TRIO-TECH INTERNATIONAL [TRT] Filings

10-Q 1 trt20240331_10q.htm FORM 10-Q trt20240331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2024

☐ 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 1-14523

TRIO-TECH INTERNATIONAL

(Exact name of Registrant as specified in its Charter)

California		95-2086631
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

Block 1008 Toa Payoh North
Unit 03-09 Singapore		318996
(Address of principal executive offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (65) 6265 3300

Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each class	Trading Symbol	on which registered
Common Stock, no par value	TRT	NYSE American

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-‐accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-‐2 of the Exchange Act. (Check one):

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 1, 2024, there were 4,250,305 shares of the issuer’s Common Stock, no par value, outstanding.

TRIO-TECH INTERNATIONAL

INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE

		Page
Part I.	Financial Information

Item 1.	Financial Statements	1
	(a) Condensed Consolidated Balance Sheets as of March 31, 2024 (Unaudited), and June 30, 2023	2
	(b) Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss) for the Three and Nine Months Ended March 31, 2024 (Unaudited), and March 31, 2023 (Unaudited)	3
	(c) Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended March 31, 2024 (Unaudited), and March 31, 2023 (Unaudited)	4
	(d) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 (Unaudited), and March 31, 2023 (Unaudited)	5
	(e) Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40

Part II.	Other Information

Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults upon Senior Securities
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information
Item 6.	Exhibits	41

Signatures		42

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FORWARD-LOOKING STATEMENTS

The discussions of Trio-Tech International’s (the “Company”) business and activities set forth in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in other past and future reports and announcements by the Company may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and assumptions regarding future activities and results of operations of the Company. In light of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the following factors, among others, could cause actual results to differ materially from those reflected in any forward-looking statements made by or on behalf of the Company: market acceptance of Company products and services; changing business conditions or technologies and volatility in the semiconductor industry, which could affect demand for the Company’s products and services; the impact of competition; problems with technology; product development schedules; delivery schedules; changes in military or commercial testing specifications which could affect the market for the Company’s products and services; difficulties in profitably integrating acquired businesses, if any, into the Company; or the divestiture in the future of one or more business segments; risks associated with conducting business internationally and especially in Asia, including currency fluctuations and devaluation, currency restrictions, local laws and restrictions and possible social, political and economic instability; changes in U.S. and global financial and equity markets, including market disruptions and significant interest rate fluctuations; ongoing public health issues related to the COVID-19 pandemic both nationally and internationally; the trade tension between U.S. and China; inflation; the war in Ukraine and Russia, the war between Israel and Hamas; other economic, financial and regulatory factors beyond the Company’s control and uncertainties relating to our ability to operate our business in China; uncertainties regarding the enforcement of laws and the fact that rules and regulation in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence our operation at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance and/or the value of our common stock, no par value (“Common Stock”), or impair our ability to raise money. Other than statements of historical fact, all statements made in this Quarterly Report are forward-looking, including, but not limited to, statements regarding industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future financial results and condition. In some cases, you can identify forward-looking statements by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” “believes,” “can impact,” “continue,” or the negative thereof or other comparable terminology. Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions.

Unless otherwise required by law, we undertake no obligation to update forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events. You are cautioned not to place undue reliance on such forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT NUMBER OF SHARES)

	March 31, 2024		June 30, 2023
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,716	$	7,583
Short-term deposits		6,309		6,627
Trade accounts receivable, less allowance for expected credit losses of $214 and $217, respectively		10,083		9,804
Other receivables		1,089		939
Inventories, less provision for obsolete inventories of $669 and $648, respectively		2,742		2,151
Prepaid expense and other current assets		577		694
Assets held for sale		-		274
Financed sales receivable		-		16
Restricted term deposits		754		739
Total current assets		32,270		28,827
NON-CURRENT ASSETS:
Deferred tax assets		117		100
Investment properties, net		433		474
Property, plant and equipment, net		6,081		8,344
Operating lease right-of-use assets		2,277		2,609
Other assets		149		116
Restricted term deposits		1,760		1,716
Total non-current assets		10,817		13,359
TOTAL ASSETS	$	43,087	$	42,186

LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	2,406	$	1,660
Accrued expense		3,904		4,291
Contract liabilities		1,499		1,277
Income taxes payable		328		418
Current portion of bank loans payable		308		475
Current portion of finance leases		56		107
Current portion of operating leases		1,295		1,098
Total current liabilities		9,796		9,326
NON-CURRENT LIABILITIES:
Bank loans payable, net of current portion		676		877
Finance leases, net of current portion		10		42
Operating leases, net of current portion		982		1,511
Income taxes payable, net of current portion		141		255
Deferred tax liabilities		3		10
Other non-current liabilities		27		594
Total non-current liabilities		1,839		3,289
TOTAL LIABILITIES	$	11,635	$	12,615

EQUITY
TRIO-TECH INTERNATIONAL’S SHAREHOLDERS’ EQUITY:
Common stock, no par value, 15,000,000 shares authorized; 4,210,305 and 4,096,680 shares issued outstanding as at March 31, 2024 and June 30, 2023, respectively	$	13,194		12,819
Paid-in capital		5,494		5,066
Accumulated retained earnings		11,570		10,763
Accumulated other comprehensive income-translation adjustments		984		758
Total Trio-Tech International shareholders’ equity		31,242		29,406
Non-controlling interest		210		165
TOTAL EQUITY	$	31,452	$	29,571
TOTAL LIABILITIES AND EQUITY	$	43,087	$	42,186

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

UNAUDITED (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

	Three Months Ended						Nine Months Ended
	Mar. 31,			Mar. 31,			Mar. 31,			Mar. 31,
	2024			2023			2024			2023
Revenue
Manufacturing	$	4,813		$	2,963		$	12,488		$	11,592
Testing services		3,796			5,697			13,606			17,709
Distribution		1,783			1,179			6,453			4,855
Real estate		6			3			19			15
		10,398			9,842			32,566			34,171
Cost of Sales
Cost of manufactured products sold		3,594			2,451			9,252			8,825
Cost of testing services rendered		2,601			3,940			9,849			11,813
Cost of distribution		1,482			975			5,334			4,064
Cost of real estate		18			18			54			54
		7,695			7,384			24,489			24,756

Gross Margin		2,703			2,458			8,077			9,415

Operating Expenses:
General and administrative		2,351			2,248			6,326			6,472
Selling		204			160			639			526
Research and development		89			87			305			311
Loss on disposal of property, plant and equipment		-			-			72			7
Total operating expense		2,644			2,495			7,342			7,316

Income / (Loss) from Operations		59			(37	)		735			2,099

Other Income / (Expenses)
Interest expense		(17	)		(29	)		(63	)		(83	)
Other income / (expense), net		252			40			366			(49	)
Government grant		12			83			89			108
Total other income / (expense)		247			94			392			(24	)

Income from Continuing Operations before Income Taxes		306			57			1,127			2,075

Income Tax Expenses		(142	)		(8	)		(274	)		(474	)

Income from Continuing Operations before Non-controlling Interest, Net of Tax		164			49			853			1,601

Discontinued Operations
(Loss) / Income from discontinued operations, net of tax		(1	)		5			3			(4	)
Net Income		163			54			856			1,597

Less: net income attributable to non-controlling interest		93			61			49			215
Net Income / (Loss) Attributable to Trio-Tech International Common Shareholders	$	70		$	(7	)	$	807		$	1,382

Amounts Attributable to Trio-Tech International Common Shareholders:
Income / (Loss) from continuing operations, net of tax		71			(10	)		801			1,384
(Loss) / Income from discontinued operations, net of tax		(1	)		3			6			(2	)
Net Income / (Loss) Attributable to Trio-Tech International Common Shareholders	$	70		$	(7	)	$	807		$	1,382

Basic Earnings per Share:
Basic earnings per share from continuing operations attributable to Trio-Tech International	$	0.02		$	-		$	0.19		$	0.34
Basic earnings per share from discontinued operations attributable to Trio-Tech International	$	-		$	-		$	-		$	-
Basic Earnings per Share from Net Income Attributable to Trio-Tech International	$	0.02		$	-		$	0.19		$	0.34

Diluted Earnings per Share:
Diluted earnings per share from continuing operations attributable to Trio-Tech International	$	0.02		$	-		$	0.19		$	0.33
Diluted earnings per share from discontinued operations attributable to Trio-Tech International	$	-		$	-		$	-		$	-
Diluted Earnings per Share from Net Income Attributable to Trio-Tech International	$	0.02		$	-		$	0.19		$	0.33

