10-Q 1 trt20231231_10q.htm FORM 10-Q trt20231231_10q.htm
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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 December 31, 2023

 

OR

 

  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 February 1, 2024, there were 4,169,555 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 December 31, 2023 (Unaudited), and June 30, 2023

1

 

(b)   Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss) for the Three and Six Months Ended December 31, 2023 (Unaudited), and December 31, 2022 (Unaudited)

3

 

(c)   Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended December 31, 2023 (Unaudited), and December 31, 2022 (Unaudited)

4

 

(d)   Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2023 (Unaudited), and December 31, 2022 (Unaudited)

5

 

(e)   Notes to Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

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

28

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

41

Item 4.

Controls and Procedures

41

     

Part II.

Other Information

 
     

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

42

Item 3.

Defaults upon Senior Securities

42

Item 4.

Mine Safety Disclosures

42

Item 5.

Other Information

42

Item 6.

Exhibits

42

     

Signatures

43

 

-i-

 

 

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; 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)

 

 

   

December 31,
2023

   

June 30,
2023

 
   

(Unaudited)

         

ASSETS

               

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 10,966     $ 7,583  

Short-term deposits

    5,791       6,627  

Trade accounts receivable, less allowance for expected credit losses of $222 and $217, respectively

    12,388       9,804  

Other receivables

    1,029       939  

Inventories, less provision for obsolete inventories of $675 and $648, respectively

    3,546       2,151  

Prepaid expense and other current assets

    589       694  

Assets held for sale

    -       274  

Financed sales receivable

    6       16  

Restricted term deposits

    762       739  

Total current assets

    35,077       28,827  

NON-CURRENT ASSETS:

               

Deferred tax assets

    153       100  

Investment properties, net

    461       474  

Property, plant and equipment, net

    6,601       8,344  

Operating lease right-of-use assets

    2,359       2,609  

Other assets

    169       116  

Restricted term deposits

    1,778       1,716  

Total non-current assets

    11,521       13,359  

TOTAL ASSETS

  $ 46,598     $ 42,186  
                 

LIABILITIES

               

CURRENT LIABILITIES:

               

Lines of credit

  $ 384     $ -  

Accounts payable

    2,345       1,660  

Accrued expense

    4,506       4,291  

Contract liabilities

    3,808       1,277  

Income taxes payable

    257       418  

Current portion of bank loans payable

    375       475  

Current portion of finance leases

    81       107  

Current portion of operating leases

    1,119       1,098  

Total current liabilities

    12,875       9,326  

NON-CURRENT LIABILITIES:

               

Bank loans payable, net of current portion

    762       877  

Finance leases, net of current portion

    15       42  

Operating leases, net of current portion

    1,240       1,511  

Income taxes payable, net of current portion

    141       255  

Deferred tax liabilities

    7       10  

Other non-current liabilities

    30       594  

Total non-current liabilities

    2,195       3,289  

TOTAL LIABILITIES

  $ 15,070     $ 12,615  
                 

EQUITY

               

TRIO-TECH INTERNATIONAL’S SHAREHOLDERS’ EQUITY:

               

Common stock, no par value, 15,000,000 shares authorized; 4,160,555 and 4,096,680 shares issued outstanding as at December 31 and June 30, 2023, respectively

  $ 13,018       12,819  

Paid-in capital

    5,156       5,066  

Accumulated retained earnings

    11,500       10,763  

Accumulated other comprehensive income-translation adjustments

    1,763       758  

Total Trio-Tech International shareholders equity

    31,437       29,406  

Non-controlling interest

    91       165  

TOTAL EQUITY

  $ 31,528     $ 29,571  

TOTAL LIABILITIES AND EQUITY

  $ 46,598     $ 42,186  

 

See notes to condensed consolidated financial statements.

 

- 1 -

 
 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

UNAUDITED (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

 

 

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 

Revenue

                               

Manufacturing

  $ 4,790     $ 5,044     $ 7,675     $ 8,629  

Testing services

    4,646       5,648       9,810       12,012  

Distribution

    2,760       1,694       4,670       3,676  

Real estate

    6       4       13       12  
      12,202       12,390       22,168       24,329  

Cost of Sales

                               

Cost of manufactured products sold

    3,609       3,849       5,658       6,374  

Cost of testing services rendered

    3,464       3,747       7,248       7,873  

Cost of distribution

    2,256       1,441       3,852       3,089  

Cost of real estate

    19       18       36       36  
      9,348       9,055       16,794       17,372  
                                 

Gross Margin

    2,854       3,335       5,374       6,957  
                                 

Operating Expenses:

                               

General and administrative

    1,817       1,919       3,975       4,224  

Selling

    248       193       435       366  

Research and development

    131       151       216       224  

(Gain) / Loss on disposal of property, plant and equipment

    (19 )     3       72       7  

Total operating expense

    2,177       2,266       4,698       4,821  
                                 

Income from Operations

    677       1,069       676       2,136  
                                 

Other (Expenses) / Income

                               

Interest expense

    (22

)

    (10

)

    (46 )     (54 )

Other (expense) / income, net

    (82 )     (264 )     114       (106 )

Government grant

    4       21       77       42  

Total other (expense) / income

    (100 )     (253 )     145       (118 )
                                 

Income from Continuing Operations before Income Taxes

    577       816       821       2,018  
                                 

Income Tax Expenses

    (95

)

    (241

)

    (132 )     (466 )
                                 

Income from Continuing Operations before Non-controlling Interest, Net of Tax

    482       575       689       1,552  
                                 

Discontinued Operations

                               

Income / (Loss) from discontinued operations, net of tax

    4       (10 )     4       (9 )

Net Income

    486       565       693       1,543  
                                 

Less: net (loss) / income attributable to non-controlling interest

    (21

)

    58       (44 )     154  

Net Income Attributable to Trio-Tech International Common Shareholders

  $ 507     $ 507     $ 737     $ 1,389  
                                 

Amounts Attributable to Trio-Tech International Common Shareholders:

                               

Income from continuing operations, net of tax

    503       512       730       1,394  

Income / (Loss) from discontinued operations, net of tax

    4       (5 )     7       (5 )

Net Income Attributable to Trio-Tech International Common Shareholders

  $ 507     $ 507     $ 737     $ 1,389  
                                 

Basic Earnings per Share:

                               

Basic earnings per share from continuing operations attributable to Trio-Tech International

  $ 0.12     $ 0.12     $ 0.18     $ 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

  $ 0.12     $ 0.12     $ 0.18     $ 0.34  
                                 

Diluted Earnings per Share:

                               

Diluted earnings per share from continuing operations attributable to Trio-Tech International

  $ 0.12     $ 0.12     $ 0.17     $ 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

  $ 0.12     $ 0.12     $ 0.17     $ 0.33  
                                 

Weighted average number of common shares outstanding

                               

Basic

    4,120       4,074       4,109       4,074  

Dilutive effect of stock options

    139       88       161       86  

Number of shares used to compute earnings per share diluted

    4,259       4,162       4,270       4,160  

 

See notes to condensed consolidated financial statements.

 

- 2 -

 

 

 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED (IN THOUSANDS)

 

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 

Comprehensive Income Attributable to Trio-Tech International Common Shareholders:

                               
                                 

Net income

  $ 486     $ 565     $ 693     $ 1,543  

Foreign currency translation, net of tax

    1,158       1,568       975       355  

Comprehensive Income

    1,644       2,133       1,668       1,898  

Less: comprehensive (loss) / income attributable to non- controlling interest

    (72 )     133       (74 )     212  

Comprehensive Income Attributable to Trio-Tech International Common Shareholders

  $ 1,716     $ 2,000     $ 1,742     $ 1,686  

 

See notes to condensed consolidated financial statements.

 

- 3 -

 

 

 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

UNAUDITED (IN THOUSANDS)

 

Six months ended December 31, 2023

   

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

    -       -       90       -       -       -       90  

Net income / (loss)

    -       -       -       737       -       (44 )     693  

Exercise of stock option

    64       199       -       -       -       -       199  

Translation adjustment

    -       -       -       -       1,005       (30 )     975  

Balance at Dec. 31, 2023

    4,161       13,018       5,156       11,500       1,763       91       31,528  

 

 

Six months ended December 31, 2022

   

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 expense

    -       -       54       -       -       -       54  

Net income

    -       -       -       1,389       -       154       1,543  

Exercise of stock option

    5       19       -       -       -       -       19  

Translation adjustment

    -       -       -       -       297       58       355  

Balance at Dec. 31, 2022

    4,077       12,769       4,762       10,608       1,494       340       29,973  

 

See notes to condensed consolidated financial statements.

 

- 4 -

 

 

 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

 

   

Six Months Ended

 
    Dec. 31,    

Dec. 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Cash Flow from Operating Activities

               

Net income

  $ 693     $ 1,543  

Adjustments to reconcile net income to net cash flow provided by operating activities

               

Depreciation and amortization

    2,784       2,143  

Addition / (Reversal) of provision for obsolete inventories

    14       (41

)

Stock option expense

    90       54  

Bad debt recovery

    (3

)

    (17

)

Accrued interest expense, net accrued interest income

    (35

)

    (8 )

Payment of interest portion of finance lease

    (3

)

    (6

)

Loss on sale of property, plant and equipment - continuing operations

    71       8  

Warranty recovery, net

    15       2  

Reversal of income tax provision

    (7

)

    -  

Deferred tax (benefits) / expense

    (51

)

    94  

Changes in operating assets and liabilities, net of acquisition effects

               

Trade accounts receivable

    (2,562

)

    (1,507

)

Other receivables

    (90

)

    60  

Other assets

    (58

)

    (4 )

Inventories

    (1,342

)

    (821

)

Prepaid expense and other current assets

    129       588  

Accounts payable, accrued expense and contract liabilities

    3,147       1,338  

Income taxes payable

    (259

)

    (197 )

Other non-current liabilities

    (564

)

    1,144  

Operating lease liabilities

    (693

)

    (594 )

Net Cash Provided by Operating Activities

  $ 1,276     $ 3,779  
                 

Cash Flow from Investing Activities

               

Withdrawal from unrestricted term deposits, net

    2,666       2,841  

Investment in unrestricted term deposits, net

    (1,641 )     (2,275 )

Additions to property, plant and equipment

    (158

)

    (3,994

)

Proceeds from disposal of assets held-for-sale

    269       -  

Net Cash Provided by Investing Activities

    1,136       (3,428 )
                 

Cash Flow from Financing Activities

               

Payment on lines of credit

    (575

)

    (1,402

)

Payment of bank loans

    (241

)

    (234

)

Payment of finance leases

    (55

)

    (67

)

Proceeds from exercising stock options

    199       19  

Proceeds from lines of credit

    952       476  

Proceeds from bank loans

    -       176  

Net Cash Provided by Financing Activities

    280       (1,032 )
                 

Effect of Changes in Exchange Rate

    776       173  
                 

Net Increase / (Decrease) in Cash, Cash Equivalents, and Restricted Cash

    3,468       (508 )

Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

    10,038       9,376  

Cash, Cash Equivalents, and Restricted Cash at End of Period

  $ 13,506     $ 8,868  
                 

Supplementary Information of Cash Flows

               

Cash paid during the period for:

               

Interest

  $ 21     $ 53  

Income taxes

  $ 371     $ 346  
                 

Reconciliation of Cash, Cash Equivalents, and Restricted Cash

               

Cash

    10,966       6,379  

Restricted Term-Deposits in Current Assets

    762       747  

Restricted Term-Deposits in Non-Current Assets

    1,778       1,742  

Total Cash, Cash Equivalents, and Restricted Cash Shown in Statements of Cash Flows

  $ 13,506     $ 8,868  

 

See notes to condensed consolidated financial statements.

