Trio-Tech International: Form 10-Q for the period ended Sep 30, 2023
Filed with the SEC on Nov 13, 2023 and accepted by EDGAR at Nov 13, 2023, 09:30 ET.
Management's discussion and analysis
As filed, 36,142 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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 “Management’s 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 three months ended September 30, 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 contribution of each of its business segments to its current and future revenue and prospects, including its Testing segment. As a result, we may divest one or more business segments in the future, including its Testing segment, to allow management to focus on segments where it believes the opportunity exists to more accurately predict future revenue growth and therefore maximize 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.
- 27 -
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.
First Quarter Fiscal Year 2024 Highlights
- Total revenue decreased by $1,973, or 16.5%, to $9,966 in the first quarter of Fiscal 2024, compared to $11,939 for the same period in Fiscal 2023.
- Manufacturing segment revenue decreased by $700, or 19.5% to $2,885 for the first quarter of Fiscal 2024, compared to $3,585 for the same period in Fiscal 2023.
- Testing segment revenue decreased by $1,200, or 18.9%, to $5,164 for the first quarter of Fiscal 2024, compared to $6,364 for the same period in Fiscal 2023.
- Distribution segment revenue decreased by $72, or 3.6%, to $1,910 for the first quarter of Fiscal 2024, compared to $1,982 for the same period in Fiscal 2023.
- Real estate segment rental revenue decreased by $1, or 12.5% to $7 for the first quarter of Fiscal 2024, compared to $8 for the same period in Fiscal 2023.
- The overall gross profit margin decreased by 5% to 25.3% for the first quarter of Fiscal 2024, from 30.3% for the same period in Fiscal 2023.
- General and administrative expense decreased by $147, or 6.4%, to $2,158 for the first quarter of Fiscal 2024, from $2,305 for the same period in Fiscal 2023.
- Selling expense increased by $14, or 8.1%, to $187 for the first quarter of Fiscal 2024, from $173 for the same period in Fiscal 2023.
- Other income increased by $38, or 24.1%, to $196 for the first quarter of Fiscal 2024, from $158 for the same period in Fiscal 2023.
- Loss from operations was $1 for the first quarter of Fiscal 2024, a decrease of $1,068 as compared to income from operations $1,067 for the same period in Fiscal 2023.
- Income tax expense was $37 in the first quarter of Fiscal 2024, a decrease of $188 as compared to $225 in the same period in Fiscal 2023.
- During the first quarter of Fiscal 2024, income from continuing operations before non-controlling interest, net of tax was $207, as compared to income from continuing operations before non-controlling interest of $977 for the same period in Fiscal 2023.
- Net loss attributable to non-controlling interest for the first quarter of Fiscal 2024 was $23, a decrease of $119 as compared to net profit of $96 in the same period in Fiscal 2023.
- Basic earnings per share for the first quarter of Fiscal 2024 was $0.06, as compared to earnings per share of $0.22 for the same period in Fiscal 2023.
- Diluted earnings per share for the first quarter of Fiscal 2024 was $0.05, as compared to earnings per share of $0.21 for the same period in Fiscal 2023.
- Total assets increased by $2,513 to $44,699 as of September 30, 2023, compared to $42,186 as of June 30, 2023.
- Total liabilities increased by $2,429 to $15,044 as of September 30, 2023, compared to $12,615 as of June 30, 2023.
- 28 -
Results of Operations and Business Outlook
The following table sets forth our revenue components for three months ended September 30, 2023 and 2022.
(Unaudited)
(Unaudited)
| Revenue Components | Three Months Ended Sept. 30, 2023 | 2022 |
|---|---|---|
| Manufacturing | 28.9% | 30.0% |
| Testing | 51.8% | 53.3% |
| Distribution | 19.2% | 16.6% |
| Real Estate | 0.1% | 0.1% |
| Total | 100.0% | 100.0% |
Revenue for the three months ended September 30, 2023, was $9,966, a decrease of $1,973 from $11,939, when compared to revenue for the same period of the prior fiscal year. As a percentage, revenue decreased by 16.5% for the three months ended September 30, 2023, when compared to revenue for the same period in the prior year.
For the three months ended September 30, 2023, there was a decrease in revenue across all segments when compared to the same period of Fiscal 2023.
Total revenue into and within China, the Southeast Asia regions and other countries (except revenue into and within the U.S.) decreased by $1,938, or 16.9%, to $9,508 for the three months ended September 30, 2023, as compared with $11,446 for the same period of Fiscal 2023.
