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~~March 31, ~~2017~~2019

☐

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)

16139 Wyandotte Street
Van Nuys, California		91406
(Address of principal executive offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: 818-787-7000

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 nonaccelerated 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 12b2 of the Exchange Act. (Check one):

Large Accelerated Filer	☐	Accelerated Filer	☐
~~Non-Accelerated Filer~~	☐	~~Smaller reporting company~~	☒
~~(Do not check if a smaller reporting company)~~
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 ☒

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

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

As of ~~February~~May 1, ~~2018,~~2019, there were ~~3,553,055~~3,673,055 shares of the issuer’s Common Stock, no par value, outstanding.

TRIO-TECH ~~INTERNATIONAL~~INTERNATIONAL

INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE

		Page

Part I.	Financial Information

Item 1.	Financial Statements
	(a) Condensed Consolidated Balance Sheets as of ~~December~~March 31, ~~2017~~2019 (Unaudited) and June 30, ~~2017~~2018	2
	(b) Condensed Consolidated Statements of Operations and Comprehensive Income for the Three ~~Months~~ and ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 (Unaudited) and ~~December~~March 31, ~~2016~~2018 (Unaudited)	3
	(c) Condensed Consolidated Statements of Shareholders Equity for the ~~Six~~Three and Nine Months Ended ~~December~~March 31, ~~2017~~2019 (Unaudited) and ~~December~~the March 31, ~~2016~~2018 (Unaudited)	5
	(d) Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 (Unaudited) and ~~December~~March 31, ~~2016~~2018 (Unaudited)	6
	(e) Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2831
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4546
Item 4.	Controls and Procedures	4546

Part II.	Other Information

Item 1.	Legal Proceedings	4647
Item 1A.	Risk Factors	4647
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4647
Item 3.	Defaults upon Senior Securities	4647
Item 4.	Mine Safety Disclosures	4647
Item 5.	Other Information	4647
Item 6.	Exhibits	4647

Signatures			4748

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FORWARD-LOOKING STATEMENTS

The discussions of Trio-Tech International’s (the “Company”) business and activities set forth in this Form 10-Q 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; and other economic, financial and regulatory factors beyond the Company’s control. 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.

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Table of Contents

PART I. ~~FINANCIAL~~FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

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

	December 31, 2017	June 30, 2017	March 31, 2019	June 30, 2018
ASSETS	(Unaudited)		(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$5,059	$4,772	$4,602	$6,539
Short-term deposits	642	787	3,646	653
Trade accounts receivable, less allowance for doubtful accounts of $255 and $247	9,493	9,009
Trade accounts receivable, less allowance for doubtful accounts of $256 and $259			7,120	7,747
Other receivables	548	401	1,034	881
Inventories, less provision for obsolete inventory of $697 and $686	2,972	1,756
Inventories, less provision for obsolete inventory of $660 and $695			2,918	2,930
Prepaid expenses and other current assets	280	226	307	208
Asset held for sale	91	86
Assets held for sale			90	91
Total current assets	19,085	17,037	19,717	19,049
NON-CURRENT ASSETS:
Deferred tax asset	435	375	335	400
Investment properties, net	1,217	1,216	828	1,146
Property, plant and equipment, net	12,385	11,291	12,687	11,935
Other assets	1,950	1,922	1,728	2,249
Restricted term deposits	1,717	1,657	1,705	1,695
Total non-current assets	17,704	16,461	17,283	17,425
TOTAL ASSETS	$36,789	$33,498	$37,000	$36,474

LIABILITIES
CURRENT LIABILITIES:
Lines of credit	$2,189	$2,556	$622	$2,043
Accounts payable	3,342	3,229	3,021	3,704
Accrued expenses	3,985	3,043	3,882	3,172
Income taxes payable	292	233	404	285
Current portion of bank loans payable	356	260	492	367
Current portion of capital leases	250	228	257	250
Total current liabilities	10,414	9,549	8,678	9,821
NON-CURRENT LIABILITIES:
Bank loans payable, net of current portion	1,617	1,552	2,442	1,437
Capital leases, net of current portion	648	531	325	524
Deferred tax liabilities	328	295	343	327
Income taxes payable			613	828
Other non-current liabilities	46	44	32	36
Total non-current liabilities	2,639	2,422	3,755	3,152
TOTAL LIABILITIES	$13,053	$11,971	$12,433	$12,973

EQUITY
TRIO-TECH INTERNATIONAL’S SHAREHOLDERS' EQUITY:
Common stock, no par value, 15,000,000 shares authorized; 3,548,055 shares issued outstanding as at December 31, 2017, and 3,523,055 shares as at June 30, 2017	$11,013	$10,921
Additional paid-in capital	3,208	3,206
Common stock, no par value, 15,000,000 shares authorized; 3,673,055 shares issued and outstanding as at March 31, 2019, and 3,553,055 shares as at June 30, 2018			$11,424	$11,023
Paid-in capital			3,261	3,249
Accumulated retained earnings	5,589	4,341	6,621	5,525
Accumulated other comprehensive income	2,508	1,633
Accumulated other comprehensive gain-translation adjustments			2,055	2,182
Total Trio-Tech International shareholders' equity	22,318	20,101	23,361	21,979
Non-controlling interest	1,418	1,426	1,206	1,522
TOTAL EQUITY	$23,736	$21,527	$24,567	$23,501
TOTAL LIABILITIES AND EQUITY	$36,789	$33,498	$37,000	$36,474

See notes to condensed consolidated financial statements.

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TRIO-TECH ~~INTERNATIONAL~~INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

UNAUDITED (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
	Dec. 31,				Mar. 31,
	2017	2016	2017	2016	2019	2018	2019	2018
Revenue
Manufacturing	$3,973	$3,320	$8,738	$6,991	$3,097	$3,124	$10,086	$11,862
Testing services	4,936	4,070	9,541	8,227	3,989	4,913	12,819	14,454
Distribution	1,606	1,675	3,142	2,779	1,727	2,033	5,587	5,175
Others	37	39	76	78
Real Estate					25	34	81	110
	10,552	9,104	21,497	18,075	8,838	10,104	28,573	31,601
Cost of Sales
Cost of manufactured products sold	3,068	2,622	6,717	5,417
Cost of manufactured products sold					2,303	2,530	7,806	9,247
Cost of testing services rendered	3,251	2,658	6,390	5,472	2,862	3,491	9,351	9,881
Cost of distribution	1,409	1,501	2,777	2,492	1,483	1,821	4,831	4,598
Others	29		58	42
Cost of real estate					16	30	52	88
					6,664	7,872	22,040	23,814
	7,757	6,810	15,942	13,423
Gross Margin	2,795	2,294	5,555	4,652	2,174	2,232	6,533	7,787

Operating Expenses:
General and administrative	1,727	1,776	3,566	3,519	1,742	1,773	5,223	5,339
Selling	252	180	431	365	246	181	580	612
Research and development	118	52	302	105	76	75	270	377
Write off of property, plant and equipment	-	8	11	8
Gain on disposal of property, plant and equipment					(13)	(31)	(13)	(20)
Total operating expenses	2,097	2,016	4,310	3,997	2,051	1,998	6,060	6,308

Income from Operations	698	278	1,245	655	123	234	473	1,479

Other Income / (Expenses)
Interest expenses	(52)	(48)	(110)	(106)	(74)	(64)	(250)	(174)
Other income, net	42	203	200	313	128	111	220	311
Total other (expenses) / income	(10)	155	90	207
Gain on sale of assets held for sale					685	-	685	-
Total other income					739	47	655	137

Income from Continuing Operations before Income Taxes	688	433	1,335	862	862	281	1,128	1,616

Income Tax Expenses	(13)	(67)	(55)	(150)	(209)	(980)	(159)	(1,035)

Income from continuing operations before non-controlling interest, net of tax	675	366	1,280	712
Income / (loss) from continuing operations before non-controlling interest, net of tax					653	(699)	969	581

Discontinued Operations (Note 19)
Loss from discontinued operations, net of tax	(2)	(4)	(5)	(3)
NET INCOME	673	362	1,275	709
Discontinued Operations
Income / (loss) from discontinued operations, net of tax					2	(6)	(2)	(11)
NET INCOME / (LOSS)					655	(705)	967	570

Less: net income attributable to non-controlling interest	-	52	27	96
Net Income Attributable to Trio-Tech International Common Shareholders	$673	$310	$1,248	$613
Less: net (loss) / income attributable to non-controlling interest					(28)	34	(129)	61
Net Income / (Loss) Attributable to Trio-Tech International Common Shareholders					$683	$(739)	$1,096	$509

Amounts Attributable to Trio-Tech International Common Shareholders:
Income from continuing operations, net of tax	678	316	1,254	619
Loss from discontinued operations, net of tax	(5)	(6)
Net Income Attributable to Trio-Tech International Common Shareholders	$673	$310	$1,248	$613

Basic Earnings per Share:
Basic per share from continuing operations attributable to Trio-Tech International	$0.19	$0.09	$0.35	$0.18
Income / (loss) from continuing operations, net of tax					682	(736)	1,097	520
Income / (loss) from discontinued operations, net of tax					1	(3)	(1)	(11)

Net Income / (Loss) Attributable to Trio-Tech International Common Shareholders					$683	$(739)	$1,096	$509

Basic Earnings per Share:
Basic per share from continuing operations attributable to Trio-Tech International					$0.19	$(0.21)	$0.30	$0.15
Basic earnings per share from discontinued operations attributable to Trio-Tech International	$-				$-
Basic Earnings per Share from Net Income
Attributable to Trio-Tech International	$0.19	$0.09	$0.35	$0.18	$0.19	$(0.21)	$0.30	$0.15

Diluted Earnings per Share:
Diluted earnings per share from continuing operations attributable to Trio-Tech International	$0.18	$0.09	$0.34	$0.17	$0.19	$(0.20)	$0.29	$0.14
Diluted earnings per share from discontinued operations attributable to Trio-Tech International	$-	$-	$-	$-	$-
Diluted Earnings per Share from Net Income
Attributable to Trio-Tech International	$0.18	$0.09	$0.34	$0.17	$0.19	$(0.20)	$0.29	$0.14

Weighted average number of common shares outstanding
Basic	3,548	3,513	3,548	3,513	3,673	3,553	3,673	3,553
Dilutive effect of stock options	245	56	222	39	12	219	73	225
Number of shares used to compute earnings per share diluted	3,793	3,569	3,770	3,552	3,685	3,772	3,746	3,778

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED (IN THOUSANDS)

	Three Months Ended		Nine Months Ended
	Mar. 31,	Mar. 31,	Mar. 31,	Mar. 31,
	2019	2018	2019	2018
Comprehensive Income Attributable to Trio-Tech International Common Shareholders:

Net income / (loss)	$655	$(705)	$967	$570
Foreign currency translation, net of tax	401	849	(189)	1,809
Comprehensive Income	1,056	144	778	2,379
Less: comprehensive income / (loss) attributable to non-controlling interest	1	142	(191)	255
Comprehensive Income attributable to Trio-Tech International Common Shareholders	$1,055	$2	$969	$2,124

See notes to condensed consolidated financial statements.

~~-3-~~

~~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,

2017

2016

2017

2016

Comprehensive Income Attributable to Trio-Tech International Common Shareholders:

Net income
$673
$362
$1,275
$709
Foreign currency translation, net of tax
  588
  (1,094)
  963
  (1,377)
Comprehensive Income / (Loss)
  1,261
  (732)
  2,238
  (668)
Less: comprehensive income / (loss) attributable to non-controlling interest
  88
  (16)
  115
  (37)
Comprehensive Income / (Loss) Attributable to Trio-Tech International Common Shareholders
$1,173
$(716)
$2,123
$(631)

~~See notes to condensed consolidated financial statements.~~

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TRIO-TECH ~~INTERNATIONAL~~INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS)

~~Six~~Nine Months ended ~~December~~March 31, ~~2017~~2019

Common
Stock

Additional Paid-in

Accumulated Retained

Accumulated Other
Comprehensive

Non- Controlling

Shares

Amount

Capital

Earnings

Income

Interest

Total

$

$

$

$

$

$

Balance at June 30, 2017
  3,523
  10,921
  3,206
  4,341
  1,633
  1,426
  21,527
Stock option expenses
  -
  -
  2
  -
  -
  -
  2
Net income
  -
  -
  -
  1,248
  -
  27
  1,275
Dividend declared by subsidiary
  -
  -
  -
  -
  -
  (123)
  (123)
Exercise of options
  15
  41
  -
  -
  -
  -
  41
Issue of restricted shares to service provider
  10
  51
  -
  -
  -
  -
  51
Translation adjustment
  -
  -
  -
  -
  875
  88
  963
Balance at Dec. 31, 2017
  3,548
  11,013
  3,208
  5,589
  2,508
  1,418
  23,736

~~Six~~

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

Balance at June 30, 2018	3,553	$11,023	$3,249	$5,525	$2,182	$1,522	$23,501
Stock option expenses	-	-	12	-	-	-	12
Net income	-	-	-	1,096	-	(129)	967
Dividend declared by subsidiary	-	-	-	-	-	(125)	(125)
Exercise of stock options	120	401	-	-	-	-	401
Translation adjustment	-	-	-	-	(127)	(62)	(189)
Balance at Mar. 31, 2019	3,673	11,424	3,261	6,621	2,055	1,206	24,567

Nine Months ended ~~December~~March 31, ~~2016~~2018

	Common Stock		Additional Paid-in	Accumulated Retained	Accumulated Other Comprehensive	Non- Controlling		Common Stock		Additional Paid-in	Accumulated Retained	Accumulated Other Comprehensive	Non- Controlling
	Shares	Amount	Capital	Earnings	Income	Interest	Total	Shares	Amount	Capital	Earnings	Income	Interest	Total
		$
Balance at June 30, 2016	3,513	10,882	3,188	3,025	2,162	1,614	20,871
Balance at June 30, 2017								3,523	$10,921	$3,206	$4,341	$1,633	$1,426	$21,527
Stock option expenses	-		1	-			1	-		40	-			40
Net income	-			613	-	96	709	-			509	-	61	570
Stock option expenses	-					(117)
Dividend declared by subsidiary								-					(125)
Exercise of options								20	51	-				51
Issue of restricted shares to service provider								10	51	-				51
Translation adjustment	-				(1,244)	(133)	(1,377)	-				1,615	194	1,809
Balance at Dec. 31, 2016	3,513	10,882	3,189	3,638	918	1,460	20,087
Balance at Mar. 31, 2018								3,553	11,013	3,246	4,850	3,248	1,556	23,923

See notes to condensed consolidated financial statements.

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TRIO-TECH ~~INTERNATIONAL~~INTERNATIONAL AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~UNAUDITED~~ (IN THOUSANDS)

	Six Months Ended		Nine Months Ended
	Dec. 31,		Mar. 31,
	2017	2016	2019	2018
	(Unaudited)		(Unaudited)
Cash Flow from Operating Activities
Net income	$1,275	$709	$967	$570
Adjustments to reconcile net income to net cash flow provided by operating activities
Gain on sale of assets held for sale			(685)	-
Depreciation and amortization	1,019	916	1,777	1,594
Stock option expenses	2	1
Reversal of provision for obsolete inventories	(3)	(4)
Bad debt recovery, net	-	(16)
Accrued interest expense, net of accrued interest income	95
Write off of property, plant and equipment - continued operations	11	8
Stock compensation			12	40
Usage of provision for obsolete inventory			(37)	(4)
Reversal of income tax provision			(145)	-
Bad debt recovery			1	-
Accrued interest expense, net accrued interest income			34	148
Gain on sale of property, plant and equipment – continued operations			(13)	(20)
Issuance of shares to service provider	51	-	-	51
Warranty recovery, net	3	(9)	(35)	1
Deferred tax provision	(25)	51
Changes in operating assets and liabilities, net of acquisition effect
Fixed assets written off			(33)	-
Deferred tax benefit / (provision)			78	33
Changes in operating assets and liabilities, net of acquisition effects
Trade accounts receivable	(484)	1,265	626	392
Other receivables	(147)	280	(153)	9
Other assets	(37)	(226)	489	(327)
Inventories	(1,153)	(275)	60	(506)
Prepaid expenses and other current assets	(54)	(99)	(99)	7
Accounts payable and accrued liabilities	934	1,001
Income tax payable	59	(26)
Accounts payable and accrued expenses			60	250
Income taxes payable			58	884
Net Cash Provided by Operating Activities	1,546	3,671	2,962	3,122

Cash Flow from Investing Activities
Proceeds from maturing of unrestricted and restricted term deposits and short-term deposits, net	484	-
Proceeds from sale of assets held for sale			943	-
Proceeds from maturing of unrestricted term deposits and short-term deposits, net			-	484
Proceeds from disposal of property, plant and equipment			3	42
Investments in restricted and unrestricted deposits	(281)	(421)	(2,939)	(281)
Additions to property, plant and equipment	(1,507)	(764)
Proceeds from disposal of plant, property and equipment	-	83
Addition to property, plant and equipment			(2,576)	(2,050)
Net Cash Used in Investing Activities	(1,304)	(1,102)	(4,569)	(1,805)

Cash Flow from Financing Activities
Repayment on lines of credit	(4,978)	(4,503)	(7,316)	(7,397)
Repayment of bank loans and capital leases			(625)	(554)
Dividends paid on non-controlling interest			(125)
Proceeds from exercising stock options			401	51
Proceeds from bank loans and capital leases	5,045	3,516	7,470	6,570
Proceeds from exercising of stock option	41	-
Dividends paid to non-controlling interest	(123)	(117)
Repayment of long-term bank loans and capital leases	(373)	(371)
Net Cash Used in by Financing Activities	(388)	(1,475)
Net Cash Used in Financing Activities			(195)	(1,455)

Effect of Changes in Exchange Rate	433	(565)	(125)	742

NET INCREASE IN CASH AND CASH EQUIVALENTS	287	529
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	4,772	3,807
CASH AND CASH EQUIVALENTS, END OF PERIOD	$5,059	$4,336
Net (Decrease) / Increase in Cash, Cash Equivalents, and Restricted Cash			(1,927)	604
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period			8,234	4,772
Cash, Cash Equivalents, and Restricted Cash at End of Period			$6,307	$5,376

Supplementary Information of Cash Flows
Cash paid during the period for:
Interest	$91		$217	$138
Income taxes	$119	$83	$114	$225

Non-Cash Transactions
Capital lease of property, plant and equipment	$228	$49	$-	$228

See notes to condensed consolidated financial statements.

Reconciliation of Cash, Cash Equivalents, and Restricted Cash
Cash	4,602	6,539
Restricted Term-Deposits in Non-Current Assets	1,705	1,695
Total Cash, Cash Equivalents, and Restricted Cash Shown in Statement of Cash Flows	$6,307	$8,234

Amounts reflecting adoption of ASU 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230) beginning in the first quarter of 2019.

Amounts included in restricted deposits represent the amount of cash pledged to secure loans payable or trade financing granted by financial institutions and serve as collateral for public utility agreements such as electricity and water. Restricted deposits are classified as non-current assets, as they relate to long-term obligations and will become unrestricted only upon discharge of the obligations.

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~~TRIO-TECH~~TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

NOTES TO 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” hereafter) was incorporated in fiscal year 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. 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~~third quarter of fiscal year ~~2018,~~2019, TTI conducted business in four business segments: Manufacturing, Testing Services, Distribution and Real Estate. TTI has subsidiaries in the U.S., Singapore, Malaysia, Thailand 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~~
(49% owned by Trio-Tech International Pte. Ltd. and 51% owned by Trio-Tech International (Thailand) 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.	~~55%~~	~~Selangor, Malaysia~~
(100% owned by Trio-Tech Malaysia Sdn. Bhd.)
~~Prestal Enterprise Sdn. Bhd.~~	~~76%~~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)~~Ltd.)	55%	Singapore
PT SHI Indonesia (Dormant) (100% owned by SHI International Pte. Ltd.)	55%	Batam, Indonesia
Trio-Tech (Tianjin) Co., Ltd. *	100%	Tianjin, China

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

The accompanying un-audited condensed consolidated financial statements have been prepared in accordance with 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 inter-company accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements are presented in U.S. dollars. The accompanying condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the ~~six~~three and nine months ended ~~December~~March 31, ~~2017~~2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, ~~2018.~~2019. 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, ~~2017.~~2018.

~~The~~Except as otherwise specifically noted in this Form 10-Q, the Company’s operating results are presented based on the translation of foreign currencies using the respective quarter’s average exchange rate.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

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2. NEW ACCOUNTING PRONOUNCEMENTS

The ~~following~~ amendments in ASU 2018-19 ASC Topic 326: Codification Improvements to Financial Instruments – Credit Losses ~~Accounting Standards Update (“ASU”) have been adopted by~~clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the lease’s standard. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. While early application is permitted, including adoption in an interim period, the Company ashas not elected to early adopt. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

The amendments in ASU 2018-18 ASC Topic 808: Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 provide more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. It allows organizations to only present units of account in collaborative arrangements that are within the scope of the revenue recognition standard together with revenue accounted for under the revenue recognition standard. The parts of the collaborative arrangement that are not in the scope of the revenue recognition standard should be presented separately from revenue accounted for under the revenue recognition standard. The amendments are effective for all entities for fiscal years beginning after December ~~31, 2017.~~15, 2019, and interim periods within those fiscal years. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.