 

- 5 -

 

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 $762 as at December 31, 2023 are classified as current assets as they relate to short-term trade financing. On the other hand, restricted deposits of $1,778 as at December 31, 2023 are classified as non-current assets as they relate to long-term obligations and will become unrestricted only upon discharge of the obligations. 

 

- 6 -

 

 

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 second 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 six months ended December 31, 2023 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.

 

- 7 -

 

 

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 December 31, 2023, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

 

- 8 -

 

 

 

3.

TERM DEPOSITS

 

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Short-term deposits

  $ 5,620     $ 6,901  

Currency translation effect on short-term deposits

    171       (274 )

Total short-term deposits

    5,791       6,627  

Restricted term deposits - Current

    737       755  

Currency translation effect on restricted term deposits

    25       (16 )

Total restricted term deposits - Current

    762       739  

Restricted term deposits – Non-current

    1,721       1,763  

Currency translation effect on restricted term deposits

    57       (47 )

Total restricted term deposits - Non-current

    1,778       1,716  

Total term deposits

  $ 8,331     $ 9,082  

 

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 $762 as at December 31, 2023 are classified as current assets as they relate to short-term trade financing. On the other hand, restricted deposits of $1,778 as at December 31, 2023 are classified as non-current assets as they relate to long-term obligations and will become unrestricted only upon discharge of the obligations. 

 

 

 

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: 

 

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Beginning

  $ 217     $ 243  

Additions charged to expense

    12       9  

Recovered

    (15

)

    (20

)

Currency translation effect

    8       (15

)

Ending

  $ 222     $ 217  

 

- 9 -

 

 

 

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 December 31, 2023.

 

 

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       289  

Less: allowance for expected credit losses

    (2,000 )     (289 )

Net loan receivables from property development projects

    -       -  
                   

Long-term loan receivables

                 

Jun Zhou Zhi Ye

Oct 31, 2016

    5,000       722  

Less: transfer – down-payment for purchase of investment property

    (5,000 )     (722 )

Net loan receivables from property development projects

    -       -  

 

The short-term loan receivables amounting to renminbi (“RMB”) 2,000, or approximately $289 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 $289 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 December 31, 2023 or for Fiscal 2024. TTCQ is in the legal process of recovering the outstanding amount of approximately $289.

 

The loan amounting to RMB 5,000, or approximately $722, 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:

   

Dec. 31,

2023

   

June 30,

2023

 
   

(Unaudited)

         
                 

Raw materials

  $ 1,752     $ 1,389  

Work in progress

    2,055       1,132  

Finished goods

    334       178  

Less: provision for obsolete inventories

    (675

)

    (648

)

Currency translation effect

    80       100  
    $ 3,546     $ 2,151  

 

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

   

Dec. 31,

2023

   

June 30,

2023

 
   

(Unaudited)

         
                 

Beginning

  $ 648     $ 674  

Additions charged to expense

    29       61  

Usage – disposition

    (15

)

    (40

)

Currency translation effect

    13       (47 )

Ending

  $ 675     $ 648  

 

- 10 -

 

 

 

7.

INVESTMENT PROPERTIES

 

The following table presents the Company’s investment in properties in China as of December 31, 2023. The exchange rate is based on the market rate as of December 31, 2023.

 

 

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

    -       (136

)

Gross investment in rental property

    9,649       1,392  
                   

Accumulated depreciation on rental property

Sep 30, 2023

    (8,246

)

    (1,198

)

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

)

        (6,453

)

    (931

)

Net investment in property – China

    3,196       461  

 

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  

 

- 11 -

 

 

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.

 

Property purchased from MaoYe generated a rental income of $6 and $12 during the three and six months ended December 31, 2023, as compared to $2 and $8 for the same period in Fiscal 2023.

 

Depreciation expense for MaoYe was $4 and $8 during the three and six months ended December 31, 2023, as compared to $4 and $8 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 December 31, 2023, 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 six months ended December 31, 2023 and 2022.

 

Depreciation expense for JiangHuai was $6 and $12 for the three and six months ended December 31, 2023, as compared to $7 and $14 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 six months ended December 31, 2023, as compared to $2 and $4 for the same period in Fiscal 2023.

 

Depreciation expense for FuLi was $7 and $14 for the three and six months ended December 31, 2023, as compared to $7 and $15 for the same period in Fiscal 2023.

 

Summary

 

Total rental income for all investment properties in China was $6 and $13 for the three and six months ended December 31, 2023, as compared to $4 and $12 for the same period in Fiscal 2023.

 

Depreciation expense for all investment properties in China were $17 and $34 for the three and six months ended December 31, 2023, as compared to $18 and $36 for the same period in Fiscal 2023.

 

- 12 -

 

 

 

8.

OTHER ASSETS

 

Other assets consisted of the following:

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         

Deposits for rental and utilities and others

    164       117  

Currency translation effect

    5       (1

)

Total

  $ 169     $ 116  

 

*Down payment for purchase of investment properties included:

 

   

2023

 
   

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       722  

Interest Receivable

    1,250       180  

Less: Impairment of Interest

    (906

)

    (131

)

Transferred to Down Payment (Note *b)

    5,344       771  

* Down Payment for Purchase of Investment Properties

    10,207       1,552  

Add: Effect of foreign currency exchange

    -       28  

Less: Provision of Impairment loss on other assets

    (10,207 )     (1,580

)

* Down Payment for Purchase of Investment Properties

  $ -     $ -  

 

a)

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.

 

b)

Amounts of RMB5,000, or approximately $722, as disclosed in Note 5, plus the interest receivable on long-term loan receivable of RMB1,250, or approximately $180, and impairment on interest of RMB906, or approximately $131.

 

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 December 31, 2023.

 

 

 

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.

 

- 13 -

 

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

 

As of December 31, 2023, the Company had certain lines of credit that are collateralized by restricted deposits.

 

Entity with

 

Type of

 

Interest

 

Credit

   

Unused

 

Facility

 

Facility

 

Rate

 

Limitation

   

Credit

 

Trio-Tech International Pte. Ltd.,

Singapore

 

Lines of Credit

 

Cost of Funds Rate +1.25%

  $ 4,013     $ 3,724  

Universal (Far East) Pte. Ltd.

 

Lines of Credit

 

Cost of Funds Rate +1.25%

  $ 1,893     $ 1,206  

Trio-Tech Malaysia Sdn. Bhd.

 

Revolving credit

 

Cost of Funds Rate +2%

  $ 326     $ 326  

 

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

 

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     $ 319  

 

 

 

10.

ACCRUED EXPENSE

 

Accrued expense consisted of the following:

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Payroll and related costs

  $ 1,633     $ 1,880  

Commissions

    206       158  

Legal and audit

    238       280  

Sales tax

    76       140  

Utilities

    183       236  

Warranty

    40       24  

Accrued purchase of materials and property, plant and equipment

    1,529       1,214  

Provision for reinstatement

    373       380  

Other accrued expense

    69       42  

Currency translation effect

    159       (63 )

Total

  $ 4,506     $ 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.

 

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Beginning

  $ 24     $ 16  

Additions charged to cost and expense

    19       32  
Utilization     (4 )     (25

)

Currency translation effect

    1       1  

Ending

  $ 40     $ 24  

 

- 14 -

 

 

 

12.

BANK LOANS PAYABLE

 

Bank loans payable consisted of the following:

   

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Note payable denominated in the Malaysian Ringgit for expansion plans in Malaysia, maturing in August 2028, bearing interest at the bank’s prime rate less 2.00% (4.85% and 4.6% at December 31, 2023 and June 30, 2023) per annum, with monthly payments of principal plus interest through August 2028, collateralized by the acquired building with a carrying value of $2,246 and $2,208, as at December 31, 2023 and June 30, 2023, respectively.

  $ 792     $ 957  

Financing arrangement at fixed interest rate 3.2% per annum, with monthly payments of principal plus interest through July 2025.

    65       84  

Financing arrangement at fixed interest rate 3.0% per annum, with monthly payments of principal plus interest through December 2026.

    150       169  

Financing arrangement at fixed interest rate 3.0% per annum, with monthly payments of principal plus interest through August 2027.

    130       142  

Total bank loans payable

  $ 1,137     $ 1,352  
                 

Current portion of bank loans payable

    354       503  

Currency translation effect on current portion of bank loans

    21       (28

)

Current portion of bank loans payable

    375       475  

Long-term portion of bank loans payable

    721       933  

Currency translation effect on long-term portion of bank loans

    41       (56

)

Long-term portion of bank loans payable

  $ 762       877  

 

Future minimum payments (excluding interest) as at December 31, 2023, were as follows:

 

Remainder of Fiscal 2024

  $ 241  

2025

    268  

2026

    236  

2027

    217  

Thereafter

    175  

Total obligations and commitments

  $ 1,137  

 

Future minimum payments (excluding interest) as at June 30, 2023, were as follows:

 

2024

  $ 475  

2025

    262  

2026

    231  

2027

    212  

Thereafter

    172  

Total obligations and commitments

  $ 1,352  

 

 

 

13.

COMMITMENTS AND CONTINGENCIES

 

Deposits with banks are not fully insured by the local government or agency and are consequently exposed to risk of loss. The Company believes that the probability of bank failure, causing loss to the Company, is remote.

 

The Company is, from time to time, the subject of litigation claims and assessments arising out of matters occurring in its normal business operations. In the opinion of management, resolution of these matters will not have a material adverse effect on the Company’s consolidated financial statements.

 

- 15 -

 

 

 

14.

BUSINESS SEGMENTS

 

The Company operated in four segments: the testing service industry (which performs structural and electronic tests of semiconductor devices); the designing and manufacturing of equipment (assembly of equipment that tests the structural integrity of integrated circuits and other products); distribution of various products from other manufacturers in Singapore and Asia; and the real estate segment in China.

 

The cost of equipment, current year investment in new equipment and depreciation expense are allocated into respective segments based on the primary purpose for which the equipment was acquired.

 

Corporate expenses are allocated to the four segments on a combination of factors involving revenue, manpower costs and fixed assets investments, except the Malaysia and China operations, which is calculated based on actual sales. The following segment information table includes segment operating income or loss after including corporate expense allocated to the segments, which gets eliminated in the consolidation.

 

The following segment Information is unaudited for the six months ended December 31, 2023, and December 31, 2022:

 

Business Segment Information:

 

Six Months

         

Operating

                         
 

Ended

 

Net

   

Income /

   

Total

   

Depr. And

   

Capital

 
 

Dec. 31,

 

Revenue

   

(Loss)

   

Assets

   

Amort.

   

Expenditures

 

Manufacturing

2023

  $ 7,675     $ 149    

$

19,242     $ 214     $ 38  
 

2022

  $ 8,629     $ 477     $ 15,345     $ 230     $ 15  
                                           

Testing Services

2023

    9,810       (280

)

    22,690       2,507       120  
 

2022

    12,012       1,129       27,757       1,875       3,967  
                                           

Distribution

2023

    4,670       646       1,976       -       -  
 

2022

    3,676       482       1,437       -       -  
                                           

Real Estate

2023

    13       (53

)

    2,502       36       -  
 

2022

    12       (42

)

    1,580       38       -  
                                           

Corporate & Unallocated

2023

    -       214       188       27       -  
 

2022

    -       90       77       -       12  
                                           

Total Company

2023

  $ 22,168     $ 676    

$

46,598     $ 2,784     $ 158  
 

2022

  $ 24,329     $ 2,136     $ 46,196     $ 2,143     $ 3,994  

 

The following segment Information is unaudited for the three months ended December 31, 2023, and December 31, 2022:

 

Business Segment Information:

 

Three Months

         

Operating

                         
 

Ended

 

Net

   

Income /

   

Total

   

Depr. And

   

Capital

 
 

Dec. 31,

 

Revenue

   

(Loss)

   

Assets

   

Amort.