Total revenue into and within the U.S. was $457 for the three months ended September 30, 2023, a decrease of $36 from $493 for the same period of the prior year.
An analysis of the decline in revenue within our four current segments for the three months ended September 30, 2023, is discussed below.
Manufacturing Segment
Revenue in the Manufacturing segment as a percentage of total revenue was 28.9% for the three months ended September 30, 2023, an increase of 1.1% of total revenue when compared to 30.0% in the same period in Fiscal 2023. The absolute amount of revenue decreased by $700 to $2,885 for the three months ended September 30, 2023, compared to $3,585, in the same period of Fiscal 2023. The decrease was principally due to lower board and system sales in the first quarter of Fiscal 2024 compared to the same period in Fiscal 2023.
Revenue in the Manufacturing segment from one customer accounted for 18.7% and 16.3% of our total revenue in the Manufacturing segment for the three months ended September 30, 2023, and 2022, respectively.
Testing Segment
The Testing segment's revenue was 51.8% for the three months ended September 30, 2023, representing a decrease of 1.5%, compared to 53.3% in the same period of Fiscal 2023. The absolute amount of revenue decreased by $1,200 to $5,164 from $6,364 for the three months ended September 30, 2023, as compared to the same period of Fiscal 2023. The decrease was principally due to lower demand resulting from a weakening of the global semiconductor industry.
Revenue in the Testing segment from one customer accounted for 40.4% and 49.8% of our revenue in the Testing segment for the three months ended September 30, 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.
- 29 -
Distribution Segment
Revenue in the Distribution segment was 19.2% as a percentage of total revenue for the three months ended September 30, 2023, an increase of 2.6%, compared to the same period in Fiscal 2023. The absolute amount of revenue decreased by $72 to $1,910 from $1,982 for the three months ended September 30, 2023, compared to the same period in Fiscal 2023.
The revenue in the Distribution segment from one customer accounted for 83% and 100% of our revenue in the Distribution segment for the three months ended September 30, 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
The Real Estate segment accounted for 0.1% of total revenue for the three months ended September 30, 2023 and 2022. The absolute amount of revenue decreased by $1 to $7 from $8 and remained comparable for the three months ended September 30, 2023, compared to the same period of Fiscal 2023. Our Real Estate segment saw a decrease in rental income due principally to the low occupancy rate in the MaoYe and FuLi properties due to slower post-pandemic recovery in China.
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 September 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.
- 30 -
Comparison of the Three Months Ended September 30, 2023, and September 30, 2022
The following table sets forth certain consolidated statements of income data as a percentage of revenue for the three months ended September 30, 2023 and 2022 respectively:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Revenue | 100.0% | 100.0% |
| Cost of sales | 74.7% | 69.7% |
| Gross Margin | 25.3% | 30.3% |
| Operating expense | ||
| General and administrative | 21.6% | 19.3% |
| Selling | 1.9% | 1.4% |
| Research and development | 0.9% | 0.6% |
| Loss on disposal of property, plant and equipment | 0.9% | 0.0% |
| Total operating expense | 25.3% | 21.3% |
| Income from Operations | 0.0% | 9.0% |
Overall Gross Margin
Overall gross margin as a percentage of revenue decreased by 5.0% to 25.3% for the three months ended September 30, 2023, from 30.3% for the same period in Fiscal 2023.
Gross profit margin as a percentage of revenue in the Manufacturing segment decreased by 0.6% to 29.0% for the three months ended September 30, 2023, as compared to 29.6% for the same period in Fiscal 2023. In absolute dollar amounts, gross profit in the Manufacturing segment decreased by $224 to $836 for the three months ended September 30, 2023, from $1,060 for the same period in Fiscal 2023. The decrease in gross profit margin was primarily due to lower Burn-in-board and system sales in three months ended September 30, 2023 compared to the same period in Fiscal 2023.
Gross profit margin as a percentage of revenue in the Testing segment decreased by 8.5% to 26.7% for the three months ended September 30, 2023, compared to 35.2% in the same period in Fiscal 2023. The decrease in gross profit margin percentage was mainly due to drop in revenue resulting from a weakening of global semiconductor industry. In absolute dollar amounts, gross profit in the Testing segment decreased by $858 to $1,380 for the three months ended September 30, 2023, from $2,238 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 as a result of fluctuations in market demand. Gross profit margin as a percentage of revenue in the Distribution segment decreased by 0.5% to 16.4% for the three months ended September 30, 2023, from 16.9% in the same period in Fiscal 2023. In absolute dollar amounts, gross profit in the Distribution segment for the three months ended September 30, 2023, was $314, indicating a decrease of $20, compared to $334 in the same period in Fiscal 2023.
