Trio-Tech International 10-Q for FY2021 Q1
Trio-Tech International (TRT)
10-Q
2020-11-13
For: 2020-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Trio-Tech International filed this 10-Q on November 13, 2020, covering the quarter ended September 30, 2020 (FY2021 Q1).
Headline figures
Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6.84M
- down 30.4% from $9.82M a year earlier
- Net loss
- $8000
- compared with net income of $273K a year earlier
- Diluted EPS
- $0.00
- compared with $0.07 a year earlier
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 September 30, 2020
OR
☐
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from ___ to ___
Commission File Number 1-14523
TRIO-TECH INTERNATIONAL
(Exact name of Registrant as specified in its Charter)
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California
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95-2086631
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(State or other jurisdiction of
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(I.R.S. Employer
|
|
incorporation or organization)
|
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Identification Number)
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|
|
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Block 1008 Toa Payoh North
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|
|
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Unit 03-09 Singapore
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318996
|
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(Address of principal executive offices)
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(Zip Code)
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Registrant's
Telephone Number, Including Area
Code: (65) 6265
3300
Securities
registered pursuant to Section 12(b) of the Act:
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Name of
each exchange
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Title
of each class
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Trading
Symbol
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On
which registered
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Common
Stock, no par value
|
TRT
|
NYSE
American
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically, every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a 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
|
☐
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|
Accelerated Filer
|
☐
|
|
Non-Accelerated Filer
|
☐
|
|
Smaller reporting company
|
☒
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|
|
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Emerging growth company
|
☐
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒
As of November 1, 2020, there were 3,710,555 shares of the
issuer’s Common Stock, no par value,
outstanding.
TRIO-TECH INTERNATIONAL
INDEX TO CONDENSED CONSOLIDATED
FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURE
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Page
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1
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1
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2
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4
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5
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6
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28
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37
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37
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38
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38
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38
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38
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38
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38
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38
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39
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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; public health issues
related to the COVID-19 pandemic; the trade tension between U.S.
and China; 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT NUMBER OF
SHARES)
|
|
September
30,
2020
|
June
30,
2020
|
|
ASSETS
|
(Unaudited)
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
and cash equivalents
|
$4,849
|
$4,150
|
|
Short-term
deposits
|
6,678
|
6,697
|
|
Trade
accounts receivable, less allowance for doubtful accounts of $318
and $314, respectively
|
5,745
|
5,951
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|
Other
receivables
|
905
|
998
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|
Inventories,
less provision for obsolete inventories of $692 and $678,
respectively
|
1,872
|
1,922
|
|
Prepaid
expenses and other current assets
|
417
|
482
|
|
Total current assets
|
20,466
|
20,200
|
|
NON-CURRENT
ASSETS:
|
|
|
|
Deferred
tax assets
|
276
|
247
|
|
Investment
properties, net
|
699
|
690
|
|
Property,
plant and equipment, net
|
10,135
|
10,310
|
|
Operating
lease right-of-use assets
|
819
|
944
|
|
Other
assets
|
1,738
|
1,609
|
|
Restricted
term deposits
|
1,695
|
1,660
|
|
Total non-current assets
|
15,362
|
15,460
|
|
TOTAL ASSETS
|
$35,828
|
$35,660
|
|
|
|
|
|
LIABILITIES
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Lines
of credit
|
$-
|
$172
|
|
Accounts
payable
|
2,024
|
2,590
|
|
Accrued
expenses
|
3,549
|
3,005
|
|
Income
taxes payable
|
360
|
344
|
|
Current
portion of bank loans payable
|
425
|
370
|
|
Current
portion of finance leases
|
224
|
231
|
|
Current
portion of operating leases
|
425
|
477
|
|
Current
portion of PPP loan
|
121
|
54
|
|
Total current liabilities
|
7,128
|
7,243
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
Bank
loans payable, net of current portion
|
1,956
|
1,836
|
|
Finance leases,
net of current portion
|
394
|
435
|
|
Operating
leases, net of current portion
|
394
|
467
|
|
Income
taxes payable
|
385
|
430
|
|
PPP
loan, net of current portion
|
-
|
67
|
|
Other
non-current liabilities
|
33
|
36
|
|
Total non-current liabilities
|
3,162
|
3,271
|
|
TOTAL LIABILITIES
|
$10,290
|
$10,514
|
|
|
|
|
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EQUITY
|
|
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|
TRIO-TECH
INTERNATIONAL’S SHAREHOLDERS' EQUITY:
|
|
|
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Common
stock, no par value, 15,000,000 shares authorized; 3,685,555 shares
issued outstanding as at September 30 and June 30, 2020 and
3,673,055 shares as at June 30,2020,
respectively
|
$11,458
|
$11,424
|
|
Paid-in
capital
|
3,369
|
3,363
|
|
Accumulated
retained earnings
|
8,028
|
8,036
|
|
Accumulated
other comprehensive income-translation adjustments
|
1,747
|
1,143
|
|
Total Trio-Tech International shareholders' equity
|
24,602
|
23,966
|
|
Non-controlling
interest
|
936
|
1,180
|
|
TOTAL
EQUITY
|
$25,538
|
$25,146
|
|
TOTAL LIABILITIES AND EQUITY
|
$35,828
|
$35,660
|
See notes to condensed consolidated financial
statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)
UNAUDITED (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
|
|
Three
Months Ended
|
|
|
|
Sept.