   

Expenditures

 

Manufacturing

2023

  $ 4,790     $ 191    

$

19,242     $ 101     $ 19  
 

2022

  $ 5,044     $ 301     $ 15,345     $ 99     $ 15  
                                           

Testing Services

2023

    4,646       (152

)

    22,690       1,181       62  
 

2022

    5,648       547       27,757       1,111       2,811  
                                           

Distribution

2023

    2,760       401       1,976       -       -  
 

2022

    1,694       217       1,437       -       -  
                                           

Real Estate

2023

    6       (27

)

    2,502       18       -  
 

2022

    4       (28

)

    1,580       20       -  
                                           

Corporate & Unallocated

2023

            264       188       15       -  
 

2022

    -       32       77       6       12  
                                           

Total Company

2023

  $ 12,202     $ 677    

$

46,598     $ 1,315     $ 81  
 

2022

  $ 12,390     $ 1,069     $ 46,196     $ 1,236     $ 2,838  

 

- 16 -

 

Management is currently evaluating the ongoing contributions of each of its business segments to its current and future revenue and prospects, including its testing segment. As a result, it may divest one or more business segments in the future, including its testing segment, to enable management to concentrate on segments where it anticipates opportunities for future revenue growth, thereby maximizing shareholder value.

 

 

 

15.

OTHER (EXPENSES) / INCOME

 

Other (expense) / income consisted of the following:

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 
   

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

 

Interest income

  $ 96     $ 37     $ 174     $ 55  

Other rental income

    36       27       72       54  

Exchange loss

    (236 )     (349 )     (177 )     (279 )

Other miscellaneous income

    22       21       45       64  

Total

  $ (82 )   $ (264 )   $ 114     $ (106 )

 

- 17 -

 

 

 

16.

GOVERNMENT GRANTS

 

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 
   

Unaudited

   

Unaudited

   

Unaudited

   

Unaudited

 

Government grant

  $ 4     $ 21     $ 77     $ 42  

 

In the three months ended December 31, 2023, the Company received government grants amounting to $4, related to capital expenditure subsidy received from the China government. During the same period in 2022, the Company received government grants amounting to $21, $17 of which was an incentive from the Singapore government for local resident recruitment, and the remaining $4 related to capital expenditure subsidy received from the China government.

 

In the six months ended December 31, 2023, the Company received government grants amounting to $77, $16 of which was an incentive from the Singapore government for local resident recruitment, and the $57 from the U.S. government related to Employee Retention Credit (“ERC”). During the same period in 2022, the Company received government grants amounting to $42, with $10 from the Singapore government for Covid-19, $17 from the Singapore government for local resident recruitment and the remaining $15 related to capital expenditure subsidy received from the China government.

 

 

 

17.

INCOME TAX

 

The provision for income taxes has been determined based upon the tax laws and rates in the countries in which we operate. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

 

Due to the enactment of the Tax Cuts and Jobs Act, the Company is subject to a tax on global intangible low-taxed income (“GILTI”). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. The Company has elected to account for GILTI as a period cost. GILTI expense was $15 and $30 for the three and six months ended December 31, 2023, as compared to $41 and $83 for the same period in fiscal 2023.

 

The Company's income tax expense was $95 and $132 for the three and six months ended December 31, 2023, as compared to $241 and $466 for the same period in Fiscal 2023. Our effective tax rate (“ETR”) from continuing operations was 16.5% and 29.5% for the quarters ended December 31, 2023 and December 31, 2022, respectively. The decrease of income tax expense was attributable to the following:

 

 

1.

The Singapore and Thailand operations incurred lower income tax due to lower income generated in period ended December 31,2023 compared to same period last fiscal year.

 

2.

The Company recognized lower GILTI expense due to lower income derived from controlled foreign corporation.

 

The Company accrues penalties and interest related to unrecognized tax benefits when necessary, as a component of penalties and interest expense, respectively. The Company had no unrecognized tax benefits or related accrued penalties or interest expense at December 31, 2023 and December 31, 2022, respectively.

 

In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these criteria, management believes it is more likely than not the Company will not realize all of the benefits of the federal, state, and foreign deductible differences. Accordingly, a valuation allowance has been established against portion of the deferred tax assets recorded in the U.S. and various foreign jurisdictions.

 

 

18.

REVENUE

 

The Company generates revenue primarily from three different segments: manufacturing, testing and distribution. The Company accounts for a contract with a customer when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company’s revenues are measured based on consideration stipulated in the arrangement with each customer, net of any sales incentives and amounts collected on behalf of third parties, such as sales taxes. The revenues are recognized as separate performance obligations that are satisfied by transferring control of the product or service to the customer.

 

- 18 -

 

Significant Judgments

 

The Company’s arrangements with its customers include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. A product or service is considered distinct if it is separately identifiable from other deliverables in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

 

The Company allocates the transaction price to each performance obligation on a relative standalone selling price basis (“SSP”). Determining the SSP for each distinct performance obligation and allocation of consideration from an arrangement to the individual performance obligations and the appropriate timing of revenue recognition are significant judgments with respect to these arrangements. The Company typically establishes the SSP based on observable prices of products or services sold separately in comparable circumstances to similar clients. The Company may estimate SSP by considering internal costs, profit objectives and pricing practices in certain circumstances.

 

Warranties, discounts and allowances are estimated using historical and recent data trends. The Company includes estimates in the transaction price only to the extent that a significant reversal of revenue is not probable in subsequent periods. The Company’s products and services are generally not sold with a right of return, nor has the Company experienced significant returns from or refunds to its customers.

 

Manufacturing

 

The Company primarily derives revenue from the sale of both front-end and back-end semiconductor test equipment and related peripherals, maintenance, and support of all these products, installation and training services and the sale of spare parts. The Company’s revenues are measured based on consideration stipulated in the arrangement with each customer, net of any sales incentives and amounts collected on behalf of third parties, such as sales taxes.

 

The Company recognizes revenue at a point in time when the Company has satisfied its performance obligation by transferring control of the product to the customer. The Company uses judgment to evaluate whether the control has transferred by considering several indicators, including whether:

 

the Company has a present right to payment;

 

the customer has legal title;

 

the customer has physical possession;

 

the customer has significant risk and rewards of ownership; and

 

the customer has accepted the product, or whether customer acceptance is considered a formality based on history of acceptance of similar products (for example, when the customer has previously accepted the same equipment, with the same specifications, and when we can objectively demonstrate that the tool meets all the required acceptance criteria, and when the installation of the system is deemed perfunctory).

 

Not all indicators need to be met for the Company to conclude that control has transferred to the customer. In circumstances in which revenue is recognized prior to the product acceptance, the portion of revenue associated with its performance obligations of product installation and training services are deferred and recognized upon acceptance.

 

Majority of sales under the manufacturing segment include a 12-month warranty. The Company generally provides a limited warranty that our products comply with applicable specifications at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective parts. The Company has concluded that the warranty provided for standard products are assurance type warranties and are not separate performance obligations.

 

Customized products are generally more complex and, as a result, may contain unforeseen faults that could lead to additional costs for us, including increased servicing or the need to provide product modifications. Warranty provided for customized products are service warranties and are separate performance obligations. Transaction prices are allocated to this performance obligation using cost plus method. The portion of revenue associated with warranty service is deferred and recognized as revenue over the warranty period, as the customer simultaneously receives and consumes the benefits of warranty services provided by the Company.

 

- 19 -

 

Testing

 

The Company renders testing services to manufacturers and purchasers of semiconductors and other entities who either lack testing capabilities or whose in-house screening facilities are insufficient. The Company primarily derives testing revenue from burn-in services, manpower supply and other associated services. SSP is directly observable from the sales orders. Revenue is allocated to performance obligations satisfied at a point in time depending upon terms of the sales order. Generally, there is no other performance obligation other than what has been stated inside the sales order for each of these sales.

 

Terms of contract that may indicate potential variable consideration include warranty, late delivery penalty and reimbursement to solve nonconformance issues for rejected products. Based on historical and recent data trends, it is concluded that these terms of the contract do not represent potential variable consideration. The transaction price is not contingent on the occurrence of any future event.

 

Distribution

 

The Company distributes complementary products, made by manufacturers around the world. The Company recognizes revenue from product sales at a point in time when the Company has satisfied its performance obligation by transferring control of the product to the customer. The Company uses judgment to evaluate whether control has transferred by considering several indicators discussed above. The Company recognizes the revenue at a point in time, generally upon shipment or delivery of the products to the customer or distributors, depending upon terms of the sales order. 

 

Contract Balances

 

The timing of revenue recognition, billings and collections may result in billed accounts receivable, unbilled receivables, contract assets, customer advances, deposits and contract liabilities. The Company’s payment terms and conditions vary by contract type, although terms generally include a requirement of payment of 70% to 90% of total contract consideration within 30 to 60 days of shipment with the remainder payable within 30 days of acceptance. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component.

 

The following table is the reconciliation of contract balances.

 

   

Dec. 31

   

June 30

 
   

2023

   

2023

 
   

(Unaudited)

         
                 

Trade Accounts Receivable

    12,388       9,804  

Accounts Payable

    2,345       1,660  

Contract Liabilities

    3,808       1,277  

 

Remaining Performance Obligation

 

The Company had $nil and $55 remaining performance obligations, which represents our obligation to deliver products and services as at December 31, 2023 and June 30, 2023 respectively.

 

- 20 -

 

 

 

19.

EARNINGS PER SHARE

 

Options to purchase 617,000 shares of Common Stock at exercise prices ranging from $2.53 to $7.76 per share were outstanding as of December 31, 2023. 284,500 stock options were excluded in the computation of diluted earnings per share (“EPS”) for the three months ended December 31, 2023, because they were anti-dilutive.

 

Options to purchase 636,375 shares of Common Stock at exercise prices ranging from $2.53 to $7.76 per share were outstanding as of December 31, 2022. 405,500 stock options were excluded in the computation of diluted EPS for the three months ended December 31, 2022, because they were anti-dilutive.

 

The following table is a reconciliation of the weighted average shares used in the computation of basic and diluted EPS for the period presented herein:

 

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
                                 

Income attributable to Trio-Tech International common shareholders from continuing operations, net of tax

  $ 503     $ 512     $ 730     $ 1,394  

Income / (loss) attributable to Trio-Tech International common shareholders from discontinued operations, net of tax

    4       (5 )     7       (5 )

Net income attributable to Trio-Tech International Common Shareholders

  $ 507     $ 507     $ 737     $ 1,389  
                                 

Weighted average number of common shares outstanding - basic

    4,120       4,074       4,109       4,074  
                                 

Dilutive effect of stock options

    139       88       161       86  

Number of shares used to compute earnings per share - diluted

    4,259       4,162       4,270       4,160  
                                 

Basic earnings per share from continuing operations attributable to Trio-Tech International

  $ 0.12       0.12       0.18       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

  $ 0.12     $ 0.12     $ 0.18     $ 0.34  
                                 

Diluted earnings per share from continuing operations attributable to Trio-Tech International

  $ 0.12       0.12       0.17       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

  $ 0.12     $ 0.12     $ 0.17     $ 0.33  

 

 

 

20.

STOCK OPTIONS

 

On September 14, 2017, the Company’s Board of Directors unanimously adopted the 2017 Employee Stock Option Plan (the “2017 Employee Plan”) and the 2017 Directors Equity Incentive Plan (the “2017 Directors Plan”) each of which was approved by the shareholders on December 4, 2017.