Weighted average number of common shares outstanding
Basic		4,176			4,075			4,131			4,075
Dilutive effect of stock options		106			84			143			86
Number of shares used to compute earnings per share diluted		4,282			4,159			4,274			4,161

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME / (LOSS)

UNAUDITED (IN THOUSANDS)

	Three Months Ended						Nine Months Ended
	Mar. 31,			Mar. 31,			Mar. 31,		Mar. 31,
	2024			2023			2024		2023
Comprehensive (Loss) / Income Attributable to Trio-Tech International Common Shareholders:

Net income	$	163		$	54		$	856	$	1,597
Foreign currency translation, net of tax		(753	)		166			222		521
Comprehensive (Loss) / Income		(590	)		220			1,078		2,118
Less: comprehensive income / (loss) attributable to non- controlling interest		93			(85	)		49		127
Comprehensive (Loss) / Income Attributable to Trio-Tech International Common Shareholders	$	(683	)	$	305		$	1,029	$	1,991

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

UNAUDITED (IN THOUSANDS)

Nine months ended March 31, 2024

	Common Stock				Paid-in		Accumulated Retained		Accumulated Other Comprehensive		Non- controlling
	Shares		Amount		Capital		Earnings		Income/ (Loss)		Interest			Total
			$		$		$		$		$			$

Balance at June 30, 2023		4,097		12,819		5,066		10,763		758		165			29,571
Stock option expense		-		-		428		-		-		-			428
Net income / (loss)		-		-		-		807		-		49			856
Exercise of stock option		113		375		-		-		-		-			375
Translation adjustment		-		-		-		-		226		(4	)		222
Balance at Mar. 31, 2024		4,210		13,194		5,494		11,570		984		210			31,452

Nine months ended March 31, 2023

	Common Stock				Paid-in		Accumulated Retained		Accumulated Other Comprehensive		Non- controlling
	Shares		Amount		Capital		Earnings		Income		Interest			Total
			$		$		$		$		$			$

Balance at June 30, 2022		4,072		12,750		4,708		9,219		1,197		128			28,002
Stock option expenses		-		-		337		-		-		-			337
Net income		-		-		-		1,382		-		215			1,597
Exercise of stock option		5		19		-		-		-		-			19
Translation adjustment		-		-		-		-		609		(88	)		521
Balance at Mar. 31, 2023		4,077		12,769		5,045		10,601		1,806		255			30,476

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

	Nine Months Ended
	Mar. 31,			Mar. 31,
	2024			2023
	(Unaudited)			(Unaudited)
Cash Flow from Operating Activities
Net income	$	856		$	1,597
Adjustments to reconcile net income to net cash flow provided by operating activities
Depreciation and amortization		3,546			3,641
Gain on sales of property, plant and equipment		72			-
Addition / (Reversal) of provision for obsolete inventories		15			49
Stock compensation		428			337
Bad debt recovery		(5	)		(15	)
Accrued interest expense, net accrued interest income		(50	)		(14	)
Payment of interest portion of finance lease		(5	)		(8	)
Warranty recovery, net		12			3
Reversal of income tax provision		(7	)		8
Deferred tax (benefits) / expense		(22	)		100
Changes in operating assets and liabilities, net of acquisition effects
Trade accounts receivable		(256	)		613
Other receivables		(150	)		129
Other assets		(34	)		-
Inventories		(600	)		64
Prepaid expense and other current assets		128			442
Accounts payable, accrued expense and contract liabilities		462			(180	)
Income taxes payable		(254	)		(271	)
Other non-current liabilities		(567	)		924
Operating lease liabilities		(1,056	)		(1,008	)
Net Cash Provided by Operating Activities	$	2,513		$	6,411

Cash Flow from Investing Activities
Withdrawal from unrestricted term deposits, net		4,020			4,888
Investment in unrestricted term deposits, net		(3,625	)		(4,990	)
Additions to property, plant and equipment		(208	)		(4,077	)
Proceeds from disposal of assets held-for-sale		198			-
Proceeds from disposal of property, plant and equipment		71			-
Net Cash Provided by / (Used in) Investing Activities		456			(4,179	)

