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, 2002
Commission file number 000-26539
EUPA International Corporation
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0409450
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(State or other jurisdiction of incorporation or (IRS Employer Identification Number)
organization)
89 N. San Gabriel Boulevard, Pasadena, California 91107
- ------------------------------------------------- ------------------------------------------------
(Address of principal executive offices) (Zip Code)
626-793-2688
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(Issuer's telephone number, including area code)
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) Yes [X] No [ ], and (2) has been subject to such filing requirements
for the past 90 days Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of November 11, 2002, the issuer had outstanding 20,200,000 shares of
its Common Stock, $0.001 par value.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of EUPA International Corporation and
its subsidiaries, Tsann Kuen U.S.A. Inc. and Union Channel Ltd. (collectively,
the "Company" and sometimes as "we", "us" or "EUPA"), as at and for the period
ending September 30, 2002 were prepared by management and commence on the
following page. In the opinion of management the financial statements fairly
present the financial condition of the Company.
-2-
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2002
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
TABLE OF CONTENTS
Independent Accountant's Report............................................ F-3
Consolidated Statements of Financial Position.............................. F-4
Consolidated Statements of Operations...................................... F-5
Consolidated Statements of Cash Flow....................................... F-6
Consolidated Statements of Changes in Stockholders' Equity................. F-7
Notes to Consolidated Financial Statements................................. F-8
F-2
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(Formerly Access Network Corporation)
Pasadena, California
We have reviewed the accompanying consolidated statements of financial position
of EUPA International Corporation and its subsidiaries (Company) as of September
30, 2002 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the nine month period ended September
30, 2002. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of inquiries of persons responsible for
financial and accounting matters and analytical procedures applied to financial
data. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements in order for them
to be in conformity with generally accepted accounting principles in the United
States of America.
The September 30, 2001 financial statements of the Company were reviewed by
other accountants, whose report dated November 29, 2001, stated that they were
not aware of any material modifications that should be made to those statements
in order for them to be in conformity with generally accepted accounting
principles.
The December 31, 2001 financial statements of the Company were audited by other
accountants, whose report dated April 5, 2002 stated an unqualified opinion and
that the financial statements were presented in accordance with accounting
standards generally accepted in the United States of America.
October 23, 2002
Los Angeles, California
F-3
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
September 30, 2002
(Unaudited) December 31, 2001
------------------ -----------------
Current Assets
Cash and cash equivalents $ 2,072,032 $ 490,667
Accounts receivable, net 10,890,048 781,444
Prepaid expenses 0 9,055
Other receivables 370 0
------------------------------------------
Total Current Assets 12,962,450 1,281,166
------------------------------------------
Fixed Assets
Property, furniture and equipment (net) 1,021,603 1,072,267
------------------------------------------
Total Fixed Assets 1,021,603 1,072,267
------------------------------------------
Other Assets
Deferred income taxes 0 7,858
Intangible assets, net 367,913 243,552
Deposits 8,370 8,370
------------------------------------------
Total Other Assets 376,283 259,780
------------------------------------------
Total Assets $ 14,360,336 $ 2,613,213
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 11,784,302 $ 148,295
Income taxes payable 29,227 0
Total Current Liabilities 11,813,529 148,295
Deposits payable 4,100 0
Total Liabilities 11,817,629 148,295
Stockholders' Equity
Common stock, $.001 par value, 25,000,000 shares authorized, 20,200,000
and 20,000,000 issued and outstanding, respectively
20,200 20,000
Additional paid in capital 1,896,903 1,884,103
Retained earnings 625,604 560,815
------------------------------------------
Total Stockholders' Equity 2,542,707 2,464,918
------------------------------------------
Total Liabilities and Stockholders' Equity $ 14,360,336 $ 2,613,213
==========================================
See Accompanying Notes and Accountants' Report
F-4
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Sales, net $ 674,690 $ 202,857 $ 33,066,850 $ 716,331
Cost of sales 0 0 31,567,097 492
