SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 23, 2001
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EUPA International Corporation (formerly Access Network Corporation)
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(Exact name of Registrant as Specified in its Charter Post-merger)
Nevada 000-26539 88-0409450
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation pre-merger) File Number) Identification No.
pre-merger)
89 N. San Gabriel Blvd., Pasadena, CA 91107
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(New Address)
Registrant's telephone number, including area code 626-793-2688
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ITEM 1 CHANGES IN CONTROL OF THE REGISTRANT.
(a) On October 23, 2001, EUPA International Corporation, formerly
Access Network Corporation ("EUPA"), acquired all of the issued and outstanding
capital stock of Tsann Kuen U.S.A. Incorporated ("TKE USA") from Tsann Kuen
Enterprise Co., Ltd. ("TKE") pursuant to an Exchange Agreement dated as of
October 10, 2001 by and among TKE, TKE USA and EUPA (the "Exchange Agreement").
TKE USA had been a wholly-owned subsidiary of TKE. Pursuant to the Exchange
Agreement, TKE USA became a wholly-owned subsidiary of EUPA and, in exchange for
the TKE USA shares, EUPA issued 12,000,000 shares of its common stock to TKE,
representing 60% of the issued and outstanding capital stock of EUPA. A copy of
the Exchange Agreement is filed as an exhibit to this Form 8-K and is
incorporated herein by reference in its entirety.
Simultaneous with the consummation of the transactions contemplated by
the Exchange Agreement, all of the incumbent directors and officers resigned and
the following directors and executive officers were appointed: Tsann Kun Wu,
Hsing Chuang, Wen-Fang Yang and Te-Jung Chien.
(b) Set forth below is a description of the business of EUPA as it
is presently conducted and as it proposes to be conducted. This information
contains forward-looking statements that involve risks and uncertainties. EUPA's
actual results may differ materially from those discussed in the forward-looking
statements. Factors that might cause such a difference include those discussed
in the Risk Factors section and elsewhere in this Report.
OVERVIEW
EUPA International Corporation has, since 1990, been the United States
market research, design, supply and sales arm of Tsann Kuen Enterprise Co., Ltd.
("TKE"), a worldwide leader for over 20 years in the manufacture and design of
home appliance and consumer electronic products for international brand names
distributors. TKE had over $500 million in worldwide sales in 2000. TKE's
strategy is to expand its United States and worldwide operations in part through
us, TKE's majority owned subsidiary. As a result, beginning in 2002, our
operations will be significantly expanded. In addition to our traditional role
of developing products and sourcing orders for TKE in the United States, we will
become the major supplier of TKE products to brand names distributors in Asia
and Europe. We will also handle the design and development of TKE products
worldwide. Finally, we plan to open and operate in China and Japan "3C" retail
appliance and electronics, a chain of stores which TKE successfully operates in
83 locations in Taiwan.
EUPA International is headquartered in Pasadena, California. It
currently designs products and sources orders for TKE in the United States. TKE
is a leading worldwide designer, marketer and supplier of a range of small and
medium size electric products and appliances for the home, including coffee
makers, electric grills, irons, toaster ovens, motor-driven products and vacuum
cleaners.
TKE products are sold in over 80 countries throughout the world. TKE designs and
manufactures brand name products for internationally recognized companies.
Common household items such as the George Forman line of grills (marketed by
Salton Inc.) were designed by EUPA and manufactured by TKE in China. We believe
that TKE maintains a leading market position in the manufacture of many
household products as a result of innovative products designed to meet consumer
needs and esthetic preferences, strong relationships with customers and its
ability to produce its products at low cost.
We believe that TKE is the largest manufacturer of coffee makers,
electric grills and irons in the world. TKE's product offerings include:
Coffee makers, irons, grills, motor driven products, pop-up toasters,
toaster ovens, rice cookers and vacuum cleaners.
EUPA currently markets products solely in the United States through an
internal sales force. All of the products we supply are sold to numerous brand
name companies, including Sunbeam, Toshiba, Philips, Sharp, Salton, Rival and
Toastmaster. We do not recognize sales revenue from the sale of TKE products in
the United States. Rather, we interface with TKE customers in the United States
and process orders for TKE. We are then paid a commission on each sale. Our
commission income generally equals our costs. We therefore do not and will not
realize significant net income from our operations in the United States.