Cash Flow from Financing Activities
Payment on lines of credit		(961	)		(1,402	)
Payment of bank loans		(362	)		(359	)
Payment of finance leases		(82	)		(92	)
Proceeds from exercising stock options		375			19
Proceeds from lines of credit		952			580
Proceeds from bank loans		-			176
Net Cash Used in Financing Activities		(78	)		(1,078	)

Effect of Changes in Exchange Rate		301			417

Net Increase in Cash, Cash Equivalents, and Restricted Cash		3,192			1,571
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period		10,038			9,376
Cash, Cash Equivalents, and Restricted Cash at End of Period	$	13,230		$	10,947

Supplementary Information of Cash Flows
Cash paid during the period for:
Interest	$	39		$	83
Income taxes	$	425		$	489

Reconciliation of Cash, Cash Equivalents, and Restricted Cash
Cash		10,716			8,430
Restricted Term-Deposits in Current Assets		754			755
Restricted Term-Deposits in Non-Current Assets		1,760			1,762
Total Cash, Cash Equivalents, and Restricted Cash Shown in Statements of Cash Flows	$	13,230		$	10,947

Restricted deposits represent the amount of cash pledged to secure loans payable or trade financing granted by financial institutions, serve as collateral for public utility agreements such as electricity and water, and performance bonds related to customs duty payable. Restricted deposits are classified as current and non-current depending on whether they relate to long-term or short-term obligations. Restricted deposits of $754 as at March 31, 2024 are classified as current assets as they relate to short-term trade financing. On the other hand, restricted deposits of $1,760 as at March 31, 2024 are classified as non-current assets as they relate to long-term obligations and will become unrestricted only upon discharge of the obligations.

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF SHARES)

1.	ORGANIZATION AND BASIS OF PRESENTATION

Trio-Tech International (the “Company”, or “TTI”) was incorporated in fiscal year ended June 30, 1958 under the laws of the State of California. TTI provides third-party semiconductor testing and burn-in services primarily through its laboratories in Southeast Asia. In addition, TTI operates testing facilities in the United States (“U.S.”). The Company also designs, develops, manufactures and markets a broad range of equipment and systems used in the manufacturing and testing of semiconductor devices and electronic components. In the third quarter of the fiscal year ended June 30, 2024 (“Fiscal 2024”), TTI conducted business in four business segments: Manufacturing, Testing, Distribution and Real Estate. TTI has subsidiaries in the U.S., Singapore, Malaysia, Thailand, Indonesia, Ireland and China as follows:

	Ownership			Location
Express Test Corporation (Dormant)		100	%	Van Nuys, California
Trio-Tech Reliability Services (Dormant)		100	%	Van Nuys, California
KTS Incorporated, dba Universal Systems (Dormant)		100	%	Van Nuys, California
European Electronic Test Centre (Dormant)		100	%	Dublin, Ireland
Trio-Tech International Pte. Ltd.		100	%	Singapore
Universal (Far East) Pte. Ltd.*		100	%	Singapore
Trio-Tech International (Thailand) Co. Ltd. *		100	%	Bangkok, Thailand
Trio-Tech (Bangkok) Co. Ltd. *		100	%	Bangkok, Thailand
Trio-Tech (Malaysia) Sdn. Bhd. (55% owned by Trio-Tech International Pte. Ltd.)		55	%	Penang and Selangor, Malaysia
Trio-Tech (Kuala Lumpur) Sdn. Bhd. (100% owned by Trio-Tech Malaysia Sdn. Bhd.)		55	%	Selangor, Malaysia
Prestal Enterprise Sdn. Bhd. (76% owned by Trio-Tech International Pte. Ltd.)		76	%	Selangor, Malaysia
Trio-Tech (SIP) Co., Ltd. *		100	%	Suzhou, China
Trio-Tech (Chongqing) Co. Ltd. *		100	%	Chongqing, China
SHI International Pte. Ltd. (Dormant) (55% owned by Trio-Tech International Pte. Ltd)		55	%	Singapore
PT SHI Indonesia (Dormant) (95% owned by SHI International Pte. Ltd.)		52	%	Batam, Indonesia
Trio-Tech (Tianjin) Co., Ltd. *		100	%	Tianjin, China
Trio-Tech (Jiangsu) Co., Ltd. (51% owned by Trio-Tech (SIP) Co., Ltd.)		51	%	Suzhou, China

* 100% owned by Trio-Tech International Pte. Ltd.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements are presented in U.S. dollars unless otherwise stated. The accompanying condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report for the fiscal year ended June 30, 2023 (“Fiscal 2023”). The Company’s operating results are presented based on the translation of foreign currencies using the respective quarter’s average exchange rate.