30,
|
Sept.
30,
|
|
|
2020
|
2019
|
|
Revenue
|
|
|
|
Manufacturing
|
$2,625
|
$3,317
|
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Testing services
|
2,954
|
4,390
|
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Distribution
|
1,258
|
2,099
|
|
Real estate
|
4
|
17
|
|
|
6,841
|
9,823
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|
Cost of Sales
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Cost of manufactured products sold
|
1,937
|
2,555
|
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Cost of testing services rendered
|
2,322
|
3,191
|
|
Cost of distribution
|
1,047
|
1,807
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Cost of real estate
|
17
|
18
|
|
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5,323
|
7,571
|
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Gross Margin
|
1,518
|
2,252
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
General and administrative
|
1,660
|
1,788
|
|
Selling
|
111
|
190
|
|
Research and development
|
75
|
76
|
|
Gain on disposal of property, plant and equipment
|
(1)
|
(24)
|
|
Total
operating expenses
|
1,845
|
2,030
|
|
|
|
|
|
(Loss)/Income from Operations
|
(327)
|
222
|
|
|
|
|
|
Other Income/(Expenses)
|
|
|
|
Interest expenses
|
(37)
|
(68)
|
|
Other income, net
|
211
|
110
|
|
Total other income
|
174
|
42
|
|
|
|
|
|
(Loss)/ Income from Continuing Operations before
Income Taxes
|
(153)
|
264
|
|
|
|
|
|
Income Tax Expenses
|
(7)
|
-
|
|
|
|
|
|
(Loss)/ Income from Continuing Operations before Non-controlling
Interest, Net of Tax
|
(160)
|
264
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
Loss
from discontinued operations, net of tax
|
(6)
|
(1)
|
|
NET (LOSS)/ INCOME
|
(166)
|
263
|
|
|
|
|
|
Less:
Net loss attributable to the non-controlling interest
|
(158)
|
(10)
|
|
Net (Loss)/ Income Attributable to Trio-Tech International Common
Shareholders
|
$(8)
|
$273
|
|
|
|
|
|
Amounts Attributable to Trio-Tech International Common
Shareholders:
|
|
|
|
Loss
from continuing operations, net of tax
|
(5)
|
274
|
|
Loss
from discontinued operations, net of tax
|
(3)
|
(1)
|
|
Net Loss Attributable to Trio-Tech International Common
Shareholders
|
$(8)
|
$273
|
|
|
|
|
|
Basic Earnings per Share:
|
|
|
|
Basic
earnings per share from continuing operations attributable to
Trio-Tech International
|
$-
|
$0.07
|
|
Basic
earnings per share from discontinued operations attributable to
Trio-Tech International
|
$-
|
$-
|
|
Basic Earnings per Share from Net Income
|
|
|
|
Attributable to Trio-Tech International
|
$-
|
$0.07
|
|
|
|
|
|
Diluted Earnings per Share:
|
|
|
|
Diluted
earnings per share from continuing operations attributable to
Trio-Tech International
|
$-
|
$0.07
|
|
Diluted
earnings per share from discontinued operations attributable to
Trio-Tech International
|
$-
|
$-
|
|
Diluted Earnings per Share from Net Income
|
|
|
|
Attributable to Trio-Tech International
|
$-
|
$0.07
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
|
Basic
|
3,686
|
3,673
|
|
Dilutive
effect of stock options
|
80
|
17
|
|
Number
of shares used to compute earnings per share diluted
|
3,766
|
3,690
|
See notes to condensed consolidated financial
statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME / (LOSS)
|
|
Three
Months Ended
|
|
|
|
Sept.