----------------------------------------------------------------
Gross profit 674,690 202,857 1,499,753 715,839
Selling expenses 0 0 20,519 0
General and administrative expenses 334,714 229,265 1,024,945 696,254
----------------------------------------------------------------
Income (loss) from operations 339,976 (26,408) 454,289 19,585
----------------------------------------------------------------
Other (Income) Expense
Interest income (2,683) 0 (8,543) (57,330)
Rental income (15,273) (27,930) (51,507) (57,390)
Bad debt expense 173,950 0 325,400 0
Interest expense 0 14,267 0 28,836
Miscellaneous 0 (17,223) 64 (23,630)
----------------------------------------------------------------
Total Other (Income) Expense 155,994 (30,886) 265,414 (109,514)
----------------------------------------------------------------
Income (loss) before income taxes 183,982 4,478 188,875 129,099
Provision for income taxes 40,826 0 124,086 115,097
----------------------------------------------------------------
Net income (loss) $ 143,156 $ 4,478 $ 64,789 $ 14,002
================================================================
Net loss per share (basic and diluted)
Basic $ 0.007 $ 0.0004 $ 0.003 $ 0.001
Diluted $ 0.007 $ 0.0004 $ 0.003 $ 0.001
Weighted average number of shares
Basic 20,200,000 12,000,000 20,100,000 12,000,000
Diluted 21,950,000 12,000,000 21,850,000 12,000,000
See Accompanying Notes and Accountants' Report
F-5
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-------------------------------------------
September 30, 2002 September 30, 2001
-------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ 64,789 $ 14,002
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization 12,858 32,000
Depreciation 22,980 28,594
Stock issued for services 11,000 0
Provision for bad debts 155,438 0
Decrease (Increase) in receivables (10,264,042) (50,281)
Decrease (Increase) in other receivables (369) 0
Decrease (Increase) in prepaid expenses 9,055 (58,367)
Decrease (Increase) in inventory 0 492
Decrease (Increase) in deferred income taxes 7,858 0
Decrease (Increase) in notes receivable 0 1,500,000
(Decrease) Increase in accounts payable and accrued expenses 11,636,007 (843,988)
(Decrease) Increase in deposits payable 4,100 0
(Decrease) Increase in income taxes payable 29,227 (83,252)
-------------------------------------------
Total Adjustments 1,624,112 525,198
-------------------------------------------
Net cash provided by (used in) operations 1,688,901 539,200
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets 0 (16,329)
Increase in intangible assets (109,535) (86,564)
-------------------------------------------
Net cash used in investing activities (109,535) (102,893)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on mortgage 0 (600,000)
Sale of stock 2,000 0
-------------------------------------------
Net cash provided by financing activities 2,000 (600,000)
-------------------------------------------
Net change in cash and cash equivalents 1,581,366 (163,693)
-------------------------------------------
Cash and cash equivalents at beginning of year 490,667 562,480
-------------------------------------------
Cash and cash equivalents at end of year $ 2,072,033 $ 398,787
===========================================
Supplemental cash flows disclosures:
Income tax payments $ 79,197 $ 115,098
-------------------------------------------
Non cash investing and financing activities:
Stock issued for services $ 11,000 $ 0
-------------------------------------------
See Accompanying Notes and Accountants' Report
F-6
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
September 30, 2002 September 30, 2001
-----------------------------------------
Retained earnings
Balance at beginning of period $ 560,815 $ 506,231
Net income (loss) 64,789 14,002
-----------------------------------------
Balance at end of period 625,604 520,233
-----------------------------------------
Common stock, par value $.001 (thousands of shares)
Balance at beginning of period 20,000 12,000
Issuance of common stock 200 0
-----------------------------------------
Balance at end of period 20,200 12,000
-----------------------------------------
Additional paid in capital
Balance at beginning of period 1,884,103 1,888,403
Issuance of common stock 1,800 0
Issuance of stock options for service 11,000 0
-----------------------------------------
Balance at end of period 1,896,903 1,888,403
-----------------------------------------
Total stockholders' equity at end of period $2,542,707 $2,420,636
=========================================
See Accompanying Notes and Accountants' Report
F-7
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 1 - NATURE OF OPERATIONS
EUPA International Corporation (EUPA), formerly Access Network Corporation, was
incorporated on September 8, 1998 under the laws of the state of Nevada. Tsann
Kuen U.S.A. (TK USA) was incorporated under the laws of the state of Illinois in
June 1990. Union Channel Limited (Union) was incorporated in Hong Kong on
September 28, 2001 and commenced operations during the quarter ended March 31,
2002. TK USA and Union are owned 100% by EUPA, collectively the three
corporations are referred to as the "Company".
