taxes. Foreign Currency Translation The accounts of Union were maintained, and its financial statements were expressed, in Hong
Kong dollars. Such financial statements were translated into U.S. dollars in accordance with SFAS
No. 52 Foreign Currency Translation, with the Hong Kong dollar as the functional currency.
According to the statement all assets and liabilities were translated at the current exchange rate,
stockholders equity accounts are translated at the historical rates and income statement items are
translated at the average exchange rates for the period. As of November 6, 2004, Union officially
dissolved operations. Note 2  Property and Equipment A summary is as follows: March 31, 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
    
    
    (654,795
    )
    
    
    (644,969
    )$
    796,256
    
    
    $
    800,610
 Note 3 Intangible Assets A summary is as follows: March 31, 2005
    
    
    December 31, 2003Patent and trademark costs
    
    $
    500,369
    
    
    $
    493,380Less accumulated amortization
    
    
    (128,450
    )
    
    
    (120,254
    )$
    371,919
    
    
    $
    373,126
 Note 4  Compensated Absences All full time regular covered employees are eligible for vacation with pay according to the
following schedule: After one (1) full year of continuous full time employment five (5) days of
vacation, after two (2) full years of continuous full time employment eight (8) days of vacation,
after three full years of continuous full time employment twelve (12) days of vacation, after four
full years of continuous full time employment sixteen (16) days of vacation, and after five full
years of continuous full time employment twenty (20) days of vacation leave. The date of employment
on a full time permanent basis will be considered the anniversary date for vacation purposes. When
a regular full time employee has completed fifty-two (52) weeks of continuous employment he/she
will be considered as having earned the aforementioned vacation benefits. At the end of each year
and at termination, employees are paid for any accumulated annual vacation leave. As of March 31,
2005 vacation liability exists in the amount of $23,714. 8




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EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  Continued
MARCH 31, 2005 Note 5  Concentration  Related Party Transactions The Company had three customers during the three months ended March 31, 2005. Fees charged to
these customers, all related parties, were approximately $254,295. Included in accounts receivable
is $375,102 from these customers as of March 31, 2005. Note 6  Common Stock We recognize compensation expenses for non-employee stock-based compensation in accordance
with SFAS No. 123. In December 2001, we issued a non-employee stock option to purchase 1,000,000
shares of our common stock at an exercise price of $0.001 per share, vesting over a five year
period. This stock option was granted to a related party in exchange for the on-going provision of
consultant services and was valued using the book value approach. At the time of grant, the book
value approach best estimated the value of the services to be provided. At the date of grant, the
per unit weighted-average fair value of unit options granted was $0.11. During the three months
ended March 31, 2005 the Company recognized consulting expenses of $5,500 under the non-employee
stock option. Note 7  Earnings Per Share We calculate basic and diluted earnings (loss) per share in accordance with SFAS No. 128,
Earnings Per Share. Basic earnings (loss) per share are computed by dividing net income (loss)
attributable to common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings (loss) per share are computed similar to basic
earnings (loss) per share except that the denominator is increased to include common stock
equivalents as if the potential shares of common stock had been issued. Stock options are stock
equivalents and are assumed to be issued and outstanding during the period. Diluted earnings (loss)
per share adjust for any changes in income and the repurchase of common shares that would have
occurred from the assumed issuance, unless such effect is anti-dilutive. Note 8  Liquidating Distribution As of December 31, 2004, we received a liquidating distribution from Union in the amount
$517,061. We have accounted for this transaction as a reduction in the Stockholders Equity section
of Union and as Other Income on the books of EUPA. 
 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 and September 30, 2004, 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. 9




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Our business is structured around developing and promoting TKEs products in the United States
(U.S.). Our activities include 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 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 three months period ended March 31, 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
three months ended March 31, 2005. During the three month period ended March 31, 2005, sales and customer support fees charged to
TKS and TKL were $35,203 and $211,379, 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 three
months ended March 31, 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 three months ended
March 31, 2005, were $0 for research and development services and $7,649 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. Results of Operations Three Months Ended March 31, 2005 Compared with Three Months Ended March 31, 2004 March 31, 2005
    