Beginning in 2001, we will become the primary representative for the
supply of TKE products in Asia and Europe. In these markets our products are
sold through an internal sales force. In these markets, TKE products are sold
to the well known worldwide brands and locally recognized brand names. For the
year ended December 31, 2000 and the nine months ended September 30, 2001, sales
of TKE products in Asia and Europe were $25.9 million and $22 million,
respectively. Traditionally, TKE's focus has been on the United States
marketplace which represents a majority of TKE's sales. However, we believe that
there is a significant opportunity in Asia and Europe to increase the volume of
sales of TKE products in these markets.
COMPETITIVE ADVANTAGES.
Design and Development Innovation. TKE puts a high emphasis on product
design and management believes that TKE has a reputation among brand names
distributors for innovative product design. TKE's research and development team
has won numerous design awards worldwide. In addition to EUPA's design center in
California, TKE operates research and development centers in Taiwan, China,
Japan and Germany. These design centers will all be operated by EUPA beginning
in 2002. In designing new products, the design centers analyze market trends,
social shifts, economics, aesthetics, ergonomics and new materials and
production methods and work closely with customers to identify consumer needs.
New TKE products are constantly being developed to meet changing consumer needs.
High Quality Production. TKE products are designed to meet many
international manufacturing standards, including VDE, BS, USAA, CSA, SEMKO,
T-Mark and TVU. Products manufactured in Taiwan are ISO9001 certified and
products manufactured in China are ISO 9002 certified. We believe that TKE is
one of the few manufacturers whose products have two ISO recognitions.
Low Cost Production. TKE operates state of the art facilities in China
and manufactures its own molds. This allows TKE to produce products at lower
cost than other manufacturers. In particular, management believes that TKE's low
manufacturing costs for coffee makers, electric grills and irons allow these
products to be sold in mass quantities at prices below those offered by any
other manufacturer.
GROWTH STRATEGY.
Our primary strategy is to increase the profile of TKE products
worldwide and grow our business through the following initiatives:
Asian and European Sales. Currently, all of EUPA's customer base is
located in the United States. Beginning in 2002, EUPA will be the major
representative for supply of TKE products in Europe and Asia and TKE's sales
force for these marketplaces will become part of EUPA. For the fiscal year ended
December 31, 2000 and the nine months ended September 30, 2001, sales of TKE
products in Europe and Asia were $25.9 million and $22 million, respectively.
New Products and Product Line Extension. EUPA plans to increase sales of
TKE products in Europe and Asia through strong product development initiatives,
including modifying and enhancing existing TKE products, expanding existing TKE
product lines and introducing new products. We conduct extensive market research
and work closely with brand names and distributors to identify consumer needs
and preferences and to develop new products to satisfy consumer demand. During
the year ended December 31, 2000, we designed and manufactured 90 different
types of appliance products.
Cultivate Relationships with New and Existing Customers. The home
appliance industry is going through a period of consolidation and we expect that
distributors will continue to consolidate their vendor base by dealing primarily
with a smaller number of suppliers that can provide them with a broad array of
innovative, differentiated and quality products. We have been able to establish
and intend to continue to build strong relationships with our distribution
customers based on TKE's frequent product innovation, high level of customer
service, breadth of product offerings, reputation for quality products and TKE's
low cost manufacturing capabilities. We will seek to maintain TKE's strong
relationships with a broad array of distributors and cultivate new relationships
as part of its marketing strategy. We will continue to seek to establish
"partnership" relationships with our customers by offering them "one stop
shopping" for a wide variety of appliance and consumer electronics products. We
plan to attract
and support customers who are consolidating their vendor relationships to
achieve greater purchasing and operating economies. With its Asian-based
management team, we intends to build up its Asian and European marketing groups
to expand our customer base in these areas.
Build on Market Leadership Position on Manufacturing Sales of Products.
We believe that TKE is the world's largest supplier of electric grills and irons
and we seek to build on this leadership by expanding our offerings of TKE
products. TKE's leadership position in these product lines provides us with a
competitive advantage in terms of marketing new TKE appliance products to our
customers.
Open and Operate 3C Retail Outlets. The household appliance industry is
mature, fragmented and highly competitive. As a result, TKE has sought to
increase revenues and profits through diversifying operations. Since 1991, TKE
has operated 3C branded retail stores specializing in appliance, communications
and computer-related products. TKE operates 83 such stores in Taiwan. These
stores generate higher profit margins than TKE's traditional manufacturing
operations and provide an additional channel for distributing TKE products. TKE
has granted EUPA the right to develop 3C stores outside of Taiwan and will
assist EUPA in entering these markets. In particular, management believes that
there is great market opportunity in China, the largest single market. EUPA
initially intends to open 3C stores in China where EUPA branded products have a
high level of consumer recognition and brand name cache and China's entry into
the World Trade Organization will allow foreign companies to effectively compete
for the huge Chinese consumer base. EUPA may also open 3C stores in Japan.