 

Assumptions

 

The fair value for the stock options granted to both employees and directors was estimated using the Black-Scholes option pricing model with the following weighted average assumptions, assuming: 

 

An expected life varying from 2.50 to 3.25 years, calculated in accordance with the guidance provided in SEC Staff bulletin No. 110 for plain vanilla options using the simplified method, since our equity shares have been publicly traded for only a limited period of time;

A risk-free interest rate varying from 0.11% to 4.59% (2023: 0.11% to 4.17%);

No expected dividend payments; and

Expected volatility of 52.2% to 73.85% (2023: 47.3% to 73.85%).

 

- 21 -

 

2017 Employee Stock Option Plan

 

The Company’s 2017 Employee Plan permits the grant of stock options to its employees covering up to an aggregate of 300,000 shares of Common Stock. In December 2021, the Company’s Board of Directors approved an amendment to the 2017 Employee Plan to increase the shares covered thereby from 300,000 shares to an aggregate of 600,000 shares, which amendment was approved by the Company’s shareholders at the annual meeting held in December 2021.

 

Under the 2017 Employee Plan, all options must be granted with an exercise price of no less than fair value as of the grant date and the options granted must be exercisable within a maximum of ten years after the date of grant, or such lesser period of time as is set forth in the stock option agreements. The options may be exercisable (a) immediately as of the effective date of the stock option agreement granting the option, or (b) in accordance with a schedule related to the date of the grant of the option, the date of first employment, or such other date as may be set by the Compensation Committee. Generally, options granted under the 2017 Employee Plan are exercisable within five years after the date of grant and vest over the period as follows: 25% vesting on the grant date and the remaining balance vesting in equal installments on the next three succeeding anniversaries of the grant date. The share-based compensation will be recognized in terms of the grade method on a straight-line basis for each separately vesting portion of the award. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 2017 Employee Plan).

 

During the first two quarters of Fiscal 2024, 48,000 stock options were granted under the 2017 Employee Plan. There were 63,875 stock options exercised during the six-month period ended December 31, 2023. The Company recognized $90 in stock-based compensation expense during the six months ended December 31, 2023.

 

During the first two quarters of Fiscal 2023, 25,000 stock options were granted under the 2017 Employee Plan. There were 5,000 stock options exercised during the six-month period ended December 31, 2022. The Company recognized $54 in stock-based compensation expense during the six months ended December 31, 2022.

 

As of December 31, 2023, there were vested stock options granted under the 2017 Employee Plan covering a total of 88,250 shares of Common Stock. The weighted-average exercise price was $5.59 and the weighted average remaining contractual term was 3.08 years.

 

As of December 31, 2022, there were vested stock options granted under the 2017 Employee Plan covering a total of 134,500 shares of Common Stock. The weighted-average exercise price was $4.78 and the weighted average remaining contractual term was 1.73 years.

 

A summary of option activities under the 2017 Employee Plan during the six months period ended December 31, 2023, is presented as follows:

 

           

Weighted

   

Weighted

Average

Remaining

   

 

 
           

Average

   

Contractual

   

Aggregate

 
   

Options

   

Exercise

Price

   

Term

(Years)

   

Intrinsic

Value

 
                                 

Outstanding at July 1, 2023

    216,375     $ 4.89       2.92     $ 140  

Granted

    48,000       4.88       -       -  

Exercised

    (63,875 )     3.12       -       -  

Forfeited or expired

    (3,500 )     3.75       -       -  

Outstanding at December 31, 2023

    197,000     $ 5.48       3.51     $ 39  

Exercisable at December 31, 2023

    88,250     $ 5.59       3.08     $ 16  

 

A summary of the status of the Company’s non-vested employee stock options during the six months ended December 31, 2023, is presented below:

 

           

Weighted

Average

 
   

Options

   

Grant-Date

Fair Value

 
                 

Non-vested at July 1, 2023

    81,750     $ 5.53  

Granted

    48,000       4.88  

Vested

    (21,000

)

    -  

Non-vested at December 31, 2023

    108,750     $ 5.38  

 

- 22 -

 

A summary of option activities under the 2017 Employee Plan during the six months period ended December 31, 2022, is presented as follows:

 

           

Weighted

Average

   

Weighted

Average

Remaining

Contractual

   

Aggregate

 
           

Exercise

   

Term

   

Intrinsic

 
   

Options

   

Price

   

(Years)

   

Value

 
                                 

Outstanding at July 1, 2022

    236,375     $ 5.21       2.61     $ 87  

Granted

    25,000       5.18       -       -  

Exercised

    (5,000

)

    3.75       -       -  

Forfeited or expired

    (40,000

)

    -       -       -  

Outstanding at December 31, 2022

    216,375     $ 5.16       2.49     $ 96  

Exercisable at December 31, 2022

    134,500     $ 4.78       1.73     $ 75  

 

A summary of the status of the Company’s non-vested employee stock options during the six months ended December 31, 2022, is presented below:

 

           

Weighted

Average

 
   

Options

   

Grant-Date

Fair Value

 
                 

Non-vested at July 1, 2022

    75,875     $ 5.98  

Granted

    25,000       5.18  

Vested

    (9,000

)

    -  

Forfeited

    (10,000 )     -  

Non-vested at December 31, 2022

    81,875     $ 5.79  

 

2017 Directors Equity Incentive Plan

 

The 2017 Directors Plan permits the grant of options to its directors in the form of non-qualified options and restricted stock, and initially covered up to an aggregate of 300,000 shares of Common Stock. In September 2020, the Company’s Board of Directors approved an amendment to the 2017 Directors Plan to increase the shares covered thereby from 300,000 shares to an aggregate of 600,000 shares, which amendment was approved by the Company’s shareholders at the annual meeting held in December 2020. In October 2023, the Company’s Board of Directors approved an amendment to the 2017 Directors Plan to increase the shares covered thereby from 600,000 shares to an aggregate of 900,000 shares, which amendment was approved by the Company’s shareholders at the annual meeting held in December 2023.

 

Under the 2017 Directors Plan, the exercise price of the non-qualified options is required to be 100% of the fair value of the underlying shares on the grant date. The options have five-year contractual terms and are exercisable immediately as of the grant date.

 

During the first two quarters of Fiscal 2024, the Company did not grant any options pursuant to the 2017 Directors Plan. There were no stock options exercised and the Company did not recognize any stock-based compensation expense during the six months ended December 31, 2023 and 2022.

 

As all the stock options granted under the 2017 Directors Plan vest immediately on the date of grant, there were no unvested stock options granted under the 2017 Directors Plan as of December 31, 2023, or December 31, 2022.

 

As of December 31, 2023, there were vested stock options granted under the 2017 Directors Plan covering a total of 420,000 shares of Common Stock. The weighted average exercise price was $4.91 and the weighted average remaining contractual term was 2.41 years.

 

As of December 31, 2022, there were vested stock options granted under the 2017 Director Plan covering a total of 420,000 shares of Common Stock. The weighted-average exercise price was $5.10 and the weighted average remaining contractual term was 2.34 years.

 

- 23 -

 

A summary of option activities under the 2017 Directors Plan during the six months ended December 31, 2023, is presented as follows: 

 

           

Weighted

   

Weighted

Average

Remaining

   

 

 
           

Average

   

Contractual

   

Aggregate

 
   

Options

   

Exercise

Price

   

Term

(Years)

   

Intrinsic

Value

 
                                 

Outstanding at July 1, 2023

    420,000     $ 4.91       2.91     $ 309  

Granted

    -       -       -       -  

Exercised

    -       -       -       -  

Forfeited or expired

    -       -       -       -  

Outstanding at December 31, 2023

    420,000     $ 4.91       2.41     $ 352  

Exercisable at December 31, 2023

    420,000     $ 4.91       2.41     $ 352  

 

A summary of option activities under the 2017 Directors Plan during the six months period ended December 31, 2022, is presented as follows:

 

           

Weighted

Average

   

Weighted

Average

Remaining

Contractual

   

Aggregate

 
           

Exercise

   

Term

   

Intrinsic

 
   

Options

   

Price

   

(Years)

   

Value

 
                                 

Outstanding at July 1, 2022

    420,000     $ 5.10       2.85     $ 228  

Granted

    -       -               -  

Exercised

    -       -       -       -  

Forfeited or expired

    -       -       -       -  

Outstanding at December 31, 2022

    420,000     $ 5.10     $ 2.34     $ 255  

Exercisable at December 31, 2022

    420,000     $ 5.10     $ 2.34     $ 255  

 

 

 

21.

LEASES

 

Company as Lessor

 

Operating leases under which the Company is the lessor arise from leasing the Company’s commercial real estate investment property to third parties. Initial lease terms generally range from 12 to 60 months. Depreciation expense for assets subject to operating leases is taken into account primarily on the straight-line method over a period of 20 years in amounts necessary to reduce the carrying amount of the asset to its estimated residual value. Depreciation expense relating to the property held as investments in operating leases was $34 and $38 for the three months ended December 31, 2023, and December 31, 2022, respectively.

 

Future minimum rental income in China and Thailand to be received from Fiscal 2024 to the fiscal year ended June 30, 2027 (“Fiscal 2027”) on non-cancelable operating leases is contractually due as follows as of December 31, 2023:

 

Remainder of Fiscal 2024

  $ 67  

2025

    134  

2026

    45  

2027

    15  
    $ 261  

 

Future minimum rental income in China and Thailand to be received from Fiscal 2024 to Fiscal 2027 on non-cancelable operating leases is contractually due as follows as of June 30, 2023:

 

2024

  $ 141  

2025

    141  

2026

    46  

2027

    16  
    $ 344  

 

- 24 -

 

Sales-type leases under which the Company is the lessor arise from the lease of four units of chiller systems. The Company classifies its lease arrangements at inception of the arrangement. The lease term is three years, contains an automatic transfer of title at the end of the lease term and a guarantee of residual value at the end of the lease term. The customer is required to pay for executory cost such as taxes.

 

Financing receivables, consisting of net investment in sales-type leases and receivables from financed sales of 4 units of chiller systems are as follows:

 

Components of Lease Balances

 

Dec. 31,

   

June 30,

 
   

2023

   

2023

 
   

(Unaudited)

         

Assets

               

Gross financial sales receivable

  $ 6     $ 17  

Unearned finance income

    -       (1

)

Financed sales receivable

  $ 6     $ 16  
                 

Net financed sales receivables due within one year

  $ 6     $ 16  

Net financed sales receivables due after one year

  $ -     $ -  
      6       16  

 

As of December 31, 2023, the financed sale receivables had a weighted average effective interest rate of 11.16% and weighted average remaining lease term of 0.25 years.

 

As of June 30, 2023, the financed sale receivables had a weighted average effective interest rate of 11.16% and weighted average remaining lease term of 0.75 years.

 

Company as Lessee

 

The Company is the lessee under operating leases for corporate offices and research and development facilities with remaining lease terms of one year to four years and finance leases for plant and equipment.