On October 23, 2001, TK USA became a wholly owned subsidiary of EUPA through a
transaction accounted for as a reverse merger. In the transaction, EUPA acquired
all of the issued and outstanding capital stock of TK USA from Tsann Kuen
Enterprise Company, Ltd. (TKE) pursuant to an Exchange Agreement dated October
10, 2001 by TKE, TK USA and EUPA. TK USA is the United States market research,
design, supply and sales arm of TKE. Pursuant to the Exchange Agreement, TK USA
became a wholly owned subsidiary of EUPA and, in exchange for the TK USA shares,
EUPA issued 12,000,000 shares of its common stock to TKE, representing sixty
percent (60%) of the issued and outstanding capital stock of EUPA at that time.
Prior to the transaction, EUPA had nominal business activity. This activity is
not material to the historical financial statements of TK USA, and therefore pro
forma operating results as if the acquisition had taken place at the beginning
of the periods presented have not been presented. For accounting purposes, TK
USA has been treated as the acquirer and, accordingly, TK USA is presented as
the continuing entity, and the historical financial statements are those of TK
USA.
Union Channel was established to become the leading outsourcing supplier for TKE
in Asia and Europe. Union Channel had sale and purchasing arrangements with TKE,
TKC China and TKC Shanghai, all are related parties. TKC China and TKC Shanghai
are operating subsidiaries of TKE. Sales to TKC China were approximately
$23,696,500 for the nine months ended September 30, 2002. Included in accounts
receivable from this customer at September 30, 2002 is approximately $9,985,300.
Purchases for Union Channel were mainly from TKE and TKC Shanghai. Included in
cost of sales for the nine months ended September 30, 2002 is approximately
$29,876,700 of purchases from these companies. Included in accounts payable as
of September 30, 2002 is approximately $11,229,400 to related parties. The
activities of Union Channel have been discontinued beginning in the third
quarter of 2002.
TKE products are sold in over 80 countries around the world. Its major products
are: small appliances including irons, coffee makers, grills, and food
processors; medium size appliances which include microwave ovens,
electromagnetic ovens, electric cookers and vacuum cleaners. TKE also has a
"high tech" division that focuses on casing and main boards and is in the
process of developing intelligent appliances.
F-8
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information - The accompanying financial statements
have been prepared by EUPA International Corporation, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC") Form 10-QSB
and Item 310 of regulation S-B, and generally accepted accounting principles for
interim financial reporting. These financial statements are unaudited and, in
the opinion of management, include all adjustments (consisting of normal
recurring adjustments and accruals) necessary for a fair presentation of the
statement of financial position, operations, and cash flows for the periods
presented. Operating results for the nine months ended September 30, 2002 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002, or any future period, due to seasonal and other
factors. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
policies have been omitted in accordance with the rules and regulations of the
SEC. These financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes, included in the
Company's Annual Report for the year ended December 31, 2001.
Basis of Consolidation - The consolidated financial statements for September 30,
2002 include the accounts of EUPA and its wholly owned subsidiaries, TK USA and
Union Channel. The consolidated financial statements for the period September
30, 2001 includes the accounts of EUPA and its wholly owned subsidiary, TK USA.
All references herein to the Company included the consolidated results. All
significant intercompany accounts and transactions have been eliminated upon
consolidation.
Revenue Recognition - Revenue from sales of products to customers is recognized
upon shipment or when title passes to customers based on the terms of the sales,
and is recorded net of returns, discounts and allowances.
Service income is recognized as the related services are provided per terms of
the service agreement.