PRODUCTS.
TKE's broad variety of products enables us to service the needs of
distributors and satisfy the different tastes, preferences and budgets of
consumers. Our products include full-featured and upscale models or designs as
well as those which are marketed to budget conscious consumers. Our product
categories include: coffee makers, irons, grills, motor-driven products, pop-up
toasters, toaster ovens, rice cookers and vacuum cleaners.
At the end of 2000, TKE manufactured 90 different types of appliance
products and sold them all over the world.
RESEARCH AND DEVELOPMENT
Management believes that the foundation of TKE's success is its
dedication to its research and development operations. Historically,
approximately 5% of TKE revenues has been devoted to product design activities,
including investment in CAD-CAM systems to assist in the design process. Growth
is driven by ensuring that products manufactured by TKE are both technologically
advanced and aesthetically pleasing. We design the style, features and
functionality of our products to anticipate consumer demand rather than to
merely react to customer needs. We carefully analyze market trends to facilitate
product development and design. Annually, we send designers to international
household appliance shows in Chicago, Paris, Cologne, San Francisco and Hong
Kong. At these shows and throughout the year, we meet with customers directly
and collect information, opinions and reactions to products and shifting trends
in appliance design. This process result in continuously upgraded product
offerings.
To address different consumer preferences around the world, TKE
maintains research and development centers in Taiwan, China, the United States,
Japan and Germany. TKE employs approximately 100 designers who are coordinated
at TKE's research and development facility in Taiwan. Our use of in-house
industrial designers, technicians and engineers and other specialties have been
a major strength in obtaining and increasing TKE's business. Beginning in 2002,
all research and development activities will be conducted by EUPA which will
result in additional revenue for us from design fees for product moulds
MARKETING AND DISTRIBUTION
TKE products are manufactured for numerous brand name companies,
including Sunbeam, Toshiba, Philips, Sharp, Salton, Rival and Toast Master. EUPA
currently manufactures products for sale in the United States through an
internal sales force of four persons. Beginning in 2002, we will have the right
to distribute TKE manufactured products in Europe and Asia and will employ the
nine persons covering these regions.
We do not maintain long-term purchase contracts with our customers and
operate principally on a purchase order basis. We believe that we are not, and
will not be, dependent on any single customer for any of TKE's products.
However, 10 customers accounted for approximately 50% of our product purchases
during fiscal 2000. We believe that the loss of any one customer would not have
a long term material adverse effect on our business because TKE's low cost high
quality products generally remain in high demand. However, the loss of a
customer could, in the short term, adversely effect our revenues.
We do not engage in extensive public marketing activities. Rather, we
direct our marketing efforts toward expanding our product offerings to our
existing customers although we intend to seek to expand our customer base in the
future. Once designed, TKE's state of the art production facilities in China
allow for low cost production of products. With TKE's broad array of branded
product offerings, reputation for quality and value-added marketing services,
such as customized merchandise planning,
inventory management and just-in-time delivery, EUPA believes that it is one of
the few companies that can act as a "one-stop shop" to retailers of home
appliances and consumer electronics.
QUALITY CONTROL.
Most of the products we supply are manufactured by TKE and its
affiliated companies in Taiwan and China. All of TKE's Chinese factories are ISO
9000 certified. Quality assurance is particularly important to us and TKE's
product shipments are required to satisfy quality control tests established by
its internal product design and engineering department.
COMPETITION
Our industry is mature and highly fragmented. Competition is based upon
price, manufacturing quality, costs and product features and enhancements. In
the manufacture of small appliances, we compete with, among others, local
Chinese suppliers. We believe that our success will be dependent on TKE's
ability to offer a broad range of existing products and to continually introduce
new products and enhancements of existing products which have substantial
consumer appeal based upon price, design, performance and features.
EMPLOYEES
As of October 31, 2001, we employed 43 persons. Approximately 8
employees work at our Pasadena, California headquarters and the balance operate
out of TKE facilities throughout the world. None of our employees are covered by
any collective bargaining agreement. We generally consider our relationship with
our employees to be satisfactory and have never experienced a work stoppage.
REGULATION
Most of TKE's products are subject to federal, state and local
regulations concerning consumer products safety. Foreign jurisdictions also have
regulatory authorities overseeing the safety of consumer products. In general,
we have not experienced difficulty complying with such regulations and
compliance has not had an adverse effect on our business.