    
    March 31, 2004Revenue
    
    $
    254,295
    
    
    $
    310,913Selling Expense
    
    
    15,934
    
    
    
    39,872General Expense
    
    
    280,512
    
    
    
    283,428Income (loss) from operations
    
    $
    (42,151
    )
    
    $
    (12,387
    )
 Revenue from Fee Income During the three months ended March 31, 2005, revenue from fee income was $254,295 down from
$310,913 in the first 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 $280,512 for the three months ended March 31, 2005
compared with $283,428 in the first 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
$(42,151) and $(12,387) for the three months ended March 31, 2005 and 2004, respectively, which was
a result of the decrease in the amount of sales and customer support, research and development and
patent fiduciary administration services provided to TKE for the three months ended March 31, 2005. Non-operating income for the three months ended March 31, 2005 was $13,715 compared with
$15,583 in the first quarter of 2004. Included in non-operating income was $660 of interest income,
$13,587 of rental income, $(532) of other expense for the three 10




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months ended March 31, 2005. During the three months ended March 31, 2004, there was $864 of
interest income, $14,619 of rental income, and $100 of other income. There was $1,600 in income tax
expenses recognized on our pre-tax income for both the three months ended March 31, 2005 and 2004. For the three months ended March 31, 2005 we realized a net loss of $(30,036) compared to a
net income of $80,737 for the three months ended March 31, 2004. The decrease in net income was a
result of the discontinued operations of Union. In the first quarter of 2005, there was no income
from discontinued operations, whereas during the first quarter of 2004 there was $79,141 income
from discontinued operations. Liquidity and Capital Resources Our primary source of liquidity as of March 31, 2005 is our cash on hand. Net cash used in
operations for the three months ended March 31, 2005 was $(123,487), as compared to net cash used
in operations of $(9,144) during the same period in 2004. The increase in net cash used in
operating activities was a result of the significant increase in accounts receivable. Our cash and
cash equivalents were $692,143 and $934,537 as of March 31, 2005 and 2004, respectively. Our
current assets totaled $1,082,420 and $1,265,960 on March 31, 2005 and 2004, respectively. Our
current liabilities were $64,422 and $167,883 on March 31, 2005 and 2004, respectively. Working
capital was $1,017,998 and $1,098,077 as of March 31, 2005 and 2004, respectively. Net cash used in investing activities totaled $(12,461), for the three months ended March 31,
2005, which consisted of the costs associated with obtaining patent rights and fixed assets,
compared with $(4,063) for the three months ended March 31, 2004. The net cash change was
$(135,948) and $(36,556) for the first 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. Mr. Wu is involved in two criminal proceedings
involving allegations of securities law violations in the Republic of China. On November 11, 2004, Mr. Wu was
indicted on charges of publicly offering shares of common stock of EUPA without first obtaining the
necessary Taiwanese governmental approvals and securities fraud. On December 31, 2004, Mr. Wu was
convicted of manipulating the stock price of Sunfar Computer Co., Ltd. and sentenced to prison for
1 1/2 years. Mr. Wus prison sentence was suspended pending the outcome of a final appeal which can
take two or more years to resolve. 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. 11




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Negative Publicity May Adversely Affect Our Business As a result of the indictments and conviction, 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. 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. 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. We Face Intense Competition The market segments in which we compete are intensely competitive, and we have many
competitors, including the manufacturing and retail services industries. Many of our current and potential competitors have longer operating histories, larger customer
bases, greater brand recognition, and significantly greater financial, marketing, and other
resources than we have. 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 do. Competitors in the retail industry also
may be able to devote more resources to sales and marketing than we do. 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 12




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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
our industry, 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 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. 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. 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. 13




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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 March 31, 2005, and (ii) no
change in internal control over financial reporting occurred during the quarter ended March 31,
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 March 11, 2005 reporting an event pursuant to Item 5.02, Departure of
Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. 14




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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: May 16, 2005 /s/ Yuan-Chang TsaiYuan-Chang TsaiPresident and Chief Executive Officer Date: May 16, 2005 /s/ Kung-Chieh HuangKung-Chieh HuangChief Financial Officer 15