UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, ~~2004~~2007

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-29332

PEAK INTERNATIONAL LIMITED

(Exact Name of Registrant as Specified in its Charter)

Incorporated in Bermuda with limited liability

None

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

44091 Nobel Drive, P.O. Box 1767, Fremont, California		94538
(Address of principal executive offices)		(Zip Code)

Flat E & F, 19/F., CDW Building, 388 Castle Peak

Road, Tsuen Wan, New Territories, Hong Kong

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (~~510~~852) ~~449~~ 3193-~~0100~~ 6000

Indicate by check mark whether the registrant (~~Registrant’s~~1) has ~~telephone~~filed ~~number~~all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during the preceding twelve 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 ¨ No x

Indicate by check mark whether the registrant: ~~(1)~~is ~~has~~a large ~~filed~~accelerated ~~all~~filer, ~~reports~~an ~~required~~accelerated tofiler, ~~be filed by Section 13~~ or ~~15(d)~~a ofnon-accelerated ~~the~~filer. ~~Securities~~See ~~Exchange~~definition ~~Act~~ of ~~1934~~“accelerated ~~during~~filer ~~the~~and ~~preceding~~large 12accelerated ~~months~~filer” ~~(or~~in ~~for~~Rule ~~such~~12b-2 ~~shorter~~of ~~period that~~ the ~~Registrant~~Exchange ~~was~~Act. ~~required~~(Check ~~to file such reports~~one)~~, and~~: ~~(2) has been subject to such filing requirements for the past 90 days. Yes x No ¨~~

~~Indicate~~Large byAccelerated ~~check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).~~Filer ¨ ~~Yes~~Accelerated Filer ¨ No Non-Accelerated Filer x

Indicate ~~the~~by ~~number~~check ofmark ~~shares~~whether ~~outstanding~~the ofregistrant ~~each~~is ofa ~~the~~shell ~~issuer’s~~company ~~classes~~(as ofdefined ~~common~~in ~~stock,~~Rule as12b-2 of ~~August~~the 9,Exchange Act). Yes ¨ No x ~~2004~~

Class		Outstanding at August 9, 2004
Common Stock, $0.01 Par Value		12,394,949

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at July 13, 2007
Common Stock, $0.01 Par Value		12,423,306

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Statements of Operations

(in thousands of United States Dollars, except share and per share data)

	Three Months Ended June 30,
	2004					2003
	2007					2006
	(Unaudited)					(Unaudited)
Net Sales	$	1712,~~794~~001		100.0	%	$	1518,~~062~~653		100.0	%
Cost of Goods Sold (Note 2)		12,474		70.1	%		10,585		70.3	%
Cost of Goods Sold		11,358		94.6	%		13,818		74.1	%
Gross Profit		~~5,320~~643		295.94	%		4,~~477~~835		2925.79	%
Selling and Marketing expenses (Note 3)		3,148		17.7	%		2,782		18.5	%
Selling and Marketing (Note 4)		1,917		16.0	%		2,261		12.1	%
General and Administrative expenses		1,703		9.6	%		1,542		10.2	%
General and Administrative (Note 4)		1,356		11.3	%		1,580		8.5	%
Research and Development expenses		46		0.3	%		43		0.3	%
Research and Development		191		1.6	%		36		0.2	%
Income from operations		423		2.3	%		110		0.7	%
(Loss) Income from operations		(2,821	)	(23.5	)%		958		5.1	%
Other Expenses —net		(80	)	(0.4	)%		(59	)	(0.3	)%
Other expenses—net		(96	)	(0.8	)%		(55	)	(0.3	)%
Interest Income		33		0.2	%		50		0.3	%
Interest income—net		187		1.6	%		117		0.6	%
Income Before Income Taxes		376		2.1	%		101		0.7	%
(Loss) Income before income taxes		(2,730	)	(22.7	)%		1,020		5.4	%
Income Tax Expense (Note 4)		(52	)	(0.3	)%		(179	)	(1.2	)%
Income tax expense		(1	)	(0.0	)%		(82	)	(0.4	)%
Net Income (Loss)	$	324		1.8	%	$	(78	)	(0.5	)%
Net (Loss) Income	$	(2,731	)	(22.8	)%	$	938		5.0	%
EARNINGS (LOSSES) PER SHARE (Note 9)
(LOSS) EARNINGS PER SHARE (Note 5)
— Basic	$	(0.0322	)			$	(0.0108	)
— Diluted	$	(0.0322	)			$	(0.0108	)
Weighted Average Number of Shares Outstanding
— Basic		12,~~361~~423,000					12,~~342~~420,000
— Diluted		12,~~772~~423,000					12,~~342~~425,000

(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)

Condensed Consolidated Balance Sheets

(in thousands of United States Dollars, except share and per share data)

	June 30, 2004			March 31,2004
	June 30, 2007			March 31,2007
	(Unaudited)			(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	2019,~~156~~980		$	20,~~303~~366
Accounts receivable—net of allowance for doubtful accounts of $233 at June 30, 2004 and $237 at March 31, 2004		12,821			12,393
Restricted cash (Note 12)		983			1,128
Inventories (Note 5)		13,782			13,547
Accounts receivable—net of allowance for doubtful accounts of $366 at June 30, 2007 and $427 at March 31, 2007		9,932			9,279
Other receivables, deposits and prepayments		1,432			1,050
Inventories (Note 2)		10,796			10,959
Total Current Assets		48,191			47,293
Other receivables, deposits and prepayments		760			852
Asset to be disposed of by sale (Note 15)		5,230			5,230
Total Current Assets		42,451			42,584
Property, Plant and Equipment—net		29,301			28,246
Property, plant and equipment—net		18,296			19,278
Land Use Right		757			761
Land use right		698			703
Deposits for Acquisition of Property, Plant and Equipment		15			969
Deposits for acquisition of property, plant and equipment		74			60
Income taxes receivable (Note 6)		5,229			5,085
Other deposit (Note 3)		301			301
Other deposit (Note 7)		301			301
TOTAL ASSETS	$	61,820		$	62,926
TOTAL ASSETS	$	89,024		$	87,885
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	5,508		$	5,064
Accounts payable:
Accrued payroll and employee benefits		1,440			1,480
-trade	$	5,047		$	3,689
Accrued other expenses		1,212			1,168
-property, plant and equipment		165			78
Income taxes payable		5,860			5,858
Accrued payroll and employee benefits		1,273			1,165
Total Current Liabilities		14,020			13,570
Accrued other expenses		1,931			1,990
Deferred Income Taxes		1,720			1,670
Income taxes payable		2			95
Total Liabilities		15,740			15,240
Total Current Liabilities		8,418			7,017
Commitments and Contingencies (Note 13)
Deferred income taxes		—			—
Total Liabilities		8,418			7,017
Commitments and Contingencies (Note 9)
Shareholders’ Equity:
Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 12,382,825 shares at June 30, 2004, and 12,312,691 shares at March 31, 2004		124			123
Common stock, $0.01 par value; authorized 100,000,000 shares; issued and outstanding 12,423,306 shares at June 30, 2007 and at March 31, 2007		124			124
Additional paid-in capital		2627,~~989~~822			2627,~~702~~707
Retained earnings		4726,~~346~~600			4729,~~022~~331
Accumulated other comprehensive loss		(1,~~175~~144	)		(1,~~202~~253	)
Total shareholders’ equity		73,284			72,645
Total Shareholders’ Equity		53,402			55,909
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8961,~~024~~820		$	8762,~~885~~926

(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)

Condensed Consolidated Statements of Cash Flows

(in thousands of United States Dollars)

	Three Months Ended June 30,
	Three Months EndedJune 30,
	2004			2003
	2007			2006
	(Unaudited)			(Unaudited)
Operating activities:
Net income (loss)	$	324		$	(78	)
Net (loss) / income	$	(2,731	)	$	938
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,~~679~~614			1,~~545~~658
Deferred income taxes		50—			~~157~~80
Loss on disposal/write-off of property, plant and equipment		2936			5923
Allowance for doubtful accounts		(461	)		~~(41~~40	)
Non-cash share-based compensation		115			165
Changes in operating assets and liabilities:
Accounts receivable		(~~424~~592	)		(~~602~~1,878	)
Inventories		~~(235~~163	)		(28	)
Other receivables, deposits and prepayments		~~(382~~92	)		~~219~~(81	)
Income taxes receivable		(144	)		(685	)
Accounts payable-trade		1,358			581
Accounts payable-trade		938			1,155
Accrued payroll, employee benefits and other expenses		49			(35	)
Accrued payroll, employee benefits and other expenses		4			(132	)
Income taxes payable		(93	)		2
Income taxes payable		2			19
Cash held in an escrow for terms of sale agreement for disposal of a subsidiary (Note 11)		641			641
Net cash provided by operating activities		1,837			1,614
Cash held in another escrow for funding of certain contingent obligations under existing contracts with senior management (Note 12)		(496	)		413
Net cash provided by operating activities		95			2,539
Investing activities:
Acquisition of property, plant and equipment		(~~3,253~~576	)		(1,~~113~~318	)
Proceeds on disposal of property, plant and equipment		—			12
Increase in deposits for acquisition of property, plant and equipment		(14	)		(107	)
Decrease (Increase) in deposits for acquisition of property, plant and equipment		954			(56	)
Net cash used in investing activities		(590	)		(1,425	)
Net cash used in investing activities		(2,299	)		(1,157	)
Financing activities:
Proceeds from issuance of common stock		288			55
Net cash provided by (used in) financing activities		—			—
Payment for repurchase of common stock		—			(2,416	)
Net (decrease) increase in cash and cash equivalents		(495	)		1,114
Net cash provided by (used in) financing activities		288			(2,361	)
Cash and cash equivalents at beginning of period		20,366			17,441
Net decrease in cash and cash equivalents		(174	)		(1,904	)
Effects of exchange rate changes on cash and cash equivalents		109			93
Cash and cash equivalents at beginning of period		20,303			25,928
Cash and cash equivalents at end of period	$	19,980		$	18,648
Effects of exchange rate changes on cash and cash equivalents		27			(30	)
Cash and cash equivalents at end of period	$	20,156		$	23,994
Supplemental cash flow information:
Cash paid during the period
Cash paid during the period for:
Interest	$	—		$	—
Income taxes	$	94		$	—
Income taxes		144			689

(See accompanying notes to Unaudited Condensed Consolidated Financial Statements)

Notes to Condensed Consolidated Financial Statements

(in thousands of United States Dollars, except share and per share data, unaudited)

(1) Organization and basis of presentation

Peak International Limited (the “Company”) was incorporated as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda (as amended) on January 3, 1997. The subsidiaries of the Company are principally engaged in the manufacture and sale of precision -engineered packaging products, such as matrix and disk drive trays, ~~shipping tubes,~~ reels and carrier tapes, ~~leadframe boxes and interleaves~~ used in the storage and transportation of semiconductor devices and other electronic components. The Company’s principal production facilities are located in the People’s Republic of China (the “PRC”). ~~and~~The ~~the~~ Company maintains sales offices in Hong Kong, the PRC, Malaysia, Singapore, Taiwan, and the United States, ofwhereby ~~America~~direct sales are made to customers, and representative offices in the PRC, the Philippines, South Korea, and Italy, that provide customers with technical information.

The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intra-group balances and transactions have been eliminated on consolidation.

The accompanying condensed consolidated financial information has been prepared by the Company without being audited, in accordance with the instructions to Form 10-Q and therefore dodoes not include all ~~the~~ information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United ~~States~~ States of America, consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results could differ from those estimates. Differences from those estimates are reported in the period they become known.

The unaudited condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) which in the opinion of management are required for a fair presentation of the Company’s interim results. The results for interim periods are not necessarily indicative of the results that may be achieved in the entire year. These condensed consolidated financial statements and notes thereto should be read together with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, ~~2004~~2007.

~~(2)~~New ~~Cost~~Accounting ofStandards ~~goods sold~~

~~Included~~In ~~therein~~February 2007, ~~was~~the Financial ~~$58~~Accounting Standards Board (~~unaudited~~“FASB”) issued Statement of Financial Accounting Standards (~~2003-$46~~“SFAS”) No. 159, ~~unaudited)~~“The ~~write-off~~Fair ofValue ~~machinery~~Option for Financial Assets and ~~molds~~Financial ~~due~~Liabilities”, towhich ~~technological~~permits entities to ~~obsolescence~~choose to measure many financial assets and ~~capacity~~financial ~~under-utilization~~liabilities at fair value. Unrealized gains and losses on items for which the ~~three~~fair ~~months~~value ~~ended~~option ~~June~~has 30been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, ~~2004~~2007. We are currently assessing the impact of SFAS No. 159 on our consolidated financial position and results of operations.

~~(3)~~In ~~Delivery~~September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands ~~freight~~disclosures ~~expenses~~about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact, if any, that the adoption of SFAS No. 157 will have on our consolidated financial statements.

~~For~~In June 2006, the ~~three~~ ~~months~~FASB ~~ended~~ratified ~~June~~the 30provisions of Emerging Issues Task Force (“EITF”) Issue No. 06-3, ~~2004~~“How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).” EITF Issue No. 06-3 requires that the ~~Company~~presentation ~~incurred~~of ~~delivery~~taxes within revenue-producing transactions between a seller and ~~freight~~a ~~expenses~~customer, ofincluding ~~approximately~~but ~~$894~~not limited to sales, use, value added, and some excise taxes, should be on either a gross (~~unaudited~~included in revenue and cost) or a net (~~2003—$751,~~excluded ~~unaudited~~from revenue) basis. In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The disclosure of those taxes can be done on an aggregate basis. The adoption of EITF Issue No. 06-3 during the first quarter of our 2008 fiscal year did not have ~~been~~a ~~included~~material asimpact ~~part~~on our consolidated results of ~~selling~~operations ~~and~~or ~~marketing~~financial ~~expenses~~position.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (4“FIN 48”) ~~Income~~which ~~Tax~~prescribes ~~Expense~~a recognition threshold and measurement attribute, as well as criteria for subsequently recognizing, derecognizing and measuring uncertain tax positions for financial statement purposes. FIN 48 also requires expanded disclosure with respect to the uncertainty in income tax assets and liabilities. We adopted FIN 48 on April 1, 2007. On that date, we had no uncertain tax positions. We recognize interest and penalties, if any, as part of our provision for income taxes in our Consolidated Statements of Operations. In May 2007, the FASB issued FASB Staff Position, or FSP, No. FIN 48-1, “Definition of Settlement in FASB Interpretation No. 48” to amend FIN No. 48 by providing that previously unrecognized tax benefits can be recognized when the tax positions are effectively settled upon examination by a taxing authority. According to FSP FIN 48-1, an enterprise’s tax position will be considered effectively settled if the taxing authority has completed its examination, the enterprise does not plan to appeal, and it is remote that the taxing authority would reexamine the tax position in the future. FSP FIN 48-1 must be applied upon the initial adoption of FIN No. 48. Enterprises that did not apply FIN No. 48 in a manner consistent with the provisions of FSP FIN 48-1 would be required to retrospectively apply its provisions to the date of the initial adoption of FIN No. 48. FSP FIN 48-1 did not have a material impact on our initial adoption of FIN No. 48.