PATENTS.
We hold patents registered in the United States and foreign countries
for various TKE manufactured products and processes. We consider these Patents
to be of considerable value and of material importance to our business.
WARRANTIES.
TKE products are generally sold with a limited one year warranty from
the date of purchase. In the case of defects in material or workmanship, we
agree to replace or repair the defective product without charge.
MANAGEMENT.
Directors and Executive Officers
Our directors and their ages and positions are as
follows:
Name of Individual Age Position with company and subsidiaries
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Tsann-Kun Wu 50 Director, Chairman of the Board and President
Hsing Chuang 47 Director and General Manager
Wen-Fang Yang 41 Director
Te-Jung Chien 39 Director
TSANN-KUN WU has been Chairman of the Board, President and director of
EUPA since October 2001. From 1978 through the present, Mr. Wu has served as
President of Tsann Kuen Enterprises Co. Ltd., the parent company of EUPA and a
leading designer and manufacturer of home appliance and consumer electronic
products.
HSING CHUANG has been General Manager and a director of EUPA since
October 2001. From 1998 to the present, Mr. Chuang has served as Vice President
of Tsann Kuen Enterprises Co. Ltd. From 1995 to 1998, Mr. Chuang served as
Manager of Research and Development for Tsann-Kuen Enterprises Co. Ltd.
WEN-FANG YANG has been a director of EUPA since October 2001. From
January 2001 to the present, Mr. Yang has served as Vice General Manager of
Tsann Kuen (China) Enterprises Co. Ltd. From December 1994 to December 2000, Mr.
Yang was employed by Shanghai P&C Telesystems Inc.
TE-JUNG CHIEN has been a director of EUPA since October 2001. From 1998
to the present, Mr. Chien has served as Vice-President of Tsann Kuenn (Japan)
Enterprises Co. Ltd.
RISK FACTORS
Prospective investors should carefully consider the following risk
factors, in evaluating us and our business. The factors listed below represent
certain important factors which we believe could cause such results to differ.
These factors are not intended to represent a complete list of the general or
specific risks that may affect us. It should be recognized that other risks may
be significant, presently or in the future, and the risks set forth below may
affect us to a greater extent than indicated.
TKE CONTROLS OUR BUSINESS. TKE owns more than 50% of our outstanding capital
stock. As a result, TKE will be able to control our business and affairs,
including the composition of our board of directors or authorizing corporate
transactions such as mergers or sales of our assets. However, the interests of
TKE may not be consistent with the interests of our other investors since it
could take action or forgoing action which may not be in the best interests of
our other investors.
WE ARE DEPENDENT ON TKE FOR OUR PRODUCT SUPPLY AND CAPITAL REQUIREMENTS. TKE
will be the major manufacturer of the products we supply and will manufacture a
significant number of products that we expect to sell in our 3C stores. As a
result, any change in the cost of manufacturing these products will have a
material adverse impact on our profit margins. TKE is subject to the risks of
doing business abroad, including trade restrictions; production delays due
to unavailability of parts or components, increases in transportation costs and
transportation delays, foreign currency fluctuations and political and economic
instability.
We do not have an independent source of capital or lines of credit. All
of our operations will be funded by EUPA. Accordingly, any change in TKE's
financial condition or liquidity could have an impact on our ability to operate
our business.
MANY OR OUR EMPLOYEES WILL 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 EUPA's officers and
employees will also be employed by TKE. As a result, their full time, attention
and energies will not be directed to our business of EUPA. If the attention of
our officers is diverted from our business, we may not be able to realize the
full potential of our business opportunities.
IF WE DO NOT DEVELOP AND INTRODUCE NEW TKE PRODUCTS, OUR ABILITY TO GROW OUR
BUSINESS 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 or developing and
introducing in a timely manner innovations to TKE's existing products which
satisfy customer needs or achieve market acceptance. The failure to develop
products and introduce them successfully and in a timely manner would harm our
ability to grow our business.
A SLOWDOWN IN THE RETAIL INDUSTRY WILL LIKE HAVE AN ADVERSE EFFECT ON OUR
RESULTS. The products that we supply 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 for the kid of
products we supply. As a result, our business and financial results will
fluctuate with the financial condition of our retail customers and the retail
industry.
THE COMPETITIVE NATURE OF THE SMALL APPLIANCE INDUSTRY MAY CREATE PRICE
PRESSURES ON US. The small household appliance industry is highly competitive
and our ability to succeed is based upon our and TKE's ability to compete
effectively. We believe that competition is based upon several factors,
including price, product features and enhancements, new product introductions
and customer delivery needs.