The amendments in ASU 2018-13 ASC Topic 820: Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement modify the disclosure requirements on fair value measurements based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

The amendments in ASU ~~2015-11 ASC Topic 330:~~2018-09 ~~Simplifying~~Codification Improvementsrepresent changes to clarify, correct errors in, or make minor improvements to the ~~Measurement of Inventory(“ASC Topic 330”) specify that an entity should measure inventory at the lower of cost~~Codification, eliminating inconsistencies and ~~net realizable value. Net realizable value is the estimated selling prices~~providing clarifications in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using Last-In-First-Out or the retail inventory method.current guidance. The amendments in ~~ASC Topic 330~~this ASU include those made to: Income Statement-Reporting Comprehensive Income-Overall; Debt-Modifications and Extinguishments; Distinguishing Liabilities from Equity-Overall; Compensation-Stock Compensation-Income Taxes; Business Combinations-Income Taxes; Derivatives and Hedging-Overall; Fair Value Measurement-Overall; Financial Services-Brokers and Dealers-Liabilities; and Plan Accounting-Defined Contribution Pension Plans-Investments-Other. The amendments are effective for ~~public business~~all entities for ~~fiscal years~~annual periods beginning after December 15, ~~2016, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented.~~2018. The ~~Company has adopted the ASU and concluded that the~~ effectiveness of this update ~~does~~is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

The amendments in ASU 2018-02 ASC Topic 220: Income Statement – Reporting Comprehensive Income provide financial statement preparers with an option to reclassify stranded tax effects within Accumulated Other Comprehensive Income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. The ~~following~~ amendments in ASC Topic 220 are effective for public business entities for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. While early application is permitted, ~~Accounting Standards Update (“ASU”) have not been adopted by~~including adoption in an interim period, the Company ashas not elected to early adopt. The effectiveness of ~~December 31, 2017.~~this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

The amendments in ~~ASU~~Accounting Standards Update (“ASU”) 2017-11: Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity ~~(Topic~~(Topic 480); Derivatives and Hedging ~~(Topic~~(Topic 815)~~. For~~ are effective for public companies ~~these amendments are effective~~ for annual periods beginning after December 15, 2018, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

The amendments in ASU ~~2017-09 —Compensation—Stock Compensation~~(ASC Topic 718 ): Scope of Modification Accounting: These amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

~~The amendments in ASU 2017-08 ASC Subtopic 310-20 —'Receivables—Nonrefundable Fees and Other Costs~~(“ASC Subtopic 310-20”): These amendments shorten the amortization period for certain callable debt securities held at a premium. For public companies, these amendments are effective for annual periods beginning after December 15, 2018, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

~~The amendments in ASU 2017-07 ASC Topic 715 —'Compensation — Retirement Benefits~~: These amendments improve the presentation of net periodic pension Cost and Net Periodic Postretirement Benefit Cost. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

~~The amendments in ASU 2017-05 ASC Subtopic 610-20 —'Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets~~(“ASC Subtopic 610-20”): These amendments clarify the scope of asset derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

~~The amendments in ASU~~ 2017-04 ASC Topic 350 — '~~'Intangibles~~Intangibles - Goodwill and Other~~: These amendments~~(“ASC Topic 350”) simplify the test for goodwill impairment. For public companies, these amendments are effective for annual periods beginning after December 15, 2019, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

~~The amendments in ASU 2017-01 ASC Topic 805 —'Business Combinations~~: These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. For public companies, these amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position or results of operations.

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~~The amendments in ASU 2016-18 ASC Topic 230 —'Statement of Cash Flows~~: These amendments provide cash flow statement classification guidance. For public business entities, these amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s presentation of consolidated financial position and statement of cash flows.

~~The amendments in ASU 2016-17 ASC Topic 810 —Consolidation~~: These amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. For public business entities, these amendments are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. While early application is permitted, including interim reporting periods within those annual reporting periods, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

~~The amendments in ASU 2016-16 ASC Topic 740 —Income Taxes~~: These amendments require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. For public business entities, these amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

~~The amendments in ASU 2016-15 ASC Topic 230 —Statement of Cash Flows~~: These amendments provide cashflow statement classification guidance. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. While early application is permitted, including adoption in an interim period, the Company has not elected to early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

The amendments in ASU 2016-13 ASC Topic 326: Financial Instruments—Credit losses (“ASC Topic 326”) are issued 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. For public companies that are not SEC filers, ASC Topic 326 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. While early application will be permitted for all organizations for fiscal years and interim periods within those fiscal years, beginning after December 15, 2018, the Company has not yet determined if it will early adopt. The effectiveness of this update is not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

~~The amendments in~~In February 2016, the FASB issued an ASU ~~2016-09 ASC Topic 718:Compensation~~–Stock Compensation are issued to simplify several aspects of the accounting for share-based payment award transactions, including (a) income tax consequences (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public business entities, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has adopted the ASU and concluded that the effectiveness of this update does not have a significant effect on the Company’s consolidated financial position or results of operations.

~~The amendments in ASU 2016-02~~2016-12 ASC Topic 842: Leases, which amends a number of aspects of the existing accounting standards for leases which require ~~companies~~lessees to recognize operating leased assets and corresponding liabilities on the ~~following~~balance sheet for all leases ~~(with the exception~~with lease terms of ~~short-term leases) at the commencement date~~more than 12 months. In July 2018, ASU 2018-10: Codification Improvements to Leases addressed stakeholders’ questions about how to apply certain aspects of the ~~applicable lease: (a) a~~new guidance in Accounting Standards Codification (ASC) 842: Leases. The clarifications address the rate implicit in the lease, ~~liability, which is a lessee’s obligation~~impairment of the net investment in the lease, lessee reassessment of lease classification, lessor reassessment of lease term and purchase options, variable payments that depend on an index or rate and certain transition adjustments. Besides, the amendments in ASU 2018-11 ASC Topic 842: Leases: Targeted Improvements related to ~~make~~transition relief on comparative reporting at adoption affect all entities with lease ~~payments arising from a lease, measured on a discounted basis;~~contracts that choose the additional transition method and ~~(b) a right-of-use asset, which is as an asset that represents the lessee’s right to use, or control the use~~separating components of a ~~specified asset~~contract affect only lessors whose lease contracts qualify for the practical expedient. In July 2018, the amendments in ASU 2018-20 ASC Topic 842: Leases: Narrow-Scope Improvements for Lessors addressed the following issues facing lessors when applying this lease ~~term. These~~standard: (1) sales taxes and other similar taxes collected from lessees, (2) certain lessor costs and (3) recognition of variable payments for contracts with lease and non-lease components. On 5 March 2019, ASU 2019-01 issued to exempt both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. The amendments ~~become~~are effective for all entities for fiscal years beginning after December 15, 2018, ~~including~~and interim periods within those fiscal ~~years, for a variety of entities including a public company.~~years. While early ~~adoption~~application is permitted and allows for either a modified retrospective adoption or a retrospective adoption by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, the Company has not elected to early adopt. The ~~effectiveness~~Company will adopt these standards starting in the first quarter of ~~this update is not expected to have~~fiscal year 2020 on a ~~significant effect on~~modified retrospective approach at the ~~Company’s consolidated financial position or results of operations.~~

~~-9-~~

The Financial Accounting Standards Board (“FASB”) has issued converged standards on revenue recognition. Specifically, the Board has issued ASU 2014-09, ASC Topic 606 (“ASU 2014-09”). ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 will supersede the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC Topic 605”), and most industry-specific guidance. ASU 2014-09 also supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts. In addition, the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer (e.g., assets within the scope of ASC Topic 360, Property, Plant, and Equipment, (“ASC Topic 360”), and intangible assets within the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in ASU 2014-09. For a public entity, the amendments in ASU 2014-09 would be effective for annual reporting periods beginning ~~after December 15, 2016, including interim periods within that reporting period. However, ASU 2015-14 ASC Topic 606:Deferral~~ of the ~~Effective Date~~(“ASC Topic 606”) defers the effective date of ASU 2014-09 for all entities by one year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.period through a cumulative-effect adjustment. The Company ~~has not adopted these standards. As~~is currently evaluating the new standards, will supersede substantially all existing revenue guidance affecting the Company under GAAP, it could impact revenue and cost recognition on sales across all the Company's business segments. The Company carried out an initial evaluation of thepotential impact of this standard on its ~~business~~consolidated financial statements and ~~anticipates~~expects that there will be an increase in assets and liabilities on the Consolidated Balance Sheets at adoption due to the recognition of ~~this standard will not have a significant effect on its Consolidated Financial Statements. While we are continuing to assess all potential impacts,~~right-of-use assets and related lease liabilities. Upon adoption, the Company ~~has not presently selected a transition method as we believe there~~expects that its financial statement disclosure will ~~not~~ be ~~any significant impact~~expanded to present additional details of ~~this new guidance on the Company.~~its leasing arrangements.

Other new pronouncements issued but not yet effective until after ~~December~~March 31, ~~2017~~2019 are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

3. TERM DEPOSITS

	Dec. 31, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018

Short-term deposits	$598	$824	$3,615	$606
Currency translation effect on short-term deposits	44	(37)	31	47
Total short-term deposits	642	787	3,646	653
Restricted term deposits	1,660	1,722	1,690	1,664
Currency translation effect on restricted term deposits	57	(65)	15	31
Total restricted term deposits	1,717	1,657	1,705	1,695
Total Term deposits	$2,359	$2,444
Total term deposits			$5,351	$2,348

Restricted deposits represent the amount of cash pledged to secure loans payable granted by financial institutions and serve as collateral for public utility agreements such as electricity and ~~water and performance bonds related to customs duty payable.~~water. Restricted deposits are classified as non-current assets, as they relate to long-term obligations and will become unrestricted only upon discharge of the obligations. Short-term deposits represent bank deposits, ~~that~~which do not qualify as cash equivalents.

~~-10-~~

4. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable consists of customer obligations due under normal trade terms. Although management generally does not require collateral, letters of credit may be required from the customers in certain circumstances. Management periodically performs credit evaluations of customers’ financial conditions.

Senior management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Management includes any accounts receivable balances that are determined to be uncollectible in the allowance for doubtful accounts. After all reasonable attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believed the allowance for doubtful accounts as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017~~2018 was adequate.

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The following table represents the changes in the allowance for doubtful accounts:

	Dec. 31, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018
Beginning	$247	$270	$259	$247
Additions charged to expenses	-	65	85	8
Recovered	(1)	(78)	(84)	(1)
Write-off	-	(2)
Currency translation effect	9	(8)	(4)	5
Ending	$255	$247	$256	$259

5. LOANS RECEIVABLE FROM PROPERTY DEVELOPMENT PROJECTS

The following table presents Trio-Tech (Chongqing) Co. ~~Ltd (‘TTCQ’~~Ltd. (“TTCQ”)’s loan receivable from property development projects in China as of ~~December~~March 31, ~~2017.~~2019. The exchange rate is based on the date published by the Monetary Authority of Singapore as of March 31, 2015, since the net loan receivable was “nil” as ~~at December~~of March 31, ~~2017.~~

2019.

	Loan Expiry Date	Loan Amount (RMB)	Loan Amount (U.S. Dollars)
Short-term loan receivables
JiangHuai (Project – Yu Jin Jiang An)	May 31, 2013	2,000	325
Less: allowance for doubtful receivables		(2,000)	(325)
Net loan receivables from property development projects		-	-

Long-term loan receivables
Jun Zhou Zhi Ye	Oct 31, 2016	5,000	814
Less: transfer – down-payment for purchase of investment property		(5,000)	(814)
Net loan receivables from property development projects		-	-

The following table presents TTCQ’s loan receivable from property development projects in China as of June 30, 2017. The exchange rate is based on the date published by the Monetary Authority of Singapore as of March 31, 2015, since the net loan receivable was “nil” as at June 30, 2017.

Loan Expiry
Date

Loan Amount
(RMB)

Loan Amount
(U.S. Dollars)

Short-term loan receivables

JiangHuai (Project – Yu Jin Jiang An) May 31, 2013
  2,000
  325
Less: allowance for doubtful receivables
  (2,000)
  (325)
Net loan receivables from property development projects
  -
  -



Long-term loan receivables


Jun Zhou Zhi Ye Oct 31, 2016
  5,000
  814
Less: transfer – down-payment for purchase of investment property
  (5,000)
  (814)
Net loan receivables from property development projects
  -
  -

~~-11-~~

On November 1, 2010, TTCQ entered 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. Due to the short-term nature of the investment, the amount was classified as a loan based on ASC Topic 310-10-25Receivables, amounting to ~~Renminbi~~renminbi (“RMB”) 2,000, or approximately $325. The loan was renewed, but expired on May 31, 2013. TTCQ is in the legal process of recovering the outstanding amount of $325. TTCQ did not generate other income from JiangHuai for the quarter ended ~~December~~March 31, ~~2017,~~2019 or for the fiscal year ended June 30, ~~2017.~~2018. Based on TTI’s financial policy, a provision for doubtful receivables of $325 on the investment in JiangHuai was recorded during the second quarter of fiscal 2014 based on TTI’s financial policy. ~~TTCQ is in the legal process of recovering the outstanding amount of $325.~~

On November 1, 2010, TTCQ entered 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. Due to the short-term nature of the investment, the amount was classified as a loan based on ASC Topic 310, amounting to RMB 5,000, or approximately $814 based on the exchange rate as at March 31, 2015 published by the Monetary Authority of Singapore. The amount was unsecured and repayable at the end of the term. The loan was renewed in November 2011 for a period of one year, which expired on October 31, 2012 and was again renewed in November 2012 and expired in November 2013. On November 1, 2013 the loan was transferred by JiaSheng to, and is now payable by, Chong Qing Jun Zhou Zhi Ye Co. Ltd. (“Jun Zhou Zhi Ye”), and the transferred agreement expired on October 31, 2016. Prior to the second quarter of fiscal year 2015, the loan receivable was classified as a long-term receivable. The book value of the loan receivable approximates its fair value. In the second quarter of fiscal year 2015, the loan receivable was transferred to the down payment for the purchase of an investment property that is being developed in the Singapore Themed Resort Project (see Note 8).

6. INVENTORIES

Inventories consisted of the following:

	Dec. 31, 2017 (Unaudited)	June 30, 2017
			Mar. 31, 2019 (Unaudited)	June 30, 2018
Raw materials	$1,107	$1,047	$1,206	$1,153
Work in progress	1,890	1,045	1,839	1,947
Finished goods	598	365	520	505
Less: provision for obsolete inventories	(697)	(686)
Currency translation effect	74	(15)	13	20
Less: provision for obsolete inventory			(660)	(695)
	$2,972	$1,756	$2,918	$2,930

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

	Dec. 31, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018

Beginning	$686	$697	$695	$686
Additions charged to expenses	-	6	5	9
Usage - disposition	(3)	(6)
Usage – disposition			(42)	(5)
Currency translation effect	14	(11)	2	5
Ending	$697	$686	$660	$695

7. ~~ASSET~~ASSETS HELD FOR SALE

Penang Property

During the fourth quarter of 2015, ~~Trio-Tech (Malaysia) Sdn. Bhd. (‘TTM’)~~the operations in Malaysia planned to sell its factory building in Penang, Malaysia. ~~In May 2015, TTM was approached by a potential buyer to purchase the factory building. Negotiation is still ongoing and is subject to approval by Penang Development Corporation.~~ In accordance with ASC Topic 360, during fiscal year 2015 the property was reclassified from investment property, which had a net book value of RM 371, or approximately ~~$92,~~$98, to assets held for sale, since there was an intention to sell the factory building. In May 2015, Trio-Tech Malaysia was approached by a potential buyer to purchase the factory building. On September 14, 2015, application to sell the property was rejected by Penang Development Corporation (PDC). The rejection was because the business activity of the purchaser was not suitable to the industry that is being promoted on said property. PDC made an offer to purchase the property, which was not at the expected value and the offer expired on March 28, 2016 and no further conversations with PDC have occurred since. Management received an expression of interest from a potential buyer in acquiring the property during second quarter of fiscal year 2019 and the sale is still under negotiation with the potential buyer during third quarter of fiscal year 2019. The completion of the sale is also subject to the approval by Penang Development Corporation. The net book values of the building ~~were~~was RM371, or ~~approximately $91,~~$90, as at ~~December~~March 31, ~~2017~~2019 and ~~RM 371,~~RM371, or ~~approximately $86,~~$91, as at June 30, ~~2017. As at end of December 31, 2017, management is still actively looking for a suitable buyer.~~

~~-12-~~

8.2018. ~~INVESTMENTS~~

~~Investments~~Mao Ye Property

During the first quarter of 2019, management decided to sell Mao Ye Property, which is one of our earlier investment properties. In order to monetize the capital gain on property, TTCQ appointed a sole agent for 6 months as of September 1, 2018 to search for suitable buyers for this property. The Company has completed the sale of thirteen of the fifteen units constituting the Mao Ye Property as the end of the third quarter 2019 which contributed the gain of $685. During the third quarter 2019, considering the current market conditions in China, management has decided not to sell the remaining two units of Mao Ye properties and as of third quarter 2019, the properties were ~~nil as at December 31, 2017 and June 30, 2017.~~reclassified to investment property from assets held for sale.

8. INVESTMENTS

During the second quarter of fiscal year 2011, the Company entered into a ~~joint-venture~~joint venture agreement with JiaSheng to develop real estate projects in China. The Company invested RMB 10,000, or approximately $1,606 ~~based on the exchange rate as of March 31, 2014 published by the Monetary Authority of Singapore,~~ for a 10% interest in the newly formed joint venture, which was incorporated as a limited liability company, Chong Qing Jun Zhou Zhi Ye Co. Ltd. (the “joint venture”), in China. The agreement stipulated that the Company would nominate two of the five members of the Board of Directors of the joint venture and had the ability to assign two members of management to the joint venture. The agreement also stipulated that the Company would receive a fee of RMB 10,000, or approximately $1,606 ~~based on the exchange rate as of March 31, 2014 published by the Monetary Authority of Singapore,~~ for the services rendered in connection with ~~obtaining priority to bid~~bidding in certain real estate projects from the local government. Upon signing of the agreement, JiaSheng paid the Company RMB 5,000 in cash, or approximately ~~$803 based on the exchange rate published by the Monetary Authority of Singapore as of March 31, 2014.~~$803. The remaining RMB 5,000, which was not recorded as a receivable as the Company considered the collectability uncertain, would be paid over 72 months commencing in 36 months from the date of the agreement when the joint venture secured a property development project stated inside the joint venture agreement. The Company considered the RMB 5,000, or approximately $803 ~~based on the exchange rate as of March 31, 2014 published by the Monetary Authority of Singapore,~~ received in cash from JiaSheng, the controlling venturer in the joint venture, as a partial return of the Company’s initial investment, of RMB10,000, or approximately $1,606 based on the exchange rate as of March 31, 2014 published by the Monetary Authority of Singapore. Therefore, the RMB 5,000 received in cash was offset against the initial investment of RMB 10,000, resulting in a net investment of RMB 5,000 as of March 31, 2014. The Company further reduced its investments by RMB 137, or approximately $22, towards the losses from operations incurred by the ~~joint-venture,~~joint venture, resulting in a net investment of RMB 4,863, or approximately ~~$781~~$781. Transaction amounts in this paragraph were translated into US dollars based on the exchange ~~rates~~rate as of March 31, 2014 published by the Monetary Authority of ~~Singapore as of March 31, 2014.~~Singapore.

~~“Investments” in the real estate segment were the cost of an investment in a joint venture in which we had a 10% interest.~~ During the second quarter of fiscal year 2014, TTCQ ~~disposed~~decided to dispose of its 10% interest in the joint ~~venture. The joint~~ venture ~~had~~after TTCQ revalued certain monetary risks relating to ~~raise funds for~~ the development of the project. As a joint-venture partner, TTCQ was required to stand guarantee for the funds to be borrowed; considering the amount of borrowing, the risk involved was higher than the investment made and hence TTCQ decided to dispose of the 10% interest in the joint venture investment. On October 2, 2013, TTCQ entered into a share transfer agreement (the “Share Transfer Agreement”) with Zhu Shu. Based on the agreement, the purchase price was to be paid by (1) RMB 10,000 worth of commercial property in Chongqing China, or approximately $1,634 ~~based on exchange rates published by the Monetary Authority~~consisting of Singapore as of October 2, 2013, by non-monetary consideration and (2) the remaining RMB 8,000, or approximately $1,307 based on exchange rates published by the Monetary Authority of Singapore as of October 2, 2013, by cash consideration. The consideration consisted of (1) commercial units measuring 668 square meters to be delivered in June 2016, and (2) the remaining RMB 8,000, or approximately $1,307 by cash consideration to be paid in sixteen quarterly equal ~~installments~~instalments of ~~RMB500~~RMB 500 per quarter commencing from January 2014. Based on ASC Topic 845 Non-monetary Consideration, the Company deferred the recognition of the gain on disposal of the 10% interest in joint venture investment until such time that the consideration is paid, so that the gain can be ascertained. The recorded value of the disposed investment amounting to $783, based on exchange rates published by the Monetary Authority of Singapore as of June 30, 2014, is classified as “other assets” under non-current assets, because it is considered a down payment for the purchase of the commercial property in Chongqing. ~~TTCQ performed a valuation on a certain commercial unit and its market value was higher than the carrying amount.~~ The first three ~~installment amounts of~~instalments, amounting to RMB 500 each due in January 2014, April 2014 and July 2014, were all outstanding until the date of disposal of the investment in the joint venture. Out of the outstanding RMB 8,000, TTCQ ~~had~~ received RMB 100 during May 2014. Except as otherwise noted, transaction amounts in this paragraph were translated into US dollars based on the exchange rate as of October 2, 2013 published by the Monetary Authority of Singapore

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On October 14, 2014, TTCQ and Jun Zhou Zhi Ye entered into a memorandum of understanding. Based on the memorandum of understanding, both parties ~~have~~ agreed to register a sales and purchase agreement upon Jun Zhou Zhi Ye obtaining the license to sell the commercial property (the Singapore Themed Resort Project) located in Chongqing, China. The proposed agreement is for the sale of shop lots with a total area of 1,484.55 square meters as consideration for the outstanding amounts owed to TTCQ by Jun Zhou Zhi Ye as follows:

Long term loan receivable RMB 5,000, or approximately $814, as disclosed in Note 5, plus the interest receivable on long term loan receivable of RMB 1,250;

Commercial units measuring 668 square meters, as mentioned above; and

RMB 5,900 for the part of the unrecognized cash consideration of RMB 8,000 relating to the disposal of the joint venture.