Income is subject to taxation in the various countries in which the Company and its subsidiaries operate. In June 2003, the Hong Kong Legislative Council passed a bill increasing the Hong Kong corporate tax rate from 16.0% to 17.5%. The Company revalued its deferred tax liabilities at this new rate and the impact was a $146 charge to income tax expense in the first quarter of fiscal 2004.

(5) Inventories

	June 30, 2004		March 31,2004
	(Unaudited)
Raw materials	$	7,138	$	7,332
Finished goods		6,644		6,215
	$	13,782	$	13,547

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(62) Inventories ~~Income Taxes Receivable~~

This represents approximately $5,205 of tax reserve certificates purchased from the Inland Revenue Department (“IRD”) of Hong Kong in respect of prior year taxes that are under examination by the IRD. The ~~placement~~components of ~~such~~inventories ~~certificates~~were isas afollows: ~~condition stipulated by the IRD.~~

There has been no change in the tax filing status of our Hong Kong subsidiaries since March 31, 2004.


	June 30, 2007		March 31, 2007
	(Unaudited)		(Audited)
Raw materials	$	5,217	$	5,146
Finished goods		5,579		5,813

	$	10,796	$	10,959

(73) Other Deposit

This represents the security bond placed at a Taiwanese court in order to obtain an anti-injunction order in respect of a potential patent dispute in Taiwan. See Note 139(a) “Litigation”.” Management of the Company does not expect the case to be settled within 12 months and therefore the amount was classified as a non-current asset as of June 30, 2007.

(8) Stock Options

Option activity relating to the Company’s stock option plan is summarized as follows (unaudited):

	Outstanding Options
	Number ofShares		Weightedaverage exerciseprice per share
Outstanding at April 1, 2004	2,810,313		$	5.99
Granted	396,420			5.10
Exercised	(58,210	)		3.96
Forfeited	(49,900	)		7.93
Outstanding at June 30, 2004	3,098,623			5.88

	Outstanding Options
	Number ofShares		Weightedaverage exerciseprice per share
Outstanding at April 1, 2003	3,537,459		$	5.96
Granted	8,000			3.87
Forfeited	(3,825	)		8.94
Outstanding at June 30, 2003	3,541,634			5.95

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(94) Non-cash ~~Earnings (Losses) Per~~ Share-based Compensation

~~The~~Prior ~~following~~to April 1, 2006, the Company accounted for share-based employee compensation, including stock options, using the method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations (“APB 25”). Under APB 25, stock options are granted at market price and no compensation cost is recognized, and a ~~reconciliation~~disclosure is made regarding the pro forma effect on net earnings assuming compensation cost had been recognized in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). In December 2004, the ~~numerator~~FASB issued SFAS 123R, which requires companies to measure and recognize compensation expense for all share-based payments at fair value. SFAS 123R eliminates the ~~denominator~~ability to account for share-based compensation transactions using APB 25, and generally requires that such transactions be accounted for using prescribed fair-value-based methods. SFAS 123R permits public companies to adopt its requirements using one of two methods: (a) a “modified prospective” method in which compensation costs are recognized beginning with the ~~basic~~effective ~~earnings~~date based on the requirements of SFAS 123R for all share-based payments granted or modified after the effective date, and based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date or (~~losses~~b) a “modified ~~per~~retrospective” method which includes the requirements of the modified prospective method described above, but also permits companies to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either for all periods presented or prior interim periods of the year of adoption. Effective April 1, 2006, the Company adopted SFAS 123R using the modified prospective method. No share:-based employee compensation cost has been reflected in net income prior to the adoption of SFAS 123R. Results for prior periods have not been restated.

	Three Months Ended June 30,
	2004		2003
	(Unaudited)		(Unaudited)
Numerator:
Net income (loss)	$	324	$	(78	)
Denominator:
Weighted average number of shares outstanding
Basic		12,360,683		12,341,642
Assumed exercise of stock options		410,905		—
Diluted		12,771,588		12,341,642

The following table presents the share-based compensation expense recognized in accordance with SFAS 123R during the quarters ended June 30, 2007 and 2006:

For the three months ended June 30, 2003, exercise of all outstanding stock options would have been anti-dilutive and such stock options were therefore not included in the computation of diluted losses per share.


	June 30, 2007		June 30, 2006
	(Unaudited)		(Unaudited)
The components of non-cash share-based compensation were as follows:
Selling and Marketing	$	19	$	70
General and Administrative		96		95

	$	115	$	165

~~(10)~~The ~~Comprehensive~~total ~~Income~~value ~~(Loss)~~of the stock options awards is expensed ratably over the service period of the employees receiving the awards. As of June 30, 2007, total unrecognized compensation cost related to stock-based options and awards was $0.6 million and the related weighted-average period over which it is expected to be recognized is approximately 1.6 years.

~~The~~Stock ~~Company’s~~Option ~~comprehensive~~Plans ~~income/(loss) consists of the following:~~

	Three Months Ended June 30,
	2004		2003
	(Unaudited)		(Unaudited)
Net income (loss)	$	324	$	(78	)
Other comprehensive income (loss):
Foreign currency translation		27		(30	)
Comprehensive income (loss)	$	351	$	(108	)

At June 30, 2007, the Company had two active share-based employee compensation plans, the 1997 Stock Option Plan and the 1998 Stock Option Plan. Stock option awards granted from these plans are granted at the fair market value on the date of grant, and vest over a period determined at the time the options are granted, generally ranging from zero to three years, and generally have a maximum term of ten years. The Company did not issue any shares under the 1997 and 1998 Stock Option Plans during the three months ended June 30, 2007.

~~(11)~~For ~~Employee~~all ~~Stock~~stock ~~Purchase~~options, ~~and~~the Company recognizes ~~Option~~compensation ~~Plans~~cost on a straight-line basis over the requisite service period. When the options are exercised, the Company issues common stock from its treasury shares.

During the three months ended June 30, 2004, under the 1998 Stock Option Plan the Company issued options for 175,000 shares to officers of the Company at an exercise price of $5.365 per share and options for 221,420 shares to employees of the Company at an exercise price of $4.8845 per share. The Company issued 11,924 shares at a price of $4.79825 to employees for contributions made during the three months ended March 31, 2004, and authorized the issuance of 11,832 shares at a price of $4.216 to employees for contributions made during the three months ended June 30, 2004, under the 2000 Employee Stock Purchase Plan.

The Company accounts for stock-based compensation awarded to employees using the intrinsic value method prescribed in Accounting Principles Board Opinions (“APB”) No. 25 “Accounting for Stock Issued to Employees” and related interpretations. No stock-based employee compensation cost is reflected in net profit/(loss), as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

~~(11)~~The ~~Employee~~following ~~Stock~~is ~~Purchase~~a ~~and~~summary ~~Option~~of ~~Plans~~stock ~~(con~~option activity within the Company’t)s share-based compensation plans and charges for the three months ended June 30, 2007:

If the Company had accounted for its stock option plans and the stock purchase plan by recording compensation based on the fair value at grant date for such awards consistent with the method of Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation”, the Company’s net income/(loss) and earnings/(losses) per share would have been increased/decreased as follows:


	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In Thousands)
Options outstanding:
Balance at April 1, 2007	1,448,065		$	4.30
Granted	—			—
Exercised	—			—
Forfeited	(60,333	)		5.92

Balance at June 30, 2007	1,387,732			4.23	2.82	$	8

Exercisable at June 30, 2007	926,190		$	4.76	2.78	$	3

	Three months ended June 30,
	2004		2003
	(Unaudited)		(Unaudited)
Net income (loss), as reported	$	324	$	(78	)
Add: compensation expense released (recognized) under SFAS no. 123, net of tax	$	23	$	(176	)
Pro forma net income (loss)	$	347	$	(254	)
Pro forma earnings (losses) per share
- Basic	$	0.03	$	(0.02	)
- Diluted	$	0.03	$	(0.02	)

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the first quarter of fiscal 2008 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2007. This amount changes based on the fair market value of the Company’s stock.

~~(12)~~No ~~Share~~options ~~Repurchase~~ were exercised during the three months ended June 30, 2007.

InThe ~~September~~weighted ~~2000,~~average ~~the~~fair ~~Board~~value of ~~Directors~~stock ~~of the Company~~option ~~authorized~~awards ~~the~~granted ~~repurchase~~and by the ~~Company~~key ofassumptions upused toin ~~$10,000~~the ofBlack-Scholes ~~its~~valuation ~~common~~model ~~stock at prices not~~ to ~~exceed~~calculate ~~150% of~~ the ~~Company’s~~fair ~~net asset~~ value ~~per~~are ~~share.~~as ~~Common~~follows: ~~stock repurchased will be cancelled immediately. The excess of purchase price over par value is charged to additional paid-in capital.~~

The Company purchased 656,186 shares from Mr. T. L. Li for $2,400 on May 5, 2003. The shares repurchased from Mr. T. L. Li were immediately retired. The shares were purchased from Mr. T. L. Li at a per share price of $3.66 per share, which represented a 5% discount from the $3.85 closing price of the shares on the NASDAQ National Market on that date. The excess of purchase price over par value was recorded as a reduction to additional paid-in capital.


	June 30, 2007			June 30, 2006
Weighted average fair value of options granted	$	—		$	1.36
Key assumptions used in determining the fair value:
Weighted average risk free interest rate		—	%		5.04	%
Expected life of options (in years)		—			3.00
Expected volatility of underlying stocks		—	%		59.5	%
Expected dividend yield		—			—

In* ~~addition,~~The ~~the~~risk-free ~~Company~~interest ~~repurchased~~rate ~~4,000~~is ~~shares~~based aton anthe ~~average price of $3~~U.94S. inTreasury ~~the~~zero-coupon ~~first~~yield ~~fiscal~~with ~~quarter~~a ofmaturity ~~fiscal~~that ~~2004.~~approximates ~~There~~the ~~was~~expected nolife ~~repurchase~~ of ~~shares for the three months ended June 30, 2004~~options.

~~(13)~~** ~~Commitments~~The ~~and~~expected ~~Contingencies~~life of options represents the weighted average period for option contractual terms.

~~(a)~~*** ~~Litigation~~The expected volatility of underlying stocks is measured using historical daily price changes of the Company’s common stock over the expected life of options.

~~Arbitration~~The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected volatility of underlying stocks. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The Company was involved in arbitration with the Company’s former chief executive officer and, in November 2002, the arbitrator ruled in the Company’s favor and awarded the Company a judgment of approximately $520. The remaining claim of $254 and accrued interest remain uncollected. The Company is uncertain whether it will be able to collect the remainder of the judgment against the former executive and therefore no financial statement impact has been recorded in this respect.

R.H. Murphy Co., Inc. (“Murphy”) is the owner of U.S. Reexamined Patent 5,400,904 C1 and certain corresponding foreign patents, which patents are directed to specific features in trays used to carry integrated circuits. Murphy has notified the Company and certain of its customers that it believes these patents are infringed by certain integrated circuit trays that the Company provided to its customers, and indicated that licenses to these patents are available. The Company does not believe that any valid claim of these patents is infringed, and is proceeding consistent with that belief.

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(135) (Loss) ~~Commitments~~Earnings ~~and~~Per ~~Contingencies~~Share ~~(con’t)~~

On July 8, 2002, the Company placed a security bond of approximately $301 at a Taiwanese district court in connection with a preliminary injunction order so that the Company can continue to sell trays in Taiwan without being interrupted by Murphy and its three distributors in Taiwan. The ~~Taiwanese~~following district court granted the order in June 2002, after which Murphy’s three local distributors filed an appeal with the Taiwanese high court against the grant of the order by the district court. In December 2002, the high court ruled that the anti-injunction order should be revoked. In February 2003, the Company filed an appeal to the Taiwanese Supreme Court which was granted and resulted in the dismissal of Murphy’s local distributors’ appeals. The grant of the preliminary injunction order has now become final and, accordingly, it is unlikely that Murphy or its local distributors will be able to obtain preliminary injunctive relief against the Company or its Taiwan customers during the pendency of the underlying litigation. In addition, in October 2002, the Company filed a ~~civil~~reconciliation ~~suit against Murphy with the Taiwanese district court seeking permanent relief in connection with the preliminary injunction order. An additional security bond~~ of ~~approximately $13 was placed with~~ the ~~Taiwanese~~numerator court in connection with the underlying civil suit, which was later increased by approximately $24. If the Company’s effort to receive permanent relief is not successful, the Company may be required to forfeit the bonds and ~~Murphy and its distributors in Taiwan may assert patent infringement claims against~~ the Company which, if successful, could prevent the Company from selling certain of its products in Taiwan and could result in monetary damages. In December 2001, the Company also filed an action with the Taiwanese Intellectual ~~Property~~denominator Office to invalidate Murphy’s patent. In February 2002, the Company also filed a complaint for unfair competition with the Fair Trade Commission against Murphy. The Fair Trade Commission dismissed the action and the Company has filed an appeal. That appeal was dismissed by the Executive Yuan and the Company has filed an administrative suit contesting the dismissal. A hearing on some of ~~these issues was held in July 2004, and~~ the ~~Company~~basic ~~expects~~(loss) aearnings ~~decision~~per toshare: be issued shortly. At present, the outcome of this potential patent dispute cannot be predicted with reasonable particularity and no impact to the financial statements has been reflected in this respect.

(b) Commitments


	Three Months Ended June 30,
	2007			2006
	(Unaudited)			(Unaudited)
Numerator:
Net (loss) income	$	(2,731	)	$	938

Denominator:
Weighted average number of shares outstanding
Basic		12,423,306			12,420,389
Assumed exercise of stock options		—			4,685

Diluted		12,423,306			12,425,074

AtFor ~~June~~the three months ended June 30, ~~2004~~2007, ~~the~~exercise ~~Company~~of ~~had~~all ~~commitments~~outstanding ~~for~~stock ~~capital~~options ~~expenditures~~would have been anti-dilutive and such stock options were therefore not included in the computation of ~~approximately~~diluted ~~$155~~loss per share.