The current general slowdown in the retail sector has resulted in, and
we expect it to continue to result in, additional pricing pressures on our
customers and, as a result, upon us. We compete with many manufacturing
companies, some of which have substantially greater facilities, personnel,
financial and other resources than we have. Significant new competitors or
increased competition from existing competitors may adversely affect our
business, financial condition and results of operations.
EXPANDING INTERNATIONAL SALES WILL SUBJECT US TO ADDITIONAL BUSINESS RISKS.
Beginning in 2001, we are gong to pursue growth opportunities
internationally. International operations are subject to a number of other risks
and potential costs, including: the risk that TKE products may not be locally
recognized; the risk that we may be required to spend significant amounts of
time and money to build a identity among distributors without certainty that we
will be successful; unexpected changes in regulatory requirements; foreign
currency fluctuations; transportation costs; adverse tax consequences; and
political and economic instability. We cannot assure you that we will not incur
significant costs in addressing these potential risks.
ONCE WE BEGIN OPENING 3C STORES WILL BECOME SUBJECT TO THE SAME RISKS AS
RETAILERS. Once we launch our 3C stores, we will become subject to additional
business risks including competition from other retailers, price pressure and
reduced sales in recessionary periods. Further, although TKE has had significant
experience in operating retail stores in Taiwan, we will not have any retailing
experience in China and Japan. There can be no assurance that we will be able to
successfully launch our retail stores in these markets. In the event that we are
not successful, a key element of our growth strategy will not be achieved.
THE SEASONAL NATURE OF OUR BUSINESS COULD ADVERSELY IMPACT OUR OPERATIONS. The
consumer appliance business is highly seasonal, with operating results varying
from quarter to quarter. We have historically experienced higher order volume
during the third and fourth quarters of each year as retailers increase their
inventories in anticipation of the year-end selling season. Lower sales than
expected by us during this period, a lack of availability of products or a
general economic downturn in retail sales could have a material adverse effect
on our business, financial condition and results of operations.
PRODUCT RECALLS OR LAWSUITS RELATING TO DEFECTIVE PRODUCTS COULD ADVERSELY
IMPACT OUR FINANCIAL RESULTS. We face exposure to product recalls and product
liability claims in the event that the products we supply are alleged to have
manufacturing or safety defects or to have resulted in injury or other adverse
effects. Although we believe that we maintain adequate product liability
insurance, there can be no assurance that we will be able to continue to
maintain these policies on acceptable terms, if at all, or that product
liability claims will not exceed the amount of our insurance coverage.
IF ANY OF THE PRODUCTS WE SUPPLY INFRINGE ON THE RIGHTS OF OTHERS, WE COULD
SUFFER SIGNIFICANT FINANCIAL LOSS. We and TKE hold numerous patents on the
products that we supply and these proprietary rights are essential to our
business. Our patents could be challenged by others or invalidated through
administrative process or litigation. This process could be costly and time
consuming and would divert the attention of management and key personnel from
other business issues. If any of our patents are successfully challenged, we
could be required to pay a
significant damage award and could no longer supply these products. The would
have an impact on both our sales and costs.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS COULD INCREASE OUR OPERATING COSTS AND
INTERFERE WITH OUR BUSINESS EFFORT. 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 may be developed by us or TKE, 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 imposition of fines or an award of damages to private litigants.
ITEM 5. OTHER EVENTS.
On October 11, 2001, the board of directors and stockholders of EUPA
approved the change of the name of the corporation from Access Network
Corporation to EUPA International Corporation. Articles of Amendment changing
the name of EUPA were filed with the Secretary of State of the State of Nevada
on October 12, 2001 and are filed as an exhibit to this Form 8-K.
On October 11, 2001, the board of directors of EUPA approved a forward
split of EUPA's common stock of 19.940179 shares for every one issued and
outstanding share. The forward split was effectuated on October 16, 2001.
ITEM 7. FINANCIAL STATEMENTS, PRO FORM FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
The audited financial statements of TKE USA for the fiscal years
ended August 31, 2000 and 1999 and the interim period ended September 30, 2001
will be filed by amendment to this Report within 60 days after the date this
report must be filed.
(b) Exhibits
Exhibit No. Description
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10.1 Exchange Agreement
10.2 Articles of Amendment of Articles of Incorporation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EUPA INTERNATIONAL CORPORATION
Date: November 7, 2001 By: /s/ Jacky Chang
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Jacky Chang