~~-13-~~

The consideration does not include the remaining outstanding amount of RMB 2,000, or approximately $326, which will be paid to TTCQ in cash.

The shop lots are to be delivered to TTCQ upon completion of the construction of the shop lots in the Singapore Themed Resort Project. The initial targeted date of completion was December 31, 2016. Based on ~~subsequent~~ discussions with the ~~developer and the overall China market outlook,~~developers, the completion date is currently estimated to be December 31, ~~2019.~~2021.

The ~~share transfer~~Share Transfer Agreement (10% interest in the joint venture) was registered with the relevant authorities in China ~~as of end~~during October 2016.

9.INVESTMENT PROPERTIES

The following table presents the Company’s investment in properties in China as of ~~December~~March 31, ~~2017.~~2019. The exchange rate is based on the market rate as of ~~December~~March 31, ~~2017.~~2019.

	Investment Date	Investment Amount (RMB)	Investment Amount (U.S. Dollars)	Investment Date / Reclassification Date	Investment Amount (RMB)	Investment Amount (U.S. Dollars)
Purchase of rental property – Property I - MaoYe	Jan 04, 2008	5,554	894
Purchase of rental property – Property I – Mao Ye 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	Jan 06, 2010	3,600	580
Purchase of rental property – Property III - Fu Li	Apr 08, 2010	4,025	648	Apr 08, 2010	4,025	648
Currency translation		-	(95)		-	(93)
Gross investment in rental property		13,179	2,027		9,649	1,436
Accumulated depreciation on rental property	Dec 31, 2017	(5,266)	(810)	Mar 31, 2019	(5,879)	(875)
Reclassified as “Assets held for sale”				July 01, 2018	2,822	410
Reclassification from “Assets held for sale”				Mar 31, 2019	(1,029)	(143)
					(4,086)	(608)
Net investment in property – China		7,913	1,217		5,563	828

The following table presents the Company’s investment in properties in China as of June 30, ~~2017.~~2018. The exchange rate is based on the market rate as of June 30, ~~2017.~~2018.

	Investment Date	Investment Amount (RMB)	Investment Amount (U.S. Dollars)	Investment Date	Investment Amount (RMB)	Investment Amount (U.S. Dollars)
Purchase of rental property – Property I - MaoYe	Jan 04, 2008	5,554	894
Purchase of rental property – Property I - Mao Ye Property				Jan 04, 2008	5,554	894
Purchase of rental property – Property II - JiangHuai	Jan 06, 2010	3,600	580	Jan 06, 2010	3,600	580
Purchase of rental property – Property III - Fu Li	Apr 08, 2010	4,025	648	Apr 08, 2010	4,025	648
Currency translation		-	(178)		-	(131)
Gross investment in rental property		13,179	1,944		13,179	1,991
Accumulated depreciation on rental property	June 30, 2017	(4,937)	(728)	June 30, 2018	(5,596)	(845)
Net investment in property – China		8,242	1,216		7,583	1,146

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The following table presents the Company’s investment properties in Malaysia as of ~~December~~March 31, ~~2017~~2019 and June 30, ~~2017.~~2018. The exchange rate is based on the exchange rate as of June 30, 2015 published by the Monetary Authority of Singapore.

Investment Date

Investment
Amount (RM)

Investment Amount
(U.S. Dollars)

Reclassification of Penang Property I Dec 31, 2012
  681
  181
Gross investment in rental property
  681
  181



Accumulated depreciation on rental property June 30, 2015
  (310)
  (83)
Reclassified as “Assets held for sale” June 30, 2015
  (371)
  (98)
Net investment in rental property - Malaysia
  -
  -

~~-14-~~

	Investment Date	Investment Amount	Investment Amount
		(RM)	(U.S. Dollars)
Purchase of Penang Property	Dec 31, 2012	681	181
Currency translation		-	(16)
Reclassification as “Assets held for sale”	June 30, 2015	(681)	(165)
		-	-
Accumulated depreciation on rental property	June 30, 2015	(310)	(83)
Currency translation		-	7
Reclassified as “Assets held for sale”	June 30, 2015	(310)	(76)
Net investment in rental property - Malaysia		-	-

Rental Property I –- Mao Ye Property

In fiscal 2008, TTCQ purchased an office in Chongqing, China from ~~MaoYe~~Mao Ye Property Ltd. (“~~MaoYe”~~Mao Ye”), for a total cash purchase price of RMB 5,554, or approximately $894. TTCQ identified a new tenant and signed a new rental agreement (653 square meters at a monthly ~~rental~~rent of RMB 39, or approximately $6) on August 1, ~~2015. This rental agreement provides for a rent increase of 5% every year on January 31, commencing with 2017 until the rental agreement~~2015 which expires on July 31, 2020. TTCQ signed a new rental agreement (451 square meters at a monthly ~~rental~~rent of RMB ~~27,~~24, or approximately $4) on ~~January 29, 2016. This rental agreement provides for a rent increase of 5% every year~~February 1, 2018 which expires on January ~~29, commencing with 2017 until~~31, 2021.

During the ~~rental agreement expires~~first quarter of 2019, management decided to sell Mao Ye Property, which is one of our earlier investment properties. In order to monetize the capital gain on ~~February 28, 2019.~~property, TTCQ appointed a sole agent for 6 months as of September 1, 2018 to search for suitable buyers for this property. The Company has completed the sale of thirteen of the fifteen units constituting the Mao Ye Property as the end of third quarter 2019 which contributed the gain of $685. During the third quarter 2019, considering the current market conditions in China, management has decided not to sell the remaining two units of Mao Ye properties and as of third quarter 2019, the properties were reclassified to investment property from assets held for sale.

Property purchased from ~~MaoYe~~Mao Ye generated a rental income of ~~$26~~$15 and ~~$53 for~~$58 during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, and ~~$26~~$22 and ~~$52~~$75 for the same periods in ~~the~~ last fiscal ~~year, respectively.~~year.

Rental Property II - JiangHuai

In fiscal year 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. ~~TTCQ~~Although these units were rented in the past, all ~~of these commercial units to a third party until the agreement expired in January 2012. TTCQ then rented three of the~~ eight ~~commercial units to another party during the fourth quarter of fiscal year 2013 under a rental agreement that expired on March 31, 2014. Currently all the~~ units are currently vacant and TTCQ is working with the developer to find a suitable buyer to purchase all the commercial units. TTCQ has yet to receive the title deed for these properties; however, TTCQ has the vacancies in possession with the exception of two units, which are in the process of clarification. TTCQ is in the legal process to obtain the title deed, which is dependent on JiangHuai completing the entire project. ~~In August 2016, TTCQ performed a valuation on one of the commercial units and its market value was higher than the carrying amount.~~

Property purchased from JiangHuai did not generate any rental income during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017 and for~~2019 or during the same ~~periods~~period in the ~~last~~prior fiscal year.

~~Other Properties~~Rental Property III – ~~Fu Li~~FuLi

In fiscal 2010, TTCQ entered into a Memorandum of Agreement with Chongqing FuLi Real Estate Development Co. Ltd. (“FuLi”) to purchase two commercial properties ~~totaling~~totalling 311.99 square meters (“office space”) located in Jiang Bei District Chongqing. Although TTCQ currently rents its office premises from a third party, it intends to use the office space as its office premises. The total purchase price committed and paid was RMB 4,025, or approximately ~~$649.~~$648. The development was completed and the property was handed over ~~during~~in April 2013 and the title deed was received during the third quarter of fiscal 2014.

The two commercial properties were leased to third parties under two separate rental ~~agreements, one~~agreements. One of ~~which will expire in April 2019 which~~such leases provides for a rent increase of 5% every year on May 1, commencing ~~with~~in 2017 until the rental agreement expires on April 30, 2019. The rental agreement of this lease has been extended for 3 years, commencing from May 01, 2019 ~~and~~to Apr 30, 2021 with a term of rent increase of 6% every year.

For the other ~~of which will expire in~~lease expired on March 31, 2018, ~~which provides for~~TTCQ identified a ~~rent increase of 5% every year on April 1, commencing with 2016 until the~~new tenant and signed a new rental agreement ~~will expire~~(161 square meters at a monthly rent of RMB 62, or approximately $9) on ~~March~~November 1, 2018 which expires on October 31, ~~2018.~~2019.

Properties purchased from Fu Li generated a rental income of ~~$11~~$10 and $23 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, while it generated a rental income of ~~$13~~$12 and ~~$26, respectively,~~$35 for the same periods in the last fiscal year.

~~Penang Property I~~

During the fourth quarter of 2015, TTM planned to sell its factory building in Penang, Malaysia. In accordance to ASC Topic 360, the property was reclassified from investment property, which had a net book value of RM 371, or approximately $98, to assets held for sale since there was an intention to sell the factory building. In May 2015, TTM was approached by a potential buyer to purchase the factory building. On September 14, 2015, application to sell the property was rejected by Penang Development Corporation (‘PDC’). The rejection was based on the business activity of the purchaser not suitable to the industry that is being promoted on the said property. PDC made an offer to purchase the property, which was not at the expected value and the offer expired on March 28, 2016. However, management is still actively looking for a suitable buyer. As of December 31, 2017 the net book value was RM 369, or approximately $91.

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Summary

Total rental income for all investment properties in China was ~~$37~~$25 and ~~$76~~$81 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, and ~~was $39~~were $34 and ~~$78, respectively,~~$110 for the same periods in the last fiscal year.

Depreciation expenses for all investment properties in China were ~~$24~~ $14 and ~~$49~~$42 and for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, and were ~~$24~~$25 and ~~$47, respectively,~~$74 for the same periods in the last fiscal ~~year~~.year.

10. OTHER ASSETS

Other assets consisted of the following:

	Dec. 31, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018
Down payment for purchase of investment properties	$1,645		$1,645
Down payment for purchase of property, plant and equipment	219	280	71	561
Deposits for rental and utilities	140	139	140
Currency translation effect	(54)	(142)	(128)	(97)
Total	$1,950	$1,922	$1,728	$2,249

11. LINES OF CREDIT

~~The carrying~~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~~.maturities.

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

As of ~~December~~March 31, ~~2017,~~2019, the Company had certain lines of credit that are collateralized by restricted deposits.

Entity with	Type of	Interest	Expiration	Credit	Unused	Type of	Interest	Expiration	Credit	Unused
Facility	Facility	Rate	Date	Limitation	Credit	Facility	Rate	Date	Limitation	Credit
Trio-Tech International Pte. Ltd., Singapore	Lines of Credit	Ranging from 1.6% to 5.5%	-	$4,636	$3,368	Lines of Credit	Ranging from 1.83% to 5.5%	-	$4,206	$4,072
Trio-Tech (Malaysia) Sdn. Bhd.	Lines of Credit	Ranging from 6.3% to 6.7%	-	$776	$776
Trio-Tech (Tianjin) Co., Ltd.	Lines of Credit	Ranging from 4.9% to 6.3%	-	$923	$2	Lines of Credit	5.22% to 6.3%	-	$1,490	$1,250
Universal (Far East) Pte. Ltd.						Lines of Credit	Ranging from 1.83% to 5.5%	-	$369	$121

As of June 30, ~~2017,~~2018, the Company had certain lines of credit that are collateralized by restricted deposits.

Entity with	Type of	Interest	Expiration	Credit	Unused	Type of	Interest	Expiration	Credit	Unused
Facility	Facility	Rate	Date	Limitation	Credit	Facility	Rate	Date	Limitation	Credit
Trio-Tech International Pte. Ltd., Singapore	Lines of Credit	Ranging from 3.96% to 7.5%	-	$4,496	$2,815	Lines of Credit	Ranging from 1.6% to 5.5%	-	$4,183	$3,325
Trio-Tech (Malaysia) Sdn. Bhd.	Lines of Credit	Ranging from 6.3% to 6.7%	-	$734	$734
Trio-Tech (Tianjin) Co., Ltd.	Lines of Credit	5.22%	-	$885	$10	Lines of Credit	5.22%	-	$1,511	$437
Universal (Far East) Pte. Ltd.						Lines of Credit	Ranging from 1.6% to 5.5%	-	$367	$256

Trio-Tech International Pte. Ltd. signed an agreement with a bank to sub-allocate a portion of the facility thereunder to Universal (Far East) Pte. Ltd. for an Accounts Payable Financing facility for Singapore Dollar of 500, or approximately $369. Interest charged ranges between 1.83% and 5.5%. The financing facility was set up to facilitate the working capital in our operations in Singapore. The Company started to use this facility in fiscal year 2018.

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12. ACCRUED EXPENSES

Accrued expenses consisted of the following:

	Dec. 31, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018
Payroll and related costs	$1,554	$1,568	$1,129	$1,545
Commissions	143	107	135	89
Customer deposits	481	218	1,117	17
Legal and audit	298	283	300	265
Sales tax	129	80	16	17
Utilities	95	142	117	130
Warranty	52	49	47	82
Accrued purchase of materials	352	33
Accrued purchase of materials and property, plant and equipment			355	454
Provision for re-instatement	289	295	302	289
Other accrued expenses	476	319	363	203
Currency translation effect	116	(51)	1	81
Total	$3,985	$3,043	$3,882	$3,172

13. 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 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, 2017 (Unaudited)	June 30, 2017	Mar. 31, 2019 (Unaudited)	June 30, 2018
Beginning	$48	$76	$82	$48
Additions charged to cost and expenses	19	46	11	64
Utilization/reversal	(15)	(73)
Reversal			(46)	(30)
Currency translation effect	1	(1)	-	-
Ending	$53	$48	$47	$82

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14. BANK LOANS PAYABLE

Bank loans payable consisted of the following:

Dec. 31, 2017
(Unaudited)

June 30, 2017

Note payable denominated in RM for expansion plans in Malaysia, maturing in August 2024, bearing interest at the bank’s prime rate less 1.50% (5.25% and 5.25% at December 31, 2017 and June 30, 2017) per annum, with monthly payments of principal plus interest through August 2024, collateralized by the acquired building with a carrying value of $2,800 and 2,671, as at December 31, 2017 and June 30, 2017, respectively.
  1,518
  1,735



Note payable denominated in U.S. dollars for expansion plans in Singapore and its subsidiaries, maturing in April 2020, bearing interest at the bank’s lending rate (3.96% and 3.96% for December 31, 2017 and June 30, 2017) with monthly payments of principal plus interest through June 2020. This note payable is secured by plant and equipment with a carrying value of $215 and $224, as at December 31, 2017 and June 30, 2017, respectively.
  363
  196



      Total bank loans payable
$1,881
$1,931

	Mar. 31, 2019 (Unaudited)	June 30, 2018
Note payable denominated in RM for expansion plans in Malaysia, maturing in August 2028, bearing interest at the bank’s prime rate less 1.50% (5.00% at March 31, 2019 and June 30, 2018) per annum, with monthly payments of principal plus interest through August 2028, collateralized by the acquired building with a carrying value of $2,727 and $2,809, as at March 31, 2019 and June 30, 2018, respectively.	2,779	1,615

Note payable denominated in U.S. dollars for expansion plans in Singapore and its subsidiaries, maturing in April 2020, bearing interest at the bank’s lending rate (3.96% for March 31, 2019 and June 30, 2018) with monthly payments of principal plus interest through June 2020. This note payable is secured by plant and equipment with a carrying value of $158 and $187, as at March 31, 2019 and June 30, 2018, respectively.	180	293

Currency translation effect on bank loan payable	(25)	(104)

Total bank loans payable	$2,934	$1,804

Current portion of bank loans payable
  346
  271
Currency translation effect on current portion of bank loans
  10
  (11)
                              Current portion of bank loans payable
  356
  260
Long term portion of bank loans payable
  1,535
  1,660
Currency translation effect on long-term portion of bank loans
  82
  (108)
                           Long term portion of bank loans payable
$1,617
$1,552

~~-17-~~

Current portion of bank loan payable	495	380
Currency translation effect on current portion of bank loan	(3)	(13)
Current portion of bank loan payable	492	367
Long term portion of bank loan payable	2,465	1,528
Currency translation effect on long-term portion of bank loan	(23)	(91)
Long term portion of bank loans payable	$2,442	$1,437

Future minimum payments (excluding interest) as at ~~December~~March 31, ~~2017(unaudited)~~2019 were as follows:

2019	$492
2020	383
2021	375
2022	394
2023	205
Thereafter	1,085
Total obligations and commitments	$2,934

2018
$356
2019
  373
2020
  298
2021
  244
2022
  127
Thereafter
  575
Total obligations and commitments
$1,973

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Future minimum payments (excluding interest) as at June 30, ~~2017~~2018 were as follows:

2018	$260
2019	273	$367
2020	274	372
2021	225	242
2022	236	254
2023		267
Thereafter	544	302
Total obligations and commitments	$1,812	$1,804

15. COMMITMENTS AND CONTINGENCIES

~~TTM~~ Trio-Tech (Malaysia) Sdn. Bhd. has capital commitments for the purchase of equipment and other related infrastructure costs amounting to RM ~~409,~~315, or approximately ~~$101,~~$77, based on the exchange rate as at ~~December~~March 31, ~~2017 published by the Monetary Authority of Singapore,~~2019, as compared to the capital commitment as at June 30, ~~2017~~2018 amounting to RM ~~684,~~62, or approximately ~~$159.~~$16.

Trio-Tech (Tianjin) Co., Ltd. in China has capital commitments for the purchase of equipment and other related infrastructure costs amounting to RMB ~~5,174,~~265, or approximately ~~$796,~~$40, based on the exchange rate as ~~on December~~at March 31, ~~2017 published by the Monetary Authority of Singapore,~~2019, as compared to the capital commitment as at June 30, ~~2017~~2018 amounting to RMB ~~1,260,~~3,927, or approximately ~~$186.~~$593.

Trio-Tech (SIP) Co., Ltd. in China has capital commitments for the purchase of equipment and other related infrastructure costs amounting to RMB 632, or approximately $94, based on the exchange rate as at March 31, 2019 as compared to the capital commitment as at June 30, 2018 amounting to RMB 6,084, or approximately $919.

Deposits with banks in China are not insured by the local government or agency, and are consequently exposed to risk of loss. The Company believes the probability of a 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 financial statements.

16. BUSINESS SEGMENTS

In fiscal year ~~2018,~~2019, the Company operates in four segments; the testing service industry (which performs structural and electronic tests of semiconductor devices), the designing and manufacturing of equipment (which equipment tests the structural integrity of integrated circuits and other products), distribution of various products from other manufacturers in Singapore and Southeast Asia, and the real estate segment in China.

The revenue allocated to individual countries was based on where the customers were located. The allocation of the cost of equipment, the current year investment in new equipment and depreciation expense have been made based on ~~the basis of~~ the primary purpose for which the equipment was acquired.

All inter-segment revenue was from the manufacturing segment to the testing and distribution segments. Total inter-segment revenue was ~~$587~~$15 and ~~$681~~$416 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, respectively,~~2019, as compared to ~~$20~~$587 and ~~$302, respectively,~~$681 for the same periods in the last fiscal year. Corporate assets mainly consisted of cash and prepaid expenses. Corporate expenses mainly consisted of stock option expenses, salaries, insurance, professional expenses and directors' fees. Corporate expenses are allocated to the four segments. The following segment information table includes segment operating income or loss after including the corporate expenses allocated to the segments, which gets eliminated in the consolidation.

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The following segment information is un-audited for the three and nine months ended March 31, 2019 and March 31, 2018:

	Business Segment Information: Nine months		Operating		Depr.
	Ended	Net	Income /	Total	and	Capital
	Mar. 31	Revenue	(Loss)	Assets	Amort.	Expenditures

Manufacturing	2019	$10,086	$175	$9,205	$88	$40
	2018	$11,862	$188	$7,035	$86	$63

Testing Services	2019	12,819	(134)	22,842	1,647	2,535
	2018	14,454	1,281	24,790	1,432	1,987

Distribution	2019	5,587	492	780	-	-
	2018	5,175	337	631	-	-

Real Estate	2019	81	(30)	3,914	42	-
	2018	110	(38)	3,732	76	-

Fabrication *	2019	-	-	26	-	-
Services	2018	-	-	28	-	-

Corporate &	2019	-	(30)	233	-	-
Unallocated	2018	-	(289)	172	-	-

Total	2019	$28,573	$473	$37,000	$1,777	$2,575
	2018	$31,601	$1,479	$36,388	$1,594	$2,050

The following segment information is unaudited for the period referenced below:

~~Business Segment Information:~~

Six months Ended Dec. 31

Net Revenue

Operating Income / (Loss)

Total Assets

Depr. and Amort.