Cash and Cash Equivalents - Cash equivalents are stated at cost. Cash
equivalents are highly liquid investments readily convertible into cash with an
original maturity of three months or less and consist of time deposits with
commercial banks.
Allowance for Doubtful Accounts - The Company establishes an allowance for
doubtful accounts on a case-by-case basis when it believes the required payment
of specific amounts owed is unlikely to occur after a review of historical
collection experience, subsequent collections and management's evaluation of
existing economic conditions.
F-9
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 years
Automobiles 4 to 6 years
Machinery and equipment 5 to 12 years
Furniture and Fixtures 7 years
Intangible Assets - Costs associated with patents and trademarks are capitalized
and amortized using the straight-line method over fifteen years.
Contingencies - Certain conditions may exist as of the date the financial
statements are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur. The
Company's management and legal counsel assess such contingent liabilities, and
such assessment inherently involves an exercise of judgment. In assessing loss
contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the Company's legal
counsel evaluates the perceived merits of any legal proceedings or unasserted
claims as well as the perceived merits of the amount of relief sought or
expected to be sought.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's financial statements.
If the assessment indicates that a potential material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material would be disclosed.
Loss contingencies considered to be remote by management are generally not
disclosed unless they involve guarantees, in which case the guarantee would be
disclosed. As of September 30, 2002 and the date of our report, management has
informed us that there are no matters that warrant disclosure in the financial
statements.
F-10
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates include collectibility of accounts receivable, accounts payable, sales
returns and recoverability of long-term assets.
Concentration of Credit Risk - Financial instruments, which subject the Company
to credit risk, consist primarily of cash equivalents and trade accounts
receivable arising from its normal business activities. The Company places its
cash in what it believes to be credit-worthy financial institutions, however,
cash balances have exceeded the FDIC insured levels at various times during the
year. Concentration of credit risk with respect to trade accounts receivable is
primarily from related parties located in Asia. The Company actively evaluates
the creditworthiness of the customers with which it conducts business through
credit approvals, credit limits and monitoring procedures.
Stock Based Compensation - The Company accounts 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 complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") 123, "Accounting for Stock-Based
Compensation." Under APB 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 the Company's stock and the amount an employee must pay to acquire the
stock.
Impairment of Long-Lived Assets - On January 1, 2002 the Company adopted SFAS
144 "Accounting for the Impairment or Disposal of Long-Lived Assets". The
Company evaluates 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.
F-11
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share - Earnings per share are based on the weighted average number
of shares of common stock and common stock equivalents outstanding during each
period. Earnings per share are computed using the treasury stock method. The
options to purchase common shares are considered to be outstanding for all
periods presented but are not calculated as part of the earnings per share.
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 109 "Accounting
for Income Taxes".
Translation Adjustments - As of September 30, 2002 the accounts of Union Channel
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 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 September 30, 2002 the exchange rate between Hong Kong dollars and U.S.
dollars is HK$1 equals U.S.$0.12821. This exchange rate also approximates the
average for the nine months ended September 30, 2002, as such, for the nine
months ended September 30, 2002 there is no material translation adjustment
recorded on the books.
New Accounting Pronouncements - In July 2001, the FASB issued SFAS 141 "Business
Combinations". SFAS 141 requires that all business combinations initiated or
completed after June 30, 2001 be accounted for using the purchase method of
accounting. The statement provides for recognition and measurement of intangible
assets separate from goodwill. The Company adopted SFAS 141 as of July 1, 2001.
The adoption of the new statement had no effect on the consolidated results of
operations or financial position of the Company.
F-12
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets".
Under SFAS 142, goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed at least annually for impairment. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to Goodwill and intangible assets
acquired prior to July 1, 2001, the Company is required to and has adopted SFAS
142 effective January 1, 2002. The adoption of this pronouncement did not have a
material effect to the Company's consolidated financial position or results of
operations.