 

Supplemental balance sheet information related to leases was as follows (in thousands):

 

Components of Lease Balances

 

Dec. 31,

   

June 30,

 
   

2023

    2023  
   

(Unaudited)

         

Finance Leases (Plant and Equipment)

               

Plant and equipment, at cost

  $ 1,607     $ 1,734  

Accumulated depreciation

    (1,072 )     (1,075 )

Plant and Equipment, Net

  $ 535     $ 659  
                 

Current portion of finance leases

  $ 81     $ 107  

Net of current portion of finance leases

    15       42  

Total Finance Lease Liabilities

  $ 96     $ 149  
                 

Operating Leases (Corporate Offices, Research and Development Facilities)

               

Operating lease right-of-use assets, Net

  $ 2,359     $ 2,609  
                 

Current portion of operating leases

    1,119       1,098  

Net of current portion of operating leases

    1,240       1,511  

Total Operating Lease Liabilities

  $ 2,359     $ 2,609  

 

- 25 -

 

   

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

    Dec. 31,  
   

2023

   

2022

   

2023

    2022  
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

    (Unaudited)  
                                 

Lease Cost

                               

Finance lease cost:

                               

Interest on finance lease

  $ 2     $ 3     $ 5       6  

Amortization of right-of-use assets

    12       44       56       92  

Total finance lease cost

    14       47       61       98  
                                 

Operating Lease Costs

  $ 385     $ 369     $ 754       749  

 

 

Other information related to leases was as follows (in thousands except lease term and discount rate):

 

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Cash Paid for Amounts Included in the Measurement of Lease Liabilities

               

Operating cash flows from finance leases

  $ 3    

$

6  

Operating cash flows from operating leases

    693       594  

Finance cash flows from finance leases

    55       67  

Right-of-Use Assets Obtained in Exchange for New Operating Lease Liabilities

               
                 

Weighted-Average Remaining Lease Term:

               

Finance leases

    0.80       1.59  

Operating leases

    2.08       2.67  

Weighted-Average Discount Rate:

               

Finance leases

    2.89 %     3.22 %

Operating leases

    5.51 %     5.54 %

 

As of December 31, 2023, the maturities of the Company’s operating and finance lease liabilities are as follow:

 

   

Operating

Lease

Liabilities

   

Finance

Lease

Liabilities

 

Fiscal Year

               

Remainder of Fiscal 2024

               

2025

    712       57  

2026

    1,019       35  

Thereafter

    772       12  

Total future minimum lease payments

  $ 2,503     $ 104  

Less: amount representing interest

    (144 )     (8

)

Present value of net minimum lease payments

  $ 2,359     $ 96  
                 

Presentation on statement of financial position

               

Current

    1,119       81  

Non-Current

    1,240       15  

 

As of June 30, 2023, future minimum lease payments under finance leases and noncancelable operating leases were as follows:

 

   

Operating

Lease

Liabilities

   

Finance

Lease

Liabilities

 

Fiscal Year

               

2024

    1,321       112  

2025

    846       33  

2026

    570       12  

Thereafter

    64       -  

Total future minimum lease payments

    2,801       157  

Less: amount representing interest

    (192

)

    (8

)

Present value of net minimum lease payments

    2,609       149  
                 

Presentation on statement of financial position

               

Current

    1,098       107  

Non-Current

    1,511       42  

 

- 26 -

 

 

 

22.

FAIR VALUE OF FINANCIAL INSTRUMENTS APPROXIMATE CARRYING VALUE

 

In accordance with ASC Topics 825 and 820, the following presents assets and liabilities measured and carried at fair value and classified by level of fair value measurement hierarchy:

 

There were no transfers between Levels 1 and 2 during the six months ended December 31, 2023 and 2022.

 

Term deposits (Level 2) – The carrying amount approximates fair value because of the short maturity of these instruments.

 

Restricted term deposits (Level 2) – The carrying amount approximates fair value because of the short maturity of these instruments.

 

Lines of credit (Level 3) – The carrying value of the lines of credit approximates fair value due to the short-term nature of the obligations.

 

Bank loans payable (Level 3) – The carrying value of the Company’s bank loans payable approximates its fair value as the interest rates associated with long-term debt is adjustable in accordance with market situations when the Company borrowed funds with similar terms and remaining maturities.

 

 

 

23.

CONCENTRATION OF CUSTOMERS

 

The Company had three major customers that accounted for the following revenue and trade account receivables:

 

   

For the Six Months Ended

Dec. 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

               

- Customer A

    21.8

%

    34.7 %

- Customer B

    17.7

%

    13.3 %

- Customer C

    13.9

%

    15.3 %

Trade Account Receivables

               

- Customer A

    21.0

%

    32.1 %

- Customer B

    24.4

%

    17.3 %

- Customer C

    22.8

%

    15.6 %

 

 

 

24.

COMPARATIVE FIGURES

 

Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income.

 

- 27 -

 

 

 

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

 

Overview

 

The following should be read in conjunction with the condensed consolidated financial statements and notes in Item I above and with the audited consolidated financial statements and notes, the information under the headings Managements discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (Fiscal 2023).

 

Trio-Tech International (“TTI”) was incorporated in 1958 under the laws of the State of California. As used herein, the term “Trio-Tech” or “Company” or “we” or “us” or “Registrant” includes Trio-Tech International and its subsidiaries unless the context otherwise indicates. Our mailing address and executive offices are located at Block 1008 Toa Payoh North, Unit 03-09 Singapore 318996, and our telephone number is (65) 6265 3300.

 

The Company is a provider of reliability test equipment and services to the semiconductor industry. Our customers rely on us to verify that their semiconductor components meet or exceed the rigorous reliability standards demanded for automotive electronics, industrial electronics, computing and data storage, consumer electronics, and communication markets. We act as a global one-stop solution for our customers by designing and building reliability test solutions and offering comprehensive testing services through our testing laboratories in Asia and the United States (“U.S.”).

 

During the six months ended December 31, 2023, TTI generated approximately 100% of its revenue from its three core business segments in the test and measurement industry, i.e., manufacturing of test equipment (“Manufacturing”), testing services (“Testing”) and distribution of test equipment and electronic components (“Distribution”). Management is currently evaluating the ongoing contributions of each of its business segments to its current and future revenue and prospects, including its Testing segment. As a result, it may divest one or more business segments in the future, including its testing segment, to enable management to concentrate on segments where it anticipates opportunities for future revenue growth, thereby maximizing shareholder value.

 

Manufacturing

 

TTI develops and manufactures an extensive range of test equipment used in the “front-end” and the “back-end” manufacturing processes of semiconductors. Our equipment includes leak detectors, autoclaves, centrifuges, burn-in systems and boards, HAST testers, temperature-controlled chucks, wet benches and more. We also act as an extended development team of Integrated Device Manufacturers (“IDMs”) and Fabless semiconductor companies in the testing process with our expert technical skills, especially in the New Product Introduction (“NPI”) process.

 

Testing

 

TTI provides comprehensive electrical, environmental, and burn-in testing services to semiconductor manufacturers in our testing laboratories in Asia and the U.S. Our customers include both manufacturers and end users of semiconductor and electronic components who look to us when they decide to outsource their testing process. We also support the asset-light strategy of our customers by setting up test facilities and providing component level, package level and system level testing services with expert technology that improves the productivity of our customers. The independent tests are performed to industry and customer specific standards.

 

Distribution

 

In addition to marketing our proprietary products, we distribute complementary products made by manufacturers around the world. The products include environmental chambers, mechanical shock and vibration testers, and other semiconductor equipment. We also distribute a wide range of components such as connectors, sockets, cables, LCD displays and touch screen panels. We act as value-added resellers by enhancing the value of the distributed products by customizing each to the needs of our customers through our expert engineering, integration, and sub-assembly services. We also support our customers as their extended research & development arm in product design, leveraging the expert skills of our component engineers and design engineers.

 

Real Estate

 

Our real estate segment generates rental income and investment income from real estate investments made in Chongqing, China.

 

- 28 -

 

 

Critical Accounting Estimates & Policies

 

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions in applying our accounting policies that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates. We discuss the development and selection of the critical accounting estimates with the Audit Committee of our Board of Directors on a quarterly basis, and the Audit Committee has reviewed our related disclosure in this Quarterly Report on Form 10-Q.

 

There have been no material changes in our critical accounting estimates and policies since our Annual Report on Form 10-K for Fiscal 2023. Refer to Note 1 “Basis of Presentation and Summary of Significant Accounting Policies” to our Condensed Consolidated Financial Statements for additional details. In addition, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for Fiscal 2023 for a complete description of our critical accounting policies and estimates.

 

Second Quarter Fiscal Year 2024 Highlights

 

Total revenue decreased by $188, or 1.5%, to $12,202 in the second quarter of Fiscal 2024, compared to $12,390 for the same period in Fiscal 2023.

Manufacturing segment revenue decreased by $254, or 5.0% to $4,790 for the second quarter of Fiscal 2024, compared to $5,044 for the same period in Fiscal 2023.

Testing segment revenue decreased by $1,002, or 17.7%, to $4,646 for the second quarter of Fiscal 2024, compared to $5,648 for the same period in Fiscal 2023.

Distribution segment revenue increased by $1,066, or 62.9%, to $2,760 for the second quarter of Fiscal 2024, compared to $1,694 for the same period in Fiscal 2023.

Real estate segment rental revenue increased by $2, or 50.0% to $6 for the second quarter of Fiscal 2024, compared to $4 for the same period in Fiscal 2023.

The overall gross profit margin decreased by 3.5% to 23.4% for the second quarter of Fiscal 2024, from 26.9% for the same period in Fiscal 2023.

General and administrative expense decreased by $102, or 5.3%, to $1,817 for the second quarter of Fiscal 2024, from $1,919 for the same period in Fiscal 2023.

Selling expense increased by $55, or 28.5%, to $248 for the second quarter of Fiscal 2024, from $193 for the same period in Fiscal 2023.

Other expense decreased by $182, or 68.9%, to $82 for the second quarter of Fiscal 2024, from other expense of $264 for the same period in Fiscal 2023.

Income from operations was $677 for the second quarter of Fiscal 2024, a decrease of $392 as compared to income from operations of $1,069 for the same period in Fiscal 2023.

Income tax expense was $95 in the second quarter of Fiscal 2024, a decrease of $146 as compared to $241 in the same period in Fiscal 2023.

During the second quarter of Fiscal 2024, income from continuing operations before non-controlling interest, net of tax was $482, as compared to income from continuing operations before non-controlling interest of $575 for the same period in Fiscal 2023.

Net loss attributable to non-controlling interest for the second quarter of Fiscal 2024 was $21, a decrease of $79 as compared to net profit of $58 in the same period in Fiscal 2023.

Basic earnings per share for the second quarter of Fiscal 2024 and Fiscal 2023 was $0.12.

Diluted earnings per share for the second quarter of Fiscal 2024 and Fiscal 2023 was $0.12.

Total assets increased by $4,412 to $46,598 as of December 31, 2023, compared to $42,186 as of June 30, 2023.

Total liabilities increased by $2,455 to $15,070 as of December 31, 2023, compared to $12,615 as of June 30, 2023.

 

- 29 -

 

 

Results of Operations and Business Outlook

 

The following table sets forth our revenue components for both three and six months ended December 31, 2023 and 2022.

 

Revenue Components

 

Three Months Ended

   

Six Months Ended

 
   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

   

Dec. 31,

 
   

2023

   

2022

   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

   

(Unaudited)

 
                                 

Manufacturing

    39.3 %     40.7 %     34.6 %     35.5 %

Testing Services

    38.1       45.6       44.2       49.4  

Distribution

    22.6       13.7       21.1       15.1  

Real Estate

    -       -       0.1       -  

Total

    100 %     100.0 %     100 %     100.0 %

 

Revenue for the three and six months ended December 31, 2023, was $12,202 and $22,168, respectively, a decrease of $188 and $2,161, respectively, when compared to the revenue of $12,390 and $24,329 for the same period of Fiscal 2023. As a percentage, revenue decreased by 1.5% and 8.9% for the three and six months ended December 31, 2023, when compared to revenue for the same period of Fiscal 2023.