(14) Segment Information

	Hong Kong& the PRC		UnitedStates		OtherAsian countries			Eliminations			Consolidated
Quarter ended June 30, 2004 (unaudited)
Net sales to third parties	$	8,920	$	1,134	$	7,740		$	—		$	17,794
Transfer between geographic areas		8,263		—		724			(8,987	)		—
Total net sales	$	17,183	$	1,134	$	8,464		$	(8,987	)	$	17,794
Income (Loss) before tax	$	513	$	37	$	(160	)	$	(14	)	$	376
Quarter ended June 30, 2003 (unaudited)
Net sales to third parties	$	7,040	$	983	$	7,039		$	—		$	15,062
Transfer between geographic areas		7,565		—		433			(7,998	)		—
Total net sales	$	14,605	$	983	$	7,472		$	(7,998	)	$	15,062
Income (Loss) before tax	$	106	$	77	$	(65	)	$	(17	)	$	101

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(156) Comprehensive ~~Asset~~Loss ~~to be disposed of by sale/asset impairment charge~~

AComprehensive ~~subsidiary~~loss ofis ~~the~~defined ~~Company~~as ~~owns a factory under construction in~~ the ~~PRC.~~aggregate Inchange ~~view of its production needs and market~~in ~~conditions,~~shareholders’ ~~the~~equity ~~completion~~excluding ofchanges ~~the~~in ~~factory~~ownership ~~under construction was delayed~~interests. ~~During~~The ~~the~~Company’s ~~fourth~~comprehensive ~~quarter~~(loss) ~~for~~income ~~the~~consists ~~year ended March 31, 2001, management reassessed the fair value~~ of the ~~building~~following: ~~given the downturn in the industrial property market in which the building is located and a provision of $759 was recorded to adjust the carrying value of the building.~~

During the quarter ended June 30, 2002, the factory under construction and the related land use right in the PRC, which has an assigned period for 50 years commencing May 1993, were reclassified as “asset to be disposed of by sale” following management’s decision to dispose of the property as a general purpose industrial building. As a result, the property has been written down to its fair market value less costs to sell pursuant to SFAS No. 144 “Accounting for the Impairment of Disposal of Long-Lived Assets,” resulting in an asset impairment charge of $13,378 during the year ended March 31, 2003. The net book value of the property and the land use right were $4,071 and $1,159 respectively as of June 30, 2004, March 31, 2004 and 2003. Management of the Company has been actively marketing this asset for sale since the decision to sell the factory.


	Three Months Ended June 30,
	2007			2006
	(Unaudited)			(Unaudited)
Net (loss) income	$	(2,731	)	$	938
Other comprehensive income:
Foreign currency translation		109			93

Comprehensive (loss) income	$	(2,622	)	$	1,031

(7) Employee Stock Purchase Plan

Under SFAS 123R, the Company’s Employee Stock Purchase Plan is considered compensatory. During the three months ended June 30, 2007, the Company did not issue any shares under the 2000 Employee Stock Purchase Plan.

(8) Share Repurchase

In September 2000, the Board of Directors authorized the repurchase, at management’s discretion, of up to $10,000 of the Company’s common stock at prices not to exceed 150% of the Company’s net asset value per share. Common stock repurchased will be cancelled immediately. The excess of purchase price over par value is charged to additional paid-in capital.

There was no repurchase of shares for the three months ended June 30, 2007 and 2006.

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(9) Commitments and Contingencies

(a) Litigation

R.H. Murphy Co., Inc. (“Murphy”) is the owner of U.S. Re-examined Patent 5,400,904 C1 and certain corresponding foreign patents, which are directed to specific features in trays used to carry integrated circuits. Murphy has notified the Company and certain of the Company’s customers that it believes these patents are infringed by certain integrated circuit trays that the Company provided to the Company’s customers, and indicated that licenses to these patents are available. The Company does not believe that any valid claim of these patents is infringed, and is proceeding consistent with that belief. Below is a summary of the Company’s actions taken against Murphy.

The Company applied for a preliminary injunction order so that the Company can continue to sell trays in Taiwan without being interrupted by Murphy and its three distributors in Taiwan and the Taiwan Taichung District Court granted the preliminary injunction order in June 2002. On July 8, 2002, the Company placed a security bond of approximately $301 at the Taiwan Taichung District Court for a compulsory execution of the preliminary injunction order. Murphy and its three local distributors filed an appeal with the Taiwan High Court, Taichung Branch against the grant of the order by the district court, and in December 2002, the High Court revoked the order issued by the district court. In January 2003, the Company filed a re-appeal with the Taiwanese Supreme Court, and the Supreme Court revoked the High Court’s ruling and dismissed Murphy and its local distributors’ appeal filed with the High Court. The grant of the preliminary injunction order has now become final and, accordingly, it is unlikely that Murphy or its local distributors will be able to obtain preliminary injunctive relief against the Company or its Taiwan customers while the underlying litigation is pending. In October 2002, the Company filed a civil suit against Murphy with the Taiwan Taichung District Court seeking permanent relief in connection with the preliminary injunction order. The Taiwan High Court, Taichung Branch dismissed the Company’s claims on January 2, 2007. The Company filed an appeal on January 26, 2007 with the Supreme Court to contest the decision issued by the Taiwan High Court, which is still pending with the Supreme Court. A security bond for the court cost of approximately $13 was placed with the Taiwan Taichung District Court in connection with the underlying civil suit. If the Company’s effort to receive permanent relief is not successful, the Company may be required to forfeit the bonds and Murphy and its distributors in Taiwan may assert patent infringement claims against the Company, which, if successful, could prevent the Company from selling certain of its products in Taiwan and could result in monetary damages. In December 2001 and July 2003, the Company also filed two cancellation actions with the Taiwanese Intellectual Property Office (“IPO”) to invalidate Murphy’s patent. The IPO rejected the cancellation actions, and the Company filed an administrative appeal and further filed an administrative suit for each of the cases, one of which is pending before the Taipei High Administrative Court and the other was pending before the Supreme Administrative Court. In February 2002, the Company also filed a complaint for unfair competition with the Fair Trade Commission (“FTC”) against Murphy. The FTC dismissed the action and the Company has filed an administrative appeal. That appeal was dismissed and the Company filed an administrative suit. The Taipei High Administrative Court rendered a judgment favorable to the Company, ruling that Murphy violated the Fair Trade Act. The FTC then filed an appeal, which was dismissed by the Supreme Administrative Court. On March 16, 2007, the FTC filed a petition for “retrial” with the Supreme Administrative Court. At present, the outcome of this patent dispute cannot be predicted with reasonable particularity and no impact to the financial statements has been reflected in this respect.

(b) Commitments

At June 30, 2007, the Company had commitments for capital expenditures of approximately $258.

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

(10) Segment Information


	Hong Kong & the PRC			United States		Other countries			Eliminations			Consolidated
Quarter ended June 30, 2007 (unaudited)
Net sales to third parties	$	6,700		$	574	$	4,727		$	—		$	12,001
Transfer between geographic areas		5,153			—		645			(5,798	)		—

Total net sales	$	11,853		$	574	$	5,372		$	(5,798	)	$	12,001

(Loss) Income before tax	$	(2,530	)	$	18	$	(434	)	$	216		$	(2,730	)

Quarter ended June 30, 2006 (unaudited)
Net sales to third parties	$	9,120		$	2,508	$	7,025		$	—		$	18,653
Transfer between geographic areas		8,397			—		1,408			(9,805	)		—

Total net sales	$	17,517		$	2,508	$	8,433		$	(9,805	)	$	18,653

Income (loss) before tax	$	702		$	210	$	208		$	(100	)	$	1,020

(11) Cash Held in an Escrow for Terms of Sale Agreement for Disposal of a Subsidiary

A former subsidiary of the Company (“Warden”) owned certain land use rights and an incomplete industrial building in Shenzhen, the PRC. The incomplete industrial building was originally purchased with the intention of completing the facility for expansion of the Company’s existing production facilities, but this plan was subsequently abandoned. During the fourth quarter of the year ended March 31, 2001, management reassessed the fair value of the building given the downturn in the industrial property market in which the building was located and a provision of $759 was recorded to reduce the carrying value of the building.

During the quarter ended June 30, 2002, the incomplete industrial building and the related land use rights in the PRC, which had an assigned period for 50 years commencing May 1993, were reclassified as “asset to be disposed of by sale” following management’s decision to dispose of the property as a general purpose industrial building. As a result, the property was written down to its fair market value less costs to sell pursuant to SFAS No. 144 “Accounting for the Impairment of Disposal of Long-Lived Assets,” resulting in an asset impairment charge of $13,378 during the year ended March 31, 2003. The net book value of the property and the land use rights were $4,071 and $1,159 respectively as of March 31, 2005 and 2004.

The Company entered into a contract with an independent third party for the sale of Warden. The sale was completed on April 13, 2005 for approximately $7,692 in cash, with approximately $1,282 of the sale proceeds held in escrow as restricted cash. A net gain on disposal of approximately $2,189 was recognized in the first quarter of fiscal 2006.

The escrow fund extended over two consecutive years, commencing with the completion of the sale on April 13, 2005, as follows:

•

The year ended April 13, 2006; and

•

The year ended April 13, 2007.

In accordance with the terms of the sale agreement, immediately following the years ended April 13, 2006 and 2007, approximately $641 and $641, respectively, each representing one half of the full amount established and held in escrow and classified as restricted cash, were released to the Company without any reduction or offsets.

Notes to Condensed Consolidated Financial Statements—(continued)

(in thousands of United States Dollars, except share and per share data, unaudited)

12. Restricted Cash

On October 14, 2005, the Company entered into escrow arrangements appointing an independent third party as an escrow agent (“Escrow Agent”) for a total of $2,501 deposited as restricted cash by the Company. In September 2005, a shareholder of the Company stated its intention to replace the Company’s senior management and effect a merger of the Company with another corporation. The escrows were set up to ensure that obligations of the Company to the officers under their employment contracts would be honored in the future. The Company deposited an amount equal to estimated severance payments and anticipated administrative costs into the escrows. During fiscal 2006, severance payments of $1,600 were paid to the former Chief Executive Officer and the former Vice President and General Counsel. During fiscal 2007, severance payments of $170 were paid to two other former senior executives of the Company and $243 was released back to the Company as free cash as a result of the resignation of a former senior executive of the Company. The remaining funds of $487 in these escrows, which were due to be available for use by the Company on March 15, 2007, were extended beyond March 31, 2007. On April 16, 2007, the Company entered into escrow arrangements with Escrow Agent to increase the funds to $983 as top-up adjustments for increases in compensations of the remaining senior executives and to include three senior executives who had not been covered in the remaining funds.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following management’s discussion and analysis of financial condition and results of operations is based upon and should be read together with the consolidated financial statements of the Company and notes thereto included in this Quarterly Report ~~and~~on Form 10-Q for the ~~Registrant’s~~quarter ended June 30, 2007 (“Quarterly Report”) and our Annual Report on Form 10-K for the year ended ~~March~~ March 31, ~~2004~~2007 (the “2007 Annual Report”).

All references to the “Company,” “Peak,” “we,” “us” or “our” herein are references to Peak International Limited, a company incorporated under Bermuda law on January 3, 1997, and, unless the context otherwise requires, its subsidiaries and predecessors. All references to “Peak (HK)” herein are to Peak Plastic & Metal Products (International) Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of the Company and, unless the context otherwise requires, its subsidiaries and predecessors. References in this Quarterly Report on Form 10-Q (“Quarterly Report”) to our historical business and operations assume that the corporate reorganization in 1997 (the “Restructuring”) by which, among other things, Peak (HK) became a wholly-owned subsidiary of the Company and the Company acquired its other subsidiaries, had already occurred as of the times to which the references relate. Any discrepancies in the tables included in this Quarterly Report between the amounts indicated and the totals thereof are due to rounding. All references to “US Dollars”, “US$” or “$” herein are to United States dollars, and references to “HK Dollars” or “HK$” are to Hong Kong dollars. We refer to our fiscal year ended March 31, 2006 as “fiscal 2006”, our fiscal year ended March 31, 2007 as “fiscal 2007” and our fiscal year ending March 31, 2008 as “fiscal 2008.”

Forward-Looking Statements

Management’s discussion and analysis of financial condition and results of operations and other sections of this Report contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934., Weas ~~intend~~amended. ~~for~~The ~~the~~ forward-looking statements toreflect ~~be covered by the safe harbor provisions for forward-looking statements in these sections. These statements, which include statements regarding~~ our ~~beliefs~~view ~~that our existing cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs in the ordinary course of business for~~ at ~~least~~ the ~~next~~time ~~12 months, statements regarding possible shortages in PVC Resin and price increases in PVC Resin, our beliefs regarding foreign currency fluctuations and the potential impact~~ of ~~currency~~this ~~fluctuations~~Quarterly onReport ~~us,~~with ~~statements~~respect ~~regarding~~to ~~intellectual~~future ~~property~~events ~~rights of third parties, statements regarding our critical accounting policies,~~ and ~~statements~~financial ~~regarding the validity of lawsuits against us are forward-looking statements~~performance. ~~Such~~We ~~forward-looking~~intend ~~statements~~for ~~are identified by use of forward-looking words such as “anticipates,” “believes,” “plans,” “estimates,”~~the ~~“expects,” and “intends” or words or phrases of similar expression. These~~ forward-looking statements ~~are subject~~ to various assumptions, risks and uncertainties, including but not limited to, the Company’s relationship with its processing partner in the PRC, issues related to the renegotiation of its processing agreement, including the method and amount of payments required to be ~~made~~covered thereunder, difficulties related to the transfer of land and buildings in the PRC that could prevent or delay the sale of the incomplete factory in Shenzhen, the PRC, changes in political and economic conditions in general and the unrest in the Middle East, the current war on terrorism and the impact of terrorist activities in the United States and abroad, economic conditions in the semiconductor and disk drive industries, any future economic downturn, demand for the Company’s products, acceptance of new products, technology developments affecting the Company’s products, the Company’s ability to raise additional capital if necessary, the price and availability of raw materials, fluctuations in currency markets, the outcome of lawsuits by ~~and against~~ the ~~Company,~~safe ~~increased~~harbor ~~charges~~provisions for under-absorbed production overhead costs, and those discussed in the Company’s filings with the Securities and Exchange Commission. Actual results could differ materially from those contemplated by the forward-looking statements asin ~~a result of~~ these ~~factors and those set forth under “Factors Which May Affect Operating Results” below~~sections. ~~These~~Examples ~~forward-looking statements speak only as~~ of ~~the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any~~ forward-looking statements ~~contained~~include ~~herein~~statements toregarding ~~reflect~~our ~~any~~beliefs ~~change~~and ~~in the Company’s~~ expectations ~~with~~regarding: ~~regard hereto or any change in events, conditions or circumstances on which any such statement is based.~~

~~All~~• ~~references to~~ the ~~“Company,”~~benefits “Peak,” “we,” “us” or “our” herein are references to Peak International Limited, a company incorporated under Bermuda law on January 3, 1997, and, unless the context otherwise requires, its subsidiaries and predecessors. All references to “Peak (HK)” herein are to Peak Plastic & Metal Products (International) Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of ~~the Company and, unless the context otherwise requires, its subsidiaries and predecessors. References in this Quarterly Report on Form 10-Q (“Quarterly Report”) to~~ our ~~historical~~recycling business ~~and operations assume that the corporate reorganization in 1997 (the “Restructuring”) by which~~, among other things, Peak (HK) became a wholly-owned subsidiary of the Company and the Company acquired its other subsidiaries, had already occurred as of the times to which the references relate. Any discrepancies in the tables included in this Quarterly Report between the amounts indicated and the totals thereof are due to rounding. All references to “US Dollars,” “US$” or “$” herein are to United States dollars, references to “HK Dollars” or “HK$” are to Hong Kong dollars.