The results of operations for the nine months ended March 31, 2024 are not necessarily indicative of the results that may be expected for any other interim period or for the full year ending June 30, 2024.

Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expense during the reporting period. Among the more significant estimates included in these consolidated financial statements are the estimated allowance for credit losses on account receivables, reserve for obsolete inventory, impairments, provision of income tax, stock options and the deferred income tax asset allowance. Actual results could materially differ from those estimates.

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Significant Accounting Policies. There have been no material changes to our significant accounting policies summarized in Note 1 “Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated Financial Statements included in our Annual Report on Form 10-K for Fiscal 2023.

2.	NEW ACCOUNTING PRONOUNCEMENTS

In June 2016, FASB issued ASU 2016-13 ASC Topic 326: Financial Instruments — Credit Losses (“ASC Topic 326”) for the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance modifies the impairment model for certain financial assets by requiring use of an expected loss methodology, which will result in more timely recognition of credit losses. The Company adopted this guidance in the first quarter in fiscal 2024 under the modified retrospective basis. The adoption of this guidance did not have a significant impact on the Company's consolidated condensed financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance requires enhanced disclosures about significant segment expense. This standard update is effective for Company beginning in the fiscal year ending June 30, 2025 and interim period reports beginning in the first quarter of the fiscal year ending June 30, 2026. Early adoption is permitted on a retrospective basis. The Company is currently evaluating the impact of this ASU on segment disclosure.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expense. This standard update is effective for Company beginning in the fiscal year ending June 30, 2026. Early adoption is permitted on a prospective basis. The Company is currently evaluating the impact of this ASU on annual income tax disclosures.

New pronouncements issued but not yet effective until after March 31, 2024, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

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3.	TERM DEPOSITS

	Mar. 31,			June 30,
	2024			2023
	(Unaudited)

Short-term deposits	$	6,439		$	6,901
Currency translation effect on short-term deposits		(130	)		(274	)
Total short-term deposits		6,309			6,627
Restricted term deposits - Current		770			755
Currency translation effect on restricted term deposits		(16	)		(16	)
Total restricted term deposits - Current		754			739
Restricted term deposits – Non-current		1,849			1,763
Currency translation effect on restricted term deposits		(89	)		(47	)
Total restricted term deposits - Non-current		1,760			1,716
Total term deposits	$	8,823		$	9,082

4.	TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR EXPECTED CREDIT LOSSES

Accounts receivable are customer obligations due under normal trade terms. The Company performs continuing credit evaluations of its customers’ financial conditions, and although management generally does not require collateral, letters of credit may be required from the customers in certain circumstances.

The allowance for trade receivable represents management’s expected credit losses in our trade receivables as of the date of the financial statements. The allowance provides for probable losses that have been identified with specific customer relationships and for probable losses believed to be inherent in the trade receivables, but that have not been specifically identified.

The following table represents the changes in the allowance for expected credit losses:

	Mar. 31,			June 30,
	2024			2023
	(Unaudited)

Beginning	$	217		$	243
Additions charged to expense		12			9
Recovered		(17	)		(20	)
Currency translation effect		2			(15	)
Ending	$	214		$	217

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5.	LOANS RECEIVABLE FROM PROPERTY DEVELOPMENT PROJECTS

The following table presents Trio-Tech (Chongqing) Co. Ltd (“TTCQ”)’s loan receivables from property development projects in China as of March 31, 2024.

	Loan Expiry	Loan Amount			Loan Amount
	Date	(RMB)			(U.S. Dollars)
Short-term loan receivables
JiangHuai (Project – Yu Jin Jiang An)	May 31, 2013		2,000			282
Less: allowance for expected credit losses			(2,000	)		(282	)
Net loan receivables from property development projects			-			-

Long-term loan receivables
Jun Zhou Zhi Ye	Oct 31, 2016		5,000			705
Less: transfer – down-payment for purchase of investment property			(5,000	)		(705	)
Net loan receivables from property development projects			-			-

The short-term loan receivables amounting to renminbi (“RMB”) 2,000, or approximately $282 arose due to TTCQ entering into a Memorandum Agreement with JiangHuai Property Development Co. Ltd. (“JiangHuai”) to invest in their property development projects (Project - Yu Jin Jiang An) located in Chongqing City, China in the fiscal year ended June 30, 2011 (“Fiscal 2011”). Based on TTI’s financial policy, an allowance for expected credit losses of $282 on the investment in JiangHuai was recorded during the fiscal year ended June 30, 2014 (“Fiscal 2014”). TTCQ did not generate other income from JiangHuai for the quarter ended March 31, 2024 or for Fiscal 2024. TTCQ is in the legal process of recovering the outstanding amount of approximately $282.