Capital Expenditures

Manufacturing

2017

$8,738
$293
$8,837
$56
$37

2016
$6,991
$(322)
$8,114
$99
$78








Testing Services

2017
  9,541
  853
  23,591
  913
  1,558

2016
  8,227
  790
  18,325
  765
  686








Distribution

2017
  3,142
  220
  621
  -
  -

2016
  2,779
  134
  651
  2
  -








Real Estate

2017
  76
  (19)
  3,624
  50
  -

2016
  78
  (6)
  3,147
  50
  -








Fabrication *

2017
  -
  -
  28
  -
  -

Services

2016
  -
  -
  29
  -
  -








Corporate &

2017
  -
  (102)
  88
  -
  -

Unallocated

2016
  -
  59
  430
  -
  -








Total

2017
$21,497
$1,245
$36,789
$1,019
$1,595

2016
$18,075
$655
$30,696
$916
$764

~~The following segment information is unaudited for the period referenced below:~~

~~Business Segment Information:~~

							Business Segment Information: Three months		Operating		Depr.
							Ended	Net	Income /	Total	and	Capital
	Three months Ended Dec. 31	Net Revenue	Operating Income / (Loss)	Total Assets	Depr. and Amort.	Capital Expenditures	Mar. 31	Revenue	(Loss)	Assets	Amort.	Expenditures

Manufacturing	2017	$3,973	$107	$8,837	$28	$2	2019	$3,097	$(8)	$9,205	$30	$39
	2016	$3,320	$(229)	$8,114	$49	$67	2018	$3,124	$(105)	$7,035	$30	$26

Testing Services	2017	4,936	517	23,591	466	976	2019	3,989	(17)	22,842	588	239
	2016	4,070	388	18,325	377	336	2018	4,913	428	24,790	519	429

Distribution	2017	1,606	119	621	-		2019	1,727	150	780	-
	2016	1,675	100	651	1	-	2018	2,033	117	631	-

Real Estate	2017	37	(9)	3,624	25	-	2019	25	(13)	3,914	14	-
	2016	39	(8)	3,147	25	-	2018	34	(18)	3,732	26	-

Fabrication *	2017	-		28	-		2019	-		26	-
Services	2016	-		29	-		2018	-		28	-

Corporate &	2017	-	(36)	88	-		2019	-	11	233	-
Unallocated	2016	-	27	430	-		2018	-	(188)	172	-

Total	2017	$10,552	$698	$36,789	$519	$1,066	2019	$8,838	$123	$37,000	$632	$278
	2016	$9,104	$278	$30,696	$452	$403	2018	$10,104	$234	$36,388	$575	$455

* Fabrication services is a discontinued ~~operation (Note 19).~~operation.

~~-19-~~-18-

Table of Contents

17. OTHER INCOME, NET

Other income / (expenses) consisted of the following:

	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
	Dec. 31,				Mar. 31,
	2017	2016	2017	2016	2019	2018	2019	2018
	(Unaudited)				Unaudited
Interest income	12	8	20	12	31	19	67	39
Other rental income	27	25	53	50	28		84	81
Exchange (loss) / gain	(25)	120	(31)	182
Exchange loss					(11)	(5)	(78)	(27)
Bad debt recovery					-		2	-
Other miscellaneous income	28	50	158	69	80	69	145	218
Total	$42	$203	$200	$313	$128	$111	$220	$311

-19-

Table of Contents

18. INCOME TAX

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. The statute of limitations, in general, is open for years ~~2004~~2014 to 2017 for tax authorities in those jurisdictions to audit or examine income tax returns. The Company is under annual review by the tax authorities of the respective jurisdiction to which the subsidiaries belong.

The U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, ~~2017, and permanently reduces~~2017. The Tax Act, among other things reduced the U.S. federal corporate tax rate from ~~35%~~35.0% to ~~21%~~21.0%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and ~~limits~~limited the deduction of interest expense for certain companies. The Tax Act is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on ~~low-tax~~low tax foreign earnings, and new measures to curtail base erosion and promote U.S. production.

As the Company has a June 30 fiscal ~~year-end,~~year end, the lower corporate income tax rate will be phased in, resulting in a lower USU.S. statutory federal rate. In accordance with Section 15 of the Internal Revenue Code, the Company applied a blended U.S. statutory federal income tax rate of 27.5% for the year ended June 30, 2018. Accounting Standard Codification (“ASC”) 740 requires filers to record the effect of tax law changes in the period enacted. During fiscal year 2018, the Company recognized income tax expenses of $900 related to the one-time deemed repatriation. No expenses have been recognized related to the deferred tax re-measurement and minimum tax on low tax foreign earnings. However, ~~the~~ SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), that permits filers who may not have the necessary information available, prepared, or analyzed (including computations) for certain income tax effects of the Act in order to ~~record~~determine a reasonable estimate to be recorded as provisional amounts during a measurement period ending no later than one year from the date of enactment. ~~We have~~

Certain material provisions affecting the Company is provided below.

One-Time Mandatory Repatriation

One of the effects of the Tax Act is to transition from a world-wide to a territorial tax system. The Tax Act requires a mandatory one-time repatriation of certain post-1986 earnings and profits that were deferred from U.S. taxation by the Company’s foreign subsidiaries. The basis of the tax is on cash held and specified assets which are taxed at 15.5% and 8%, respectively. The Company has elected to pay the repatriation tax over an 8-year period.

The Company recorded an estimated $900 charge in fiscal 2018 related to the ~~net impact~~one-time transition tax on the ~~2018~~deemed repatriation of deferred foreign income, which was included in the provision for income taxes on our consolidated income statements and income taxes on our consolidated balance sheets, based on existing tax laws and the best information available as of the date of estimate.

As of second quarter of fiscal year 2019, the initial estimate for the one-time transition tax was adjusted to reflect final computation using all available data and tax legislation published post estimate. In the second quarter of fiscal 2019 upon finalization of our accounting analysis, we reversed $145 from the provision of income tax thus reducing the tax liability related to the one-time transition tax to $755. That adjustment materially impacts our provision for income taxes and effective tax ~~rate and tax expense~~rate. The significant change is ~~not material~~ due to ~~our existing net operating loss carryforwards~~the update of information from additional analysis performed on foreign tax pools and ~~other~~earnings and profits computations where the information is only available post-estimate. As at March 31, 2019, the U.S. Treasury Department and the Internal Revenue Services are still in the process of issuing various regulations related to the Tax Act. The transition tax ~~credits. We have not made any provisional adjustments~~may change in the future due to changes in tax law as ~~a result~~enacted by the U.S. Government, new guidance from federal and state regulators and related interpretations of the Tax Act.

~~The~~Minimum Tax ~~Act includes a one-time mandatory repatriation transition tax~~ on certain net accumulated earnings and profits of our foreign subsidiaries. We are still in the process of analyzing the earnings and profits and tax pools of our foreign subsidiaries to reasonably estimate the effects of the one-time transition tax and, therefore, have not recorded a provisional impact. The tax expense impact of the one-time transition tax to be determined may be partially or fully offset by a release of valuation allowance for the utilization of existing net operating losses and tax credits that may reduce the amount of related taxes payable. We expect the accounting for this aspect of theLow Tax ~~Act to be complete by the end of fiscal 2018.~~Foreign Earnings

The Tax Act implemented the inclusion in gross income for the Global Intangible Low-Tax Income (GILTI) for any taxable year beginning on or after January 1, 2018. This provision significantly expands current taxation of foreign subsidiary corporate earnings. The Company ~~had no material adjustments~~must generally include in current income all earnings of the foreign subsidiaries in excess of the assumed deemed return on tangible assets of the foreign subsidiaries. The Company has elected to ~~its liabilities~~provide for ~~unrecognized~~the minimum tax as future income tax ~~benefits according~~expense as a period expense. The Company recorded $19 of income tax expense related to GILTI for the ~~provisions~~nine months ended March 31, 2019.

-20-

Table of ~~ASC Topic 740 Income Tax.~~Contents

Deferred Tax Re-Measurement

The re-measurement is based on the expected reversals of the deferred taxes at the estimated U.S. federal tax rates of 28.0% for the current fiscal year and 21.0% for future fiscal years. As the Company ~~had an~~established a full valuation allowance on the U.S. deferred tax assets, the Company has not recognized any income tax ~~expense of $13 and $55~~effects for the ~~three and six months ended December 31, 2017, respectively, as compared to~~deferred tax re-measurement under the Tax Act. The Company’s accounting for any possible income tax ~~expense of $67 and $150, respectively,~~effects for the same periods in the last fiscal year. The decrease in income tax expenses was mainly due to higher incomes generated by the subsidiaries which has carry forward tax losses which was partially offset by increase in deferred tax ~~for timing differences recorded by Singapore and Malaysia operation. The income tax expenses included with-holding tax held by related companies that were~~re-measurement will be completed during the measurement period, which should not ~~recoverable~~extend beyond one year from the ~~Inland Revenue Board in Singapore.~~enactment date.

The Company accrues penalties and interest related to unrecognized tax benefits when necessary as a component of penalties and interest expenses, respectively. The Company had not accrued any penalties or interest expenses relating to unrecognized benefits ~~at December~~as of March 31, ~~2017 and June 30, 2017.~~

~~-20-~~

2019.

19. ~~DISCONTINUED OPERATION AND CORRESPONDING RESTRUCTURING PLAN~~REVENUE

The Company generates revenue primarily from 3 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.

Significant Judgments

The Company’s ~~Indonesia operation~~arrangements with its customers include various combinations of products and ~~the Indonesia operation’s immediate holding company,~~services, which ~~comprise the fabrication services segment, suffered continued operating losses~~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 fiscal year 2010 to 2014, and the cash flow was minimal from fiscal year 2009 to 2014. The Company established a restructuring plan to close the fabrication services operation, and in accordance with ASC Topic 205, Presentation of Financial Statement Discontinued Operations (“ASC Topic 205”), from fiscal year 2015 onwards, the Company presented the operation results from fabrication services as a discontinued operation as the Company believed that no continued cash flow would be generated by the discontinued component and that the Company would have no significant continuing involvementother deliverables in the ~~operations of~~arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the ~~discontinued component.~~

In accordance with the restructuring plan, the Company’s Indonesia operation is negotiating with its suppliers to settle the outstanding balance of accounts payable of $57 and has no collection for accounts receivable. The Company’s fabrication operation in Batam, Indonesia is in the process of winding up the operations. Management has assessed the costs and expenses to be immaterial, thus no accrual has been made.

~~The discontinued operations in Indonesia did not incur general and administrative expenses for both three and six months ended December 31, 2017 and 2016.~~ The Company anticipates that it may incur additional costs and expenses when the winding up of the business of the subsidiary through which the facilities operated takes place. Management has assessed the costs and expenses to be immaterial, thus no accrual has been made.

~~Loss from discontinued operations was as follows:~~

Three Months Ended

Six Months Ended

Dec. 31, 2017

Dec. 31, 2016

Dec. 31, 2017

Dec. 31, 2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Revenue
$-
$-
$-
$-
Cost of sales
  -
  -
  -
  -
Gross margin
  -
  -
  -
  -





Operating expenses:




  General and administrative
  -
  1
  -
  -
      Total
  -
  1
  -
  -





Other expenses
  (2)
  (3)
  (5)
  (3)





Loss from discontinued operations
  (2)
  (4)
  (5)
  (3)





Less: Loss attributable to Non-controlling interest
  (3)
  (2)
  (1)
  (3)





Loss from discontinued operations
$(5)
$(6)
$(6)
$(6)
customer.

The Company ~~does~~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 ~~provide~~probable in subsequent periods. The Company’s products and services are generally not sold with a ~~separate cash flow statement for~~right of return, nor has the ~~discontinued operation,~~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 ~~impact~~Company has satisfied its performance obligation by transferring control of the ~~discontinued operation was immaterial.~~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 of the required acceptance criteria, and when the installation of the system is deemed perfunctory).

-21-

Table of Contents

Not all of the 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 to install product is deferred and recognized upon acceptance.

The majority of sales under the Manufacturing segment include a standard 12-month warranty. The Company has concluded that the warranty provided for standard products are assurance type warranties and are not separate performance obligations. 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.

Testing

The Company rendered 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. Standalone Selling price 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 included warranty, late delivery penalty and reimbursement to solve non-conformance 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 particularly equipment, industrial products and components by manufacturers mainly from the U.S., Europe, Taiwan and Japan. 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 the 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.

Method and Impact of Adoption

Effective as of July 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and its related amendments using the modified retrospective transition method. This method was applied to contracts that were not complete as of the date of adoption. Under the modified retrospective transition approach, periods prior to the adoption date were not adjusted and continue to be reported in accordance with ASC 605.

An assessment was made on the impact of all existing arrangements as at the date of adoption, under ASC 606, to identify the cumulative effect of applying ASC 606 on the beginning retained earnings. The Company quantified the impact of the adoption on its financial position, results of operations and cash flow. The impact amounted to 0.06% of fiscal 2018 revenue or $28, which is immaterial to the Company. Hence, based on materiality principle, the Company concluded that the cumulative adjustment is not required to be made to the Company’s Beginning Retained Earnings.

The impact is primarily driven by the changes related to the accounting of standard warranty. Prior to adoption of ASC 606, the Company accounted for the estimated warranty cost as a charge to costs of sales when revenue was recognized. Upon adoption of ASC 606, the standard warranty for customized products is recognized as a separate performance obligation.

The Company has completed its adoption and implemented policies, processes and controls to support the standard’s measurement and disclosure requirements. The Company recognizes net product revenue when it satisfies the obligations as evidenced by the transfer of control of its products and services to customers. The guidance did not have material impact on the Company’s consolidated financial results.

Contract Balances

The timing of revenue recognition, billings and cash collections may result in accounts receivable, contract assets, and contract liabilities (deferred revenue) on the Company’s condensed consolidated balance sheet. A receivable is recorded in the period the Company delivers products or provides services when the Company has an unconditional right to payment.

Contract assets primarily relate to the value of products and services transferred to the customer for which the right to payment is not just dependent on the passage of time. Contract assets are transferred to receivable when rights to payment become unconditional.

-22-

Table of Contents

A contract liability is recognized when the Company receives payment or has an unconditional right to payment in advance of the satisfaction of performance. The contract liabilities represent (1) Deferred product revenue related to the value of products that have been shipped and billed to customers and for which the control has not been transferred to the customers, and (2) Deferred service revenue, which is recorded when the Company receives consideration, or such consideration is unconditionally due, from a customer prior to transferring services to the customer under the terms of a sales contract. Deferred service revenue typically results from warranty services, and maintenance and other service contracts.

As of July 1, 2018, deferred income amounting to $260 was reclassified from other receivables to contract assets and customer deposits amounting to $31 was reclassified from accrued expenses to contract liabilities in order to establish the new opening balance for contract assets and 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.

Contract assets were recorded under other receivable while contract liabilities were recorded under accrued expenses in the balance sheet.

The following table is the reconciliation of contract balances.

	Mar 31, 2019 (Unaudited) $	July 1, 2018 (Unaudited) $
Trade Accounts Receivable	7,120	7,747
Trade Accounts Payable	3,021	3,704
Contract Assets	357	260
Contract Liabilities	1,077	31

Remaining Performance Obligation

The remaining performance obligation (RPO) disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the company expects to recognize these amounts in revenue. It is intended to be a statement of overall work under contract that has not yet been performed and does not include contracts in which the customer is not committed. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty. The disclosure includes estimates of variable consideration,except when the variable consideration is a sale based or usage-based royalty promised in exchange for a license of intellectual property. Additionally, as a practical expedient, the Company does not include contracts that have an original duration of one year or less. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, and adjustment for revenue that has not materialized and adjustments for currency.

As at March 31, 2019, the aggregate amount of the transaction price allocated to RPO related to customer contracts that are unsatisfied or partially unsatisfied was $1,061. Given the profile of contract terms, approximately 23.5% percent of this amount is expected to be recognized as revenue over the next two years, approximately 76.5% percent between three and five years and the balance thereafter.

Practical Expedients

The Company applies the following practical expedients:

●

The Company accounts for shipping and handling costs as activities to fulfil the promise to transfer the goods, instead of a promised service to its customer.

●

The Company has not elected to adjust the promised amount of consideration for the effects of a significant financing component as the Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will generally be one year or less.

●

The Company has elected to adopt the practical expedient for contract costs, specifically in relation to incremental costs of obtaining a contract.

Costs to obtain a contract are not material, and the Company generally expenses such costs as incurred because the amortization period is one year or less.

-23-

Table of Contents

20. EARNINGS PER SHARE

The Company adopted ASC Topic 260, Earnings Per Share. Basic ~~earnings per share~~Earnings Per Share (“EPS”) ~~are~~is computed by dividing net income available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS give effect to all dilutive potential common shares outstanding during a period. In computing diluted EPS, the average price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

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

Three Months Ended

Six Months Ended

Dec. 31,

Dec. 31,

Dec. 31,

Dec. 31,

2017

2016

2017

2016

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Income attributable to Trio-Tech International common shareholders from continuing operations, net of tax
$678
$316
$1,254
$619
(Loss) / income attributable to Trio-Tech International common shareholders from discontinued operations, net of tax
  (5)
  (6)
  (6)
  (6)
Net Income Attributable to Trio-Tech International Common Shareholders
$673
$310
$1,248
$613





Weighted average number of common shares outstanding - basic
  3,548
  3,513
  3,548
  3,513





Dilutive effect of stock options
  245
  56
  222
  39
Number of shares used to compute earnings per share - diluted
  3,793
  3,569
  3,770
  3,552





Basic earnings per share from continuing operations attributable to Trio-Tech International
$0.19
  0.09
  0.35
  0.18
Basic earnings per share from discontinued operations attributable to Trio-Tech International
  -
  -
  -
  -
Basic earnings per share from net income attributable to Trio-Tech International
$0.19
$0.09
$0.35
$0.18





Diluted earnings per share from continuing operations attributable to Trio-Tech International
$0.18
  0.09
  0.34
  0.17
Diluted earnings per share from discontinued operations attributable to Trio-Tech International
  -
  -
  -
  -
Diluted earnings per share from net income attributable to Trio-Tech International
$0.18
$0.09
$0.34
$0.17

~~-22-~~

	Three Months Ended		Nine Months Ended
	Mar. 31,	Mar. 31,	Mar. 31,	Mar. 31,
	2019	2018	2019	2018
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Income attributable to Trio-Tech International common shareholders from continuing operations, net of tax	$682	$(736)	$1,097	$520
Income / (loss) attributable to Trio-Tech International common shareholders from discontinued operations, net of tax	1	(3)	(1)	(11)
Net Income Attributable to Trio-Tech International Common Shareholders	$683	$739	$1,096	$509

Weighted average number of common shares outstanding - basic	3,673	3,553	3,673	3,553

Dilutive effect of stock options	12	219	73	225
Number of shares used to compute earnings per share - diluted	3,685	3,772	3,746	3,778

Basic earnings per share from continuing operations attributable to Trio-Tech International	$0.19	(0.21)	0.30	0.15
Basic earnings per share from discontinued operations attributable to Trio-Tech International	-	-	-	-
Basic Earnings Per Share from Net Income Attributable to Trio-Tech International	$0.19	$(0.21)	$0.30	$0.15

Diluted earnings per share from continuing operations attributable to Trio-Tech International	$0.19	(0.20)	0.29	0.14
Diluted earnings per share from discontinued operations attributable to Trio-Tech International	-	-	-	-
Diluted Earnings Per Share from Net Income Attributable to Trio-Tech International	$0.19	$(0.20)	$0.29	$0.14

21. STOCK OPTIONS

On September 24, 2007, the Company’s Board of Directors unanimously adopted the 2007 Employee Stock Option Plan (the “2007 Employee Plan”) and the 2007 Directors Equity Incentive Plan (the “2007 Directors Plan”), each of which was approved by the shareholders on December 3, 2007. Each of those plans was amended byduring the ~~Board in 2010~~term of such plan to increase the number of shares covered ~~thereby, which amendments were approved by~~thereby. As of the ~~shareholders on December 14, 2010. The Board also amended~~last amendment thereof, the 2007 Employee Plan covered an aggregate of 600,000 shares of the Company’s Common Stock and the 2007 Directors Plan ~~in November 2013 to further increase the number~~covered an aggregate of ~~shares covered thereby from 400,000 shares to~~ 500,000 shares ~~which amendment was approved~~of the Company’s Common Stock. Each of those plans terminated by ~~the shareholders~~its respective terms on ~~December 9, 2013.~~September 24, 2017. These two plans ~~are~~were administered by the Board, which also ~~establishes~~established the terms of the awards.

-24-

Table of Contents

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. ~~At present, the 2017 Employee Plan provides for awards~~Each of up to 300,000 shares of the Company’s Common Stock to its employees, consultants and advisors. At present, the 2017 Directors Plan provides for awards of up to 300,000 shares of the Company’s Common Stock to the members of the Company’s Board of Directors in the form of non-qualified options and restricted stock. These twothese plans ~~are~~is administered by the Board ~~which also establishes the terms~~of Directors of the ~~awards.~~Company.

Assumptions

The fair value for the options granted were estimated using the Black-Scholes option pricing model with the following weighted average assumptions, assuming no expected dividends:

Six Months Ended
December 31,

2017 2016

Expected volatility 60.41% to 104.94% 62.05% to 104.94%
Risk-free interest rate 0.30% to 0.78% 0.30% to 0.78%
Expected life (years) 2.50 2.50

	Nine Months Ended March 31,
	2019	2018

Expected volatility	47.29% to 97.48 %	47.29% to 104.94 %
Risk-free interest rate	0.30% to 1.05 %	0.30% to 1.05 %
Expected life (years)	2.50 – 3.25	2.50 – 3.25

The expected volatilities are based on the historical volatility of the Company’s stock. Due to higher volatility, the observation is made on a daily ~~basis.~~basis for the three months ended March 31, 2019. The observation period covered is consistent with the expected life of options. The expected life of the options granted to employees has been determined utilizing the “simplified” method as prescribed by ASC Topic 718 Stock Based Compensation, which, among other provisions, allows companies without access to adequate historical data about employee exercise behavior to use a simplified approach for estimating the expected life of a "plain vanilla" option grant. The simplified rule for estimating the expected life of such an option is the average of the time to vesting and the full term of the option. The risk-free rate is consistent with the expected life of the stock options and is based on the United States Treasury yield curve in effect at the time of grant.

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. Under the 2017 Employee Plan, all options must be granted with an exercise price of not 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~~instalments 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).