In August 2001, the FASB issued SFAS 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS supersedes SFAS 121 and the accounting and
reporting provisions of APB 30. SFAS 144 provides guidance for determining
whether long-lived assets should be tested for impairment and specific criteria
for classifying assets to be disposed of as held for sale. The statement is
effective for fiscal years beginning after December 15, 2001, and the Company
has adopted the statement as of January 1, 2002. Management does not expect the
adoption of this statement to have a material effect on the Company's
consolidated financial position or results of operations.
NOTE 3 - CONCENTRATION - RELATED PARTY TRANSACTIONS
The Company had one major customer during the nine months ended September 30,
2002. Sales to this customer, TKC China, a related party, were approximately
$23,696,500. Included in accounts receivable is $9,985,300 from this customer as
of September 30, 2002.
The Company also had two major suppliers, Tsann Kuen Enterprises (TKE), the
parent company of EUPA, and TKC Shanghai, a subsidiary of TKE. Purchases from
these companies totaled $24,691,200 during the nine months ended September 30,
2002 and the Company had in accounts payable $2,101,900 to these entities as of
September 30, 2002.
The Company received 100% of its gross revenue during the three months ended
September 30, 2002 from Tsann Kuen Enterprises (TKE). The revenue recorded was
from fees charged for product research and development performed by the Company.
As of September 30, 2002 the entire fee was included in the accounts receivable
balance.
F-13
EUPA INTERNATIONAL CORPORATION AND SUBSIDIARIES
(FORMERLY ACCESS NETWORK CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
NOTE 4 - COMMON STOCK
On October 16, 2001 the Company effected a forward stock split of 19.940179
shares for every one issued and outstanding share of common stock. The effect of
the stock split is reflected for all periods presented.
The Company granted 750,000 warrants with an exercise price of $0.001 as a
broker commission in assisting to consummate the transaction. These warrants
approximated a value of $80,000, which has been netted out in the equity
section.
In December 2001, the Company issued an option to purchase 1,000,000 shares of
the Company's stock at an exercise price of $0.001, vesting over a period of
five years. The options were issued in exchange for future ongoing marketing
service to be rendered to the Company. The per unit weighted-average fair value
of unit options granted was $0.11 at the date of grant using a book value
approach. The book value approach best estimated the value of the services to be
provided. During the nine months ended September 30, 2002 the Company recognized
consulting expenses of $11,000 for the granting of stock options to
non-employees.
F-14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
The information contained in this Item 2, Management's Discussion and Analysis
or Plan of Operation, contains "forward looking statements" within the meaning
of Section 27A of the Securities Act 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results may materially
differ from those projected in the forward-looking statements as a result of
certain risks and uncertainties set forth in this report. Although management
believes that the assumptions made and expectations reflected in the forward
looking statements are reasonable, there is no assurance that the underlying
assumptions will, in fact, prove to be correct or that actual future results
will not be different from the expectations expressed in this report.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our audited consolidated financial statements for the fiscal year ended
December 31, 2001 and notes thereto.
EUPA International Corporation (formerly Access Network Corporation) was
incorporated on September 8, 1998 under the laws of the State of Nevada. TK USA
was incorporated under the laws of the State of Illinois in June 1990. On
October 23, 2001, TK USA became a wholly owned subsidiary of EUPA through a
transaction accounted for as a reverse merger. In the transaction, EUPA acquired
all of the issued and outstanding capital stock of TK USA from Tsann Kuen
Enterprise Co., Ltd. ("TKE") pursuant to an Exchange Agreement dated as of
October 10, 2001 by and among TKE, TK USA and EUPA (the "Exchange Agreement").
Pursuant to the Exchange Agreement, TK USA became a wholly owned subsidiary of
EUPA and, in exchange for the TK 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 at that time. Prior to the merger, EUPA had nominal business
activity. This activity is not material to the historical financial statements
of TK USA, and therefore pro forma operating results as if the acquisition had
taken place at the beginning of the periods presented have not been presented.
For accounting purposes, TK USA has been treated as the acquirer and,
accordingly, TK USA is presented as the continuing entity, and the historical
financial statements are those of TK USA through the date of the Exchange
Agreement. From the date of the Exchange Agreement forward, the activity of EUPA
includes its parent level expenses and the operations of its two wholly owned
subsidiaries, TK USA and Union Channel Limited.