•

our distribution capabilities,

•

the benefits of our products,

•

the benefits of our in-house tooling facilities,

•

our ability to meet our cash requirements for fiscal 2008 from our existing cash and cash equivalents and cash flows from operations,

•

our plans to expand capacity and replace fixed assets,

•

the lack of a contractual obligation on our part to pay taxes and other amounts owed by the main production facilities located in Shenzhen in the People’s Republic of China at which our products are manufactured and the assessment of any penalties on such amounts,

•

our expected financial position, business and financing plans for the next 12 months,

•

the sufficiency of our existing cash and cash equivalents and anticipated cash flow from operations to meet our anticipated cash needs in the ordinary course of business for at least the next 12 months,

•

the compliance of our operations in the PRC with the applicable PRC legal and regulatory requirements relating to environmental matters and custom duties,

•

intellectual property rights of third parties,

•

our critical accounting policies, and

•

the validity of lawsuits against us.

Such forward-looking statements are identified by use of forward-looking words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” and “intend” or words or phrases of similar expression. These forward-looking statements are subject to various assumptions, risks and uncertainties, including but not limited to, economic conditions in the semiconductor and disk drive industries, any future economic downturn, demand for our products, our dependence on significant customers, technology developments affecting our products, our ability to raise additional capital if necessary, the price and availability of raw materials, fluctuations in currency markets, the outcome of lawsuits by and against us, difficulties related to working in the PRC, including regional government and processing partner relations and contracts, foreign currency exchange laws, taxation and health issues, and amounts we may have to pay for back taxes and social insurance contributions to the PRC tax authorities. Actual results could differ materially from those contemplated by the forward-looking statements as a result of these factors and those set forth below under Item 1A of Part II “Risk Factors” in this Quarterly Report and in our 2007 Annual Report. These forward-looking statements speak only as of the date hereof. We expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard hereto or any change in events, conditions or circumstances on which any such statement is based. Investors are cautioned not to place undue reliance on these forward-looking statements.

Results of Operations

Net Sales. Net sales ~~increased~~decreased by approximately 1835.17% to $1712.80 million in the first quarter of fiscal ~~2005~~2008 from $1518.17 million in the same quarter of fiscal ~~2004~~2007. ~~The~~All ~~increase~~product ~~was~~categories ~~primarily~~recorded ~~due~~a todecrease ~~an increase~~ in sales ~~of our semiconductor trays, tubes, tapes and reels~~. Net sales of semiconductor trays ~~increased~~decreased by 4031.19% ~~over~~ from the ~~same~~first ~~period~~quarter ~~last~~of ~~year~~fiscal 2007, reflecting a 4823.03% ~~increase~~decrease in sales volume, and aan 511.31% ~~drop~~decrease in average selling price. For the first quarter of fiscal ~~2005~~2008, net sales of tapes and reels ~~increased~~decreased by 2018.1% compared to the first quarter of fiscal ~~2004~~2007, primarily due to a 3521.2% ~~increase~~decrease in sales volume combined with a 113.19% ~~drop~~increase in average selling price. Net sales ~~for~~of ~~tubes~~disk ~~increased~~drive trays decreased by 4045.52% compared to the ~~same~~first ~~period~~quarter ~~last~~of ~~year~~fiscal 2007, ~~primarily~~reflecting ~~due~~a tovolume aincrease 39of 5.76% ~~increase~~that inwas ~~sales~~offset ~~volume~~by ~~for~~a ~~tubes~~decrease ~~and~~in ~~a increase~~average selling price of 048.61%, inwhich ~~the~~was ~~average~~mainly ~~realized~~due ~~sales~~to ~~price~~change ofin ~~tubes.~~sales mix. Net sales ~~for~~of ~~disk~~disc ~~drive~~caddies, ~~trays~~a product that was first introduced in fiscal 2005, decreased byin ~~75.9%~~the ~~compared~~first quarter of fiscal 2008 to ~~the~~nil ~~same~~due ~~period~~to ~~last~~the ~~year,~~merger ~~driven~~in bythe afirst ~~volume~~quarter ~~decrease~~of fiscal 2007 of ~~70.9%~~Seagate and ~~the~~Maxtor, ~~drop~~two inof ~~average~~our ~~selling~~historically ~~price~~larger customers, byand 17the subsequent rationalization of inventory.~~2%.~~ Our disk drive tray sales and new product sales have generally been to ~~one~~a few major ~~customer~~customers or to subcontractors supporting ~~that~~those ~~customer~~customers. These sales are largely dependent on the introduction of new products by ~~that~~those ~~customer~~customers. New product introductions are difficult to forecast ~~both~~ with respect to both timing asand ~~well as~~ demand. We have been producing new custom molds for that customer in anticipation of several new products, but this activity has not yet lead to significant production orders. Mature products, while requiring some replacement trays, do not generally generate a sustainable high level of revenue. As a result, ~~revenue from~~ sales of our disk drive trays ~~has~~and new products have, and will in the future, fluctuate dramatically with the corresponding fluctuations in the introduction of new products.

10Gross (Loss) Profit. Gross profit was $0.6 million in the first quarter of fiscal 2008 in comparison to $4.8 million in the first quarter of fiscal 2007. Gross margin decreased as a percentage of sales from 25.9% in the first quarter of fiscal 2007 to 5.4% in the same quarter of fiscal 2008. The gross margin was unfavorably impacted by several factors. First, the reduced sales resulted in a greater proportion of fixed manufacturing overhead being absorbed in cost of goods sold. Second, the gross margin for the first quarter of fiscal 2008 also included approximately $0.6 million of unfavorable material cost and usage variances and $0.3 million of finished goods that were scrapped due to obsolescence.

~~Gross~~Selling ~~Profit~~and Marketing. Selling ~~Gross~~and ~~profit~~marketing ~~increased~~expenses decreased by 15.2% to $51.39 million in the first quarter of fiscal ~~2005~~2008 from $42.53 million in the first quarter of fiscal ~~2004.~~2007 ~~Gross margin~~ as a ~~percentage~~result of ~~sales~~cost ~~improved~~savings ~~to 29.9% in the first quarter of fiscal 2005~~ from ~~29.7% in~~ the ~~same~~streamlining ~~quarter~~ of ~~fiscal~~logistics ~~2004. The increases in gross profit~~ and gross margin percentage were attributable to more efficient factory utilization as volume increased as well as technological improvements that mitigated the increased costs of petroleum based raw materialswarehousing.

~~Income~~General ~~from Operations~~and Administrative. General Anand ~~operating~~administrative ~~income~~expenses ofdecreased ~~$423,000~~by ~~was~~14.2% ~~recorded in the first quarter of fiscal 2005 compared~~ to $~~110,000~~1.4 million in the first quarter of fiscal ~~2004.~~2008 ~~Operating margin improved~~ from 0$1.7%6 million in the first quarter of fiscal ~~2004~~2007 toas ~~2.3%~~a inresult of the ~~first~~streamlining ~~quarter~~ of ~~fiscal~~operations ~~2005.~~and ~~The~~ improvement in operating ~~income was due primarily to improved gross margin, improved factory utilization and operating efficiency~~efficiencies.

~~Selling~~Other ~~and Marketing~~ expenses—net. Other ~~Selling and marketing~~ expenses—net ~~increased~~were byprimarily ~~13.2%~~comprised ~~to $3.1 million in the first quarter~~ of ~~fiscal~~losses ~~2005~~ from ~~$2.8~~foreign currency ~~million~~transactions ~~in the first quarter of fiscal 2004, primarily~~ due to anthe ~~increase~~relative instrength ~~freight charges~~or ~~and~~weakness ~~delivery expenses~~ of ~~$148,990~~the asUS ~~well~~dollar asat anvarious ~~increase~~times incompared ~~sales~~with ~~commissions~~the ofother ~~$56,347~~currencies asthat awe ~~result~~use ofto ~~increased~~conduct ~~sales of~~ our ~~products during the first quarter of fiscal 2005~~business.

~~General~~Interest ~~and Administrative expenses~~income—net. Interest ~~General~~income—net ~~and administrative expenses~~ increased by 1059.48% to $~~1.7~~187,000 ~~million~~for in the first quarter of fiscal ~~2005~~2008 from $~~1.5~~117,000 ~~million~~for in the first quarter of fiscal ~~2004~~2007 ~~primarily~~ due to aincreases ~~refund~~both in ~~the~~deposits placed ~~amount~~with ofbanks ~~$81,000~~and ~~from our employer funded pension plan~~ in ~~the~~interest ~~first~~rates ~~quarter of fiscal 2004. The refund was a result of the return of our contributions to the pension plan~~ for ~~employees~~such ~~who have subsequently left us~~deposits.

~~Other~~Income ~~Expenses—net~~Tax Expense. Income ~~Other~~tax ~~Expenses~~expense ~~—net~~of ~~primarily~~$1,000 ~~represented~~was ~~differences in realized and unrealized exchange (losses) gains that we~~ recorded ~~arising from transactions in foreign currencies. During~~for the first quarter of fiscal ~~2005~~2008, acompared ~~net~~to ~~exchange~~an ~~loss~~income oftax ~~$80,000~~expense ~~was~~of ~~recorded compared to~~ $5982,000 recorded in the first quarter of fiscal ~~2004.~~year ~~The loss was primarily due to unfavorable movements of New Taiwan Dollars and Euros against the US Dollar~~2007.

~~Interest~~Net (Loss) Income. We ~~Interest~~had ~~income~~a ~~decreased~~net ~~by 34.0%~~loss toof approximately $~~33,000~~2.7 million for the first quarter of fiscal ~~2005~~2008, ~~from~~compared to a net income of $~~50,000~~0.9 million for the ~~first~~same quarter of fiscal ~~2004~~2007, ~~primarily~~reflecting ~~due~~the toeffects ~~reductions~~of inthe ~~bank~~factors ~~deposit~~discussed ~~interest rates and average cash balances~~above.

~~Income~~(Loss) ~~Tax~~Earnings ~~Expense~~Per Share. Diluted Anloss ~~income~~per ~~tax~~share ~~expense of $52,000 was recorded~~ for the first quarter of fiscal ~~2005,~~2008 ~~compared~~was to $~~179~~0.22,~~000~~ ~~recorded~~compared into ~~the~~diluted ~~first~~earnings per ~~quarter~~share of ~~fiscal year 2004. In June 2003, the Hong Kong Legislative Council passed a bill increasing the Hong Kong corporate tax rate from 16.~~$0~~% to 17~~.~~5%.~~08 Wefor ~~revalued our deferred tax liabilities at this new rate and~~ the ~~impact~~same ~~was~~period alast ~~$146~~year,~~000~~ ~~charge~~reflecting ~~to income tax expense in~~ the ~~first~~effects ~~quarter~~ of ~~fiscal~~the ~~2004~~foregoing factors.

~~Net~~14 Income (Loss). We had a net income of approximately $324,000 for the first quarter of fiscal 2005, compared to a net loss of $78,000 for the same quarter of fiscal 2004, reflecting the effects of the previously discussed factors.

Earnings (Losses) Per Share. Diluted earnings per share for the first quarter of fiscal 2005 was $0.03, compared to a diluted losses per share of $0.01 for the same period last year, reflecting the effects of the foregoing factors.

Liquidity and Capital Resources

Our net cash provided by operating activities was $10.8 1 million for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal 302007, ~~2004,~~ compared to net cash provided by operating activities of $12.65 million for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30, 2003~~2006. This ~~increase in net cash provided by operating activities~~ was primarily due to an ~~increase in~~ operating ~~profit,~~loss ~~improved collections~~of ~~and~~$2.8 amillion ~~decrease~~for in the ~~amount~~first quarter of ~~tax~~fiscal ~~reserve~~2007 ~~certificates~~in wecomparison ~~were~~to ~~required~~operating toprofit ~~purchase~~of ~~during~~$1.0 million for the first quarter. of fiscal 2006.

Net cash used in investing activities was $20.36 million for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal 302007, ~~2004,~~ compared to net cash used in investing activities of $1.24 million for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June 30,~~fiscal ~~2003~~2006. This ~~increase~~ was primarily due to ~~capital~~decreased ~~expenditures in the amount of $2.3 million for the~~ acquisition of ~~new~~ equipment ~~for our Shenzhen, PRC factory~~ during the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30, 2004~~2007.

~~Net~~No net cash was provided by ~~financing~~nor ~~activities was $288,000 for the three months ended June 30, 2004, compared to net cash~~ used in financing activities ~~of $2.4 million~~ for the ~~three~~first ~~months~~quarter ~~ended~~of ~~June~~fiscal ~~30,~~2007 ~~2003.~~or ~~The~~the ~~decrease~~first inquarter ~~net~~of ~~cash~~fiscal ~~used~~2006, inas ~~financing~~there ~~activities~~ was ~~primarily~~no ~~due~~issuance toor ~~the~~ repurchase of ~~shares of our~~ common stock ~~worth~~ ~~$2.4~~or ~~million~~other financing transactions during ~~the~~these ~~first quarter of fiscal 2004~~periods.

11As of June 30, 2007, we had commitments for capital expenditures of $0.3 million. The actual amounts of capital expenditures may vary substantially from those budgeted or estimated for a variety of reasons, including changes in market conditions, unavailability or changes in scheduled delivery of specific equipment, changes in interest rates and other factors. In addition, we plan to continue to expand capacity and replace our obsolete fixed assets in future periods and plan to fund such expansion through our current cash reserves, future cash flow from operations and new bank borrowings as required.