The Company ~~did not grant any~~granted options to purchase 16,000 shares of its Common Stock to employee pursuant to the 2017 Employee ~~plan~~Plan during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019. There were no stock options exercised during the nine months ended March 31, 2019. The Company recognized stock-based compensation expenses of $3 and $11 in the three and nine months ended March 31, 2019 under the 2017 Employee Plan. The balance of unamortized stock-based compensation of $14 based on fair value on the grant date related to options granted under the 2017 Employee Plan is to be recognized over a period of three years.

As of March 31, 2019, there were vested employee stock options granted under the Employee Plan 2017 covering a total of 34,000 shares of Common Stock. The weighted-average exercise price was $5.72, and the weighted average contractual term was 4.06 years.

On March 23, 2018, the Company granted options to purchase 60,000 shares of its Common Stock to employee directors pursuant to the 2017 Employee Plan during the nine-month ended March 31, 2018. The Company recognized stock-based compensation expenses of $4 in the nine months ended March 31, 2018 under the 2017 Employee Plan. The balance of unamortized stock-based compensation of $11 based on fair value on the grant date related to options granted under the 2017 Employee Plan is to be recognized over a period of three years.

~~-23-~~-25-

Table of Contents

As of March 31, 2018, there were vested employee stock options covering a total of 15,000 shares of Common Stock. The weighted-average exercise price was $5.98, and the weighted average contractual term was 4.98 years. The total fair value of vested employee stock options was $90 and remains outstanding as of March 31, 2018.

A summary of option activities under the 2017 Employee Plan during the nine months ended March 31, 2019 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2018	60,000	$5.98	4.73	$-
Granted	16,000	3.75	4.68	-
Exercised	-	-	-	-
Forfeited or expired	-	-	-	-
Outstanding at March 31, 2019	76,000	5.51	4.13	-
Exercisable at March 31, 2019	34,000	5.72	4.06	-

A summary of the status of the Company’s non-vested employee stock options during the nine months ended March 31, 2019 is presented below:

	Options	Weighted Average Grant-Date Fair Value

Non-vested at July 1, 2018	45,000	$5.98
Granted	16,000	3.75
Vested	(19,000)	(5.72)
Forfeited	-	-
Non-vested at March 31, 2019	42,000	$5.34

A summary of option activities under the 2017 Employee Plan during the nine-month period ended March 31, 2018 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2017	-	$-	-	$-
Granted	60,000	5.98	4.98	-
Exercised	-	-	-	-
Forfeited or expired	-	-	-	-
Outstanding at March 31, 2018	60,000	5.98	4.98	-
Exercisable at March 31, 2018	60,000	5.98	4.98	-

A summary of the status of the Company’s non-vested employee stock options during the nine months ended March 31, 2018 is presented below:

	Options	Weighted Average Grant-Date Fair Value

Non-vested at July 1, 2017	-	$-
Granted	60,000	5.98
Vested	(15,000)	5.98
Forfeited	-	-
Non-vested at March 31, 2018	45,000	3.83

-26-

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2007 Employee Stock Option Plan

The Company’s 2007 Employee Plan terminated by its terms on September 24, 2017 and no further options may be granted thereunder. However, the options outstanding thereunder continue to remain outstanding and in effect in accordance with their terms. The Employee Plan permitted the grant of stock options to its employees covering up to an aggregate of 600,000 shares of Common Stock. Under the 2007 Employee Plan, all options were required to be granted with an exercise price of not less than fair value as of the grant date and the options granted were required to 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 were permitted to 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 2007 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~~instalments 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 2007 Employee Plan).

The Company did not grant any options pursuant to the 2007 Employee Plan for nine months ended March 31, 2019. There were 50,000 options exercised during the nine months ended March 31, 2019. The Company recognized stock-based compensation expenses of $1 in the nine months ended March 31, 2019 under the 2007 Employee Plan.

The Company did not grant any options pursuant to the 2007 Employee Plan during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. There were no options exercised during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018. The Company recognized stock-based compensation expenses of $3 in the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2018 under the 2007 Employee Plan. The balance unamortized stock-based compensation of $3$2 based on fair value on the grant date related to options granted under the 2007 Employee Plan is to be recognized over a period of three years. ~~The weighted-average remaining contractual term for non-vested options was 3.77 years.~~

The Company did not grant any options pursuant to the 2007 Employee Plan during the six months ended December 31, 2016. There were no options exercised during the six months ended December 31, 2016. The Company recognized stock-based compensation expenses of $1 in the six months ended December 31, 2016 under the 2007 Employee Plan. The balance unamortized stock-based compensation of $3 based on fair value on the grant date related to options granted under the 2007 Employee Plan is to be recognized over a period of three years. The weighted-average remaining contractual term for non-vested options was 4.22 years.

As of ~~December~~March 31, ~~2017,~~2019, there were vested employee stock options covering a total of ~~79,375~~68,125 shares of Common Stock. The weighted-average exercise price was ~~$3.36~~$3.62, and the weighted average contractual term was ~~1.86~~2.40 years.

As of ~~December~~March 31, ~~2016,~~2018, there were vested employee stock options covering a total of ~~60,000~~98,750 shares of Common Stock. The weighted-average exercise price was ~~$3.26~~$3.43, and the weighted average contractual term was ~~2.26~~1.98 years.

A summary of option activities under the 2007 Employee Plan during the ~~six-month period~~nine months ended ~~December~~March 31, ~~2017~~2019 is presented as follows:

Options

Weighted Average
Exercise
Price

Weighted Average Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Outstanding at July 1, 2017
  127,500
$3.52
  3.10
$187
Granted
  -
  -
  -
  -
Exercised
  -
  -
  -
  -
Forfeited or expired
  -
  -
  -
  -
Outstanding at December 31, 2017
  127,500
$3.52
  2.60
$445
Exercisable at December 31, 2017
  79,375
$3.36
  1.86
$290

~~-24-~~

~~A summary of option activities under the 2007 Employee Plan during the six-month period ended December 31, 2016 is presented as follows:~~

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2016	90,000	$3.26	3.42	$30
Outstanding at July 1, 2018					127,500	$3.52	2.10	$121
Granted	-				-
Exercised	-				(50,000)	3.25	-
Forfeited or expired	-				-	-
Outstanding at December 31, 2016	90,000	$3.26	2.91	$10
Exercisable at December 31, 2016	60,000	$3.26	2.26	$8
Outstanding at March 31, 2019					77,500	$3.69	2.47	$-
Exercisable at March 31, 2019					68,125	$3.62	2.40	$-

A summary of the status of the Company’s non-vested employee stock options during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 is presented below:

	Options	Weighted Average Grant-Date Fair Value	Options	Weighted Average Grant-Date Fair Value

Non-vested at July 1, 2017	48,125	$3.77
Non-vested at July 1, 2018			28,750	$3.83
Granted	-		-
Vested	-		(19,375)	4.14
Forfeited	-		-	-
Non-vested at December 31, 2017	48,125	$3.77

Non-vested at March 31, 2019			9,375	$4.14

-27-

Table of Contents

A summary of option activities under the 2007 Employee Plan during the nine-month period ended March 31, 2018 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2017	127,500	$3.52	3.10	$187
Granted	-	-	-	-
Exercised	-	-	-	-
Forfeited or expired	-	-	-	-
Outstanding at March 31, 2018	127,500	3.52	2.35	285
Exercisable at March 31, 2018	98,750	3.43	1.98	230

A summary of the status of the Company’s non-vested employee stock options during the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 is presented below:

	Options	Weighted Average Grant-Date Fair Value	Options	Weighted Average Grant-Date Fair Value

Non-vested at July 1, 2016	38,750	$3.22
Non-vested at July 1, 2017			48,125	$3.77
Granted	-		-
Vested	(8,750)	(3.10)	(19,375)	(3.43)
Forfeited	-		-	-
Non-vested at December 31, 2016	30,000	$3.26

Non-vested at March 31, 2018			28,750	$3.83

2017 Directors Equity Incentive Plan

The 2017 Directors Plan permits the grant of options covering up to an aggregate of 300,000 shares of Common Stock to its directors in the form of non-qualified options and restricted stock. The exercise price of the non-qualified options is 100% of the fair value of the underlying shares on the grant date. The options have five-year contractual terms and are generally exercisable immediately as of the grant date.

The Company did not grant any options pursuant to the 2017 ~~Employee plan~~Director Plan during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019. There were no options exercised during the nine months ended March 31, 2019. The Company did not recognize any stock-based compensation expenses during the nine months ended March 31, 2019.

On March 23, 2018, the Company granted options to purchase 80,000 shares of its Common Stock to directors pursuant to the 2017 Directors Plan with an exercise price equal to the fair market value of Common Stock (as defined under the 2017 Directors Plan in conformity with Regulation 409A or the Internal Revenue Code of 1986, as amended) at the date of grant. The fair value of the options granted to purchase 80,000 shares of the Company’s Common Stock was approximately $478 based on the fair value of $5.98 per share determined by the Black Scholes option pricing model. As all of the stock options granted under the 2017 Directors Plan vest immediately at the date of grant, there were no unvested stock options granted under the 2017 Directors Plan as of March 31, 2018. The Company recognized stock-based compensation expenses of $33 in the nine months ended March 31, 2018 under the 2017 Directors Plan.

A summary of option activities under the 2017 Directors Plan during the nine months ended March 31, 2019 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2018	80,000	$5.98	4.73	$-
Granted	-	-	-	-
Exercised	-	-	-	-
Forfeited or expired	-	-	-	-
Outstanding at March 31, 2019	80,000	5.98	3.98	-
Exercisable at March 31, 2019	80,000	5.98	3.98	-

~~-25-~~-28-

Table of Contents

A summary of option activities under the 2017 Directors Plan during the nine months ended March 31, 2018 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2017	-	$-	-	$-
Granted	80,000	5.98	4.98	-
Exercised	-	-	-	-
Forfeited or expired	-	-	-	-
Outstanding at March 31, 2018	80,000	5.98	4.98	-
Exercisable at March 31, 2018	80,000	5.98	4.98	-

2007 Directors Equity Incentive Plan

The 2007 Directors Plan terminated by its terms on September 24, 2017 and no further options may be granted thereunder. However, the options outstanding thereunder continue to remain outstanding and in effect in accordance with their terms. The ~~Director~~Directors Plan permitted the grant of options covering up to an aggregate of 500,000 shares of Common Stock to its directors in the form of non-qualified options and restricted stock. The exercise price of the non-qualified options is 100% of the fair value of the underlying shares on the grant date. The options have five-year contractual terms and are generally exercisable immediately as of the grant date.

~~During the first two quarters of fiscal year 2018, the~~The Company did not grant any options pursuant to the 2007 ~~Directors Plan.~~Director Plan during the nine months ended March 31, 2019. There were ~~15,000 worth of~~70,000 stock options exercised during the ~~six-month~~nine months period ended ~~December~~March 31, ~~2017.~~2019. The Company did not recognize any stock-based compensation expenses during the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019.

~~During the first two quarters of fiscal year 2017, the~~The Company did not grant any options pursuant to the 2007 ~~Directors Plan.~~Director Plan during the nine months ended March 31, 2018. There were no20,000 stock options exercised during the ~~six-month~~nine-month period ended ~~December~~March 31, ~~2016.~~2018. The Company did not recognize any stock-based compensation expenses during the ~~six~~nine months ended ~~December~~March 31, ~~2016.~~2018.

A summary of option activities under the 2007 Directors Plan during the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2018	390,000	$3.41	2.05	$412
Granted	-	-	-	-
Exercised	(70,000)	3.39	-	-
Forfeited or expired	(20,000)	(3.62)	-	-
Outstanding at March 31, 2019	300,000	$3.40	1.83	$-
Exercisable at March 31, 2019	300,000	$3.40	1.83	$-

Options

Weighted Average
Exercise
Price

Weighted Average Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Outstanding at July 1, 2017
  415,000
$3.36
  2.93
$673
Granted
  -
  -
  -
  -
Exercised
  (15,000)
  2.76
  -
  -
Forfeited or expired
  -
  -
  -
  -
Outstanding at December 31, 2017
  400,000
$3.38
  2.49
$1,452
Exercisable at December 31, 2017
  400,000
$3.38
  2.49
$1,452

-29-

Table of Contents

A summary of option activities under the 2007 Directors Plan during the ~~six~~nine months ended ~~December~~March 31, ~~2016~~2018 is presented as follows:

	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value

Outstanding at July 1, 2017	415,000	$3.36	2.93	$673
Granted	-	-	-	-
Exercised	(20,000)	2.59	-	-
Forfeited or expired	(5,000)	2.07	-	-
Outstanding at March 31, 2018	390,000	3.41	2.30	911
Exercisable at March 31, 2018	390,000	3.41	2.30	911

Options

Weighted Average
Exercise
Price

Weighted Average Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Outstanding at July 1, 2016
  415,000
$3.14
  3.29
$198
Granted
  -
  -
  -
  -
Exercised
  -
  -
  -
  -
Forfeited or expired
  (50,000)
  2.30
  -
  -
Outstanding at December 31, 2016
  365,000
$3.25
  3.18
$68
Exercisable at December 31, 2016
  365,000
$3.25
  3.18
$68

~~-26-~~

22. FAIR VALUE OF FINANCIAL INSTRUMENTS APPROXIMATE CARRYING VALUE

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

There were no transfers between Levels 1 and 2 during the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

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 loan payables 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.

~~-27-~~-30-

Table of Contents

~~TRIO-TECH~~TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S 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 unaudited financial statements and notes in Item I above and with the audited consolidated financial statements and notes, and the information under the ~~headings “Risk Factors” and~~heading “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, ~~2017.~~2018.

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 16139 Wyandotte Street, Van Nuys, California 91406, and our telephone number is (818) 787-7000.

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 aerospace, communications and other electronics products.

TTI generated approximately 99.7% of its revenue from its three core business segments in the test and measurement industry, i.e. manufacturing of test equipment, testing services and distribution of test equipment during the three months ended ~~December~~March 31, ~~2017.~~2019. To reduce our risks associated with sole industry focus and customer concentration, the Company expanded its business into the real estate investment and oil and gas equipment fabrication businesses in 2007 and 2009, respectively. The Company’s Indonesia operation and the Indonesia operation’s immediate holding company, which comprised the fabrication services segment, suffered continued operating losses since it commenced its operations, and the cash flow was minimal in the past years. The Company established a restructuring plan to close the fabrication services operation, and in accordance with ASC Topic 205,Presentation of Financial Statement Discontinued Operations (“(“ASC Topic 205”), the Company presented the operation results from fabrication services as a discontinued operation. The Real Estate segment contributed only 0.3% to the total revenue and has been ~~insignificant since the property market in China has slowed down due to control measures in China.~~insignificant.

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~~temperature-controlled chucks, wet benches and more.

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 do not want to establish their own facilities. 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 mainly from the U.S., Europe, Taiwan and Japan. The products include environmental chambers, handlers, interface systems, vibration systems, shaker systems, solderability testers and ~~other~~ semiconductor equipment. Besides equipment, we also distribute a wide range of components such as connectors, sockets, LCD display panels and touch-screen panels. Furthermore, our range of products are mainly targeted for industrial products rather than consumer products whereby the life cycle of the industrial products can last from 3 years to 7 years.

Real Estate

Beginning in 2007, TTI has invested in real estate property in Chongqing, China, which has generated investment income from the rental revenue from real estate we purchased in Chongqing, China, and investment returns from deemed loan receivables, which are classified as other income. The rental income is generated from the rental properties in ~~MaoYe~~Mao Ye and FuLi in Chongqing, China. In the second quarter of fiscal 2015, the investment in JiaSheng, which was deemed as loans receivable, was transferred to down payment for purchase of investment property in China.

~~-28-~~-31-

Table of Contents

~~Second~~Third Quarter Fiscal ~~2018~~2019 Highlights

●

Total revenue ~~increased~~decreased by ~~$1,448,~~$1,266, or ~~15.9%~~12.5%, to ~~$10,552~~$8,838 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$9,104~~$10,104 for the same period in fiscal ~~2017.~~2018.

●

Manufacturing segment revenue ~~increased~~decreased by ~~$653,~~$27, or ~~19.7%~~0.9%, to ~~$3,973~~$3,097 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$3,320~~$3,124 for the same period in fiscal ~~2017.~~2018.

●

Testing segment revenue ~~increased~~decreased by ~~$866,~~$924, or ~~21.3%~~18.8%, to ~~$4,936~~$3,989 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$4,070~~$4,913 for the same period in fiscal ~~2017.~~2018.

●

Distribution segment revenue decreased by ~~$69,~~$306, or ~~4.1%~~15.1%, to ~~$1,606~~$1,727 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$1,675~~$2,033 for the same period in fiscal ~~2017.~~2018.

●

Real estate segment revenue decreased by ~~$2,~~$9, or ~~5.1%~~26.5%, to ~~$37~~$25 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$39~~$34 for the same period in fiscal ~~2017.~~2018.

●

Gross profit margin in absolute dollars ~~increased~~decreased by ~~$501,~~$58, or ~~21.8%~~2.6%, to ~~$2,795~~$2,174 for the ~~second~~third quarter of fiscal ~~2018,~~2019, as compared to ~~$2,294~~$2,232 for the same period in fiscal ~~2017.~~2018.

●

The overall gross profit margin increased by ~~1.3%~~2.5% to ~~26.5%~~24.6% for the ~~second~~third quarter of fiscal ~~2018,~~2019, from ~~25.2%~~22.1% for the same period in fiscal ~~2017.~~2018.

●

Income from operations for the ~~second~~third quarter of fiscal ~~2018~~2019 was ~~$698, an increase~~$123, a decrease of ~~$420~~$111 or ~~151.1%~~47.4%, as compared to ~~$278~~$234 for the same period in fiscal ~~2017.~~2018.

●

General and administrative expenses decreased by ~~$49,~~$31, or ~~2.8%~~1.7%, to ~~$1,727~~$1,742 for the ~~second~~third quarter of fiscal year ~~2018,~~2019, from ~~$1,776~~$1,773 for the same period in fiscal year ~~2017.~~2018.

●

Selling expenses increased by ~~$72,~~$65, or ~~40.0%~~35.9%, to ~~$252~~$246 for the ~~second~~third quarter of fiscal year ~~2018,~~2019, from ~~$180~~$181 for the same period in fiscal year ~~2017.~~2018.

●

Gain on disposal of property, plant and equipment decreased by $18 to $13 for the third quarter of fiscal 2019, as compared to $31 for the same period in fiscal 2018.

●

Other income ~~decreased~~increased by ~~$161~~$17 to ~~$42~~$128 in the ~~second~~third quarter of fiscal year ~~2018~~2019 compared to ~~$203 in~~$111 for the same period in fiscal year ~~2017.~~2018.

●

Tax ~~expense~~expenses for the ~~second~~third quarter of fiscal year ~~2018~~2019 was ~~$13,~~$209, a decrease of ~~$54,~~$771, as compared to ~~$67 in~~income tax expenses of $980 for the same period in fiscal year ~~2017.~~2018 due primarily to a one-time Repatriation Tax in the previous fiscal year.

●

During the ~~second~~third quarter of fiscal year ~~2018,~~2019, income from continuing operations before non-controlling interest, net of tax was ~~$675,~~$653, an increase of ~~$309,~~$1,352, as compared to ~~$366~~loss of $699 for the same period in fiscal year ~~2017.~~2018.

●

Net ~~income~~loss attributable to non-controlling interest for the ~~second~~third quarter of fiscal year ~~2018~~2019 was ~~nil,~~$28, as compared to ~~$52 in~~income of $34 for the same period in fiscal year ~~2017.~~2018.

●

Working capital increased ~~by $1,183,~~$1,751 or ~~15.8%~~18.9%, to ~~$8,671~~$11,039 as of ~~December~~March 31, ~~2017,~~2019, compared to ~~$7,488~~$9,288 as of June 30, ~~2017.~~2018.

●

Earnings per share for the three months ended ~~December~~March 31, ~~2017~~2019 was $0.19, an increase of ~~$0.10,~~$0.40, as compared to ~~$0.09~~loss per share of ($0.21) for the same period in fiscal year ~~2017.~~2018.

●

Total assets increased by ~~$3,291~~$526 or ~~9.8%~~1.4% to ~~$36,789~~$37,000 as of ~~December~~March 31, ~~2017,~~2019, compared to ~~$33,498~~$36,474 as of June 30, ~~2017.~~2018.

●

Total liabilities ~~increased~~decreased by ~~$1,082~~$540 or ~~9.0%~~4.2% to ~~$13,053~~$12,433 as of ~~December~~March 31, ~~2017,~~2019, compared to ~~$11,971~~$12,973 as of June 30, ~~2017.~~2018.

Results of Operations and Business Outlook

The following table sets forth our revenue components for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
	Dec. 31,				Mar. 31,
	2017	2016	2017	2016	2019	2018	2019	2018

Manufacturing	37.7%	36.5%	40.6%	38.7%	35.0%	30.9%	35.3%	37.5%
Testing Services	46.8	44.7	44.4	45.5	45.1	48.7	44.9	45.7
Distribution	15.2	18.4	14.6	15.4	19.6	20.1	19.5	16.4
Real Estate	0.3	0.4			0.3			0.4

Total	100.0%				100.0%

~~-29-~~-32-

Table of Contents

Revenue for the three months and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$10,552~~$8,838 and ~~$21,497,~~$28,573, respectively, ~~an increase~~a decrease of ~~$1,448~~$1,266 and ~~$3,422,~~$3,028, respectively, when compared to the revenue for the same periods of the prior fiscal year. As a percentage, revenue ~~increased~~decreased by ~~15.9%~~12.5% and ~~18.9%~~9.6% for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, when compared to total revenue for the same periods of the prior year.

For the three months ended ~~December~~March 31, ~~2017,~~2019, the ~~$1,448 increase~~$1,266 decrease in overall revenue was primarily due toto:

●

a decrease in the manufacturing segment in the U.S. operations; and

●

a decrease in the testing segment in the Malaysia and Tianjin, China operations.