 

Revenue within our four current segments for the three and six months ended December 31, 2023, is discussed below.

 

Manufacturing Segment

 

Revenue in the Manufacturing segment as a percentage of total revenue was 39.3% and 34.6% for the three and six months ended December 31, 2023, respectively, a decrease of 1.4% and 0.9% of total revenue when compared to 40.7% and 35.5% in the same period of Fiscal 2023. The revenue decreased by $254 to $4,790 from $5,044 and decreased by $954 to $7,675 from $8,629 for the three and six months ended December 31, 2023, respectively.

 

Revenue in the Manufacturing segment has been on a downward trend since the beginning of the calendar year 2023 due to a decline in semiconductor industry capital spending. Demand recovery was noted in the first quarter of Fiscal 2024, resulting in a strong backlog in the Manufacturing segment. Part of these orders has been delivered in the quarter ended December 31, 2023, and the balance is expected to be delivered in the next two quarters.

 

During the three and six months ended December 31, 2023, one customer contributed 26.5% and 24.0%, respectively, to the total Manufacturing segment revenue.

 

Testing Segment

 

Revenue in the Testing segment as a percentage of total revenue was 38.1% for the three months ended December 31, 2023, representing a decrease of 7.5% compared to 45.6% in the same period of Fiscal 2023. Revenue in the Testing segment was 44.2% as a percentage of total revenue for the six months ended December 31, 2023, a decrease of 5.2% compared to the same period of Fiscal 2023. Total revenue decreased by $1,002 and $2,202 to $4,646 and $9,810 for the three and six months ended December 31, 2023, respectively, as compared to the same periods of Fiscal 2023.

 

The decrease in revenue in the Testing segment reflects the weak demand environment in the semiconductor industry in calendar year 2023.

 

The revenue in the Testing segment from one customer accounted for 34.1% and 40.9% of our revenue in the Testing segment for the three months ended December 31, 2023 and 2022, respectively, and 34.9% and 45.6% of our total revenue in the Testing segment for the six months ended December 31, 2023 and 2022, respectively. The future revenue in the Testing segment will be affected by the demands of this customer if the customer base cannot be increased. Demand for testing services varies from country to country, depending on any changes taking place in the market and our customers’ forecasts. As it is challenging to forecast fluctuations in the market accurately, management believes it is necessary to maintain testing facilities in close proximity to the customers in order to make it convenient for them to send us their newly manufactured parts for testing and to enable us to maintain a share of the market.

 

Distribution Segment

 

Revenue in the Distribution segment was 22.6% and 21.1% as a percentage of total revenue for the three and six months ended December 31, 2023, respectively, an increase of 8.9% and 6.0%, compared to the same period of Fiscal 2023. Total revenue increased by $1,066 to $2,760 and increased by $994 to $4,670 from $1,694 and $3,676 for the three and six months ended December 31, 2023, respectively, compared to the same period of Fiscal 2023.

 

- 30 -

 

In the Distribution segment, there has been a demand recovery in the electronics components and display products from our customers compared to the same period of Fiscal 2023.

 

The revenue in the Distribution segment from one customer accounted for 84.7% and 78.9% of our revenue in the Distribution segment for the three months ended December 31, 2023 and 2022, respectively, and 84.0% and 82.5% of our total revenue in the Distribution segment for the six months ended December 31, 2023 and 2022, respectively. Demand for the Distribution segment varies depending on the demand for our customers’ products, the changes taking place in the market, and our customers’ forecasts. Hence it is difficult to forecast fluctuations in the market accurately.

 

Real Estate Segment

 

Revenue increased to $6 and $13 from $4 and $12 for the three and six months ended December 31, 2023, compared to the same period of Fiscal 2023. Our real estate (“Real Estate”) segment saw an increase in rental income due to occupancy in MaoYe properties.

 

Uncertainties and Remedies

 

There are several influencing factors which create uncertainties when forecasting performance, such as the changing nature of technology, specific customer requirements, decline in demand for certain types of burn-in devices or equipment, decline in demand for testing services and fabrication services, and other factors. One factor that influences uncertainty is the highly competitive nature of the semiconductor industry. Additionally, certain customers are unable to provide a forecast of the products required in the upcoming weeks, rendering it, difficult to plan adequate resources needed to meet these customers’ requirements because of short lead time and last-minute order confirmation. This will normally result in a lower margin for these products as it is often more expensive to purchase materials in a short time frame. However, the Company has taken certain actions and formulated certain plans to deal with and to help mitigate these unpredictable factors. For example, to meet manufacturing customers’ demands upon short notice, the Company maintains higher inventories but continues to work closely with its customers to avoid stockpiling. We believe that we have improved customer service through our efforts to keep our staff up to date on the newest technology and stressing the importance of understanding and meeting the stringent requirements of our customers. Finally, the Company is exploring new markets and products, looking for new customers, and upgrading and improving burn-in technology while at the same time searching for improved testing methods for higher technology chips.

 

The Company’s primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar-denominated sales and operating expense in its subsidiaries. Strengthening of the United States dollar (“U.S. Dollar”) relative to foreign currencies adversely affects the U.S. Dollar value of the Company’s foreign currency-denominated sales and earnings, and generally leads the Company to raise international pricing, potentially reducing demand for the Company’s products. Margins on sales of the Company’s products in foreign countries and on sales of products that include components obtained from foreign suppliers could be materially adversely affected by foreign currency exchange rate fluctuations. In some circumstances, for competitive or other reasons, the Company may decide not to raise local prices to fully offset the U.S. Dollar’s strengthening, or at all, which would adversely affect the U.S. Dollar value of the Company’s foreign currency-denominated sales and earnings. Conversely, a strengthening of foreign currencies relative to the U.S. Dollar, while generally beneficial to the Company’s foreign currency denominated sales and earnings, could cause the Company to reduce international pricing, thereby limiting the benefit. Additionally, strengthening of foreign currencies may also increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.

 

As of December 2023, although we have seen improvements in both our operations and those of our suppliers, we may continue to experience supply shortages as well as inflationary cost pressures in at least the near term. Risks and uncertainties related to supply chain challenges, and inflationary pressures may continue to negatively impact our revenue and gross margin. We continue to monitor and evaluate the business impact to react proactively.

 

On August 9, 2022, the CHIPS and Science Act of 2022 (CHIPS Act) was enacted in the United States. The CHIPS Act will provide financial incentives to the semiconductor industry which are primarily directed at manufacturing activities within the U.S. We continue to evaluate the business impact and potential opportunities related to the CHIPS Act. As of date, we do not see any direct effect of the CHIPS Act on the Company in the foreseeable future. 

 

- 31 -

 

 

Comparison of the Three Months Ended December 31, 2023, and December 31, 2022

 

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the three months ended December 31, 2023 and 2022 respectively:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

    100.0 %     100.0 %

Cost of sales

    76.6 %     73.1 %

Gross Margin

    23.4 %     26.9 %

Operating expense

               

General and administrative

    14.9 %     15.5 %

Selling

    2.0 %     1.6 %

Research and development

    1.1 %     1.2 %

Loss on disposal of property, plant and equipment

    (0.1 )%     - %

Total operating expense

    17.9 %     18.3 %

Income from Operations

    5.5 %     8.6 %

 

Overall Gross Margin

 

Overall gross margin as a percentage of revenue decreased by 3.5% to 23.4% for the three months ended December 31, 2023, from 26.9% for the same period of Fiscal 2023. Gross profits decreased by $481 to $2,854 for the three months ended December 31, 2023, from $3,335 for the same period in Fiscal 2023.

 

Gross profit margin as a percentage of revenue in the Manufacturing segment increased marginally by 1% to 24.7% for the three months ended December 31, 2023, as compared to 23.7% for the same period in Fiscal 2023. In absolute dollar amounts, gross profit in the Manufacturing segment for the three months ended December 31, 2023, was $1,181, indicating a decrease of $14, compared to $1,195 in the same period in Fiscal 2023. Gross profit margin as a percentage increased despite a decline in revenue due to a favourable sales mix.

 

Gross profit margin as a percentage of revenue in the Testing segment decreased by 8.3% to 25.4% for the three months ended December 31, 2023, compared to 33.7% in the same period in Fiscal 2023. The decrease in gross profit margin percentage was mainly due to lower volume across all test operations. A significant portion of the cost of sales in Testing segment are fixed costs. As the demand for services and factory utilization decrease, the fixed costs are spread over the decreased output, which decreases the gross profit margin. In absolute dollar amounts, gross profit in the Testing segment decreased by $719 to $1,182 for the three months ended December 31, 2023, from $1,901 for the same period in Fiscal 2023.         

 

Gross profit margin of the Distribution segment is not only affected by the market price of the products we distribute, but also the mix of products we distribute, which frequently changes because of fluctuations in market demand. Gross profit margin as a percentage of revenue in the Distribution segment increased by 3.4% to 18.3% for the three months ended December 31, 2023, from 14.9% in the same period in Fiscal 2023. In absolute dollar amounts, gross profit in the Distribution segment for the three months ended December 31, 2023, was $504, indicating an increase of $251, compared to $253 in the same period in Fiscal 2023. The strong demand for electronics components and display products from our customers has contributed to the increase of gross profit margin.

 

In absolute dollar amounts, gross loss in the Real Estate segment was $13 for three months ended December 31, 2023, as compared to $14 for the same period in Fiscal 2023.

 

Operating Expense

 

Operating expense for the three months ended December 31, 2023 and 2022 was as follows:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

General and administrative

  $ 1,817     $ 1,919  

Selling

    248       193  

Research and development

    131       151  

Loss on disposal of property, plant and equipment

    (19 )     3  

Total

  $ 2,177     $ 2,266  

 

- 32 -

 

General and administrative expense decreased by $102, or 5.3%, from $1,919 to $1,817 for the three months ended December 31, 2023, compared to the same period in Fiscal 2023. The decrease in general and administrative expense was mainly attributable to the lower remuneration related expense resulting from the unfavorable financial performance compared to same period of Fiscal 2023.

 

Selling expense increased by $55, or 28.5%, from $193 to $248 for the three months ended December 31, 2023, compared to the same period in Fiscal 2023. The increase in selling expense was primarily attributable to an increase in commission costs in the Singapore and U.S. operations because of an increase in commissionable revenue, and an increase in travel costs due to increased business travel in the second quarter of Fiscal 2024, compared to the same quarter of Fiscal 2023.

 

Income from Operations

 

Income from operations was $677 for the three months ended December 31, 2023, a decrease of $392, compared to income of $1,069 from operations for the same period in Fiscal 2023. The decrease was mainly due to the decreased revenue and gross profit in absolute dollars amount in the Testing segment.

 

Interest Expense

 

Interest expense for the three months ended December 31, 2023 and 2022 was as follows:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Interest expense

  $ 22     $ 10  

 

Interest expense was $22 for the three months ended December 31, 2023, an increase of $12, or 120.0%, compared to $10 for the same period of Fiscal 2023 due to utilization of credit facilities. As of December 31, 2023, the Company had an unused line of credit of $5,256 as compared to $6,139 at December 31, 2022.

 

Other Expenses

 

Other expense for the three months ended December 31, 2023 and 2022 was as follows:

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Interest income

  $ 96     $ 37  

Other rental income

    36       27  

Exchange loss

    (236 )     (349 )

Other miscellaneous income

    22       21  

Total

  $ (82 )   $ (264 )

 

Other expense decreased by $182 from $264 to $82 for the three months ended December 31, 2023 compared to the same period in Fiscal 2023. The decrease was primarily contributed by lower negative foreign currency impact and an increase in interest income earned in the three months ended December 31, 2023 compared to the same period in Fiscal 2023.