The loan amounting to RMB 5,000, or approximately $705, arose due to TTCQ entering into a Memorandum Agreement with JiaSheng Property Development Co. Ltd. (“JiaSheng”) to invest in their property development projects (Project B-48 Phase 2) located in Chongqing City, China in Fiscal 2011. The amount was unsecured and repayable at the end of the term. During the fiscal year ended June 30, 2015, the loan receivable was transferred to down payment for purchase of investment property that is being developed in the Singapore Themed Resort Project (See Note 8).

6.	INVENTORIES

Inventories consisted of the following:

	Mar. 31, 2024			June 30, 2023
	(Unaudited)

Raw materials	$	1,573		$	1,389
Work in progress		1,475			1,132
Finished goods		351			178
Less: provision for obsolete inventories		(669	)		(648	)
Currency translation effect		12			100
	$	2,742		$	2,151

The following table represents the changes in provision for obsolete inventories:

	Mar. 31, 2024			June 30, 2023
	(Unaudited)

Beginning	$	648		$	674
Additions charged to expense		35			61
Usage – disposition		(19	)		(40	)
Currency translation effect		5			(47	)
Ending	$	669		$	648

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7.	INVESTMENT PROPERTIES

The following table presents the Company’s investment in properties in China as of March 31, 2024. The exchange rate is based on the market rate as of March 31, 2024.

	Investment Date / Reclassification	Investment Amount			Investment Amount
	Date	(RMB)			(USD)

Purchase of rental property – Property I – MaoYe Property	Jan 04, 2008		5,554			894
Currency translation			-			(87	)
Reclassification as “Assets held for sale”	July 01, 2018		(5,554	)		(807	)
Reclassification from “Assets held for sale”	Mar 31, 2019		2,024			301
			2,024			301
Purchase of rental property – Property II - JiangHuai	Jan 06, 2010		3,600			580
Purchase of rental property – Property III - FuLi	Apr 08, 2010		4,025			647
Currency translation			-			(168	)
Gross investment in rental property			9,649			1,360

Accumulated depreciation on rental property	Mar 31, 2024		(8,367	)		(1,194	)
Reclassified as “Assets held for sale”- MaoYe Property	July 01, 2018		2,822			410
Reclassification from “Assets held for sale”- MaoYe Property	Mar 31, 2019		(1,029	)		(143	)
			(6,574	)		(927	)
Net investment in property – China			3,075			433

The following table presents the Company’s investment in properties in China as of June 30, 2023. The exchange rate is based on the market rate as of June 30, 2023.

	Investment Date /	Investment			Investment
	Reclassification Date	Amount (RMB)			Amount (U.S. Dollars)

Purchase of rental property – Property I – MaoYe Property	Jan 04, 2008		5,554			894
Currency translation			-			(87	)
Reclassification as “Assets held for sale”	July 01, 2018		(5,554	)		(807	)
Reclassification from “Assets held for sale”	Mar 31, 2019		2,024			301
			2,024			301
Purchase of rental property – Property II - JiangHuai	Jan 06, 2010		3,600			580
Purchase of rental property – Property III - FuLi	Apr 08, 2010		4,025			648
Currency translation			-			(199	)
Gross investment in rental property			9,649			1,330

Accumulated depreciation on rental property	Jun 30, 2023		(7,884	)		(1,123	)
Reclassified as “Assets held for sale”- MaoYe Property	July 01, 2018		2,822			410
Reclassification from “Assets held for sale”- MaoYe Property	Mar 31, 2019		(1,029	)		(143	)
			(6,091	)		(856	)
Net investment in property – China			3,558			474

Rental Property I - MaoYe Property

During the fiscal year ended June 30, 2008, TTCQ purchased an office in Chongqing, China from MaoYe Property Ltd. (“MaoYe”) for a total cash purchase price of RMB 5,554, or approximately $894. During the year ended June 30, 2019, the Company sold thirteen of the fifteen units constituting the MaoYe Property. Management has decided not to sell the remaining two units of MaoYe properties in the near future, due to current conditions of the property market in China. A new lease agreement was entered into on February 1, 2023 for a period of 4 years at a monthly rate of RMB14, or approximately $2, after termination of the previous agreement. Pursuant to the agreement, monthly rental will increase by 5% each year.