As of June 30, ~~2004~~2007, we had ~~commitments~~no ~~for~~outstanding ~~capital~~bank ~~expenditures~~borrowings. ofOur ~~$155,000~~principal ~~and~~source ~~had~~of noliquidity ~~outstanding~~consisted ~~bank~~of ~~borrowings~~$20.0 ~~Our~~million in cash and cash equivalents ~~balance at June 30, 2004 was $20~~.2 ~~million.~~ We believe that our existing cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs in the ordinary course of business for at least the next 12 months. If our existing cash and cash equivalents and cash generated from operations isare insufficient to satisfy our liquidity requirements, we may seek to sell additional public or private equity securities or obtain debt financing. There can be no assurance that ~~additional~~we ~~funding~~ will be ~~available~~able atto ~~all~~sell additional equity securities, publicly or ifprivately ~~available,~~in ~~will~~the beamounts ~~obtained~~that onmay ~~terms~~be ~~favorable~~needed toor usat all. ~~Additional~~There ~~financing~~can ~~may~~be ~~also~~no beassurance ~~dilutive~~that toadditional ~~our~~financing ~~existing~~will ~~shareholders,~~be or available in the ~~case~~amounts ofthat ~~debt~~may be needed, ~~may~~or ~~subject~~if usavailable, towill ~~restrictive~~be ~~covenants~~obtained ~~and~~on ~~require~~terms usfavorable to ~~make~~us. ~~periodic~~Additional ~~payments~~equity ofor ~~principal~~debt ~~and~~financing ~~interest~~may also be dilutive to our existing shareholders.

Critical Accounting Policies

In preparing our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we must make a variety of estimates that affect the reported amounts and related disclosures. ~~The~~We ~~following~~consider certain accounting policies ~~are~~related ~~currently~~to ~~considered~~share-based ~~most~~compensation, revenue ~~critical~~recognition, toallowance ~~the~~for ~~preparation~~doubtful accounts, inventory valuation, valuation of ~~our~~long-lived ~~financial~~assets, ~~statements.~~deferred Iftaxes ~~actual~~and ~~results~~property, ~~differ~~plant ~~significantly~~and equipment to be critical policies due to the estimation process involved in each. Management ~~from~~discusses ~~management’s~~its estimates and ~~projections,~~judgments ~~there~~with ~~could~~the beAudit aCommittee ~~material~~of ~~effect on~~ our ~~financial~~Board ~~statements~~of Directors.

~~Revenue~~For ~~Recognition.~~a ~~Our~~more ~~revenue~~detailed isdescription ~~recognized~~on ~~when~~ the application ~~product~~of ~~has~~these ~~been shipped~~ and ~~title~~other toaccounting ~~the~~policies, ~~product~~see ~~has~~Note ~~transferred~~2 toof the ~~customer.~~Consolidated ~~Title~~Financial ~~to the~~Statements ~~product~~included ~~may~~in ~~transfer~~our to2007 ~~the~~Annual ~~end~~Report. ~~customer~~Reference oris ~~distributor~~also ~~when~~made ~~shipped~~to orthe ~~when~~discussion ~~received~~of by the ~~customer~~application ~~based~~of onthese acritical ~~specific~~accounting ~~agreement.~~policies Weand estimates ~~evaluate~~contained ~~the~~in ~~provision~~Management’s ~~for~~Discussion ~~estimated~~and ~~returns~~Analysis ~~monthly,~~in ~~based~~our on2007 ~~historical~~Annual ~~sales~~Report. ~~and~~During ~~returns.~~the Tothree ~~date~~months weended ~~have not~~June 30, ~~experienced~~2007, there were no significant ~~returns.~~or ~~Any~~material ~~increase~~changes in the ~~level~~application of ~~returns~~critical ~~could~~accounting ~~have~~policies athat ~~material~~would require ~~and~~an ~~adverse~~update ~~effect~~to onthe information provided in our ~~financial~~2007 ~~statements~~Annual Report.

~~Allowance~~Share-Based ~~for~~Compensation Doubtful Accounts. Allowance for doubtful accounts is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable on the balance sheet are stated net of such provision. We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligation to us, we record a specific reserve for bad debts against amounts due. A provision is also made based on the aging of the receivables. If circumstances change, such as the incurrence of higher than expected defaults or an unexpected material adverse change occurs regarding a major customer’s ability to meet its financial obligations to us, our estimates of the recoverability of amounts due to us could be reduced by a material amount.

~~Inventory~~In ~~Valuation~~December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123R, which requires companies to measure and recognize compensation expense for all share-based payments at fair value. Share-based payments include stock options and non-vested share grants. We ~~write~~grant ~~down~~options to purchase common stock to some of our ~~inventory~~employees ~~for~~and ~~estimated obsolescence~~directors orunder ~~unmarketable~~various ~~inventory~~plans at prices equal to the ~~difference~~market ~~between~~value of the stock on the dates the options were granted. We historically have accounted for stock options using the method prescribed in the Accounting Principles Board (“APB”) 25 whereby stock options are granted at market price and no compensation cost ofis ~~inventory~~recognized, and disclosed the ~~estimated~~pro ~~market~~forma ~~value~~effect on net earnings assuming compensation cost had been recognized in accordance with SFAS 123. SFAS 123R, which was effective for us since April 1, 2006, eliminates the ability to account for share-based ~~upon~~compensation ~~assumptions~~transactions ~~about~~using ~~future~~APB ~~demand~~25, and ~~market~~generally ~~conditions~~requires that such transactions be accounted for using prescribed fair-value-based methods. AtSFAS ~~each~~123R ~~balance~~permits ~~sheet~~public companies to adopt its requirements using one of two methods: (a) a “modified prospective” method in which compensation costs are recognized beginning with the effective date based on the requirements of SFAS 123R for all share-based payments granted or modified after the effective date, ~~inventory~~and based on ~~hand~~the inrequirements ~~excess~~of SFAS 123 for all awards granted to employees prior to the effective date of ~~one~~ ~~year’s~~SFAS ~~demand~~123R orthat ~~usage~~remain unvested on the effective date or ~~those~~(b) a ~~that~~“modified retrospective” ~~were~~method ~~produced~~which ~~more~~includes ~~than~~the ~~twelve~~requirements ~~months~~of ~~ago~~the modified prospective method described above, ~~are~~but ~~written~~also ~~down~~permits companies to ~~zero.~~restate Ifbased ~~actual~~on ~~future~~the ~~demand~~amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either for all periods presented or ~~market~~prior ~~conditions~~interim ~~are~~periods ~~less~~of ~~favorable~~the ~~than~~year ~~those~~of ~~projected~~adoption. byWe ~~management,~~have ~~additional~~adopted ~~write-downs~~SFAS ~~may~~123R ~~be required~~using the modified prospective method.

~~Valuation~~15 of Long-lived Assets. We assess the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

As part of our adoption of Statement of Financial Accounting Standards (“SFAS”) 123R as of April 1, 2006, we are required to recognize the fair value of share-based compensation awards as an expense. We apply the Black-Scholes option-pricing model in order to determine the fair value of stock options on the date of grant, and we apply judgment in estimating key assumptions that are important elements in the model such as the expected stock-price volatility, expected stock option life and expected forfeiture ratios. Our estimates of these important assumptions are based on historical data and judgment regarding market trends and factors. If actual results are not consistent with our assumptions and judgments used in estimating these factors, we may be required to record additional share-based compensation expense, which could be material to our results of operations.

Revenue Recognition

Our revenue is recognized when product has been shipped and title to the product has transferred to the customer. Title of the product may transfer to the customer when shipped to or received by the customer based on the specific purchase terms of the agreement. We evaluate the provision for estimated returns monthly, based on historical sales and returns. To date we have not experienced significant returns. Any increase in the level of returns could have a material and adverse effect on our financial statements.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is made against accounts receivable to the extent they are considered to be doubtful. Accounts receivable in the balance sheet are stated net of such provision. We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligation to us, we record a specific reserve for bad debts against amounts due. A provision is also made based on the aging of the receivables. If circumstances change, such as the incurrence of higher than expected defaults or an unexpected material adverse change occurs regarding a major customer’s ability to meet its financial obligations to us, our estimates of the recoverability of amounts due to us could be reduced by a material amount.

Inventory Valuation

We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. At each balance sheet date, inventory on hand in excess of one year’s demand or usage or those that were produced more than twelve months ago, are fully reserved for a net carrying value of zero. If actual future demand or market conditions are less favorable than those projected by management, additional write-downs may be required.

Valuation of Long-lived Assets

We assess the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

•

significant under-performance relative to expected historical or projected future operating results;

•

significant changes in the manner of our use of the asset;

•

significant negative industry or economic trends; and

•

our market capitalization relative to net book value.

Upon the existence of one or more of the above indicators of impairment, we test such assets for a potential impairment. The carrying value of a long-lived asset is considered impaired when the estimated future cash flows, undiscounted, are less than the asset’s carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

~~Asset~~16 to be Disposed of By Sale. Asset to be disposed of by sale represents the factory under construction in Shenzhen, the PRC, together with the land use right on which the building is built and is stated at fair value less cost to sell as of the balance sheet date in accordance with SFAS No. 144 “Accounting for the Impairment of Disposal of Long-Lived Assets.” Fair value was calculated on the basis of a professional valuation report on the property provided by an independent appraiser.

Deferred Taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes and tax bases of assets and liabilities in each of the jurisdictions in which we operate. This process involves us

12As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes and tax bases of assets and liabilities in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and, to the extent we believe that recovery is more unlikely than likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations. Any change in the future recoverability of the deferred tax assets could significantly affect the results of our operations or cash flows.

estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilitiesProperty, ~~which~~Plant ~~are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income,~~ and, to the extent we believe that recovery is more unlikely than likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include anEquipment expense within the tax provision in the statement of operations. Any change in the future recoverability of the deferred tax assets could significantly affect the results of our operations or cash flows.

Property, plant and equipment, ~~net Property, plant and equipment~~ is stated at cost less accumulated depreciation. Gains or losses on disposals are reflected in current operations. Major expenditures for betterments and renewals are capitalized. All ordinary repairs and maintenance costs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives. The useful lives of property, plant and equipment adopted for depreciation purposes are as follows:

The useful lives of property, plant and equipment adopted for depreciation purposes are as follows:


Buildings		10 years
Plant, machinery and equipment		5-10 years
Molds		3-5 years
Leasehold improvements, furniture, fixtures and motor vehicles		5-10 years

Buildings		10 years
Plant, machinery and equipment		5 -10 years
Molds		3 – 5 years
Leasehold improvements, furniture, fixtures and motor vehicles		5 -10 years

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

~~Factors~~Currency ~~Which~~Exchange ~~May Affect~~Rate ~~Operating~~Fluctuations ~~Results~~

~~The~~Our ~~risks~~sales ~~and~~are ~~uncertainties~~denominated primarily in US dollars while our cost ~~described~~of ~~below~~goods sold are ~~not~~generally ~~the~~incurred ~~only~~in ~~ones~~US wedollars, ~~face~~Hong Kong dollars and Renminbi, and our operating expenses are generally denominated in Renminbi, Hong Kong dollars, Singapore dollars, New Taiwanese dollars and US dollars. IfIn anaddition, ~~adverse~~a substantial ~~outcome~~portion of ~~any~~our ofcapital expenditures, primarily for the ~~following~~purchase ~~risks~~of ~~actually~~equipment, ~~occurs~~has been and is expected to continue to be denominated in US dollars, Renminbi, Japanese Yen and the Euro. Consequently, a portion of our ~~business~~costs and operating margins may be affected by fluctuations in exchange rates, ~~financial~~primarily ~~condition~~between orthe US dollar and other currencies. Our results of operations ~~could~~and befinancial ~~materially~~condition ~~and~~could be adversely affected. Inby ~~evaluating~~fluctuations ~~our~~in ~~business, shareholders~~currency ~~should~~exchange ~~consider~~rates ~~carefully~~or the imposition ~~following~~of ~~factors~~new inor ~~addition~~additional tocurrency controls in the ~~other~~jurisdictions ~~information~~in ~~presented~~which ~~herein~~we operate. At June 30, 2007 and 2006, we had no outstanding foreign exchange contracts.

As the Hong Kong dollar is officially pegged to the US dollar and the Renminbi is controlled by the PRC government such that it only trades within a limited range against the US dollar, unless there are significant changes in the policies of the Hong Kong and the PRC government, fluctuations in the exchange rates of the Hong Kong dollar and the Renminbi are not expected to have a significant impact on our results of operations. However, should the PRC government allow the Renminbi to have a wider trading range, resulting in a significant appreciation of the Renminbi against the US dollar, our production costs will increase and our operating margins will erode.

For the quarter ended June 30, 2007, we had quarterly expenses in Renminbi of approximately $4.8 million. If the exchange rate of US dollars were to increase by 5% against Renminbi, we would see an increase in expenses of approximately $0.2 million per quarter. In addition, we had approximately $20.0 million of cash and cash equivalents as of June 30, 2007, of which approximately $1.1 million was denominated in Renminbi. If the exchange rate of US dollars were to increase by 5% against Renminbi, we would potentially suffer loss by approximately $0.05 million in the account reflection.

We do not anticipate significant material risk from the exchange rate of the US dollar with regards to Japanese Yen, Hong Kong dollars, Euro, Singapore dollars and New Taiwanese dollars.

Item 4T.

Controls and Procedures

(a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

At the end of fiscal 2008, Section 404 of the Sarbanes-Oxley Act will require our management to provide an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accountants will be required to audit management’s assessment at the end of fiscal 2009. We are in the process of performing the system and process documentation, evaluation and testing required for management to make this assessment and for its independent registered public accountants to provide their attestation report. We have not completed this process or assessment, and this process will require significant amounts of management time and resources. In the course of evaluation and testing, management may identify deficiencies that will need to be addressed and remediated.

(b) Changes in internal control over financial reporting. There was no significant change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with management’s evaluation during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

See Note 9, “Commitments and Contingencies,” of our unaudited condensed consolidated financial statements contained in Part I of this Quarterly Report.

Item 1A.

Risk Factors

In addition to the other information in this Quarterly Report, the following factors should be considered carefully in evaluating our business and prospects:

Our operating results are difficult to predict and are likely to fluctuate significantly based on several factors, which can cause our stock price to decline.