TK USA is the United States market research, design, supply and sales arm of
TKE. It currently markets TKE products in the United States for TKE through an
internal sales force. All of the products are sold to numerous brand name
companies, including Sunbeam, Toshiba, Philips, Sharp, Salton, Rival and
Toastmaster. TK USA does not recognize sales revenue from the sale of TKE
products in the United States. Rather, it interfaces with TKE customers in the
United States and processes orders. TK USA is then paid a service fee, or
commission, on each sale. TKE's commission income generally equals its costs.
EUPA does not and will not realize significant net income from TK USA's
operations in the United States.
EUPA commenced operations in Asia during the March 31, 2002 quarter through its
new subsidiary, Union Channel. Union Channel was incorporated in Hong Kong in
January 2002.
-3-
Union Channel was formed to be the leading supplier of TKE products in Asia and
Europe. However, Union Channel was not intended to have independent operations.
All of its purchases were made from TKE and all of its sales were made to TKC
China, an operating subsidiary of TKE.
Unfortunately, after two quarters of operation, management believes that Union
Channel could not efficiently operate in Asia and Europe because it did not have
the requisite human resources and customer support, and to put this
infrastructure in place would not be cost-efficient. As a result, management
terminated Union Channel's operation in the third quarter of 2002 so that EUPA
could focus on searching for more profitable business opportunities in the
United States or internationally. This will materially reduce EUPA's revenues
for the balance of the year, although management does not believe that it will
have a material impact on net operating results.
To partially offset the effect of the discontinuation of the Union Channel
operations, management has determined to accelerate its plan to derive revenues
from EUPA's research and development activities. EUPA's TK USA subsidiary
devotes significant time and resources to the design and development of small
appliances. Some of TKE's products are the result of TK USA's design efforts.
Beginning in the third quarter, TK USA charges a design fee and will receive
ongoing royalties for products designed by it. The fees will be based upon the
type of product and the difficulty of design. In the fourth quarter of 2002,
EUPA's net income will not dramatically increase as additional expense will be
incurred as research and development activity accelerates.
TKE products are sold in over 80 countries around the world. Its major products
are small appliances including irons, coffee makers, grills, and food processors
and medium sized appliances including microwave ovens, electromagnetic ovens,
electric cookers and vacuum cleaners. TKE's High Tech division focuses on casing
and main boards. It is also developing intelligent appliances including network
coffee maker, all in one computer and others.
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2001
Revenue: During the three months ended September 30, 2002, operating
revenues increased to $674,690 from $202,857 in the comparable period in 2001.
The change was exclusively the result of design fees earned by EUPA's TK USA
subsidiary. TK USA has been engaged in the design and development of small home
appliances for TKE for a long time, but it had not previously charged for these
services. Design services are currently rendered exclusively to TKE pursuant to
a design service agreement between TK USA and TKE which expires on December 31,
2002. The fees are based upon the complexity of the design with payment made
quarterly.
During the quarter ended September 30, 2001 quarter, the Company's
$202,857 of revenues were derived from service fees, or commissions, from TK
China, with respect to sales made to customers in the United States. Beginning
in January 2002, this commission fee arrangement was terminated and a similar
arrangement was put in place with Union Channel. The arrangement with Union
Channel ceased at the end of the second quarter of 2002 as a result of the
cessation of the Union Channel operations. The arrangement between TK China, TKE
-4-
and TK USA resumed in the third quarter of 2002 although no revenues were
recognized in the third quarter.
Gross Profit: The design services agreement with TKE and TK USA was
designed for TK USA to recognize a gross profit margin of approximately 2% to
3%. During the quarter ended September 30, 2002 all revenue was derived from
fees charged for products designed for TKE. There were no purchase and sale
transactions during the current quarter.