 

Government Grant

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 
                 

Government Grant

  $ 4     $ 21  

 

In the three months ended December 31, 2023, the Company received government grants amounting to $4, related to capital expenditure subsidy received from the China government. During the same period in 2022, the Company received government grants amounting to $21, $17 of which was an incentive from the Singapore government for local resident recruitment, and the remaining $4 related to capital expenditure subsidy received from the China government.

 

- 33 -

 

Income Tax Expense

 

The Company's income tax expense was $95 and $241 for the three months ended December 31, 2023, and 2022, respectively. Income tax expense decreased due to lower net income resulting from decrease in revenue discussed above.

 

Non-controlling Interest

 

As of December 31, 2023, we held a 55% interest in Trio-Tech (Malaysia) Sdn. Bhd., Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI International Pte. Ltd., and 52% interest in PT. SHI Indonesia. We also held a 76% interest in Prestal Enterprise Sdn. Bhd and 51% interest in Trio-tech JiangSu Co. Ltd. The share of non-controlling interest in the net loss from the subsidiaries for the three months ended December 31, 2023 was $21, a decrease of $79 compared to the share of non-controlling interest in the net income from the subsidiaries of $58 for the same period of Fiscal 2023. The decrease in the net income shared by non-controlling interest in the subsidiaries was attributable to the decrease in net income generated by the Company’s Malaysia and China operations.

 

Net Income Attributable to Trio-Tech International Common Shareholders

 

Net income attributable to Company’s common shareholders were $507 for both the three months ended December 31, 2023 and December 31, 2022.

 

Earnings per Share

 

Basic earnings per share from continuing operations were $0.12 for both the three months ended December 31, 2023 and December 31, 2022. Basic earnings per share from discontinued operations were $nil for both the three months ended December 31, 2023 and 2022.

 

Diluted earnings per share from continuing operations were $0.12 for both the three months ended December 31, 2023 and December 31, 2022. Diluted earnings per share from discontinued operations were $nil for both the three months ended December 31, 2023 and 2022.

 

Segment Information

 

The revenue, gross margin, and income / (loss) from operations for each segment during the first quarter of Fiscal 2024 and Fiscal 2023 are presented below. As the revenue and gross margin for each segment have been discussed in the previous section, only the comparison of income / (loss) from operations is discussed below.

 

Manufacturing Segment

 

The revenue, gross margin and income from operations for the Manufacturing segment for the three months ended December 31, 2023 and 2022 were as follows:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 4,790     $ 5,044  

Gross margin

    24.9 %     23.7 %

Income from operations

  $ 191     $ 301  

 

Income from operations from the Manufacturing segment was $191 compared to income from operations of $301 in the same period in Fiscal 2023. The decrease in income from operations was mainly due to an increase in operating expense. Operating expense was $990 and $892 for the three months ended December 31, 2023 and 2022, respectively. The increase in operating expense was mainly due to higher commission expense resulting from higher commissionable revenue, and an increase in travel and entertainment expense incurred in three months ended December 31, 2023 compared to same period in Fiscal 2023.

 

- 34 -

 

 

Testing Segment

 

The revenue, gross margin, and (loss)/ income from operations for the Testing segment for the three months ended December 31, 2023 and 2022 were as follows:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 4,646     $ 5,648  

Gross margin

    25.4 %     33.7 %

(Loss) / Income from operations

  $ (152 )   $ 547  

 

Loss from operations in the Testing segment for the three months ended December 31, 2023, was $152, a decrease of $699 from income from operations of $547 in the same period in Fiscal 2023. The decrease was mainly attributable to a decrease in gross profit due to lower revenue. Operating expense was $1,334 and $1,354 for the three months ended December 31, 2023 and 2022, respectively.

 

Distribution Segment

 

The revenue, gross margin, and income from operations for the Distribution segment for the three months ended December 31, 2023 and 2022 were as follows: 

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 2,760     $ 1,694  

Gross margin

    18.3 %     14.9 %

Income from operations

  $ 401     $ 217  

 

Income from operations in the Distribution segment for three months ended December 31, 2023 was $401, compared to $217 for the same period in Fiscal 2023. The increase of $184 was mainly due to an increase in gross profit margin. Operating expense was $103 and $36 for the three months ended December 31, 2023 and 2022, respectively. The increase in operating expense primarily resulted from an increase in business travel.

 

Real Estate Segment

 

The revenue, gross margin and loss from operations for the Real Estate segment for the three months ended December 31, 2023 and 2022 were as follows: 

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 6     $ 4  

Gross margin

    (216.7 )%     (350.0 )%

Loss from operations

  $ (27 )   $ (28 )

 

Loss from operations in the Real Estate segment for the three months ended December 31, 2023, was $27 compared to $28 for the same period of Fiscal 2023. Operating expense was $14 for both the three months ended December 31, 2023 and 2022.

 

Corporate

 

The income from operations for corporate for the three months ended December 31, 2023, and 2022 was as follows:

 

   

Three Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 

Income from operations

  $ 264     $ 32  

 

Corporate operating income was $264 for the three months ended December 31, 2023, compared to profit of $32 in the same period in Fiscal 2023. Corporate expense is allocated to the four segments on a combination of factors involving revenue, manpower costs and fixed assets investments, except the Malaysia and China operations, which is calculated based on actual sales. Corporate operating income was higher for the three months ended December 31, 2023 since the allocation to the individual segments was based on budgeted corporate expense for the quarter. Any excess/under allocation to each segment is reviewed and adjusted over the last two quarters of the fiscal year.

 

- 35 -

 

Comparison of the Six Months Ended December 31, 2023, and December 31, 2022

 

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the six months ended December 31, 2023 and 2022, respectively:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
                 

Revenue

    100.0 %     100.0 %

Cost of sales

    75.8       71.4  

Gross Margin

    24.2 %     28.6 %

Operating expense:

               

General and administrative

    17.9 %     17.4 %

Selling

    2.0       1.5  

Research and development

    1.0       0.9  

(Gain) / Loss on disposal of property, plant and equipment

    0.3       -  

Total operating expense

    21.2 %     19.8 %

Income from Operations

    3.0 %     8.8 %

 

Overall Gross Margin

 

Overall gross margin as a percentage of revenue decreased by 4.4% to 24.2% for the six months ended December 31, 2023, compared to 28.6% in the same period of Fiscal 2023. Gross profits decreased by $1,583 to $5,374 for the six months ended December 31, 2023, from $6,957 for the same period of Fiscal 2023.

 

Gross profit margin as a percentage of revenue in the Manufacturing segment increased marginally by 0.2% to 26.3% for the six months ended December 31, 2023, from 26.1% in the same period of Fiscal 2023. Gross profit in absolute value decreased by $238 to $2,017 for the six months ended December 31, 2023 compared to $2,255 for the same period of Fiscal 2023. The gross profit decrease was primarily due to a decrease in Manufacturing segment revenue in the six months ended December 31, 2023 compared to the same period of Fiscal 2023.

 

Gross profit margin as a percentage of revenue in the Testing segment decreased by 8.4% to 26.1% for the six months ended December 31, 2023, from 34.5% in the same period of Fiscal 2023. Gross profit in the Testing segment decreased by $1,577 to $2,562 for the six months ended December 31, 2023, from $4,139 for the same period of Fiscal 2023 due to lower margins in the Testing segment resulting from lower demand. The gross margin was negatively impacted by the decrease in revenue across all test operations where a significant portion of our cost of goods sold are fixed, and as the demand for services and factory utilization decrease, the fixed costs are spread over the decreased output, which reduces the gross profit margin.         

 

Gross profit margin as a percentage of revenue in the Distribution segment was 17.5% for the six months ended December 31, 2023, compared to 16.0% in the same period of Fiscal 2023. Gross profit in the Distribution segment for the six months ended December 31, 2023, was $818, an increase of $231 compared to $587 in the same period of Fiscal 2023. The increase in gross profit was due to the increase in distribution sales, coupled with an increase in gross margin compared to the same period of Fiscal 2023.

 

Gross loss in the Real Estate segment decreased by $1 to $23 for the six months ended December 31, 2023, from $24 in the same period of Fiscal 2023.

 

Operating Expenses

 

Operating expense for the six months ended December 31, 2023 and 2022 was as follows:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

General and administrative

  $ 3,975     $ 4,224  

Selling

    435       366  

Research and development

    216       224  

Gain on disposal of plant and equipment

    72       7  

Total

  $ 4,698     $ 4,821  

 

- 36 -

 

General and administrative expense decreased by $249, or 5.9%, from $4,224 to $3975 for the six months ended December 31, 2023, compared to the same period of Fiscal 2023. The decrease in general and administrative expense was mainly attributable to the implementation of the cost cutting initiative from Malaysia and China operation in view of lower testing demand, and lower remuneration related expense resulting from unfavorable financial performance in six months ended December 31, 2023.

 

Selling expense increased by $69, or 18.9%, for the six months ended December 31, 2023, from $366 to $435 compared to the same period of Fiscal 2023. The increase in selling expense was primarily attributable to an increase in commission because of an increase in commissionable revenue and increased business travel.

 

Income from Operations

 

Income from operations was $690 for the six months ended December 31, 2023, compared to $2,136 for the same period of Fiscal 2023. The decrease was mainly due to the decrease in revenue, coupled with a decrease in gross profit margin in the Testing segment, as discussed earlier.

 

Interest Expense

 

Interest expense for the six months ended December 31, 2023 and 2022 were as follows:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 
                 

Selling

  $ 46     $ 54  

 

Interest expense decreased by $8 to $46 from $54 for the six months ended December 31, 2023, compared to the same period of Fiscal 2023.

 

Other Income / (Expenses)

 

Other income / (expense) for the six months ended December 31, 2023 and 2022 was as follows:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

Interest income

  $ 174     $ 55  

Other rental income

    72       54  

Exchange gain / (loss)

    (177 )     (279 )

Other miscellaneous income

    45       64  

Total

  $ 114     $ (106 )

 

Other income for the six months ended December 31, 2023 was $114, a decrease of $220 compared to other expense of $106 for the same period of Fiscal 2023. The decrease was mainly contributed by lower negative foreign currency impact and an increase in interest income.

 

Government Grant

 

   

Six Months Ended

 
   

December 31,

 
   

2023

   

2022

 
   

(Unaudited)

   

(Unaudited)

 
                 

Government Grant

  $ 77     $ 42  

 

In the six months ended December 31, 2023, the Company received government grants amounting to $77, $16 of which was an incentive from the Singapore government for local resident recruitment, and the $57 from the U.S. government related to Employee Retention Credit (“ERC”). During the same period in 2022, the Company received government grants amounting to $42, with $10 from the Singapore government for Covid-19, $17 from the Singapore government for local resident recruitment and the remaining $15 related to capital expenditure subsidy received from the China government.

 

- 37 -

 

Income Tax Expenses

 

Income tax expense for the six months ended December 31, 2023 was $132, a decrease of $334 compared to of $466 for the same period of Fiscal 2023. The decrease in income tax expense was primarily due to decrease in the taxable income across the Company in the six months ended December 31, 2023.

 

Non-controlling Interest

 

As of December 31, 2023, we held a 55% interest in Trio-Tech (Malaysia) Sdn. Bhd., Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI International Pte. Ltd., and 52% interest in  PT. SHI Indonesia. We also held a 76% interest in Prestal Enterprise Sdn. Bhd and 51% interest in Trio-Tech JiangSu Co. Ltd. The net loss attributable to the non-controlling interest in these subsidiaries for the six months ended December 31, 2023, was $44, a change of $198, compared to a net income of $154 for the same period of Fiscal 2023. The decrease was attributable to the decrease in net income generated by the China operation.