- 10 -

Property purchased from MaoYe generated a rental income of $6 and $18 during the three and nine months ended March 31, 2024, as compared to $nil and $8 for the same period in Fiscal 2023.

Depreciation expense for MaoYe was $4 and $12 during the three and nine months ended March 31, 2024, as compared to $4 and $12 for the same period in Fiscal 2023.

Rental Property II - JiangHuai

During the year ended June 30, 2010 (“Fiscal 2010”), TTCQ purchased eight units of commercial property in Chongqing, China from Chongqing JiangHuai Real Estate Development Co. Ltd. (“JiangHuai”) for a total purchase price of RMB 3,600, or approximately $580. As of March 31, 2024, TTCQ had not received the title deed for properties purchased from JiangHuai. While the above is not expected to affect the property’s market value, the current economic situation is likely to cause delays in court to consummate the acquisition of properties.

Property purchased from JiangHuai did not generate any rental income for the three and nine months ended March 31, 2024 and 2023.

Depreciation expense for JiangHuai was $6 and $18 for the three and nine months ended March 31, 2024, as compared to $7 and $20 for the same period in last Fiscal 2023.

Rental Property III – FuLi

In Fiscal 2010, TTCQ entered into a Memorandum Agreement with Chongqing FuLi Real Estate Development Co. Ltd. (“FuLi”) to purchase two commercial properties totaling 311.99 square meters (“Office Space”) located in Jiang Bei District Chongqing. The total purchase price committed and paid was RMB 4,025, or approximately $648. The development was completed, the property was transferred to TTCQ in April 2013 and the title deed was received during the third quarter of Fiscal 2014.

TTCQ is actively searching for tenants to occupy the commercial properties, which are vacant as of the date of this Report.

Properties purchased from FuLi generated a rental income of $Nil and $1 for the three and nine months ended March 31, 2024, as compared to $3 and $7 for the same period in Fiscal 2023.

Depreciation expense for FuLi was $7 and $21 for the three and nine months ended March 31, 2024, as compared to $7 and $22 for the same period in Fiscal 2023.

Summary

Total rental income for all investment properties in China was $6 and $19 for the three and nine months ended March 31, 2024, as compared to $3 and $15 for the same period in Fiscal 2023.

Depreciation expense for all investment properties in China were $17 and $51 for the three and nine months ended March 31, 2024, as compared to $18 and $54 for the same period in Fiscal 2023.

8.	OTHER ASSETS

Other assets consisted of the following:

	Mar. 31,		June 30,
	2024		2023
	(Unaudited)
Deposits for rental and utilities and others		148		117
Currency translation effect		1		(1	)
Total	$	149	$	116

- 11 -

*Down payment for purchase of investment properties included:

	Mar. 31, 2024
	RMB			U.S. Dollars
Original Investment (10% of Junzhou equity)	$	10,000		$	1,606
Less: Management Fee		(5,000	)		(803	)
Net Investment		5,000			803
Less: Share of Loss on Joint Venture		(137	)		(22	)
*Net Investment as Down Payment (Note a)**		4,863			781
Loans Receivable		5,000			705
Interest Receivable		1,250			176
Less: Impairment of Interest		(906	)		(128	)
*Transferred to Down Payment (Note b)**		5,344			753

* Down Payment for Purchase of Investment Properties		10,207			1,534
Add: Effect of foreign currency exchange		-			46
Less: Provision of Impairment loss on other assets		(10,207	)		(1,580	)
* Down Payment for Purchase of Investment Properties	$	-		$	-

In Fiscal 2011, the Company signed a Joint Venture agreement (the “Agreement”) with Jia Sheng Property Development Co. Ltd. (the “Developer”) to form a new company, Junzhou Co. Limited (“Joint Venture” or “Junzhou”), to jointly develop the “Singapore Themed Park” project (the “Project”). The Company paid RMB10,000 for the 10% investment in the Joint Venture. The Developer paid the Company a management fee of RMB5,000 in cash upon signing of the Agreement, with a remaining fee of RMB5,000 payable upon fulfilment of certain conditions in accordance with the Agreement. The Company further reduced its investment by RMB137, or approximately $22, through the losses from operations incurred by the Joint Venture.