Our operating results are affected by a wide variety of factors that could materially affect net sales and profitability or lead to significant fluctuations in our quarterly or annual operating results. These factors include, among others:

• the price of raw materials, the majority of which are petroleum derivatives. Prices of these raw materials are significantly affected by oil prices which are volatile;

•

factors relating to conditions in the semiconductor, disk drive and electronic industries including:

•— lower demand for products;

•— increased price competition;

•— downturns and deterioration of business conditions;

•— technological changes and the introduction of new products; and

•— changes in production processes in the semiconductor and electronic industries which could require changes in packaging products;

• ~~capital~~although ~~requirements~~we do not believe that it is our liability, the need for us to pay, and the ~~availability~~amounts that we have previously paid and might in the future again pay,on a voluntary basis for certain tax, social insurance contributions and potential penalties on behalf of ~~funding~~the unaffiliated PRC company that operates our main production facilities in Shenzhen, the PRC, which we refer to as the Factory, in order to avoid the seizure of the Factory’s assets and keep it operational, as well as claims resulting from employee lawsuits against the Factory;

•

our capital requirements and the availability of funding;

•

our expansion plan and possible disruptions caused by the installation of new equipment or the construction of new facilities;

•

difficulties in recycling trays manufactured using our proprietary plastic compounds;

•

the lack of long-term purchase or supply agreements with customers;

•

the loss of key personnel or the shortage of available skilled employees;

• our ability to sell our new plant that is substantially completed;

•

international political or economic events or developments, including those relating to Hong Kong and the PRC;

13• our relationship with our processing partner in the PRC and the ability of the government of the PRC to seize the assets and shut down the Factory;

•

production volume fluctuations and the management of our inventories;

• currency fluctuations and foreign exchange rules and regulations in the PRC;

•

the recurrence of SARS or other major health issues in Asia;

• the outcome of our patent litigation in Taiwan; and

• the imposition of fines, penalties and bonds ~~required~~arising byfrom violations of rules and regulations in the PRC ~~due~~relating to ~~violations~~customs ofregulations, ~~its~~foreign currency exchange rules, taxation, the withholding of taxes for employees and other laws and regulations.

Unfavorable changes in the above or other factors could substantially harm our results of operations or financial condition. We believe that period to period comparisons of our results of operations will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our results of operations in one or more periods fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock may decline, possibly by a significant amount.

We depend on the health of the semiconductor, disk drive and ~~electronics~~ electronic industries which are highly cyclical and the decline in demand for products in these industries could severely affect our net sales and financial results.

Our net sales depend on increased demand for our products from manufacturers of semiconductor, disk drive and electronic components. Any deterioration of business conditions in the semiconductor industry, including lower demand for semiconductor products, decreased unit volume of semiconductor products shipped, other factors resulting in decreased demand for packaging products, or increased price competition in the semiconductor industry could result in increased price pressure on suppliers to the semiconductor industry, and could have a material adverse effect on our results of operations and financial condition. The industries we serve are characterized by rapid technological change leading to more complex products, evolving industry standards, intense competition and fluctuations in demand. From time to time, demand for electronic systems, which generally include both semiconductors and electronic components, has suffered significant downturns, which in some cases have been prolonged. For example, during 2002 and 2003, demand for our products decreased as the overall economy and the electronic industry experienced a general downturn in business. These downturns have been characterized by diminished product demand, product over-capacity and accelerated erosion of average selling prices. Any future downturn in the semiconductor, or disk drive or ~~electronics~~electronic industries may substantially harm our results of operations or financial condition.

Our customer base is concentrated and the loss of one or more of our key customers would harm our business.

Our top 10 customers together accounted for 6467.4%, 6069.07% and 5967.58% of our net sales in fiscal ~~2004~~2007, fiscal ~~2003~~2006 and fiscal ~~2002~~2005, respectively. For the first quarter of fiscal 2008, our top 10 customers together accounted for 65.4% of our net sales. We are dependent upon a single customer, Seagate Technology, for substantially all sales of our disk drive trays, with whom we have no long-term contract. InWe ~~addition,~~also ~~in fiscal 2004, ASE accounted for 11.7% of our net sales. Like Seagate Technology, we~~ do not have a long-term ~~contract~~contracts with ~~ASE~~our other top 10 customers. Our ability to maintain close, mutually beneficial relationships with our leading customers is important to the ongoing growth and profitability of our business. Although our sales to specific customers have varied from year to year, our results of operations have been dependent on a number of significant customers and the conditions of their respective industries. All of our customers operate in the global semiconductor, disk drive and electronic industries which historically have been highly cyclical. As a result of the concentration of our customer base, the loss or cancellation of business from, or significant changes in scheduled deliveries or decreases in the prices of products or services provided to, any of these customers could materially and adversely affect our results of operations and financial condition. Our sales are made pursuant to purchase orders, and therefore, we generally have no agreements with or commitments from our customers for the purchase of products. Although customers typically provide us with forecasts of their requirements, these forecasts are not binding. Our customers may not maintain or increase their sales volumes or orders for our products and we may be unable to maintain or add to our existing customer base.

~~Our~~20 ~~operations are concentrated in the People’s Republic of China and we are subject to the risks associated with international operations, which could lead to increased costs and harm our business.~~

As ofour ~~June~~sales ~~30,~~to ~~2004~~specific customers have varied from year to year, ~~substantially~~our ~~all~~results of ~~our~~operations ~~fixed~~have ~~assets~~been ~~and~~dependent ~~inventories~~on ~~were~~a ~~located~~number inof ~~Shenzhen,~~significant customers and the conditions ~~PRC~~of their respective industries. ~~Our~~Substantially ~~main~~all ~~production~~of ~~facilities~~our ~~are~~customers ~~located~~operate in ~~Shenzhen,~~ the ~~PRC~~global ~~and~~semiconductor, ~~are~~disk ~~operated~~drive byand anelectronic ~~unaffiliated~~industries ~~PRC~~which ~~company~~historically ~~under~~have abeen ~~processing~~highly ~~agreement that~~cyclical. ~~obligates~~Other itevents tosuch ~~provide~~as ~~all~~consolidation ofwithin the semiconductor ~~personnel~~industry ~~for~~could ~~the~~also ~~operation~~materially ofimpact our ~~facilities~~sales. ~~and~~For toexample ~~render~~the ~~assistance~~merger in ~~dealing~~the ~~with~~first ~~matters~~quarter ~~relating~~of tofiscal ~~the~~2007 ~~import~~ of ~~raw~~Seagate ~~materials~~ and ~~the~~Maxtor, ~~export~~two of our ~~products.~~historically ~~Our~~larger ~~existing production facilities in Shenzhen~~customers, and the ~~PRC~~subsequent ~~are~~rationalization ~~located~~of oninventory ~~land~~had ~~leased~~a substantial ~~from~~impact ~~the~~on ~~PRC~~our ~~government~~results byof ~~one~~operation. ofAs ~~our~~a ~~wholly-owned~~result ~~subsidiaries~~of ~~under~~the ~~land~~concentration ~~use~~of ~~certificates~~our ~~and~~customer ~~agreements~~base, ~~with~~the aloss ~~remaining~~or ~~term~~cancellation of ~~approximately~~business 38from, ~~years.~~or ~~Our~~significant ~~assets~~changes ~~and~~in ~~facilities~~scheduled ~~located~~deliveries inor ~~the~~decreases ~~PRC~~in ~~and~~ the ~~PRC~~prices ~~company’s operation~~ of ~~these~~products ~~facilities~~or ~~are~~services provided ~~subject~~ to, ~~the~~any ~~laws~~of ~~and~~these ~~regulations~~customers ofcould ~~the~~materially ~~PRC~~ and adversely affect our results of operations inand ~~the~~financial ~~PRC~~condition. ~~are~~Our ~~subject~~sales toare ~~the~~made ~~economic~~pursuant ~~and~~to ~~political~~purchase ~~situation~~orders, ~~in the PRC. We~~ and ~~our~~therefore, ~~processing~~we ~~partner~~generally have ~~modified~~ ~~the~~no ~~manner~~agreements inwith ~~which~~or ~~the~~commitments ~~production~~from ~~facilities~~our customers ~~are~~for ~~operated, and have modified~~ the ~~operating~~purchase ~~agreement~~of ~~from time to time to reflect these changes~~products. ~~While~~Although wecustomers ~~expect~~typically toprovide beus ~~able~~with toone ~~renegotiate~~or ~~the~~two ~~terms~~month ~~and~~forecasts ~~conditions~~ of ~~the~~their ~~processing~~requirements, ~~agreement in~~these ~~the~~forecasts ~~future~~are tonot ~~reflect~~binding. ~~the~~Our ~~practices~~customers ~~and~~may ~~procedures~~not inmaintain ~~effect~~or atincrease ~~this~~their ~~time~~sales ~~and~~volumes toor ~~effect~~orders ~~further~~for ~~changes,~~our products ~~there~~and ~~are no assurances that~~ we ~~will~~may be ~~able~~unable to domaintain ~~so,~~or ~~which~~add ~~could lead~~ to ~~increased~~our ~~costs~~existing ~~and~~customer ~~harm our business~~base.

14As a result of the resignation of one of our directors in May 2007, we are not in compliance with NASDAQ rules regarding the composition of our board of directors and audit committee, and there is a risk of delisting if the non-compliance is not cured within the time period allowed by NASDAQ.

~~The~~On ~~operations~~May 14, 2007, Mr. Thomas Gimple resigned from his position as a director and as a member of our ~~production~~Audit ~~facilities~~Committee inof ~~Shenzhen,~~our Board of Directors. The resignation of Mr. Gimple was not the ~~PRC~~result ~~may~~of beany ~~harmed~~disagreement bywith ~~changes~~us. inAs a result of Mr. Gimple’s resignation, our Audit Committee does not meet the ~~laws~~requirement of NASDAQ Rule 4350(d)(2)(A) for three independent members, and ~~regulations~~we are out of compliance with NASDAQ Rule 4350(c)(1), which requires a majority of independent directors. Consequently, we are in the ~~PRC~~process orof searching for a new candidate to serve on our board of directors to satisfy the ~~interpretation~~NASDAQ ~~thereof,~~Rules. We have notified NASDAQ of such circumstances as ~~those~~required ~~relating~~by tothe ~~taxation,~~applicable ~~import~~NASDAQ rules, and ~~export~~on ~~tariffs~~May 29, ~~environmental regulations~~2007, ~~land~~NASDAQ ~~use~~formally ~~rights,~~gave ~~property,~~written ~~foreign~~notice ~~currency~~to ~~exchange~~us ~~regulations~~regarding ~~and~~our ~~other~~noncompliance ~~matters~~with the NASDAQ rules. ~~Prior~~In tothe ~~September 2002~~letter, NASDAQ confirmed that we ~~exported~~have ~~all~~a cure ~~the~~period ~~products~~to ~~manufactured~~regain atcompliance, which shall be until the earlier of our ~~production~~next ~~facilities~~annual inshareholders’ ~~Shenzhen~~meeting or May 14, ~~the~~2008; ~~PRC.~~or ~~Accordingly,~~if weour ~~were~~next ~~not~~annual ~~subject~~shareholders’ tomeeting ~~certain~~is ~~PRC~~held ~~taxes~~before ~~and~~November 12, ~~are~~2007, ~~exempt~~then ~~from~~no ~~customs~~later ~~duties~~than November 12, on2007. ~~imported~~While ~~raw~~we ~~materials~~have ~~and~~every ~~exported~~intent ~~products.~~to ~~During~~fill the ~~fourth~~ ~~quarter~~position ofin ~~fiscal~~the ~~2003~~timeframe permitted, if we ~~finished~~cannot cure such non-compliance, we face the ~~procedure~~risk of ~~setting~~being updelisted afrom ~~wholly~~the ~~owned~~NASDAQ ~~subsidiary~~Global inMarket. If our stock is delisted from the ~~PRC~~NASDAQ Global ~~and~~Market, ~~now~~it awould ~~small~~trade ~~portion~~on ofthe ~~our~~OTC ~~products~~Bulletin ~~are~~Board ~~sold~~(the ~~locally~~“OTCBB”) or in the ~~PRC~~“Pink Sheets” maintained by the National Quotation Bureau. ~~This~~Delisting ~~newly~~from ~~established~~the ~~PRC~~NASDAQ ~~subsidiary~~Global isMarket ~~subject~~could toreduce ~~PRC~~the ~~taxes~~liquidity ~~and~~of ~~custom~~the market for our ~~duties~~stock onand ~~materials~~negatively ~~imported~~impact ~~for~~our ~~PRC~~reputation ~~sales~~and consequently our business.

~~According~~Our ~~to customs~~operations ~~rules~~are inconcentrated ~~the PRC, it is possible that we may be subject to classification by the Chinese customs authorities~~ in ~~a manner that would require us to supply a substantial bond against customs duties that we would have to pay if we were importing material for ultimate sale in~~ the ~~PRC.~~People’s WeRepublic ~~may~~of ~~also~~China ~~be subject to significantly higher administrative importation costs generally. These measures could harm our ability to manufacture products at a competitive price~~ and ~~our results of operations could suffer. In addition, if~~ we are ~~required~~subject to ~~post~~the arisks ~~bond~~associated ~~in connection~~ with ~~our~~international ~~exemption status from PRC duties on imported raw materials for export sales and exported products~~operations, wewhich ~~will~~may ~~experience~~negatively aaffect ~~substantial drain of~~ our ~~liquid resources~~business. ~~We cannot assure that we will be able to provide the required bond at a commercially feasible cost, or at all.~~

WeAs ~~may~~of ~~become~~June 30, ~~subject~~2007, substantially toall ~~PRC~~of ~~taxes~~our fixed assets and ~~may~~inventories bewere ~~required~~located toin ~~pay~~Shenzhen, ~~customs~~the ~~duties~~PRC. Our main production facilities are located in Shenzhen, the ~~future~~PRC ~~even~~and ~~under~~are ~~the~~operated pursuant to a processing agreement. Ifwith wean ~~are~~unaffiliated ~~required~~PRC tocompany, ~~pay~~which we ~~PRC~~refer ~~taxes~~to oras ~~customs~~the ~~duties~~Factory, that obligates it to provide all of the personnel for the operation of our ~~results~~facilities and to render assistance in dealing with matters relating to the import of ~~operations~~raw ~~could~~materials ~~suffer~~and the export of our products. We ~~believe~~are ~~that~~dependent on continued good relations with our ~~operations~~processing partner in ~~Shenzhen,~~order to supervise the operation of the Factory and its employees. The Factory is located on land leased from the PRC ~~are~~government ~~now~~by inone ~~compliance~~of our wholly-owned subsidiaries under land use certificates and agreements with a remaining term of approximately 35 years. Our assets and facilities located in the ~~applicable~~PRC and the PRC ~~legal~~company’s operation of the Factory are subject to the laws and ~~regulatory~~regulations ~~requirements~~of the PRC and our results of operations in the PRC are subject to the economic and political situation in the PRC. ~~However~~In addition, during the third fiscal quarter of 2005, we ~~cannot~~discovered ~~assure~~discrepancies, ~~that~~which were at the ~~central~~Factory orand not at Peak, in the computation and withholding of ~~local~~both ~~governments~~taxes and social insurance contributions for workers at the Factory. Upon discovery of these discrepancies, we conducted an internal review of the ~~PRC~~Factory’s ~~will~~practices and we concluded that the Factory had a duty to correct certain of these discrepancies. While we believe we were not ~~impose~~contractually ~~new~~obligated ~~regulations~~under orthe ~~interpretations~~terms of ~~existing~~our ~~laws,~~agreement ~~rules~~with our processing partner to pay these amounts, ~~and~~we ~~regulations~~elected ~~which~~to ~~could~~voluntarily ~~require~~make ~~additional~~such ~~expenditures~~payment orin ~~preclude~~order to avoid the ~~production~~seizure of ~~products~~the inFactory’s assets and keep it operational. Additional voluntary payments made by us on behalf of the Factory to the PRC bytax ~~Peak~~authorities orcould ~~its~~diminish ~~processing~~a ~~partner~~significant portion of our current cash reserves and materially harm our operating results and business.