 

Net Income Attributable to Trio-Tech International Common Shareholders

 

Net income was $751 for the six months ended December 31, 2023, a decrease of $638 compared to a net income of $1,389 for the same period of Fiscal 2023. The decrease was mainly due to the decrease in revenue and gross margin. However, the decrease was partially offset by a decrease in operating expense and other expense.

 

Earnings per Share

 

Basic earnings per share from continuing operations was $0.18 for the six months ended December 31, 2023, compared to $0.34 for the same period in Fiscal 2023. Basic earnings per share from discontinued operations were $nil for both the six months ended December 31, 2023 and 2022.

 

Diluted earnings per share from continuing operations was $0.17 for the six months ended December 31, 2023, compared to $0.33 for the same period of Fiscal 2023. Diluted earnings per share from discontinued operations were $nil for both the six months ended December 31, 2023 and 2022.

 

Segment Information

 

The revenue, gross profit margin, and income / (loss) from operations in each segment for the six months ended December 31, 2023 and 2022, respectively, are presented below. As the segment revenue and gross margin for each segment have been discussed in the previous section, only the comparison of income / (loss) from operations is discussed below.

 

Manufacturing Segment

 

The revenue, gross margin and income from operations for the Manufacturing segment for the six months ended December 31, 2023 and 2022 were as follows:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 7,675     $ 8,629  

Gross margin

    26.3 %     26.1 %

Income from operations

  $ 149     $ 477  

 

Income from operations from the Manufacturing segment was $149 for the six months ended December 31, 2023, a decrease of $328 as compared to $477 in the same period of Fiscal 2023 due to a decrease in gross profit resulting from lower revenue and an increase in operating expense. The Manufacturing segment's operating expense was $1,868 and $1,778 for the six months ended December 31, 2023 and 2022, respectively. The increase in operating expense of $92 was primarily attributable to an increase in commission expense because of an increase in commissionable revenue.

 

- 38 -

 

 

Testing Segment

 

The revenue, gross margin and (loss) / income from operations for the Testing segment for the six months ended December 31, 2023 and 2022 were as follows:

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 9,810     $ 12,012  

Gross margin

    26.1 %     34.5 %

(Loss) / Income from operations

  $ (280 )   $ 1,129  

 

Loss from operations in the Testing segment for the six months ended December 31, 2023, was $280, a decrease of $1,409 compared to an income from operations of $1,129 in the same period of Fiscal 2023 mainly due to lower gross profit resulting from lower revenue. The decrease in gross profit of $1,577 was partially offset by a decrease in operating expense of $169. Operating expense was $2,842 and $3,011 for the six months ended December 31, 2023 and 2022, respectively.

 

Distribution Segment

 

The revenue, gross margin and income from operations for the Distribution segment for the six months ended December 31, 2023 and 2022 were as follows: 

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 4,670     $ 3,676  

Gross margin

    18.3 %     16.0 %

Income from operations

  $ 646     $ 482  

 

Income from operations in the Distribution segment for the six months ended December 31, 2023 was $646, an increase of $164 compared to $482 in the same period of Fiscal 2023. The increase in operating income was primarily due to an increase in gross margin by $231, which was partially offset with an increase in operating expense of $66. Operating expense was $172 and $106 for the six months ended December 31, 2023 and 2022, respectively. The increase in operating expense was mainly contributed by increase in general and administrative expense by $48.

 

Real Estate Segment

 

The revenue, gross margin and loss from operations for the Real Estate segment for the six months ended December 31, 2023 and 2022 were as follows: 

 

   

Six Months Ended

 
   

Dec. 31,

2023

   

Dec. 31,

2022

 
   

(Unaudited)

   

(Unaudited)

 

Revenue

  $ 13     $ 12  

Gross margin

    (216.7 )%     (200.0 )%

Loss from operations

  $ (53 )   $ (42 )

 

Loss from operations in the Real Estate segment for the six months ended December 31, 2023 was $53, an increase of $11 compared to $42 for the same period of Fiscal 2023. The increase in operating loss was mainly due to an increase in operating expense. Operating expense was $30 and $18 for the six months ended December 31, 2023 and 2022, respectively.

 

- 39 -

 

 

Corporate

 

The income from operations for corporate for the six months ended December 31, 2023 and 2022 were as follows:   

 

   

Six Months Ended

 
   

Dec. 31,

2022

   

Dec. 31,

2021

 
   

(Unaudited)

   

(Unaudited)

 

Income from operations

  $ 214     $ 90  

 

The improvement of $124 was mainly due to allocation of corporate expense to the individual segments was based on budgeted expense for the quarter as mentioned earlier. Any excess/under allocation to each segment is reviewed and adjusted over the last two quarters of the fiscal year. .

 

Financial Condition

 

During the six months ended December 31, 2023, total assets increased by $4,412 to $46,598 compared to $42,186 as of June 30, 2023. The increase was primarily due to an increase in inventories, cash and cash equivalents, other receivables, other assets, trade account receivable, deferred tax assets and restricted term deposits partially offset by a decrease in short term deposits, prepaid expense, assets held for sale and operating right-of-use assets.

 

Cash and cash equivalents were $10,966 at December 31, 2023, reflecting an increase of $3,383 from $7,583 as at June 30, 2023. This increase is attributed primarily due to cash generated from operations, and the collection of customer deposits in Singapore and China operations during the six months ended December 31, 2023.

 

Short-term deposits were $5,791 at December 31, 2023, reflecting a decrease of $836 from $6,627 as at June 30, 2023. The decrease was mainly attributed to the maturity of short-term deposits in the Singapore operation during the six months ended December 31, 2023 which is reflected in the cash and cash equivalents.

 

The trade accounts receivable balance as of December 31, 2023 increased by $2,584 to $12,388, from $9,804 as at June 30, 2023, primarily due to an increase in revenue from customers that have longer credit term in Singapore, Malaysia and China operations. The number of days’ sales outstanding in accounts receivables for the group was 116 days and 82 days at the end of the second quarter of Fiscal 2024 and the end of Fiscal 2023, respectively.

 

Other receivables at December 31, 2023, were $1,029, an increase of $90, compared to $939 as at June 30, 2023. The increase was mainly due to higher advance payments made to suppliers and refundable services taxes in the Singapore operation.

 

Inventories at December 31, 2023, were $3,546, an increase of $1,395, compared to $2,151 as at June 30, 2023. The increase in inventories mainly attributed to the increased backlog in the Manufacturing segment attributable to our Singapore operations which are expected to be delivered over the next quarter. 

 

Prepaid expense was $589 at December 31, 2023 compared to $105 at June 30, 2023. This was mainly due to the prepayment for insurance, rental and software license fee.

 

Investment properties’ net in China was $461 at December 31, 2023 and $474 as at June 30, 2023. The decrease was primarily due to the foreign currency exchange movement between June 30, 2023 and December 31, 2023.

 

Property, plant and equipment decreased by $1,743 from $8,344 at June 30, 2023, to $6,601 as at December 31, 2023, mainly due to the depreciation charged for the period and the foreign currency exchange movement between June 30, 2023 and December 31, 2023.

 

Other assets increased by $53 to $169 as at December 31, 2023 compared to $116 at June 30, 2023. This was primarily due to an increase in utilities deposits in our Singapore operation.

 

Lines of credit increased to $384 at December 31, 2023 as compared to $Nil as at June 30, 2023. The increase in lines of credit was due to a drawdown of the lines of credit in our Singapore operation for working capital purposes.

 

Accounts payable increased by $685 to $2,345 at December 31, 2023, compared to $1,660 at June 30, 2023 which was in line with the increase in inventories.

 

Accrued expense increased by $215 to $4,506 at December 31, 2023, as compared to $4,291 at June 30, 2023. The increase in accrued expense was mainly due to an increase in the accrued purchases.

 

Contract liabilities increased by $2,531 to $3,808 at December 31, 2023 as compared to $1,277 at June 30, 2023 due to the increase in customers’ deposits received in the Singapore and China operations.

 

- 40 -

 

Bank loans payable decreased by $215 to $1,137 at December 31, 2023, as compared to $1,352 as of June 30, 2023. The decrease in bank loans payable was mainly due to the repayment of bank loans in our Malaysia operations.

 

Finance leases decreased by $53 to $96 at December 31, 2023, as compared to $149 at June 30, 2023. This was due to the repayments of leases in our Singapore and Malaysia operations.

 

Operating lease right-of-use assets and the corresponding lease liability decreased by $250 to $2,359 at December 31, 2023, as compared to $2,609 at June 30, 2023. This was due to the repayment made and the operating lease expense charged for the period partially offset by a new lease arrangement entered by Malaysia operation.

 

Other non-current liabilities decreased by $564 to $30 as at December 31, 2022, as compared to $594 as at June 30, 2022. The decrease was mainly due to a decrease in accruals relating to acquisition of property, plant and equipment in the China operations. The remaining accrual has a term of less than 12 months as at December 31, 2022, thereby being reclassified to current liabilities.

 

Liquidity Comparison

 

Net cash used in operating activities decreased by $2,503 to an inflow of $1,276 for the six months ended December 31, 2023, from an inflow of $3,779 for the same period in Fiscal 2023. The decrease in net cash flow provided by operating activities was primarily due to lower net income generated of $693 compared to the same period of Fiscal 2023 and lower receipts from trade receivables and other receivables by $1,205, higher cash outflow for inventories by $521, lower prepaid expense by $459, and higher cash outflow from other non-current liabilities by $1,708. These are partially offset by lower cash outflow for accounts payables, accrued expense and contract liabilities of $1,809.

 

Net cash provided by investing activities increased by $4,564 to $1,136 for the six months ended December 31, 2023 compared with the same period in Fiscal 2023. The increase in cash inflow was primarily due to cash inflow of $634 from maturity of unrestricted term deposits coupled with lower capital expenditure of $3,836 for six months ended December 31, 2023.

 

Net cash provided by financing activities for the six months ended December 31, 2023, was $280, representing an increase of $1,312, compared to cash outflow of $1,032 during the six months ended December 31, 2022. The increase was mainly attributable to increase in utilization of lines of credit by $476 during the six months ended December 31, 2022. Furthermore, the Company also incurred higher cash outflow for settling lines of credit in the same period of Fiscal 2023.

 

The Company filed a shelf registration statement with the Securities and Exchange Commission, pursuant to which we may raise capital of $10,000,000 of any combination of securities (common stock, warrants, debt securities or units) for expansion of the Company’s testing capacity and working capital purposes if necessary.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

An evaluation was carried out by the Company’s Chief Executive Officer and Chief Financial Officer of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2023, the end of the period covered by this Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective at a reasonable level.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting during the fiscal quarter ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

- 41 -

 

 

TRIO-TECH INTERNATIONAL

PART II. OTHER INFORMATION

 

ITEM 1.          LEGAL PROCEEDINGS

 

Not applicable.

 

ITEM 1A.       RISK FACTORS

 

Not applicable.

 

ITEM 2.          UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Not applicable.

 

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4.          MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

ITEM 5.         OTHER INFORMATION

 

Not applicable.

 

 

ITEM 6.          EXHIBITS

 

31.1

Rule 13a-14(a) Certification of Principal Executive Officer of Registrant

31.2

Rule 13a-14(a) Certification of Principal Financial Officer of Registrant

32

Section 1350 Certification

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

- 42 -

 

 

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.

 

 

 

TRIO-TECH INTERNATIONAL

 

By:

/s/ Srinivasan Anitha

SRINIVASAN ANITHA

Chief Financial Officer

(Principal Financial Officer)

Dated: February 12, 2024

 

- 43 -