In absolute dollar amounts, gross loss in the Real Estate segment was $10 for three months ended September 30, 2023 and for the same period in Fiscal 2023.
- 31 -
Operating Expense
Operating Expense for the three months ended September 30, 2023 and 2022 was as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| General and administrative | $2,158 | $2,305 |
| Selling | 187 | 173 |
| Research and development | 85 | 73 |
| Loss on disposal of property, plant and equipment | 91 | 4 |
| Total | $2,521 | $2,555 |
General and administrative expense decreased by $147, or 6.4%, from $2,305 to $2,158 for the three months ended September 30, 2023, compared to the same period in Fiscal 2023. The decrease in general and administrative expense was mainly attributable to the implementation of cost cutting initiatives from Malaysia and China operations in view of lower testing demand.
Selling expense increased by $14, or 8.1%, from $187 to $173 for the three months ended September 30, 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 manufacturing segment of the Singapore operations as a result of an increase in commissionable revenue, and an increase in travel costs due to increased business travel in the first quarter of Fiscal 2024, compared to the same quarter in Fiscal 2023.
(Loss) / Income from Operations
(Loss) / Income from operations was $1 for the three months ended September 30, 2023, a decrease of $1,068, compared to profit of $1,067 from operations for the same period in Fiscal 2023. The result was mainly due to the decreased revenue and gross profit margin in absolute dollars amount.
Interest Expense
Interest expense for the three months ended September 30, 2023 and 2022 was as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Interest expense | $24 | $44 |
Interest expense was $24 for the three months ended September 30, 2023, a decrease of $20, or 45.4%, compared to $44 for the same period of Fiscal 2023 due to lower utilization of credit facilities. As of September 30, 2023, the Company had an unused line of credit of $5,379 as compared to $5,289 at September 30, 2022.
- 32 -
Other Income
Other income for the three months ended September 30, 2023 and 2022 was as follows:
(Unaudited)
(Unaudited)
| Three Months Ended September 30, 2023 | 2022 | |
|---|---|---|
| Interest income | $78 | $18 |
| Other rental income | 36 | 27 |
| Exchange gain | 59 | 70 |
| Other miscellaneous income | 23 | 43 |
| Total | $196 | $158 |
Other income increased by $38 from $158 to $196 for the three months ended September 30, 2023 compared to the same period in Fiscal 2023. The increase was primarily contributed by increase in interest income.
Government Grant
In the three months ended September 30, 2023, the Company received government grants amounting to $73, $16 of which was financial assistance received from the Singapore government, and the remaining $57 from the US government related to Employee Retention Credit (”ERC”).
In the three months ended September 30, 2022, the Company received government grants amounting to $21 from the local government in its China and Singapore operations.
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) passed by the U.S. Congress, provided an ERC scheme which was a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act (the “Appropriations Act”) extended and expanded the availability of the ERC through December 31, 2021. The Appropriations Act amended the ERC to be equal to 70% of qualified wages paid to employees during Fiscal 2021.
The Company qualified for the ERC beginning in April 30, 2021 for qualified wages through September 30, 2021 and filed a cash refund claim during the three months ended December 31, 2021. To date, the Company has received $57 during the three months ended September 30, 2023.
Income Tax Expense
The Company's income tax expense was $37 and $225 for the three months ended September 30, 2023, and 2022, respectively. Income tax expense decreased due to lower net income resulting from decrease in revenue mentioned earlier.
Non-controlling Interest
As of September 30, 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 September 30, 2023 was $23, a decrease of $119 compared to the share of non-controlling interest in the net income from the subsidiaries of $96 for the same period of the previous fiscal year. 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 China and Malaysia operations.
Net Income Attributable to Trio-Tech International Common Shareholders
Net income attributable to Company’s common shareholders for the three months ended September 30, 2023, was $230, a change of $652, compared to a net income of $882 for the same period in Fiscal 2023.
- 33 -
Earnings per Share
Basic earnings per share from continuing operations were $0.06 for the three months ended September 30, 2023, compared to $0.22 for the same period in Fiscal 2023. Basic earnings per share from discontinued operations were $nil for both the three months ended September 30, 2023 and 2022.