The operations of our production facilities in Shenzhen, the PRC may be harmed by changes in the laws and regulations of the PRC or the interpretation thereof, such as those relating to taxation, import and export tariffs, environmental regulations, land use rights, property, foreign currency exchange regulations and other matters. Prior to September 2002, we exported all the products manufactured at our production facilities in Shenzhen, the PRC. Accordingly, we were not subject to certain PRC taxes and are exempt from customs duties on imported raw materials and exported products. During the fourth quarter of fiscal 2003, we finished the procedure of setting up a wholly-owned subsidiary in the PRC and hence a small portion of our products was sold locally in the PRC. This PRC subsidiary is subject to PRC taxes and customs duties on materials imported for such PRC sales. This PRC subsidiary ceased manufacturing operations in fiscal 2005.

According to customs rules in the PRC, we may be subject to classification by the PRC customs authorities in a manner that would require us to supply a substantial bond against customs duties that we would have to pay if we were importing material for ultimate sale in the PRC. We may also be subject to significantly higher administrative importation costs generally. These measures could harm our ability to manufacture products at a competitive price and our results of operations could suffer. In addition, if we are required to post a bond in connection with our exemption status from PRC duties on imported raw materials for export sales and exported products, we will experience a substantial drain of our current cash reserves. We may not be able to provide the required bond at a commercially feasible cost, or at all.

We may become subject to PRC taxes and may be required to pay customs duties in the future even under the contract processing agreement. If we are required to pay PRC taxes or customs duties, our results of operations could suffer. We believe that our operations in Shenzhen, the PRC are now in compliance with the applicable PRC legal and regulatory requirements for custom duties. However, the central or local governments of the PRC may impose new regulations or interpretations of existing laws, rules and regulations which could require additional expenditures or preclude the production of products in the PRC by Peak or our processing partner.

The economy of the PRC differs from the economies of many countries in many respects such as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, self-sufficiency, rate of inflation and balance of payments position, among others. In the past, the economy of the PRC has been primarily a planned economy subject to state plans. Since the entry of the PRC into the World Trade Organization in 2002, the PRC government has been reforming its economic and political systems. These reforms have resulted in significant economic growth and social change. We cannot assure, however, that the PRC government’s policies for economic reforms will be consistent or effective. Our results of operations and financial position may be harmed by changes in the PRC’s political, economic or social conditions.

We, and the Factory at which our products are manufactured, have in the past and may in the future, be ~~parties~~the subject of investigations by PRC government authorities, which can divert management’s attention, lead to ~~legal~~fines ~~proceedings~~and ~~that~~penalties, ~~could~~increase ~~have~~our acosts ~~negative~~and ~~financial~~harm ~~impact~~our onoperating usresults.

We and the Factory have in the past ~~been~~and ~~involved~~may in ~~litigation~~the ~~relating~~future tobe ~~securities~~the ~~and~~subject ~~employment~~of ~~law,~~investigations ~~and~~by PRC government authorities. Such investigations are expensive ~~currently~~and ~~involved~~time-consuming inand ~~litigation~~could indivert ~~Taiwan~~management’s ~~related~~attention ~~to intellectual~~away ~~property.~~from ~~While~~running ~~these~~our ~~lawsuits~~business. ~~vary~~In ~~greatly~~addition, inas ~~the~~a ~~materiality~~result of ~~potential~~such ~~liability~~investigations ~~associated~~we, ~~with~~or ~~them~~the Factory, ~~the~~may ~~uncertainty~~be ~~associated~~subject ~~with~~to ~~substantial~~taxes, ~~unresolved~~fines ~~litigation~~or ~~could~~penalties, ~~seriously~~which would increase our costs and harm our ~~business~~operating results. In the event the Factory is unable to pay any fines or penalties assessed against it by PRC authorities, ~~financial~~we ~~condition~~may voluntarily pay such amounts to avoid the seizure of our assets and the closure of the Factory. For ~~reputation~~example, ~~whether~~in ~~material~~April ~~individually~~2005, orthe inPRC tax authorities began an investigation into the ~~aggregate.~~withholding Inand ~~particular,~~payment ~~this~~of ~~uncertainty~~income ~~could~~taxes ~~harm~~by ~~our~~the ~~relationships~~Factory ~~with~~in ~~existing~~Shenzhen ~~customers~~for certain current and former employees of Peak, our ~~ability~~affiliates toor ~~obtain~~other ~~new~~companies ~~customers~~who performed services at the Factory but had not paid income taxes in the PRC and ~~our~~for ~~ability~~whom the Factory did not withhold and pay income taxes. The PRC tax authorities sought to ~~operate~~collect unpaid income taxes on salaries and expense allowances of certain ~~aspects~~current and former employees of Peak, our ~~business~~affiliates or other companies who performed services in the PRC based on such worker’s relationship with the Factory, and interest and penalties on such amounts. Since some of these claims were based on income earned over several years, the amount of such

~~Litigation~~22 also could result in the diversion of our management’s time and attention away from business operations, which could harm our business. Negative developments with respect to the litigation could cause the price of our common stock to decline significantly. In addition, although we are unable to determine the amount, if any, that we may be required to pay if the litigation is not resolved in a favorable manner. For more information about the litigation, please see Item 1 entitled “Legal Proceedings” of Part II “Other Information.”

taxes, accrued interest and penalties was substantial. We do not believe that we were liable for such claims, but in the event the PRC tax authorities determine payments for back taxes, interest and penalties are owed, the potential consequences could have included substantial monetary claims against the Factory or the seizure of the Factory and our assets at the Factory and the termination of substantially all of our production operations. As the PRC authorities did assert claims for such taxes against the Factory, we did make payments in fiscal 2006 on a voluntary basis in order to avoid the seizure of the Factory or our assets at the Factory and keep it operational. Additional voluntary payments by us on behalf of the Factory to the PRC tax authorities could diminish a significant portion of our current cash reserves and materially harm our operating results and business. Upon final settlement of this PRC tax investigation there were no interest or penalty assessments on the above unpaid income taxes associated with the Factory. However, we and the Factory may in the future be subject to further investigations by the PRC authorities, including tax authorities, for similar or other claims, including claims for other unpaid taxes, which we may pay whether or not we are contractually required to do so in order to avoid seizure of the Factory or some or all of its or our assets.

Failure to successfully defend against intellectual property lawsuits brought against us may adversely affect our business.

As technology is an integral part of our design and products, we have, in the past, received communications alleging that our products infringe or misappropriate certain intellectual property rights held by others, and may continue to receive such communications in the future. We are currently involved in an intellectual property dispute in Taiwan with R.H. Murphy Co., Inc. If any third party were to make valid intellectual property infringement or misappropriation claims against us, we may be required to:

•

discontinue using disputed manufacturing process technologies;

•

stop selling products that contain allegedly infringing technology;

•

pay substantial monetary damages;

•

seek to develop non-infringing technologies, which may not be feasible; or

•

seek to acquire licenses to the allegedly infringed technology, which may not be available on commercially reasonable terms, if at all.

If our products are found to infringe or misappropriate third-party intellectual property rights, we may be subject to significant liabilities and be required to change our manufacturing processes or products. This could restrict us from making, using, selling or exporting some of our products, which could in turn materially and adversely affect our business and financial condition. Our failure to develop non-infringing technologies or license intellectual property rights in a timely and cost-effective manner could materially and adversely affect our business and financial condition. In addition, any litigation, whether to enforce our patents or other intellectual property rights or to defend ourselves against claims that we have infringed the intellectual property rights of others, could, regardless of the ultimate outcome, materially and adversely affect our operating results by requiring us to incur significant legal expenses and diverting the resources of the company and the attention of management.

The loss of any of our key personnel or the failure to attract or retain specialized technical and management personnel could impair our ability to grow our business.

We rely heavily on the services of our key employees such as (i) Dean Personne, our President and Chief Executive Officer, (ii) John Supan, our Chief Financial Officer, (iii) Splendid Zuo, our Vice President and General Manager of Operations, (iv) Mary Chow, our Vice President of Supply Chain Management, and (v) our sales vice presidents, Chris Buckley, Wayne Moore and James Steger. We believe our future success will depend upon our ability to retain these and other key employees and our ability to attract and retain other skilled managerial, engineering, technical and sales and marketing personnel. The competition for such personnel, particularly management and technical personnel, is intense in our industry. Despite the incentives we provide, our current employees

may not continue to work for us, and if additional personnel were required for our operations, we may not be able to obtain the services of additional personnel necessary for our growth. For instance, the departure of two of our sales executives in fiscal 2007 had adversely affected our sales performance. The loss of any of our key employees or our inability to attract or retain qualified personnel, including engineers, could delay the development and introduction of and have an adverse effect on our ability to sell our products as well as our overall growth.

We may engage in future acquisitions and we may be unable to successfully integrate these companies into our operations, which would adversely affect our business.

As part of our growth strategy, we may make acquisitions in companies and/or businesses. Our industry is very competitive, and we believe that acquiring suitable companies and businesses will allow us to compete more effectively. The success of an acquisition would depend on a number of factors, including:

•

our ability to identify suitable opportunities for acquisition;

•

our ability to reach an acquisition agreement on terms that are satisfactory to us or at all;

•

our ability to successfully integrate the acquired company or business; and

•

the economic, business or other strategic objectives and goals of the acquired company compared to those of our own.

If we are unsuccessful in our acquisitions, we may not be able to implement fully our business strategy to maintain or grow our business.

We have in the past and may in the future, be party to legal proceedings that could have a negative financial impact on us.

We have in the past been involved in litigation relating to securities and employment law, and are currently involved in litigation in Taiwan related to intellectual property, and in tax and labor disputes in the PRC. While these lawsuits and disputes vary greatly in the materiality of potential liability associated with them, the uncertainty associated with substantial unresolved litigation could seriously harm our business, financial condition and reputation, whether material individually or in the aggregate. In particular, this uncertainty could harm our relationships with existing customers, our ability to obtain new customers and our ability to operate our business.

Litigation and the resolution of disputes also could result in the diversion of our management’s time and attention away from business operations, which could harm our business. Negative developments with respect to the litigation could cause the price of our common stock to decline significantly. In addition, we are unable to determine the amount, if any, that we may be required to pay if such litigation is not resolved in a favorable manner. For more information about the litigation, please see Note 9, “Commitments and Contingencies,” of our unaudited condensed consolidated financial statements contained in Part I of this Quarterly Report

A significant portion of our business is conducted in the Asia Pacific region. This concentration could expose us to risks inherent to doing business in the Asia Pacific region that could harm our business.

A significant portion of our net sales are derived from sales to customers in the PRC, Hong Kong, Singapore, Taiwan, the Philippines and other countries in East and Southeast Asia, or the Asia Pacific region. Accordingly, our financial condition and results of operations and the market price of shares of our common stock may be affected by:

•

economic and political instability;

•

changes in regulatory requirements, tariffs, customs, duties and other trade barriers;

•

transportation delays;

1524

•

fluctuations in currency exchange rates;

•

currency convertibility and repatriation;

•

taxation of our earnings and the earnings of our personnel;

• the recurrence of SARS and other major health issues; ~~and~~

•

amounts we may pay, whether or not we are contractually required to do so, in the PRC on behalf of the Factory in Shenzhen for personal income taxes, interest and penalties that may be imposed by PRC tax authorities on the income of foreign workers who performed services in the Shenzhen Factory;

•

amounts we may pay, whether or not we are contractually required to do so, on behalf of the Factory in the PRC as a result of employees’ litigation against the Factory in Shenzhen; and

•

other risks relating to changes, administration or new interpretations of laws, regulations and policies in the jurisdictions in which we conduct our business.

None of these factors are within our control. In fiscal 1999, many countries in the Asia Pacific region experienced considerable currency volatility and depreciation, high interest rates, stock market volatility and declining asset values which contributed to net foreign capital outflows, an increase in the number of insolvencies, a decline in business and consumer spending and a decrease in economic growth as compared with prior years.

Consumer demand for products that use semiconductors, disk drives and electronic components generally rises as the overall level of economic activity increases and falls as such activity decreases. In addition, currency devaluations in the Asia Pacific region could result in accelerated price erosion of semiconductor and electronic products as products manufactured in countries whose currencies have devalued significantly against the US dollar become less expensive in US dollar terms. Any adverse effect on the global semiconductor, disk drive and ~~electronics~~electronic industries as a result of lower demand for products in the Asia Pacific region or accelerated product price erosion arising from currency devaluations in the Asia Pacific region could harm our financial condition or results of operations.

We are incorporated under the laws of Bermuda and there may be potential difficulties in protecting our shareholders’ rights.

We are incorporated under the laws of Bermuda and our corporate affairs are governed by our Memorandum of Association and ~~Bye~~By-laws and by the laws governing corporations incorporated in Bermuda. The rights of our shareholders and the responsibilities of members of our Board of Directors under Bermuda law are different from those applicable to a corporation incorporated in the United States and, therefore, our shareholders may have more difficulty protecting their interests in connection with actions by our management, members of our Board of Directors or our principal shareholder than they would as shareholders of a corporation incorporated in the United States.

~~Our~~The ~~stock~~rights ~~price~~of ~~has~~our ~~been~~shareholders and ~~will~~the ~~likely~~responsibilities ~~continue~~of members of our Board of Directors under Bermuda law are different from those applicable to bea ~~volatile~~corporation incorporated in the United States and, ~~you~~therefore, our shareholders may behave ~~unable~~more todifficulty ~~resell~~protecting ~~your~~their ~~shares~~interests atin connection with actions by our management, members of our Board of Directors or ~~above~~our ~~the~~principal ~~price~~shareholder ~~you~~than ~~paid~~they would as shareholders of a corporation incorporated in the United States.