These decreases were partially offset by:

●

an increase in the manufacturing segment in the ~~U.S. and~~ Singapore operations; and

●

an increase in the testing segment in the Singapore ~~Malaysia~~ and ~~Tianjin, China~~Bangkok, Thailand operations.

~~These increases were partially offset by~~For the

nine months ended March 31, 2019, the $3,028 decrease in overall revenue was primarily due to:

●

a decrease in the manufacturing ~~segment in the Suzhou, China operations;~~

●

~~decrease in the testing segment in the Suzhou, China and Bangkok, Thailand operations;~~

●

~~decrease in the distribution~~ segment in the Singapore and Suzhou, China operations; and

●

a decrease in the ~~real estate~~testing segment in ~~China.~~the Tianjin, China Operations and Malaysia operations.

~~For the six months ended December 31, 2017, the $3,422 increase in overall revenue was primarily due to~~

●

~~an increase in the manufacturing segment in the U.S., Singapore and Suzhou, China operations;~~

These decreases were partially offset by:

●

an increase in the testing segment in the Singapore ~~Malaysia~~ and ~~Tianjin, China~~Bangkok, Thailand operations; and

●

an increase in the distribution segment in the Singapore ~~operations.~~

~~These increases were partially offset by the~~

●

~~decrease in the testing segment in the Bangkok, Thailand operations;~~

●

~~decrease in the distribution segment in the~~and Suzhou, China ~~operations; and~~

●

~~decrease in the testing segment in China.~~operations.

Revenue into and within China, the Southeast Asia regions and other countries (except revenue into and within the U.S.) ~~increased~~decreased by ~~$1,294~~$1,198 (or ~~14.5%~~12.2%) to ~~$10,200,~~$8,605, and by ~~$3,287~~$2,782 (or ~~18.9%~~9.1%) to ~~$20,619~~$27,640 for the three months and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, as compared with ~~$8,906~~$9,803 and ~~$17,332,~~$30,422, respectively, for the same periods of last fiscal year.

Revenue into and within the U.S. was ~~$352~~$233 and ~~$878~~$933 for the three months and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, ~~an increase~~a decrease of ~~$154~~$67 and ~~$135,~~$246, respectively, from ~~$198~~$300 and ~~$743~~$1,179 for the same periods of last fiscal year, respectively.

Revenue for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 is discussed within the four segments as follows:

Manufacturing Segment

Revenue in the manufacturing segment as a percentage of total revenue was ~~37.7%~~35.0% and ~~40.6%~~35.3% for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, an increase of ~~1.2%~~4.1% and ~~1.9%~~a decrease of 2.2% of total revenue, respectively, when compared to the same periods of the last fiscal year. The absolute amount of revenue ~~increased~~decreased by ~~$653~~$27 to ~~$3,973~~$3,097 from ~~$3,320~~$3,124 and ~~increased~~decreased by ~~$1,747~~$1,776 to ~~$8,738~~$10,086 from ~~$6,991~~$11,862 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, compared to the same periods of the last fiscal year.

The revenue in the manufacturing segment from a major customer accounted for ~~47.5%~~27.7% and ~~55.7%~~47.4% of our total revenue in the manufacturing segment for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~42.3%~~35.5% and ~~57.0%~~47.4% of our total revenue in the manufacturing segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

The future revenue in our manufacturing segment will be significantly affected by the purchase and capital expenditure plans of this major customer, if the customer base cannot be increased.

~~-30-~~

Testing Services Segment

Revenue in the testing segment as a percentage of total revenue was ~~46.8%~~45.1% and ~~44.4%~~44.9% for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017, an increase of 2.1% and~~2019, a decrease of ~~1.1%~~3.5% and 0.8%, respectively, of total revenue when compared to the same periods of the last fiscal year. The absolute amount of revenue ~~increased~~decreased by ~~$866~~$924 to ~~$4,936~~$3,989 from ~~$4,070~~$4,913 and by ~~$1,314~~$1,635 to ~~$9,541~~$12,819 from ~~$8,227~~$14,454 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2018, respectively, compared to the same periods of the last fiscal year.

The revenue in the testing segment from a major customer accounted for 69.7% and 80.4% of our revenue in the testing segment for the three months ended March 31, 2019 and 2018, respectively, and 72.8% and 79.2% of our total revenue in the manufacturing segment for the nine months ended March 31, 2019 and 2018, respectively. The future revenue in our testing segment will be affected by the demands of this major customer if the customer base cannot be increased. Demand for testing services varies from country to country depending on changes taking place in the market and our customers’ forecasts. As it is difficult to accurately forecast fluctuations in the market, management believes it is necessary to maintain testing facilities in close proximity to our 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.

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Table of Contents

Distribution Segment

Revenue in the distribution segment as a percentage of total revenue was ~~15.2%~~19.5% and ~~14.6%~~19.6% for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, a decrease of ~~3.2%~~0.6% and ~~0.8%~~an increase of 3.2%, respectively, when compared to the same periods of the prior fiscal year. The absolute amount of revenue decreased by ~~$69~~$306 to ~~$1,606~~$1,727 from ~~$1,675,~~$2,033, and increased by ~~$363~~$412 to ~~$3,142~~$5,587 from ~~$2,779~~$5,175 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, compared to the same periods of the last fiscal year.

Demand in the distribution segment varies depending on the demand for our customers’ products and the changes taking place in the market and our customers’ forecasts. Hence it is difficult to accurately forecast fluctuations in the market.

Real Estate Segment

The real estate segment accounted for 0.3% ~~and 0.4%~~ of total net revenue for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2019. The absolute amount of revenue in the real estate segment decreased by $2$9 to ~~$37~~$25 from ~~$39~~$34 and by $2$29 to ~~$76~~$81 from ~~$78~~$110 for the three and ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, respectively, compared to the same periods of the last fiscal year. The decrease was primarily due to a decrease in rental income in the real estate segment for the three and ~~six~~nine months ended ~~December 31, 2017.~~

During fiscal year 2007, TTI invested in real estate property in Chongqing, China, which has generated investment income from rental revenue and investment returns from deemed loan receivables, which are classified as other income. The rental income is generated from the rental properties in MaoYe, JiangHuai and FuLi in Chongqing, China. In the second quarter of fiscal 2015, the investment in JiaSheng, which was deemed as loans receivable, was transferred to down payment for purchase of investment property in China.

Trio-Tech Chongqing Co., Ltd. (“TTCQ”) invested RMB 5,554 in rental properties in Maoye during fiscal year 2008, RMB 3,600 in rental properties in JiangHuai during fiscal year 2010 and RMB 4,025 in rental properties in FuLi during fiscal year 2010. The total investment in properties in China was RMB 13,179, or approximately $2,027 and $1,944 as at December 31, 2017 and June 30, 2017, respectively. The carrying value of these investment properties in China was RMB 7,913 and RMB 8,242, or approximately $1,217 and $1,216 as at December 31, 2017 and June 30, 2017, respectively. ~~For the three and six months ended December 31, 2017,~~ these properties generated a total rental income of $37 and $76, respectively, as compared to $39 and $78, respectively, for the same periods of the last fiscal year. TTCQ’s investment in properties that generated rental income is discussed further in this Form 10-Q.

TTCQ has yet to receive the title deed for properties purchased from JiangHuai. TTCQ is in the legal process of obtaining the title deed, which is dependent on JiangHuai completing the entire project. JiangHuai property did not generate any income during the three and six months ended December 31, 2017, and 2016.

~~-31-~~

“Investments” in the real estate segment were the cost of an investment in a joint venture in which we had a 10% interest. During the second quarter of fiscal year 2014, TTCQ disposed of its 10% interest in the joint venture. The joint venture had to raise funds for the development of the project. As a joint-venture partner, TTCQ was required to stand guarantee for the funds to be borrowed; considering the amount of borrowing, the risk involved was higher than the investment made and hence TTCQ decided to dispose of the 10% interest in the joint venture investment. On October 2, 2013, TTCQ entered into a share transfer agreement with Zhu Shu. Based on the agreement, the purchase price was to be paid by (1) RMB 10,000 worth of commercial property in Chongqing China, or approximately $1,634 based on exchange rates published by the Monetary Authority of Singapore as of October 2, 2013, by non-monetary consideration and (2) the remaining RMB 8,000, or approximately $1,307 based on exchange rates published by the Monetary Authority of Singapore as of October 2, 2013, by cash consideration. The consideration consisted of (1) commercial units measuring 668 square meters to be delivered in June 2016 and (2) sixteen quarterly equal installments of RMB500 per quarter commencing from January 2014. Based on ASC Topic 845 Non-monetary Consideration, the Company deferred the recognition of the gain on disposal of the 10% interest in joint venture investment until such time that the consideration is paid, so that the gain can be ascertained. The recorded value of the disposed investment amounting to $783, based on exchange rates published by the Monetary Authority of Singapore as of June 30, 2014, is classified as “other assets” under non-current assets, because it is considered a down payment for the purchase of the commercial property in Chongqing. TTCQ performed a valuation on a certain commercial unit and its market value was higher than the carrying amount. The first three installment amounts of RMB 500 each due in January 2014, April 2014 and July 2014 were all outstanding until the date of disposal of the investment in the joint venture. Out of the outstanding RMB 8,000, TTCQ received RMB 100 during May 2014.

On October 14, 2014, TTCQ and Jun Zhou Zhi Ye entered into a memorandum of understanding. Based on the memorandum of understanding, both parties have agreed to register a sales and purchase agreement upon Jun Zhou Zhi Ye obtaining the license to sell the commercial property (the Singapore Themed Resort Project) located in Chongqing, China. The proposed agreement is for the sale of shop lots with a total area of 1,484.55 square meters as consideration for the outstanding amounts owed to TTCQ by Jun Zhou Zhi Ye as follows:

~~Long term loan receivable RMB 5,000, or approximately $814, as disclosed in Note 5, plus the interest receivable on long term loan receivable of RMB 1,250;~~

~~Commercial units measuring 668 square meters, as mentioned above; and~~

~~RMB 5,900 for the part of the unrecognized cash consideration of RMB 8,000 relating to the disposal of the joint venture.~~

~~The consideration does not include the remaining outstanding amount of RMB 2,000, or approximately $326, which will be paid to TTCQ in cash.~~

The shop lots are to be delivered to TTCQ upon completion of the construction of the shop lots in the Singapore Themed Resort Project. The initial targeted date of completion was December 31, 2016. Based on subsequent discussions with the developer and the overall China market outlook, the completion date is currently estimated to be DecemberMarch 31, 2019.

~~The share transfer (10% interest in~~During the ~~joint venture) was registered with~~first quarter of 2019, management decided to sell off the ~~relevant authorities in China~~Mao Ye Property, which is one of our earlier investment properties. In order to monetize the capital gain on property, TTCQ appointed a sole agent for 6 months as of September 1, 2018 to search for suitable buyers for this property. During the third quarter of 2019, the Company completed the sale of 13 units constituting the Mao Ye Property which had resulted in an aggregate gain of RMB4,620, and $685 recorded included in other income, on the Consolidated Statements of Operations. As the end ~~October 2016.~~of third quarter, the remaining 2 units of properties were reclassified to investment property from assets held for sale due to the strategic operational decision made by the management based on the current property market condition in China.

Uncertainties and Remedies

There are several influencing factors which create uncertainties when forecasting performance, such as the constantly changing nature of technology, specific requirements from the customer, decline in demand for certain types of burn-in devices or equipment, decline in demand for testing services and fabrication services, and other similar factors. One factor that influences uncertainty is the highly competitive nature of the semiconductor industry. Another is that some customers are unable to provide a forecast of the products required in the upcoming weeks; hence it is difficult to plan for the resources needed to meet these customers’ requirements due to short lead time and ~~last minute~~last-minute order confirmation. This will normally result in a lower margin for these products, as it is 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, in order to meet manufacturing customers’ demands upon short notice, the Company maintains higher inventories, but continues to work closely with its customers to avoid stock piling. We believe that we have improved customer service ~~from staff by keeping our staff~~ 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 of higher technology chips.

~~-32-~~

We are in the process of implementing an ~~Enterprise~~ERP (Enterprise Resource ~~Planning (“ERP”)~~Planning) system as part of a multi-year plan to integrate and upgrade our systems and processes. The implementation of this ERP system is scheduled to occur in phases over the next few years and began with the migration of certain ~~of our~~ operational and financial systems in our Singapore operations to the new ERP system during the second quarter of fiscal 2017. ~~This implementation effort continues in~~During the third quarter of fiscal 2018, ~~when~~ the operational and financial systems in Singapore ~~will be~~were substantially transitioned to the new system. ~~Implementation~~

This implementation effort continuing in fiscal 2019. The operational and financial systems in our Malaysia operation were substantially transitioned to the new system during the first quarter of fiscal 2019.

As a phased implementation of this system occurs, we are experiencing certain changes to our processes and procedures which, in turn, result in changes to our internal control over financial reporting. While we expect the new ERP system ~~involves risks~~to strengthen our internal financial controls by automating certain manual processes and ~~uncertainties. Any disruptions, delays or deficiencies~~standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as processes and procedures in ~~the design or implementation~~each of the ~~new system could result in increased costs and adversely affect our ability to timely report our financial results, which could negatively impact our business and results~~affected areas evolve.

-34-

Table of ~~operations.~~Contents

The Company’s primary exposure to movements in foreign currency exchange rates relates to non-U.S. dollar-denominated sales and operating expenses in its subsidiaries. Strengthening of the 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 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.

There are several influencing factors which create uncertainties when forecasting performance of our real estate segment, such as obtaining the rights by the joint venture to develop the real estate projects in China, inflation in China, currency fluctuations and devaluation, and changes in Chinese laws, regulations, or their interpretation.

Comparison of the Three Months Ended ~~December~~March 31, ~~2017~~2019 and ~~December~~March 31, ~~2016~~2018

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018

Revenue	100.0%		100.0%
Cost of sales	73.5	74.8	75.4	77.9
Gross Margin	26.5%	25.2%	24.6%	22.1%
Operating expenses
General and administrative	16.4%	19.5%	19.7%	17.5%
Selling	2.4	2.0	3.0	1.8
Research and development	1.1	0.6	0.9	0.7
Loss on disposal of property, plant and equipment	-	0.1
(Gain)/loss on disposal of property, plant and equipment			(0.1)	(0.3)
Total operating expenses	19.9%	22.2%	23.5%	19.7%
Income from Operations	6.6%	3.0%	1.4%	2.4%

Overall Gross Margin

Overall gross margin as a percentage of revenue increased by ~~1.3%~~2.5% to ~~26.5%~~24.6% for the three months ended ~~December~~March 31, ~~2017,~~2019, from ~~25.2%~~22.1% in the same period of the last fiscal year. In terms of absolute dollar amounts, gross profits ~~increased~~decreased by ~~$501~~$58 to ~~$2,795~~$2,174 for the three months ended ~~December~~March 31, ~~2017,~~2019, from ~~$2,294~~$2,232 as compared to the same period of the last fiscal year. There was ~~an increase~~a decrease in gross profit margin of the testing segment, in absolute ~~dollars, across all segments except for real estate.~~

~~-33-~~

dollars.

Gross profit margin as a percentage of revenue in the manufacturing segment increased by ~~1.8%~~6.6% to ~~22.8%~~25.6% for the three months ended ~~December~~March 31, ~~2017,~~2019, from ~~21.0%~~19.0% in the same period of the last fiscal year. The increase in gross profit margin was due to the change in product mix in the ~~U.S. and~~ Singapore operations, where there was a decrease in sales of products that had lower profit margins and an increase in sales of products that had higher ~~profit margins and a decrease in sales of products that had lower~~ profit margins as compared to the same period of last fiscal year. As a result, the ~~increase~~decrease in ~~cost~~manufacturing revenue was lower than the ~~increase~~decrease in ~~manufacturing revenue~~cost for the three months ended ~~December~~March 31, ~~2017,~~2019, as compared to the same period last fiscal year. In absolute dollar amounts, gross profits in the manufacturing segment increased by ~~$207~~$200 to ~~$905~~$794 for the three months ended ~~December~~March 31, ~~2017~~2019 from ~~$698~~$594 for the same period of last fiscal year.

Gross profit margin as a percentage of revenue in the testing segment decreased by 0.6% to ~~34.1%~~28.3% for the three months ended ~~December~~March 31, ~~2017,~~2019, from ~~34.7%~~28.9% in the same period of the last fiscal year. The decrease inof gross profit margin ~~as a percentage of revenue~~ was mainly ~~due to a~~impacted by the decrease ~~in high margin testing revenue the Bangkok, Thailand operations. Furthermore, there was an increase in compliance costs~~of sales in the Malaysia ~~operations which increased in the cost of sales. This decrease in gross margin as a percentage of revenue was partially offset by the increase in the Singapore~~operation and Tianjin, China ~~operations~~operation where significant portions of our cost of goods sold are fixed and as the demand of services and factory utilization ~~increase,~~decrease, the fixed costs are spread over the ~~increased~~decreased output, which ~~increases~~decreases the gross profit margin. The negative impact on gross profit margin was partially offset by the effort of cost saving in Tianjin, China operation and Malaysia operation. Both operation has put in effort mainly to reduce their labour cost. In absolute dollar amounts, gross profit in the testing segment ~~increased~~decreased by ~~$273~~$295 to ~~$1,685~~$1,127 for the three months ended ~~December~~March 31, ~~2017~~2019 from ~~$1,412~~$1,422 for the same period of the last fiscal year.

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Table of Contents

Gross profit margin of the distribution segment is not only affected by the market price of our products, but also by our product mix, which changes frequently as a result of changes in market demand. Gross profit margin as a percentage of revenue in the distribution segment increased by ~~1.9%~~3.7% to ~~12.3%~~14.1% for the three months ended ~~December~~March 31, ~~2017,~~2019, from 10.4% in the same period of the last fiscal year. The increase in gross profit margin as a percentage of revenue was due to the change in product mix in the distribution segment of the ~~Singapore and~~ Suzhou, China operations resulting in an increase in sales of products that had higher profit margin and a decline in sales of products that had lower profit margin, as compared to the same period of last fiscal year. In terms of absolute dollar amounts, gross profit in the distribution segment for the three months ended ~~December~~March 31, ~~2017~~2019 was ~~$197,~~$244, an increase of ~~$23~~$32 as compared to ~~$174~~$212 in the same period of last fiscal year.

Gross profit margin as a percentage of revenue in the real estate segment was ~~21.6%~~36.0% for the three months ended ~~December~~March 31, ~~2017,~~2019, as compared to ~~25.6%~~11.8% in the same period of the last fiscal year. In absolute dollar amounts, gross profit in the real estate segment for the three months ended ~~December~~March 31, ~~2017~~2019 was ~~$8, a decrease~~$9, an increase of $2$5 from ~~$10~~$4 in the same period of last fiscal ~~year. The decrease was primarily due to a decrease in rental income from the MaoYe investment property, as compared to the same period in the last fiscal year.~~year

Operating Expenses

Operating expenses for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
General and administrative	$1,727	$1,776	$1,742	$1,773
Selling	252	180	246	181
Research and development	118	52	76	75
Loss on disposal of property, plant and equipment	-	8
Gain on disposal of property, plant & equipment			(13)	(31)
Total	$2,097	$2,016	$2,051	$1,998

General and administrative expenses decreased by ~~$49,~~$31, or ~~2.8%~~1.7%, from ~~$1,776~~$1,742 to ~~$1,727~~$1,773 for the three months ended ~~December~~March 31, ~~2017~~2019 compared to the same period of last fiscal year. The decrease in the general and administrative expenses was mainly attributable to the decrease in the Singapore, Malaysia and Suzhou, China operations, which was partially offset by the increase in the Tianjin, China operations.

The decrease in general and administrative expenses was primarily due to the decrease in payroll related expenses in the Malaysia and Tianjin, China operations. Both operations’ sales slowed down due to market condition which triggered the cost saving effort primarily on payroll related expenses. On the other hand, the market downturn had minimal impact on Singapore ~~and Suzhou, China operations and~~operation. The decrease in ~~bonus~~general and administrative expenses ~~in the Malaysia operations. This decrease~~ was partially offset by an increase in the ~~Tianjin, China~~Singapore operations as a result of ~~wage increment~~additional headcount in the three months ended ~~December~~March 31, ~~2016~~2019 as compared to the same period of last fiscal year.

~~-34-~~

Selling expenses increased by ~~$72,~~$65, or ~~40.0%~~35.9%, for the three months ended ~~December~~March 31, ~~2017,~~2019, to $246 from ~~$180 to $252,~~$181 as compared to the same period of the last fiscal year. The increase was mainly due to ~~an increase in~~higher commission expenses in the ~~U.S and~~ Singapore operations ~~as the commissionable revenue increased, and an increase in travel expenses in the Singapore, Malaysia and Tianjin, China~~ in the three months ended ~~December~~March 31, ~~2017~~2019 as compared to the same period of last fiscal year.

~~Research and development~~ Higher commission expenses ~~increased by $66, for~~were incurred due to the ~~three months ended December 31, 2017, from $52 to $118, as~~Singapore operations having secured more commissionable sales in third quarter of fiscal year 2019 compared to the same period ~~of the last fiscal year. The increase was mainly due to a change~~ in ~~cost allocation in the three months ended December 31, 2017 as compared to the same period of last fiscal~~previous year.

Income from Operations

Income from operations was ~~$698~~$101 for the three months ended ~~December~~March 31, ~~2017,~~2019, as compared to ~~$278~~$234 for the same period of last fiscal year. The ~~increase~~decrease was mainly due to the ~~increase in gross profit margin being greater than the increase in operating~~lower revenue and higher selling expenses as discussed earlier.