Operating Expenses: Operating expenses, consisting of general and
administrative expenses increased to $334,714 for the three months ended
September 30, 2002 as compared to $229,265 for the three months ended September
30, 2001. The increase is largely attributable to legal and accounting fees
related to compliance with public company obligations, and banking and interest
fees from EUPA and TK USA. In addition, EUPA and TK USA operating expenses
consist generally of research and development, and professional service fees
related to compliance with public company obligations.
Net Income (Loss): For the three months ended September 30, 2002, the
Company realized a net profit of $143,156, compared to profit of $4,478 for the
three months ended September 30, 2001. The current year includes a tax provision
approximating $40,826 for foreign income taxes for the Company's Union Channel
operations. During the quarter ended September 30 2002, the Company dramatically
increased its revenue as a result of its design services operation.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2001
Revenue: Operating revenues increased significantly in the nine months
ended September 30, 2002 to $33,066,850 from $716,331 in the comparable period
in 2001. The change was exclusively the result of the operations of Union
Channel which began during the first quarter and the result of the product
design fee operations of TK USA, which began during the third quarter. Union
Channel did not, however, operate as an independent business enterprise. It has
a sale and purchasing arrangement with its parent company, TKE, and TKC China,
an operating subsidiary of TKE. These arrangements resulted in several related
party transactions on the books of the Company. Sales to TKC China were
approximately $23,696,500 for the nine months ended September 30, 2002,
representing substantially all of the Company sales for this period. Included in
accounts receivables from TKC China at September 30, 2002 is approximately
$9,985,300. Included in cost of sales is approximately $24,691,200 resulting
from purchases from TKE. Included in accounts payable as of September 30, 2002
is approximately $2,101,900 to TKE.
During the nine months ended September 30, 2001, the Company's $716,331 of
revenues was derived from service fees, or commissions, which were received
during the nine months ended September 30, 2001. Beginning in January 2002, this
commission fee arrangement was terminated and a similar arrangement was put in
place with Union Channel. The arrangement with Union Channel ceased at the end
of the second quarter of 2002 as a result of the cessation of the Union Channel
operations. The arrangement between TK China, TKE and TK USA resumed in the
third quarter of 2002 although no revenues were recognized in the third quarter.
-5-
Gross Profit: During the first two quarters of the current financial year,
sale and purchase arrangements with TKE, TKC China and Union Channel were
designed for Union Channel to recognize a gross profit margin of approximately
2% to 3%. There were no such arrangements in place for the nine months ended
September 30, 2001. Beginning in the third quarter of 2002, the arrangements
with Union Channel were terminated and the design services agreement commenced.
The design services agreement was designed for TK USA to recognize a gross
profit margin of approximately 2% to 3%. As result of these arrangements with
TKE, for the nine months ended September 30, 2002 gross profit increased 109%
compared with the comparable period ended September 30, 2001.
Operating Expenses: Operating expenses, general and administrative
expenses, increased to $1,045,464 for the nine months ended September 30, 2002
as compared to $696,254 for the nine months ended September 30, 2001. The
increase is largely attributable to the operating expenses of Union Channel,
which commenced operations in the first quarter of 2002, and an increase in
legal and accounting expenses. EUPA and TK USA operating expenses consist
generally of research and development, sales and marketing related expenses for
efforts in the United States. The service income arrangement with Union Channel,
effective January 2002, provided EUPA (inclusive of TK USA) with service fee
income equivalent to 1.1% of operating expenses, inclusive on all non cash
expense items.
Net Income: For the nine months ended September 30, 2002, the Company
realized a net profit of $64,789, compared to net income $14,002 for the nine
months ended September 30, 2001. The current year includes a tax provision
approximating $124,086 for foreign income taxes for the Company Union Channel
operations.
LIQUIDITY AND CAPITAL RESOURCES
General. During the nine months ended September 30, 2002, net cash
provided by operating activities was $1,688,901. This represents a significant
increase from the prior year when net cash provided by operating activities was
$539,200. Cash used in investing activities was $109,535, which consisted of the
costs associated with the obtaining of patent rights. The Company's cash flow
requirements are eased by the fact that it is not obligated to pay its accounts
payable to TKE until the corresponding accounts receivable have been collected
from TKC China.