Diluted earnings per share from continuing operations were $0.05 for the three months ended September 30, 2023, as compared to $0.21 for the same period in Fiscal 2023. Diluted earnings per share from discontinued operations were $nil for both the three months ended September 30, 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 September 30, 2023 and 2022 were as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Revenue | $2,885 | $3,585 |
| Gross margin | 29.0% | 29.6% |
| (Loss) / Income from operations | $(42) | $176 |
(Loss) / Income from operations from the Manufacturing segment was $42 compared to income from operations of $176 in the same period in Fiscal 2023, primarily due to an decrease in gross profit margin. Operating expense remained comparable for the Manufacturing segment, which was $878 and $884 for the three months ended September 30, 2023 and 2022, respectively.
Testing Segment
The revenue, gross margin, and income from operations for the Testing segment for the three months ended September 30, 2023 and 2022 were as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Revenue | $5,164 | $6,364 |
| Gross margin | 26.7% | 35.2% |
| (Loss) / Income from operations | $(128) | $861 |
Loss from operations in the Testing segment for the three months ended September 30, 2023, was $128, a decrease of $989 from income from operations of $861 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 $1,508 and $1,377 for the three months ended September 30, 2023 and 2022, respectively. The increase of $131 in operating expense is due to an increase in corporate expense partially offset by the decrease in general and administrative expenses.
- 34 -
Distribution Segment
The revenue, gross margin, and income from operations for the Distribution segment for the three months ended September 30, 2023 and 2022 were as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Revenue | $1,910 | $1,982 |
| Gross margin | 16.4% | 16.9% |
| Income from operations | $245 | $265 |
Income from operations in the Distribution segment for three months ended September 30, 2023 was $245, compared to $265 for the same period in Fiscal 2023. The decrease of $21 was mainly due to a decrease in gross profit margin.
Real Estate Segment
The revenue, gross margin and loss from operations for the Real Estate segment for the three months ended September 30, 2023 and 2022 were as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Revenue | $7 | $8 |
| Gross margin | (142.9)% | (125.0)% |
| Loss from operations | $(26) | $(14) |
Loss from operations in the Real Estate segment for the three months ended September 30, 2023, was $26 compared to $14 for the same period of Fiscal 2023. Operating expenses was $16 and $4 for the three months ended September 30, 2023 and 2022, respectively.
Corporate
The loss from operations for Corporate for the three months ended September 30, 2023, and 2022 was as follows:
(Unaudited)
(Unaudited)
| Three Months Ended Sept. 30, 2023 | 2022 | |
|---|---|---|
| Loss from operations | $(50) | $(221) |
Corporate operating loss was $50 for the three months ended September 30, 2023, compared to loss of $221 in the same period in Fiscal 2023.
- 35 -
Financial Condition
During the three months ended September 30, 2023, total assets increased by $2,513 to $44,699 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 and trade account receivable partially offset by a decrease in short term deposits, prepaid expenses, assets held for sale and operating right-of-use assets.
Cash and cash equivalents were $8,333 at September 30, 2023, reflecting an increase of $750 from $7,583 as at June 30, 2023, primarily due to maturity of the short-term deposit in the Singapore operation for the three months ended September 30, 2023.
Short-term deposits were $5,946 at September 30, 2023, reflecting a decrease of $681 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 three months ended September 30, 2023 which is reflected in the cash and cash equivalents. These deposits matured but were not rolled forward, as these funds were required for working capital purposes.
At September 30, 2023, the trade accounts receivable balance increased by $1,169 to $10,973, from $9,804 as at June 30, 2023, primarily due to an increase in revenue from customers that have longer credit term in Singapore and China operation. The number of days’ sales outstanding in accounts receivables for the Group was 94 days and 82 days at the end of the first quarter of Fiscal 2024 and the end of Fiscal 2023, respectively.
Other receivables at September 30, 2023, were $1,671, an increase of $732, compared to $939. The increase was mainly due to higher advance payments made to suppliers and refundable services taxes in the Singapore Operation.
Inventories at September 30, 2023, were $4,023, an increase of $1,872, 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 two quarters.
Prepaid expenses was $660 at September 30, 2023 compared to $694 at June 30, 2023. This was mainly due to the prepayment for insurance, rental and software license fee.
Investment properties’ net in China was $458 at September 30, 2023 and $474 as at June 30, 2023. The decrease was primarily due to the foreign currency exchange movement between June 30, 2023 and September 30, 2023.