In Fiscal 2014, the Company disposed of its entire 10% interest in the Joint Venture but, to date, has not received payment in full therefor. The Company recognized a disposal based on the recorded net book value of RMB5,000, or equivalent to $803, from net considerations paid, in accordance with GAAP under ASC Topic 845 Non-monetary Consideration. It is presented under “Other Assets” as non-current assets to defer the recognition of the gain on the disposal of the 10% interest in the Joint Venture investment until such time that the consideration is paid, so the gain can be ascertained.

Amounts of RMB5,000, or approximately $705, as disclosed in Note 5, plus the interest receivable on long-term loan receivable of RMB1,250, or approximately $176, and impairment on interest of RMB906, or approximately $128.

The shop lots are to be delivered to TTCQ upon completion of the construction of the shop lots in Singapore Themed Resort Project. The initial targeted date of completion was in Fiscal 2017. However, progress has been delayed as the developer is currently undergoing an asset reorganization process, to re-negotiate with its creditors to complete the project.

During the fourth quarter of Fiscal 2021, the Company accrued an impairment charge of $1,580 related to the doubtful recovery of the down payment on property in the Singapore Theme Resort Project in Chongqing, China. The Company elected to take this non-cash impairment charge due to increased uncertainties regarding the project’s viability, given the developers weakening financial condition as well as uncertainties arising from the negative real-estate environment in China, implementation of control measures on real-estate lending in China and its relevant government policies, together with effects of the ongoing pandemic. The local court is verifying the documents due to the sizable number of creditors as of March 31, 2024.

9.	LINES OF CREDIT

The carrying value of the Company’s lines of credit approximates its fair value because the interest rates associated with the lines of credit are adjustable in accordance with market situations when the Company borrowed funds with similar terms and remaining maturities.

The Company’s credit rating provides it with ready and adequate access to funds in global markets.

- 12 -

As of March 31, 2024, the Company had certain lines of credit that are collateralized by restricted deposits.

Entity with

Type of

Interest

Credit

Unused

Facility

Rate

Limitation

Credit

Trio-Tech International Pte. Ltd.,

Singapore

Lines of Credit

Cost of Funds Rate +1.25%

3,928

3,649

Universal (Far East) Pte. Ltd.

Lines of Credit

Cost of Funds Rate +1.25%

1,853

1,828

Trio-Tech Malaysia Sdn. Bhd.

Revolving credit

Cost of Funds Rate +2%

317

As of June 30, 2023, the Company had certain lines of credit that are collateralized by restricted deposits.

Entity with

Type of

Interest

Credit

Unused

Facility

Rate

Limitation

Credit

Trio-Tech International Pte. Ltd.,

Singapore

Lines of Credit

Cost of Funds Rate +1.25% to +1.3%

3,907

3,701

Universal (Far East) Pte. Ltd.

Lines of Credit

Cost of Funds Rate +1.25% to +1.3%

1,843

1,559

Trio-Tech Malaysia Sdn. Bhd.

Revolving credit

Cost of Funds Rate +2%

319

10.

ACCRUED EXPENSE

Accrued expense consisted of the following:

	Mar. 31,		June 30,
	2024		2023
	(Unaudited)

Payroll and related costs	$	1,572	$	1,880
Commissions		171		158
Legal and audit		285		280
Sales tax		55		140
Utilities		241		236
Warranty		36		24
Accrued purchase of materials and property, plant and equipment		1,064		1,214
Provision for reinstatement		373		380
Other accrued expense		47		42
Currency translation effect		60		(63	)
Total	$	3,904	$	4,291

11.

ASSURANCE WARRANTY ACCRUAL

The Company provides for the estimated costs that may be incurred under its warranty program at the time the sale is recorded. The warranty period of the products manufactured by the Company is generally one year or the warranty period agreed upon with the customer. The Company estimates the warranty costs based on the historical rates of warranty returns. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

		Mar. 31,				June 30,
		2024				2023
		(Unaudited)