Our stock price has been and iswill likely to continue to be ~~highly~~ volatile. ~~Between~~A ~~April~~decline 1,in ~~2004 and June 30, 2004,~~ our stock price ~~has~~could ~~traded~~result asin ~~high~~securities asclass ~~$8.00~~action onlitigation ~~April~~against 19us, ~~2004,~~which ~~and~~could asdivert ~~low~~management’s asattention ~~$4.75~~and onharm ~~June~~our ~~15, 2004~~business. ~~Our stock price could fluctuate significantly due to a number of factors, including:~~

Our stock price has been and is likely to continue to be highly volatile. Our stock price could fluctuate significantly due to a number of factors, including:

•

variations in our actual or anticipated operating results;

•

sales of substantial amounts of our stock;

•

announcements about us or about our competitors, including technological innovation or new products or services;

•

litigation and other developments relating to patents or other proprietary rights or those of our competitors;

• conditions in the semiconductor, disk drive and ~~electronics~~electronic industries;

•

governmental regulation and legislation;

•

international political or economic events or developments, including those relating to Hong Kong and the PRC;

• the recurrence of SARS and other major health issues; ~~and~~

•

amounts we may pay, whether or not we are contractually required to do so, in the PRC for personal income taxes, interest and penalties that may be imposed by PRC tax authorities on the income of foreign workers who performed services in the Shenzhen Factory;

•

amounts we may pay, whether or not we are contractually required to do so, on behalf of the Factory in the PRC as a result of employees’ litigation against the Factory; and

•

changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations.

Many of these factors are beyond our control. In addition, the stock markets in general, and the NASDAQ ~~National~~Global Market in particular, have experienced extreme price and volume fluctuations recently. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. In the past, companies that have experienced volatility in the market prices of their stock have been the object of securities class action litigation. If we were the object of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

16If we fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results or prevent fraud. As a result, current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

~~market~~Effective ~~price~~internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Pursuant to the Sarbanes-Oxley Act of 2002, we will be required to furnish a report by management on our ~~common~~internal ~~stock~~control over financial reporting, ~~regardless~~including management's assessment of ~~our~~the ~~actual~~effectiveness ~~operating~~of ~~performance~~such control, for fiscal 2008. Internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the ~~past~~risk that the control may become inadequate because of changes in conditions, ~~companies~~or that the degree of compliance with the policies or procedures may deteriorate. We have ~~experienced~~ ~~volatility~~in the past discovered, and may in the ~~market~~future ~~prices~~discover, areas of ~~their~~our ~~stock~~internal controls that need improvement and we have ~~been~~devoted, and will in the future ~~object~~devote, ofresources ~~securities~~to ~~class~~remediate ~~action~~and ~~litigation~~improve our internal controls. IfAlthough we ~~were~~believe ~~the~~that ~~object~~these ofefforts ~~securities~~have ~~class~~strengthened ~~action~~our ~~litigation~~internal controls, itwe ~~could~~are ~~result~~continuing into ~~substantial~~work ~~costs~~to ~~and~~improve aour ~~diversion~~internal ofcontrols. We cannot be certain that these ~~management’s~~measures ~~attention~~will ensure that we implement and ~~resources~~maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could ~~harm~~have a negative effect on the trading price of our ~~business~~common stock.

~~Item~~26 ~~3. Quantitative and Qualitative Disclosures about Market Risk~~

~~PVC~~Changes ~~Compound~~to ~~Price~~financial accounting standards may affect our results of operations and cause us to change our business practices.

~~PVC compound,~~We ~~the~~prepare ~~principal~~our ~~material~~financial ~~used~~statements into ~~the~~conform ~~manufacture~~with ofgenerally ~~our~~accepted ~~tubes~~accounting principles, ~~together~~or ~~with additives~~GAAP, ~~accounted~~in ~~for~~the 8United States.1% These ofaccounting ~~total~~principles ~~raw~~are ~~material~~subject ~~costs~~to ~~for~~interpretation by the ~~three~~American ~~months~~Institute ~~ended~~of ~~June~~Certified 30Public Accountants, ~~2004.~~the ~~While~~Securities weand ~~believe,~~Exchange ~~primarily~~Commission asand avarious ~~result~~bodies offormed ~~increased~~to ~~production~~interpret and create appropriate accounting policies. A change ~~capacity~~in bythose ~~suppliers,~~policies ~~that~~can have a ~~severe~~significant ~~shortage~~effect inon ~~the~~our ~~supply~~reported results and may affect our reporting of ~~PVC~~transactions ~~compound~~completed before a change is ~~unlikely~~announced. Changes to ~~occur~~those inrules or the ~~foreseeable~~questioning ~~future,~~of ~~there~~current ~~can~~practices bemay noadversely ~~assurance~~affect ~~that~~our reported ~~such~~financial ~~shortage~~results ~~will~~or ~~not~~the ~~occur~~way we conduct our business. ~~Any~~For ~~price~~example, ~~increases~~accounting ~~would~~policies ~~result~~affecting inmany ~~higher~~aspects ~~costs~~of our business, ~~which~~including ~~could~~ rules relating to employee stock option grants, have arecently ~~material~~been ~~adverse~~revised ~~effect~~or onare ~~our~~under ~~results~~review. ofThe Financial ~~operations~~Accounting Standards Board and ~~financial~~other ~~condition~~agencies have finalized changes to U.S. Wegenerally ~~currently~~accepted ~~maintain~~accounting ~~approximately~~principles ~~two~~that require us, starting in our fiscal year 2007, to ~~three~~record ~~months’~~a ~~stock~~charge ofto ~~PVC~~earnings ~~compound~~for ~~and~~employee stock option grants and other ~~raw~~equity ~~materials~~incentives. ~~used~~We inhave ~~our~~significant ~~production~~and ~~processes,~~ongoing accounting charges resulting from option grant and ~~increase~~other ~~such stock~~equity ~~when~~incentive weexpensing ~~believe~~that ~~prices~~reduce ~~are~~our ~~favorable~~overall net income. WeFor domore ~~not~~information, ~~and~~please dosee ~~not~~Note ~~intend~~4 toentitled “Non-cash Share-based Compensation”. In addition, ~~enter~~since ~~into~~we ~~future~~historically ~~contracts~~have orused ~~use~~equity-related ~~any~~compensation ~~financial~~as ~~instruments~~a tocomponent ~~hedge~~of our ~~exposure~~total toemployee ~~fluctuations~~compensation inprogram, the ~~price~~accounting ofchange ~~PVC~~makes ~~compound~~the oruse ~~other~~of ~~raw~~equity-related ~~materials~~compensation ~~used~~less inattractive ~~our~~to ~~production~~us, ~~processes~~and therefore could make it more difficult to attract and retain employees.

~~Currency~~Item ~~Exchange~~2. ~~Rate~~Unregistered ~~Fluctuations~~ Sales of Equity Securities and Use of Proceeds

Our sales are primarily denominated in US Dollars while our cost of goods sold are generally incurred in US Dollars, Hong Kong Dollars and Renminbi, and our operating expenses are generally denominated in Renminbi, Hong Kong Dollars, Singapore dollars, New Taiwanese dollars and US Dollars. In addition, a substantial portion of our capital expenditures, primarily for the purchase of equipment, has been and is expected to continue to be denominated in US Dollars, Renminbi, Japanese Yen and the Euro. Consequently, a portion of our costs and operating margins may be affected by fluctuations in exchange rates, primarily between the US Dollar and other currencies. Our results of operations and financial condition could be adversely affected by fluctuations in currency exchange rates or the imposition of new or additional currency controls in the jurisdictions in which we operate. At June 30, 2004, we had no outstanding foreign currency exchange contracts.

Many of our competitors are located in countries whose currencies devalued significantly against the US dollar beginning in the second half of 1997. As a result of such devaluation, these competitors’ products have become less expensive in US dollar terms. This reduction could result in our customers purchasing products from these competitors rather than from us, which would have a material and adverse effect on our net sales and results of operations.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer have concluded that, subject to the limitations noted above, our disclosure controls and procedures were effective to ensure that material information relating to us, including our consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this Quarterly Report was being prepared.

(b) Changes in internal control over financial reporting. There was no significant change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation described in Item 4(a) above that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

R.H. Murphy Co., Inc. (“Murphy”) is the owner of U.S. Reexamined Patent 5,400,904 C1 and certain corresponding foreign patents, which patents are directed to specific features in trays used to carry integrated circuits. Murphy has notified us and certain of our customers that it believes these patents are infringed by certain integrated circuit trays that we provided to our customers, and indicated that licenses to these patents are available. We do not believe that any valid claim of these patents is infringed, and are proceeding consistent with that belief.

On July 8, 2002, we placed a security bond of approximately $301,000 at a Taiwanese district court in connection with a preliminary injunction order so that we can continue to sell trays in Taiwan without being interrupted by Murphy and its three distributors in Taiwan. The Taiwanese district court granted the preliminary injunction order in June 2002, after which Murphy’s three local distributors filed an appeal with the Taiwanese high court against the grant of the order by the district court. In December 2002, the high court ruled that the anti-injunction order should be revoked. In February 2003, we filed an appeal to the Taiwanese Supreme Court which was granted and resulted in the dismissal of Murphy’s local distributors’ appeals. The grant of the preliminary injunction order has now become final and, accordingly, it is unlikely that Murphy or its local distributors will be able to obtain preliminary injunctive relief against us or our Taiwan customers during the pendency of the underlying litigation. In addition, in October 2002, we filed a civil suit against Murphy with the Taiwanese district court seeking permanent relief in connection with the preliminary injunction order. An additional security bond of approximately $13,200 was placed with the Taiwanese court in connection with the underlying civil suit, which was later increased by approximately $23,820. If our effort to receive permanent relief is not successful, we may be required to forfeit the bonds and Murphy and its distributors in Taiwan may assert patent infringement claims against us which, if successful, could prevent us from selling certain of our products in Taiwan and could result in monetary damages. In December 2001, we also filed an action with the Taiwanese Intellectual Property Office to invalidate Murphy’s patent. In February 2002, we also filed a complaint for unfair competition with the Fair Trade Commission against Murphy. The Fair Trade Commission dismissed the action and we have filed an appeal. That appeal was dismissed and we filed an administrative suit contesting the dismissal. A hearing on some of these issues was held in July, 2004 and the company expects a decision to be issued shortly. At present, the outcome of this patent dispute cannot be predicted with reasonable particularity and no impact to the financial statements has been reflected in this respect

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Not applicable.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5.

Other Information

Not applicable.

1927

Item 6. Exhibits ~~and Reports on Form 8-K~~

a. Exhibits


10.15+		Employment Agreement dated February 15, 2005, as amended as of July 7, 2005, March 23, 2006, August 25, 2006 and May 30, 2007 between the Company and Dean Personne (incorporated by references to Exhibits 99.1 and 99.2 of the Company’s Form 8-K filed April 6, 2006, Exhibit 10.4 of the Company’s Form 8-K filed July 13, 2005, Exhibit 99.1 of the Company’s Form 8-K filed August 2, 2006 and Exhibit 10.2 to the Company’s Report on Form 8-Kfiled on June 1, 2007)

10.16+		Employment Agreement dated August 1, 2006, as amended on May 30, 2007, between the Company and John Supan (incorporated by references to Exhibit 10.1 of the Company’s Form 8-K filed August 3, 2006 and Exhibit 10.4 to the Company’s Report on Form 8-K filed on June 1, 2007)

10.19		Form of Indemnification Agreement between the Company and each of its directors and certain officers.

31.1		Rule 13a-14(a) Certification by the Chief Executive Officer

31.2		Rule 13a-14(a) Certification by the Chief Financial Officer

32.1		Section 1350 Certification by the Chief Executive Officer

32.2		Section 1350 Certification by the Chief Financial Officer

3.1(a)		Memorandum of Association and Bye-Laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1, Registration No. 333-6652, filed on March 19, 1997 and declared effective by the Commission on June 20, 1997 (the “Company’s Initial Public Offering Registration Statement on Form F-1”))
3.1(b)		Bye-laws of the Registrant (incorporated by reference to Exhibit 3.1(b) of the Company’s Annual Report on Form 10-K for the year ended March 31, 2001)
4.1		Specimen of Share Certificate for the Shares of the Registrant (incorporated by reference to Exhibit 4.1 to the Company’s Amendment No. 1 to the Company’s Initial Public Offering Registration Statement on Form F-1)
31.1		Rule 13a-14(a) Certification by the Chief Executive Officer
31.2		Rule 13a-14(a) Certification by the Chief Financial Officer
32.1*		Section 1350 Certification by the Chief Executive Officer
32.2*		Section 1350 Certification by the Chief Financial Officer

+	Indicates management contract or compensatory plan or arrangement.

*28 In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

b. Reports on Form 8-K.

On April 23, 2004, the Company filed a Current Report on Form 8-K furnishing under item 12 the Company’s press release relating to its financial results for its fourth fiscal quarter and fiscal year ended March 31, 2004.

On April 27, 2004, the Company filed a Current Report on Form 8-K furnishing under item 12 a copy of the conference call transcript from its April 22, 2004 conference call.

SIGNATURES

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 thereunto duly authorized.

	PEAK INTERNATIONAL LIMITED
Date: August 16, 2004	By	/s/ Calvin Reed
Date: August 13, 2007	By	/s/ Dean Personne
		Calvin Reed President and Chief Executive Officer
		Dean Personne President and Chief Executive Officer
Date: August 16, 2004	By	/s/ William Snyder
Date: August 13, 2007	By	/s/ John Supan
		William Snyder Chief Financial Officer
		John Supan Chief Financial Officer

2129

EXHIBIT INDEX

ExhibitNumber		Description of Document
3.1(a)		Memorandum of Association and Bye-Laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1, Registration No. 333-6652, filed on March 19, 1997 and declared effective by the Commission on June 20, 1997 (the “Company’s Initial Public Offering Registration Statement on Form F-1”))
10.19		Form of Indemnification Agreement between the Company and each of its directors and certain officers.
3.1(b)		Bye-laws of the Registrant (incorporated by reference to Exhibit 3.1(b) of the Company’s Annual Report on Form 10-K for the year ended March 31, 2001)
4.1		Specimen of Share Certificate for the Shares of the Registrant (incorporated by reference to Exhibit 4.1 to the Company’s Amendment No. 1 to the Company’s Initial Public Offering Registration Statement on Form F-1)
31.1		Rule 13a-14(a) Certification by the Chief Executive Officer
31.2		Rule 13a-14(a) Certification by the Chief Financial Officer
32.1*		Section 1350 Certification by the Chief Executive Officer
32.1		Section 1350 Certification by the Chief Executive Officer
32.2*		Section 1350 Certification by the Chief Financial Officer
32.2		Section 1350 Certification by the Chief Financial Officer

* In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purpose of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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