Interest Expense

Interest expense for the ~~second~~third quarter of fiscal years ~~2018~~2019 and ~~2017~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Interest expense	$52	$48	$74	$64

Interest expense increased by $4$10 to ~~$52 from $48~~$74 for the three months ended ~~December~~March 31, ~~2017. We are trying~~2019 from $64 for the same period in the last fiscal year. The increase was mainly due to ~~keep our debt~~increased utilization of short-term loan in the Singapore operation and long-term loan in the Malaysia operation. The bank loan payable increased by $1,130 to $2,934 for the nine months ended March 31, 2019 as compared to $1,804 as at ~~a minimum in order to save financing costs. As~~June 30, 2018.

-36-

Table of ~~December 31, 2017, the Company had unused lines of credit of $4,146.~~Contents

Other Income

Other income for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Interest income	$12	$8	$31	$19
Other rental income	27	25	28
Exchange (loss)/ gain	(24)	120
Exchange loss			(11)	(5)
Other miscellaneous income	27	50	80	69
Total	$42	$203	$128	$111

Other income for the three months ended ~~December~~March 31, ~~2017~~2019 was ~~$42, a decrease~~$17, an increase of ~~$161~~$128 as compared to ~~$203~~$111 for the same period last fiscal year. This ~~decrease~~increase was mainly attributable to ~~foreign currency exchange difference between functional currency~~higher interest income received due to placement of interest-bearing deposits by the Malaysia, Singapore and ~~U.S. dollars contributing to an exchange loss of $24 for the three months ended December 31, 2017 as compared to an exchange gain of $120 for the same period in last fiscal year.~~Chongqing, China operations.

Income Tax Expenses

Income ~~tax~~Tax expenses for the three months ended ~~December~~March 31, ~~2017 were $13,~~2019 was $209, a ~~decrease~~change of ~~$54~~$771 as compared to ~~$67~~income tax expense of $980 for the same period last fiscal year. ~~The decrease in income tax expenses~~This change was mainly due to the reversal of $145 from provision of income tax. The reversal was made after finalization of the One-Time Mandatory Repatriation Tax summarized in the financial statements under Item 1 above in this Form 10-Q. Initially, during the third quarter of fiscal year 2018, we made an ~~increase~~income tax provision of $900 on an estimated basis. During the second quarter of fiscal 2019, upon finalization of the One-Time Mandatory Repatriation Tax, we determined that an adjustment was required, resulting in ~~withholding~~a $145 tax ~~payment by~~liability reversal which in turn reduced the ~~Singapore operation~~income tax provision to $755. This adjustment materially impacted our provision for income taxes and ~~a decrease in deferred~~effective tax ~~for timing differences recorded by the Malaysia operation.~~rate.

~~-35-~~

The significant change in the tax liability provision was due to the update of information from additional analysis performed on foreign tax pools and earnings and profits computations.

Non-controlling Interest

As of ~~December~~March 31, ~~2017,~~2019, we held a 55% interest in Trio-Tech (Malaysia) Sdn. Bhd., Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI International Pte. Ltd. and PTSHI Indonesia, and a 76% interest in Prestal Enterprise Sdn. Bhd. The non-controlling interest for the three months ended ~~December~~March 31, ~~2017,~~2019 in the net ~~income~~loss of subsidiaries was ~~nil,~~$28, compared to ~~$52~~income of $34 for the same period of the previous fiscal year. The decrease in the non-controlling interest in the net income of subsidiaries was attributable to the decrease in net income generated by the Malaysia testing operation due to a decrease in ~~other income and increase in corporate overhead allocation as compared to~~testing revenue which decreased the ~~same period in the last fiscal year.~~net profit.

~~Loss~~Profit from Discontinued Operations

~~Loss~~Profit from discontinued operations was $2 for the three months ended ~~December~~March 31, ~~2017,~~2019, as compared to a loss of $4$6 for the same period of the last fiscal year. This discontinued operation refers to fabrication service segment. The increase in the profit from discontinued operation was attributable to the unrealised exchange gain as at March 31, 2019.

Net Income

Net income was ~~$673~~$683 for the three months ended ~~December~~March 31, ~~2017,~~2019, an increase of ~~$363~~$1,422 as compared to net ~~income~~loss of ~~$310~~$739 for the three months ended ~~December~~March 31, ~~2016.~~2018. The increase in net income was mainly due to the ~~increase operating income, as discussed earlier.~~gain on disposal of Mao Ye properties and also the absence of provision for repatriation tax in third quarter of fiscal year 2019, which was provided for in the third quarter of 2018.

Earnings per Share

Basic earnings per share from continuing operations was $0.19 for the three months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$0.09~~loss per share of $0.21 for the same period in the last fiscal year. Basic earnings per share from discontinued operations were nil for both the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

Diluted earnings per share from continuing operations was ~~$0.18~~$0.19 for the three months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$0.09~~loss per share of $0.20 for the same period in the last fiscal year. Diluted earnings per share from discontinued operations were nil for both the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

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Segment Information

The revenue, gross margin and income from each segment for the ~~second~~third quarter of fiscal years ~~2018~~2019 and ~~2017,~~2018, respectively, are presented below. As the revenue and gross margin for each segment have been discussed in the previous section, only the comparison of income from operations is discussed below.

Manufacturing Segment

The revenue, gross margin and income ~~/ (loss)~~ from operations for the manufacturing segment for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$3,973	$3,320	$3,097	$3,124
Gross margin	22.8%	21.0%	25.6%	19.0%
Income / (loss) from operations	$107	$(229)
Loss from operations			$(8)	$(105)

~~-36-~~

~~Income~~Loss from operations in the manufacturing segment was ~~$107~~$8 for the three months ended ~~December~~March 31, ~~2017, an improvement~~2019, a decrease of ~~$336,~~$97 as compared to a loss from operation of ~~$229~~$105 in the same period of the last fiscal year. The ~~improvement~~decrease was primarily due to an increase of ~~$207~~$200 in the gross margin, as discussed earlier, ~~and a decrease~~which partially offset an increase of ~~$129~~$103 in operating expenses. Operating expenses for the manufacturing segment were ~~$798~~$802 and ~~$927~~$699 for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~decrease~~increase in operating expenses was mainly due to ~~a decrease in general and administrative expenses of $349, which was partially offset by~~ an increase in selling expenses of $80, general and administrative expenses of $50, ~~increase~~and partially offset by a decrease in corporate overhead ~~by $141,~~of $27 as compared to the same period of last fiscal year. The ~~decrease~~increase in general and administrative expenses was primarily due to ~~a revision~~an increase in ~~the method of allocation of payroll related expenses between segments in the Singapore operations, fixed assets being fully depreciated and absence of provision for doubtful debt expenses~~headcount in the Singapore operations. The increase in selling expenses was due to an increase in commission expenses in the ~~U.S. and~~ Singapore operations as the commissionable revenue increased as compared to the same period last fiscal year. The ~~increase~~decrease in corporate overhead expenses was due to a change in the corporate overhead allocation as compared to the same period last fiscal year. Corporate charges are allocated on a pre-determined fixed charge basis.

Testing Segment

The revenue, gross margin and income from operations for the testing segment for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$4,936	$4,070	$3,989	$4,913
Gross margin	34.1%	34.7%	28.3%	28.9%
Income from operations	$517	$388
(Loss)/income from operations			$(17)	$428

~~Income~~Loss from operations in the testing segment for the three months ended ~~December~~March 31, ~~2017~~2019 was ~~$517,~~$17, which represents an increase in loss from operations of ~~$129 compared to $388~~$445 based on income of $428 in the same period of last fiscal year. The ~~increase~~decrease in operating income was mainly attributable to ~~an increase~~the decrease of ~~$273~~$295 in gross margin, as discussed earlier, ~~which was partially offset by~~coupled with an increase ~~of $144~~ in operating ~~expenses.~~expenses of $150. Operating expenses were ~~$1,168~~$1,144 and ~~$1,024~~$994 for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. The increase in operating expenses was mainly attributable to an increase in ~~general and administrative~~corporate overhead expenses, ~~by $222,~~ which was partially offset by a decrease in ~~corporate overhead expenses by $127. The increase in~~ general and administrative expenses ~~was due to a revision in the method~~by $67 and selling expenses of ~~allocation of payroll related expenses between segments in the Singapore operations and payroll related expenses in the Tianjin, China operations.~~$14. The ~~decrease~~increase in corporate overhead expenses was due to a change in the corporate overhead allocation as compared to the same period last fiscal year. Corporate charges are allocated on a pre-determined fixed charge basis. The decrease in general and administrative expenses was due to a decrease in office expenses in the Malaysia operation and a decrease in manpower and administrative expenses in the Tianjin, China operation.

Distribution Segment

The revenue, gross margin and income from operations for the distribution segment for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$1,606	$1,675	$1,727	$2,033
Gross margin	12.3%	10.4%	14.1%	10.4%
Income from operations	$119	$100	$150	$117

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Income from operations in the distribution segment increased by ~~$19~~$33 to ~~$119~~$150 for the three months ended ~~December~~March 31, ~~2017,~~2019, as compared to ~~$100~~$117 in the same period of last fiscal year. The increase in operating income was primarily due to an increase in gross margin as discussed earlier, which was partially offset by ~~an increase~~a decrease in operating expenses of ~~$4.~~$1. Operating expenses were ~~$78~~$94 and ~~$74~~$95 for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

~~-37-~~

Real Estate Segment

The revenue, gross margin and loss from operations for the real estate segment for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$37	$39	$25	$34
Gross margin	21.6%	25.6%	36.0%	11.8%
Loss from operations	$(9)	$(8)	$(13)	$(18)
Gain on sale of assets held for sale			$685	-

Loss from operations in the real estate segment for the three months ended ~~December~~March 31, ~~2017~~2019 was ~~$9, an increase~~$13, a decrease of ~~$1,~~$5 as compared to ~~$38~~$18 for the same period of the last fiscal year. The decrease in operating loss was mainly due to ~~a decrease~~an increase in gross margin as discussed ~~earlier, which~~earlier. There was ~~partially offset by a decrease in operating expenses~~other income arising from gain on sale of ~~$1. Operating expenses were $17 and $18~~asset held for sale amounting to $685 for the three months ended ~~December~~March 31, ~~2017 and 2016, respectively.~~2019.

Corporate

The ~~(loss) / income~~loss from operations for corporate for the three months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Three Months Ended		Three Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
(Loss) / income from operations	$(36)	$27
Loss from operations			$(11)	$(188)

Corporate operating ~~income changed~~loss decreased by ~~$63~~$177 to ~~a loss of $36~~$11 for the three months ended ~~December~~March 31, ~~2017 from an income~~2019 as compared to of ~~$27~~$188 in the same period of the last fiscal year. The change from an operating income to an operating loss was mainly attributable to an increase in general and administrative expenses by $74 due to an increase in payroll related expenses and professional fees during the three months ended December 31, 2017, ~~as compared to the same period last fiscal year.~~

Comparison of the ~~Six~~Nine Months Ended ~~December~~March 31, ~~2017~~2019 and ~~December~~March 31, ~~2016~~2018

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~March 31, 2018, respectively:

	Six Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Nine Months Ended
			Mar. 31, 2019	Mar. 31, 2018
Revenue	100.0%		100.0%
Cost of sales	74.2	74.3	77.1	75.4
Gross Margin	25.8%	25.7%	22.9%	24.6%
Operating expenses:
General and administrative	16.6%	19.6%	18.3%	16.9%
Selling	2.0		2.1	1.9
Research and development	1.4	0.6	0.9	1.2
Total operating expenses	20.0%	22.2%	21.3%	19.9%
Income from Operations	5.8%	3.5%	1.6%	4.7%

Overall Gross Margin

Overall gross margin as a percentage of revenue ~~increased~~decreased by ~~0.1%~~1.7% to ~~25.8%~~22.9% for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~25.7%~~24.6% in the same period of last fiscal year, primarily due to an decrease in the gross profit margin in the testing segments, which was offset by an increase in the gross profit margin in the manufacturing, ~~and~~ distribution ~~segments, which was partially offset by a decrease in the gross profit margin in the testing~~ and real estate segments. In terms of absolute dollar amounts, gross profits ~~increased~~decreased by ~~$903~~$1,254 to ~~$5,555~~$6,533 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~$4,652~~$7,787 for the same period of the last fiscal year.

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Gross profit margin as a percentage of revenue in the manufacturing segment increased by 0.6% to ~~23.1%~~22.6% for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~22.5%~~22.0% in the same period of the last fiscal year. In absolute dollar amounts, gross profit ~~increased~~decreased by ~~$447~~$336 to ~~$2,021~~$2,280 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$1,574~~$2,616 for the same period in last fiscal year. The ~~increase~~decrease in absolute dollar amount of gross margin was primarily due to ~~the change~~a decrease in ~~product mix~~orders in the Singapore ~~and~~operation, Suzhou, China operations ~~where there was an increase in sales of products that had higher profit margins~~ and ~~a decrease in sales of products that had lower profit margins as compared to the same period of last fiscal year. In our~~ U.S. ~~operations, a delay in orders from a customer while also~~operation, which contributed to a decrease in the gross margin. ~~As a result, the increase in manufacturing revenue was higher than the increase in cost for the six months ended December 31, 2017, as compared to the same period last fiscal year.~~

Gross profit margin as a percentage of revenue in the testing segment decreased by ~~0.5%~~4.5% to ~~33.0%~~27.1% for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 from ~~33.5%~~31.6% in the same period of the last fiscal year. The decrease in profit margin as a percentage of revenue was mainly due to a decrease in ~~high margin testing revenue the Bangkok, Thailand operations. Furthermore, there was an increase in compliance costs~~demand from our customers in the ~~Malaysia operations which increased in the cost of sales. This decrease in gross margin as a percentage of revenue was partially offset by the increase in the Singapore, Suzhou, China and~~ Tianjin, China ~~operations~~operation and Malaysia operation, where significant portions of our cost of goods sold are ~~fixed and as~~fixed. As the demand of services and factory utilization ~~increase,~~decreases, the fixed costs are spread over the ~~increased~~decreased output, which ~~increases~~decreases the gross profit margin. In terms of absolute dollar amounts, gross profit in the testing segment ~~increased~~decreased by ~~$396~~$1,105 to ~~$3,151~~$3,468 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~$2,755~~$4,573 for the same period of the last fiscal year.

Gross profit margin as a percentage of revenue in the distribution segment increased by ~~1.3%~~2.4% to ~~11.6%~~13.5% for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~10.3%~~11.1% in the same period of the last fiscal year. In terms of absolute dollar amounts, gross profit in the distribution segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$365,~~$756, an increase of ~~$78~~$179 as compared to ~~$287~~$577 in the same period of the last fiscal year. The increase in absolute dollar amount of gross margin was due to increase of distribution revenue in the ~~change~~Singapore operation and Suzhou, China operation which was offset by a decrease of distribution revenue in ~~product mix, as this segment had fewer sales of products with a lower profit margin as compared to~~ the ~~same period of last fiscal year.~~Malaysia operation. The gross profit margin of the distribution segment was not only affected by the market price of our products, but also our product mix, which changes frequently as a result of changes in market demand.

Gross profit margin as a percentage of revenue in the real estate segment ~~decreased~~increased by ~~22.5%~~15.8% to ~~23.7%~~35.8% for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~46.2%~~20.0% in the same period of the last fiscal year. In terms of absolute dollar amounts, gross profit ~~decreased~~increased by ~~$18~~$7 to ~~$18~~$29 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$36~~$22 for the same period in last fiscal year. ~~The decrease~~ was due to the a reversal of overprovision for taxes in the six months ended December 31, 2016 while there was none in the same period this fiscal year. an increase in rental income from both investment properties, MaoYe and FuLi, due to an increase in space rented during the period, and a decrease in cost of sales, due to a reversal of overprovision for taxes, as compared to the same period in the last fiscal year. In addition, there was decrease in rental income from the MaoYe investment property in the six months ended December 31, 2017, as compared to the same period in the last fiscal year.

Operating Expenses

Operating expenses for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
General and administrative	$3,566	$3,519	$5,223	$5,339
Selling	431	365	580	612
Research and development	302	105	270	377
Loss on disposal of property, plant and equipment	11	8
Gain on disposal of property, plant and equipment			(13)	(20)
Total	$4,310	$3,997	$6,060	$6,308

General and administrative expenses ~~increased~~decreased by ~~$47,~~$116, or ~~1.3%~~2.2%, from ~~$3,519~~$5,339 to ~~$3,566~~$5,223 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 compared to the same period of the last fiscal year. There was ~~an increase~~a decrease in general and administrative expenses in the U.S., Tianjin, China operations and ~~Tianjin,~~Suzhou, China operations, which was partially offset by the ~~decrease~~increase in general and administrative expenses in all other operations.

~~-39-~~

The ~~increase~~decrease in general and administrative expenses was primarily due to the ~~increase~~decrease in payroll related and bonus expenses in the U.S. ~~and~~operation, Tianjin, China ~~operations.~~operation and Malaysia operation. This ~~increase~~decrease was partially offset mainly by ~~a decrease~~an increase in ~~payroll related~~medical expenses in the Singapore ~~operations~~operation for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, as compared to the same period of last fiscal year.

Selling expenses ~~increased~~decreased by ~~$66,~~$32, or ~~18.1%~~5.2%, for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~$365~~$612 to ~~$431~~$580 compared to the same period of the last fiscal ~~year,~~year. The ~~increase~~decrease was mainly due to an ~~increase~~decrease in commission expenses in the U.S ~~and Singapore~~ operations ~~as the commissionable revenue increased, and an increase in travel expenses~~ in the ~~Singapore, Malaysia and Tianjin, China in the six~~nine months ended ~~December~~March 31, ~~2017,~~2019, and selling expenses further decreased due to adoption of a new revenue standard as described in Note 19 to financial statements included in Part1 Item1 of this Form 10-Q as compared to the same period of last fiscal year.

Research and development expenses ~~increased~~decreased by ~~$197,~~$107, for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, from ~~$105~~$377 to ~~$302,~~$270, as compared to the same period of the last fiscal year. The ~~increase~~decrease was mainly due to a ~~change in cost allocation~~decrease of expenses in the ~~six~~Suzhou, China operation. The Suzhou operation did not incur research and development expenses in the nine months ended ~~December~~March 31, ~~2017 as compared to the same period of last fiscal year, as well as~~2019 whereas there was a ~~oneoff~~one-off research and development project in the Suzhou, China ~~operations.~~operations in the nine months ended March 31, 2018.

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Income from Operations

Income from operations was ~~$1,245~~$451 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$655~~$1,479 for the same period of the last fiscal year. The ~~increase~~decrease was mainly due to the ~~increase~~decrease in gross profit margin being greater than the ~~increase~~decrease in operating expenses, as discussed earlier.

Interest Expense

Interest expense for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Interest expense	$110	$106	$250	$174

Interest expense increased by $4$76 to ~~$110~~$250 from ~~$106~~$174 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to the same period of the last fiscal year. The increase was due to increase utilization of short-term loans in the Singapore operation and long-term loans in the Malaysia operation. The bank loan payable increased by $1,130 to $2,934 for the nine months ended March 31, 2019 as compared to $1,804 as at June 30, 2018.

Other Income

Other income for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Interest income	$20	$12	$67	$39
Other rental income	53	50	84	81
Exchange (loss)/ gain	(30)	182
Exchange loss			(78)	(26)
Bad debt recovery			2	-
Other miscellaneous income	157	69	145	217
Total	$200	$313	$220	$311

Other income for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$200,~~$220, a decrease of ~~$113~~$189 as compared to ~~$313~~$311 for the same period of last fiscal year. This decrease was mainly attributable to ~~foreign currency exchange difference between functional currency and U.S. dollars contributing to an exchange loss~~the existence of ~~$30 for the six months ended December 31, 2017 as compared to an exchange gain of $182 for the same period last fiscal year, which was partially offset by~~ a non-recurring reimbursement ~~income.~~

~~-40-~~

income for the nine months ended March 31, 2018.

Income Tax Expenses

Income tax expense for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$55,~~$159, a ~~decrease~~change of ~~$95,~~$876 as compared to ~~$150 for the same period of last fiscal year. The decrease in~~ income tax expense ~~was mainly due to a change from deferred tax benefit in~~of $1,035 for the same period last fiscal ~~year~~year. This change was mainly due to ~~deferred~~the provision for repatriation tax ~~expense~~of $900 for ~~timing differences recorded by~~nine months ended March 31, 2019. During the ~~Malaysia operation.~~second quarter of fiscal 2019, upon finalization of the One-Time Mandatory Repatriation Tax, we determined that an adjustment was required, resulting in a $145 tax liability reversal which in turn reduced the income tax provision to $755. These adjustments materially impacted our provision for income taxes and effective tax rate.

The significant change in the tax liability provision was due to the update of information from additional analysis performed on foreign tax pools and earnings and profits computations.

Non-controlling Interest

As of ~~December~~March 31, ~~2016,~~2019, we held a 55% interest in Trio-Tech Malaysia, Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI International Pte. Ltd. and PTSHI Indonesia, and a 76% interest in Prestal Enterprise Sdn. Bhd. The net ~~income~~loss attributable to our non-controlling interest in these subsidiaries for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$27,~~$129, a decrease of ~~$69,~~$190 as compared to ~~$96~~net income of $61 for the same period of last fiscal year. The decrease was attributable to the decrease in net income generated by the Malaysia testing ~~operations~~operation due to a decrease in ~~operating income, other income and increase in corporate overhead allocation as compared to~~testing revenue which decreased the ~~same period in the last fiscal year~~net profit.

Loss from Discontinued Operations

Loss from discontinued operations was $5$1 for the ~~six~~nine months ended ~~December~~March 31, ~~2017, an increase~~2019, a decrease of $2$10 as compared to a loss of $3$11 for the same period of the last fiscal year.