Property, plant and equipment decreased by $1,054 from $8,344 at June 30, 2023, to $7,290 as at September 30, 2023, mainly due to the depreciation charged for the period and the foreign currency exchange movement between June 30, 2023 and September 30, 2023.
Other assets increased by $47 to $163 as at September 30, 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 $297 at September 30, 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 $896 to $2,556 at September 30, 2023, compared to $1,660 at June 30, 2023 which was in line with the increase in inventories.
Accrued expense increased by $1,939 to $7,507 at September 30, 2023, as compared to $5,568 as at June 30, 2023. The increase in accrued expense was mainly due to an increase in the accrued purchases, and contract liabilities relating to customers’ deposits received in the Company’s Singapore operations.
Bank loans payable decreased by $120 to $1,232 at September 30, 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 connection with our Malaysia operations.
Finance leases decreased by $28 to $121 at September 30, 2023, as compared to $149 at June 30, 2023. This was due to the repayments of leases in connection with our Singapore and Malaysia operations.
Operating lease right-of-use assets and the corresponding lease liability decreased by $47 to $2,562 at September 30, 2023, as compared to $2,609 at June 30, 2023. This was due to the repayment made and the operating lease expenses charged for the period.
- 36 -
Liquidity Comparison
Net cash used in operating activities increased by $1,618 to an outflow of $57 for the three months ended September 30, 2023, from an inflow of $1,561 for the same period in Fiscal 2023. The increase in net cash outflow provided by operating activities was primarily due to lower net income generated of $207 compared to the same period of Fiscal 2023 and lower receipts from trade receivables and other receivables by $1,061, higher cash outflow for inventories by $573, prepaid expense by $501, other non-current liabilities by $367 and higher cash outflow for income tax payable $346. These are partially offset against higher cash inflow from accounts payables and accrued expenses of $1,399.
Net cash provided by investing activities decreased by $516 to an inflow of $814 for the three months ended September 30, 2023, from inflow of $1,330 for the same period in Fiscal 2023. The decrease in cash inflow was primarily due to a decrease in withdrawal of unrestricted deposit by $1,793. These increases were partially offset by a decrease in additions to property, plant and equipment by $1,079 and proceeds from disposal of assets held for sale $198.
Net cash inflow from financing activities for the three months ended September 30, 2023, was $144, representing an increase of $558, compared to cash outflow of $414 during the three months ended September 30, 2022. The increase was mainly attributable to a decrease in utilization of lines of credit by $668.
The Company filed a shelf registration statement with the Securities and Exchange Commission, pursuant to which we may raise capital of U.S. $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.
Controls and procedures
As filed, 919 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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 September 30, 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 September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
- 37 -
TRIO-TECH INTERNATIONAL
PART II. OTHER INFORMATION
0
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2023-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2023-07-01 to 2023-09-30 | $10.0m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months2023-07-01 to 2023-09-30 | $7.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months2023-07-01 to 2023-09-30 | $2.5m | us-gaap:GrossProfit |
| Research and development | 3 months2023-07-01 to 2023-09-30 | $85.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months2023-07-01 to 2023-09-30 | −$1.0k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2023-07-01 to 2023-09-30 | $24.0k | us-gaap:InterestExpense |
| Income tax | 3 months2023-07-01 to 2023-09-30 | $37.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2023-07-01 to 2023-09-30 | $230.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months2023-01-01 to 2023-09-30 | $207.0k | us-gaap:ProfitLoss |
| Diluted EPS | 3 months2023-07-01 to 2023-09-30 | $0.05 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2023-07-01 to 2023-09-30 | $0.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2023-07-01 to 2023-09-30 | 4,280,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2023-01-01 to 2023-09-30 | −$57.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months2023-07-01 to 2023-09-30 | $77.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months2023-01-01 to 2023-09-30 | $77.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2023-09-30 | $8.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2023-09-30 | $32.4m | us-gaap:AssetsCurrent |
| Total assets | At period end2023-09-30 | $44.7m | us-gaap:Assets |
| Current liabilities | At period end2023-09-30 | $12.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2023-09-30 | $15.0m | us-gaap:Liabilities |
| Long-term debt | At period end2023-09-30 | $1.2m | us-gaap:LongTermDebt |
| Shareholders' equity | At period end2023-09-30 | $29.5m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001437749-23-031430. Last ingested by Listed: Oct 26, 2026, 09:24 ET. Listed shows no prices and gives no investment advice.