Capital expenditures. There were no capital expenditures for the nine
months ended September 30, 2002.
Working Capital Requirements. Cash needs of the Company are currently met
by the Company operations. The Company believes that its current financial
resources with TKE will be sufficient to finance its operations for TK USA and
obligations (current and long-term liabilities) for the long and short term. The
Company believes that its products design fees and ongoing royalties with TK USA
will provide adequate working capital for the expenses at the parent level and
TK USA operations in California. However, the Company consolidated actual
working capital needs for the long and short terms will depend upon numerous
factors, including the Company operating results, the cost of increasing the
Company sales and marketing activities in the Unites States, Asia and Europe,
competition, and the availability of existing credit facilities for TKE, none of
which can be predicted with certainty.
-6-
FACTORS THAT MAY AFFECT OUR FUTURE RESULTS AND FINANCIAL CONDITIONS
Investing in our securities involves a high degree of risk. In addition to
the other information contained in this annual report, including the reports we
incorporate by reference, you should consider the following factors before
investing in our securities.
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, SALES AND CAPITAL REQUIREMENTS.
TKE is the major manufacturer of the products we supply and the major
customer for our design services. Further, it 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.
In addition to our operational dependence on TKE, we do not currently have
an independent source of capital or lines of credit. All of our operations will
initially be funded by TKE. 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 our 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. 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 for which we will derive revenue and ongoing
royalty income. 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.
-7-
A SLOWDOWN IN THE RETAIL INDUSTRY WILL LIKELY 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 kind 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.
ONCE WE BEGIN OPENING 3C STORES, WE 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. Although TKE has had significant
experience in operating retail stores in Taiwan, we will not have any retailing
experience in China and Japan. In addition, local culture background,
regulations and retail license acquirement, those impacts may affect our retail
stores start schedule. 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 and we
might focus on small home appliances outlook development and products research
and design to instead of retail section. The financial impact will be normal.
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.
-8-
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. This 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 3. CONTROLS AND PROCEDURES.
Within the 90 days prior to the date of filing this Quarterly Report on
Form 10-Q, the Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's periodic SEC filings.
Subsequent to the date of that evaluation, there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls, nor were any corrective actions required
with regard to significant deficiencies and material weaknesses.
-9-
PART II -- OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company previously announced plans to open and operate in China and
Japan "3C", a chain of retail appliance and electronics stores which TKE
successfully operates in 83 locations in Taiwan. During the third quarter of
2002, the Company organized a specialized team to conduct a market survey in
Mainland China. As result, the Company determined that there are high entry
barriers in Mainland China which include restrictions on the acquisition of
retail licenses, local government regulations and culture differentiation. In
order to avoid unexpected failure in a highly competitive market, the Company is
in the process of analyzing the market information and data collected. As a
result, the Company cannot predict at this time when it will be able to open its
first 3C store in Mainland China.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
99.1 Certification of Tsan-Kun Wu pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Jacky S. Chang pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On August 1, 2002, the Company filed a report on Form 8-K under Item 1
reporting that effective as of July 25, 2002, it dismissed Stonefield Josephson,
Inc. as its independent accountant and engaged Lichter, Weil & Associates as its
independent accountant.
-10-
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.
Dated: November 14, 2002
EUPA INTERNATIONAL CORPORATION
By: /s/ Jacky S. Chang
--------------------------
Name: Jacky S. Chang
Title: C.F.O.
-11-
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, TSAN-KUN WU, President and Chief Executive Officer (principal executive
officer) of EUPA International Corporation (the "Registrant"), certifies that:
1. I have reviewed this quarterly report on Form 10-QSB of EUPA International
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date:
/s/ Tsan-Kun Wu
- ---------------
Tsan-Kun Wu
Date: November 14, 2002
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, JACKY S. CHANG, Chief Financial Officer (principal financial officer) of EUPA
International Corporation (the "Registrant"), certifies that:
1. I have reviewed this quarterly report on Form 10-QSB of EUPA International
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date:
/s/ Jacky S. Chang
- ------------------
Jacky S. Chang
Date: November 14, 2002