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Net Income

Net income was ~~$1,248~~$967 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, an increase of ~~$635,~~$397 as compared to a net income of ~~$613~~$570 for the same period in the last fiscal year. The ~~improvement~~increase was mainly due to ~~an increase in operating income, as discussed earlier.~~gain on disposal of the Mao Ye properties.

Earnings per Share

Basic earnings per share from continuing operations was ~~$0.35~~$0.30 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$0.18~~$0.15 for the same period in the last fiscal year. Basic earnings per share from discontinued operations were nil for both the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

Diluted earnings per share from continuing operations was ~~$0.34~~$0.29 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 as compared to ~~$0.17~~$0.14 for the same period in the last fiscal year. Diluted earnings per share from discontinued operations ~~were~~was nil for both the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016.~~2018.

Segment Information

The revenue, gross profit margin, and income or loss from operations in each segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, 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 from operations is discussed below.

Manufacturing Segment

The revenue, gross margin and income ~~or loss~~ from operations for the manufacturing segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

Six Months Ended

Dec. 31,
2017

Dec. 31,
2016

(Unaudited)

Revenue
$8,738
$6,991
Gross margin
23.1%
22.5%
Income / (loss) from operations
$293
$(322)

~~-41-~~

	Nine Months Ended
	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$10,086	$11,862
Gross margin	22.6%	22.1%
Income from operations	$175	$188

Income from operations from the manufacturing segment was ~~$293~~$175 for the ~~six~~nine months ended ~~December~~March 31, ~~2017, an improvement~~2019, a decrease of ~~$615~~$13 as compared to ~~a loss of $322~~$188 in the same period of the last fiscal year, due to ~~an increase~~a decrease in gross margin by ~~$396 coupled with~~$335 which was partially offset by a decrease in operating expenses. Operating expenses for the manufacturing segment were ~~$1,728~~$2,105 and ~~$1,896~~$2,428 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. The decrease in operating expenses of ~~$168~~$323 was mainly due to a decrease in general and administrative expenses ~~of $637, which was partially offset~~ by ~~an increase~~$44, a decrease in selling expenses by $52, a decrease in corporate overhead ~~of $269~~by $98 and ~~increase~~a decrease in research and development expenses ~~of $160 as discussed earlier,~~by $128, as compared to the same period of last fiscal year. The decrease in general and administrative expenses was primarily due to a revision in the method of allocation of payroll related expenses between segments in the Singapore operations, fixed assets being fully depreciated and absence of provision for doubtful debt expenses in the Singapore operations. The increase in corporate overhead expenses is due to increase in allocation in corporate expenses which is charged on a predetermined fixed basis, which is higher as compared to the same period last fiscal year.

Testing Segment

The revenue, gross margin and (loss) / income from operations for the testing segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$9,541	$8,227	$12,819	$14,454
Gross margin	33.0%	33.5%	27.1%	31.6%
Income from operations	$853	$790
(Loss) / Income from operations			$(134)	$1,281

~~Income~~Loss from operations in the testing segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$853, an increase~~$134, a deterioration of ~~$63~~$1,415 compared to ~~$790~~income from operation of $1,281 in the same period of the last fiscal year. The ~~increase in operating income~~deterioration was attributable to ~~an increase~~the decrease in gross ~~profit of $396, which was partially offset~~margin by an$1,105 as discussed earlier. The increase in operating expenses of ~~$333.~~$310 also further decreased the operating income. Operating expenses were ~~$2,298~~$3,602 and ~~$1,965~~$3,292 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively. The ~~increase in~~higher operating expenses ~~was~~were mainly attributable to an increase in general and administrative expenses by ~~$521, which was partially offset by a decrease~~$168 and an increase in corporate overheads by ~~$250.~~$98. The increase in general and administrative expenses was due to ~~a revision in the method~~an increase of ~~allocation~~medical expenses and an increase of ~~payroll related expenses between segments~~headcount in the Singapore ~~operations, and an increase in payroll related expenses in the Tianjin, China~~ operations. The ~~decrease~~increase in corporate overhead expenses was due to a change in the corporate overhead allocation as compared to the same period last fiscal year. Corporate charges are allocated on a pre-determined fixed charge basis.

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Distribution Segment

The revenue, gross margin and income from operations for the distribution segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$3,142	$2,779	$5,587	$5,175
Gross margin	11.6%	10.3%	13.5%	11.1%
Income from operations	$220	$134	$492	$337

Income from operations in the distribution segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$220,~~$492, an increase of ~~$86~~$155 as compared to ~~$134~~$337 in the same period of the last fiscal year. The increase in operating income was primarily due to an increase in gross margin ~~as discussed earlier, together with a decrease in~~of $179, which was partially offset by the increase of operating expenses ~~of $8.~~by $24. Operating expenses were ~~$145~~$264 and ~~$153~~$240 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016,~~2018, respectively.

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Real Estate Segment

The revenue, gross ~~loss or~~ margin and loss from operations for the real estate segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
Revenue	$76	$78	$81	$110
Gross margin / (loss)	23.7%	46.2%
Gross margin			35.8%	20.0%
Loss from operations	$(19)	$(6)	$(30)	$(37)

Loss from operations in the real estate segment for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$19,~~$30, an ~~increase~~improvement of ~~$13~~$7 as compared to ~~a loss of $6~~$37 for the same period of the last fiscal year. Gross profit margin increased by 15.8% due to the decrease of depreciation expenses of the Mao Ye properties as it has been reclassified to assets held for sale in the first quarter of fiscal year 2019. The ~~increase~~decrease in operating loss was mainly due to an increase in gross ~~loss, as discussed earlier, partially offset by a decrease in operating expenses of $5.~~margin. Operating expenses were ~~$37 and $42~~$59 for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016, respectively.~~2018.

Corporate

The ~~(loss) / income~~loss from operations for corporate for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 and ~~2016~~2018 were as follows:

	Six Months Ended		Nine Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Mar. 31, 2019	Mar. 31, 2018
(Unaudited)
(Loss) / income from operations	$(102)	$59
Loss from operations			$(30)	$(290)

Operating loss in the corporate office for the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019 was ~~$102, change~~$30, a decrease of ~~$161,~~$260, as compared to ~~an income of $59~~$290 for the same period of the last fiscal year. The ~~change from an operating income to an operating loss~~decrease was mainly ~~attributable to an increase in general and administrative expenses by $171~~ due to ~~an increase~~a decrease in ~~payroll~~staff related expenses and also decrease in professional ~~fees during the six months ended December 31, 2017, as compared to the same period last fiscal year.~~fees.

Financial Condition

During the ~~six~~nine months ended ~~December~~March 31, ~~2017~~2019, total assets increased by ~~$3,291~~$526 from ~~$33,498~~$36,474 as at June 30, ~~2017~~2018 to ~~$36,789.~~$37,000. The increase in total assets was primarily due to an increase in ~~cash and cash equivalents, trade accounts receivable,~~short-term deposits, other receivables, ~~inventory,~~ prepaid expenses, property, plant and equipment ~~other assets,~~ and restricted term deposits, which were partially offset by a decrease in ~~short term deposits.~~

~~Cash~~cash and cash equivalents, ~~were $5,059 as at December 31, 2017, reflecting an increase of $287 from $4,772 as at June 30, 2017, mainly due to improved collections in the U.S.~~trade receivables, deferred tax asset, investment properties and ~~Suzhou, China operations and uplift of deposit in the Malaysia operation. This was partially offset by the lower utilization of credit facilities in our Singapore operation.~~

~~Short term deposits were $642 as at December 31, 2017, reflecting a decrease of $145 from $787 as at June 30, 2017, primarily due to uplift of deposit by the Malaysia operation.~~

As at December 31, 2017, the trade accounts receivable balance increased by $484 to $9,493 from $9,009 as at June 30, 2017, mainly due to longer collection cycles in the Singapore and Tianjin, China operations and foreign currency exchange difference between the functional currency and U.S. dollars for the six months ended December 31, 2017. The number of days’ sales outstanding in accounts receivables was 77 and 83 days at the end of the second quarter of fiscal year 2018 and for the fiscal year ended 2017, respectively.other assets.

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Cash and cash equivalents were $4,602 as at March 31, 2019, reflecting a decrease of $1,937 from $6,539 as at June 30, 2018, mainly due to placement of interest-bearing deposits by the Singapore, Malaysia and Chongqing, China operation. This was partially offset by improved collections in the U.S. operation.

Short term deposits were $3,646 as at March 31, 2019, reflecting an increase of $2,993 from $653 as at June 30, 2018, primarily due to placement of deposit by the Singapore, Malaysia and Chongqing, China operations.

As at ~~December~~March 31, ~~2017~~2019, the trade accounts receivable balance decreased by $627 to $7,120 from $7,747 as at June 30, 2018, mainly due to decreased sales in the Malaysia operation and the Tianjin, China operation for the nine months ended March 31, 2019. The accounts receivables turnover days were 70 and 72 days at the end of the third quarter of fiscal year 2019 and for the fiscal year ended 2018, respectively.

As at March 31, 2019, other receivables were ~~$548,~~$1,034, reflecting an increase of ~~$147~~$153 from ~~$401~~$881 as at June 30, ~~2017.~~2018. The increase was primarily due to ~~input tax and tax incentives~~an increase of advance payment made in the ~~Tianjin, China operations in the second quarter of fiscal year 2018.~~Singapore operation.

Inventories as at ~~December~~March 31, ~~2017~~2019 were ~~$2,972, an increase~~$2,918, a decrease of ~~$1,216,~~$12 as compared to ~~$1,756~~$2,930 as at June 30, ~~2017.~~2018. The ~~increase~~decrease in inventory was mainly due to ~~a delay in shipment as a result of external factors and higher inventory turnover days in~~ the Singapore ~~operations.~~operation managing and monitoring its purchases to meet the requirements.

Prepaid expenses were ~~$280~~$307 as at ~~December~~March 31, ~~2017~~2019, compared to ~~$226~~$208 as at June 30, ~~2017.~~2018. The increase of ~~$54~~$99 was primarily due to an increase in prepayment for insurance expenses, software related expenses ~~in the Singapore operation~~ and ~~insurance~~NYSE annual fees in the Singapore and ~~Tianjin, China~~U.S. operations.

Investment properties were $828 as at March 31, 2019 compared to $1,146 at June 30,2018. The decrease of $318 was primarily due to disposal of Mao Ye investment properties.

Property, plant and equipment, net increased by ~~$1,094~~$751 from ~~$11,291~~$11,935 as at June 30, ~~2017,~~2018, to ~~$12,385~~$12,686 as at ~~December~~March 31, ~~2017,~~2019, mainly due to higher capital expenditure in the ~~Singapore~~Suzhou, China operations, Malaysia operation and Tianjin, China ~~operations and foreign currency exchange difference between the functional currency and U.S. dollars~~operation for the ~~six~~nine months ended ~~December~~March 31, ~~2017.~~2018.

Other assets ~~increased~~decreased by ~~$28~~$521 to ~~$1,950~~$1,728 as at ~~December~~March 31, ~~2017,~~2019, as compared to ~~$1,922~~$2,249 as at June 30, ~~2017.~~2018. This was mainly due to reclassification of down payment made for the purchase of property, plant & equipment to fixed assets by the Malaysia and ~~foreign currency exchange difference between functional currency and U.S. dollars from June 30, 2017 to December 31, 2017.~~Tianjin, China operation.

~~Restricted term deposits increased~~Accounts payable decreased by ~~$60~~$683 to ~~$1,717~~$3,021 as at ~~December~~March 31, ~~2017,~~2019, as compared to ~~$1,657~~$3,704 as at June 30, ~~2017.~~2018. This ~~was primarily due to foreign currency exchange difference between functional currency and U.S. dollars from June 30, 2017 to December 31, 2017.~~

~~Utilized lines of credit decreased by $367 to $2,189 as at December 31, 2017 compared to $2,556 as at June 30, 2017, which~~ was mainly due to ~~lower utilization of lines of credit by the Singapore operation~~more payments released in the first, second and third quarters of fiscal year 2019 compared to the fourth quarter of fiscal year 2018.

~~Accounts payable~~Accrued expenses increased by ~~$113~~$710 to ~~$3,342~~$3,882 as at ~~December~~March 31, ~~2017,~~2019, as compared to ~~$3,229~~$3,172 as at June 30, ~~2017. This was mainly due to the foreign currency exchange difference between the functional currency and U.S. dollars for the six months ended December 31, 2017.~~

~~Accrued expenses increased by $942 to $3,985 as at December 31, 2017, as compared to $3,043 as at June 30, 2017.~~2018. The increase in accrued expenses was mainly due to ~~an increase in purchase accruals~~customer deposits in the Singapore operation and ~~Tianjin,~~Suzhou, China operations.

Bank loans payable increased by ~~$161~~$1,130 to ~~$1,973~~$2,934 as at ~~December~~March 31, ~~2017,~~2019, as compared to ~~$1,812~~$1,804 as at June 30, ~~2017.~~2018. This was due to an additional loan ~~made~~availed by the ~~Singapore~~Malaysia operation, which was partially offset by repayment of bank loans by the ~~Malaysia~~Singapore operation.

Capital leases ~~increased~~decreased by ~~$139~~$192 to ~~$898~~$582 as at ~~December~~March 31, ~~2017,~~2019, as compared to ~~$759~~$774 as at June 30, ~~2017.~~2018. This was due to ~~new leases in the Malaysia operations, partially offset by~~ repayment of capital leases by the Malaysia and Singapore operations.

Liquidity Comparison

Net cash provided by operating activities decreased by ~~$2,125~~$160 to ~~$1,546~~$2,962 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, compared to ~~$3,671~~$3,122 during the same period of the last fiscal year. The decrease in net cash ~~generated~~provided by operating activities was primarily due to ~~a decrease in cash inflow of $1,749 from accounts receivables and $427 from other receivables, and~~ an increase in cash outflow of ~~$878~~$162 from other receivables, $106 from prepaid expenses and other current asset, and $685 from gain on disposal of assets for sale. The decrease in ~~inventories. These were~~net cash was partially offset by increase in cash inflow from net income of $397, an increase of cash inflow of $234 from accounts receivables and $816 from other assets, an increase in ~~net income~~cash inflow of ~~$117 and~~$566 in inventories, a decrease in ~~other assets~~cash outflow of ~~$189.~~$190 from accounts payable and accrued expenses and also a decrease in cash outflow of $826 for income tax expenses.

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Net cash used in investing activities increased by ~~$202~~$2,764 to ~~$1,304~~$4,569 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, compared to ~~$1,102~~$1,805 during the same period of the last fiscal year. The increase was primarily due to ~~$743~~$526 in capital spending coupled with increase in $2,658 in investments in unrestricted short-term deposits and a decrease of ~~$83~~$484 in proceeds from ~~disposal~~maturing of ~~property, plant~~unrestricted and ~~equipment.~~restricted term deposits and short-term deposits. This increase in net cash used in investing activities was partially offset by the ~~$484 increase in proceeds~~$943 from ~~maturing~~sale of ~~restricted and unrestricted deposits and a $140 decrease in investments in restricted and unrestricted deposits.~~

~~-44-~~

assets held for sale.

Net cash used in financing activities decreased by ~~$1,087~~$1,260 to ~~$388~~$195 for the ~~six~~nine months ended ~~December~~March 31, ~~2017,~~2019, compared to ~~$1,475~~net cash used in financing activities of $1,455 during the same period of the last fiscal year. The decrease was mainly due to an increase in cash generated through borrowings from bank loans and capital leases by ~~$1,529, which was partially offset by~~$829 and an increase of $350 in ~~repayment of lines of credit of $475.~~cash generated from stock option exercised.

We believe that our projected cash flows from operations, borrowing availability under our revolving lines of credit, cash on hand, trade credit and the secured bank loan will provide the necessary financial resources to meet our projected cash requirements for at least the next 12 months.

Critical Accounting Estimates & Policies

~~The~~Effective as of July 1, 2018, the Company has adopted ASU ~~2015-11~~2014-09, Revenue from contracts with Customers (Topic 606), and its related amendments using modified retrospective transition method. We have completed our adoption and implemented policies, processes and controls to support the standard’s measurement and disclosure requirements as described in Note 1 to the financial statements included in Item 1 of this Form 10-Q.

The amendments in ASU 2016-02 ASC Topic ~~330:~~842: ~~Simplifying the Measurement of Inventory~~Leases ~~(“ASC Topic 330”)~~become effective for the ~~financial year~~Company in fiscal years beginning after December 15, ~~2016 and~~2018, including interim periods within those fiscal ~~years,~~years. These amendments require companies to recognize the following for all leases (with the exception of short-term leases) at the commencement date of the applicable lease: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and ~~concluded~~(b) a right-of-use asset, which is as an asset that represents the ~~effectiveness~~lessee’s right to use, or control the use of, a specified asset for the lease term. The Company will adopt these standards starting in the first quarter of fiscal year 2020 on a modified retrospective approach at the beginning of the period through a cumulative-effect adjustment. The Company is currently evaluating the potential impact of this ~~update does not have a significant effect~~standard on its consolidated financial statements and expects that there will be an increase in assets and liabilities on the ~~Company’s consolidated~~Consolidated Balance Sheets at adoption due to the recognition of right-of-use assets and related lease liabilities. Upon adoption, the Company expects that its financial ~~position or results~~statement disclosure will be expanded to present additional details of ~~operations.~~its leasing arrangements.

There have been no other significant changes in the critical accounting policies ~~except as~~from those, disclosed ~~in “Management’s~~in” Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the most recent Annual Report on Form 10-K.

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ITEM 3. ~~QUANTITATIVE~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. ~~CONTROLS~~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~~March 31, ~~2017,~~2019, 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

Except as discussed below, there has been no change in the Company’s internal control over financial reporting during the fiscal quarter ended ~~December~~March 31, ~~2017~~2019 that ~~has~~have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Enterprise Resource Planning (ERP) Implementation

We are in the process of implementing an ERP ~~System,~~system, as part of a multi-year plan to integrate and upgrade our systems and processes. The implementation of this ERP system is scheduled to occur in phases over the next few years and began with the migration of certain ~~of our~~ operational and financial systems in our Singapore operations to the new ERP system during the second quarter of fiscal 2017. ~~This implementation effort continues in~~During the third quarter of fiscal 2018, ~~when~~ the operational and financial systems in Singapore ~~will be~~were substantially transitioned to the new system.

This implementation effort is continuing in fiscal 2019. The operational and financial systems in our Malaysia operation were substantially transitioned to the new system during the first quarter of fiscal 2019.

~~Enhancement~~ Adoption of ~~Automated Manufacturing System~~New Revenue Recognition Accounting Standard

~~During~~In the first quarter of fiscal ~~2018,~~2019, we ~~enhanced~~implemented controls relating to adoption of the ~~automated manufacturing system used by our Malaysia operation resulting~~new revenue recognition accounting standards that were adopted in ~~a material change in internal controls over financial reporting. The enhancement automates~~fiscal 2019 to ensure that the revenue contracts and related policies and process ~~of invoice generation and matching of customer payments against invoices. We believe the enhancement was necessary~~flows were sufficiently reviewed to ~~support increased volumes and transaction complexities related to our business as well to reduce the number of manual processes employed by the Company.~~identify adoption impacts.

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~~TRIO-TECH~~

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

Malaysia and Singapore regulations prohibit the payment of dividends if the Company does not have sufficient retained earnings and tax credit. In addition, the payment of dividends can only be made after making deductions for income tax pursuant to the regulations. Furthermore, the cash movements from the Company’s 55% owned Malaysian subsidiary to overseas are restricted and must be authorized by the Central Bank of Malaysia. California law also prohibits the payment of dividends if the Company does not have sufficient retained earnings or cannot meet certain asset to liability ratios.

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 XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

~~-46-~~

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~~SIGNATURES~~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/ Victor H.M. Ting VICTOR H.M. TING Vice President and Chief Financial Officer (Principal Financial Officer) Dated: ~~February 12, 2018~~May 14, 2019

~~-47-~~

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	Investment Date	Investment Amount (RM)	Investment Amount (U.S. Dollars)
Reclassification of Penang Property I	Dec 31, 2012	681	181
Gross investment in rental property		681	181

Accumulated depreciation on rental property	June 30, 2015	(310)	(83)
Reclassified as “Assets held for sale”	June 30, 2015	(371)	(98)
Net investment in rental property - Malaysia		-	-

2018	$356
2019	373
2020	298
2021	244
2022	127
Thereafter	575
Total obligations and commitments	$1,973

	Six months Ended Dec. 31	Net Revenue	Operating Income / (Loss)	Total Assets	Depr. and Amort.	Capital Expenditures

Manufacturing	2017	$8,738	$293	$8,837	$56	$37
	2016	$6,991	$(322)	$8,114	$99	$78

Testing Services	2017	9,541	853	23,591	913	1,558
	2016	8,227	790	18,325	765	686

Distribution	2017	3,142	220	621	-	-
	2016	2,779	134	651	2	-

Real Estate	2017	76	(19)	3,624	50	-
	2016	78	(6)	3,147	50	-

Fabrication *	2017	-	-	28	-	-
Services	2016	-	-	29	-	-

Corporate &	2017	-	(102)	88	-	-
Unallocated	2016	-	59	430	-	-

Total	2017	$21,497	$1,245	$36,789	$1,019	$1,595
	2016	$18,075	$655	$30,696	$916	$764

	Three Months Ended		Six Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Revenue	$-	$-	$-	$-
Cost of sales	-	-	-	-
Gross margin	-	-	-	-

Operating expenses:
General and administrative	-	1	-	-
Total	-	1	-	-

Other expenses	(2)	(3)	(5)	(3)

Loss from discontinued operations	(2)	(4)	(5)	(3)

Less: Loss attributable to Non-controlling interest	(3)	(2)	(1)	(3)

Loss from discontinued operations	$(5)	$(6)	$(6)	$(6)