30,
|
Sept.
30,
|
|
|
2020
|
2019
|
|
Comprehensive Income (Loss) Attributable to Trio-Tech
International Common Shareholders:
|
|
|
|
|
|
|
|
Net
(loss)/income
|
(166)
|
263
|
|
Foreign
currency translation, net of tax
|
640
|
(563)
|
|
Comprehensive Income/(Loss)
|
474
|
(300)
|
|
Less:
Comprehensive (loss)/income attributable to the non-controlling
interests
|
(122)
|
9
|
|
Comprehensive Income/(Loss) Attributable to Trio-Tech International
Common Shareholders
|
$596
|
$(309)
|
|
|
|
|
See
notes to condensed consolidated financial statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
|
Three Months ended September 30,
2020
|
Common Stock
|
Paid-in
|
Accumulated Retained
|
Accumulated Other
Comprehensive
|
Non- controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Interest
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
Balance
at June 30, 2020
|
3,673
|
11,424
|
3,363
|
8,036
|
1,143
|
1,180
|
25,146
|
|
Stock
option expenses
|
-
|
-
|
6
|
-
|
-
|
-
|
6
|
|
Net
loss
|
-
|
-
|
-
|
(8)
|
-
|
(158)
|
(166)
|
|
Dividend declared
by subsidiary
|
-
|
-
|
-
|
-
|
-
|
(122)
|
(122)
|
|
Exercise of stock
option
|
13
|
34
|
-
|
-
|
-
|
-
|
34
|
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
604
|
36
|
640
|
|
Balance
at Sept. 30, 2020
|
3,686
|
11,458
|
3,369
|
8,028
|
1,747
|
936
|
25,538
|
|
Three
Months ended September 30, 2019
|
Common Stock
|
Paid-in
|
Accumulated Retained
|
Accumulated Other
Comprehensive
|
Non- controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Interest
|
Total
|
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
Balance
at June 30, 2019
|
3,673
|
11,424
|
3,305
|
7,070
|
1,867
|
1,195
|
24,861
|
|
Stock
option expenses
|
-
|
-
|
8
|
-
|
-
|
-
|
8
|
|
Net
income / (loss)
|
-
|
-
|
-
|
273
|
-
|
(10)
|
263
|
|
Dividend declared
by subsidiary
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Exercise of stock
option
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
(582)
|
19
|
(563)
|
|
Balance
at Sept. 30, 2019
|
3,673
|
11,424
|
3,313
|
7,343
|
1,285
|
1,204
|
24,569
|
See notes to condensed consolidated financial
statements.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (IN THOUSANDS)
|
|
Three Months
Ended
|
|
|
|
Sept.
30,
|
Sept.
30,
|
|
|
2020
|
2019
|
|
|
(Unaudited)
|
(Unaudited)
|
|
Cash Flow from Operating Activities
|
|
|
|
Net
(loss) / income
|
$(166)
|
$263
|
|
Adjustments
to reconcile net income to net cash flow provided by operating
activities
|
|
|
|
Depreciation and amortization
|
702
|
786
|
|
Stock compensation
|
-
|
8
|
|
Addition / (Reversal) of provision for obsolete
inventories
|
6
|
(5)
|
|
Stock option expense
|
6
|
-
|
|
Bad debt recovery
|
(5)
|
(13)
|
|
Accrued interest expense, net accrued interest income
|
-
|
(10)
|
|
Payment of interest portion of finance lease
|
(10)
|
-
|
|
Warranty recovery, net
|
-
|
(1)
|
|
Gain on sale of property, plant and equipment-
continuing operations
|
(1)
|
(24)
|
|
Deferred tax benefit
|
(19)
|
(4)
|
|
Changes
in operating assets and liabilities, net of acquisition
effects
|
|
|
|
Trade accounts receivable
|
219
|
(386)
|
|
Other receivables
|
93
|
61
|
|
Other assets
|
(67)
|
98
|
|
Inventories
|
67
|
707
|
|
Prepaid expenses and other current assets
|
71
|
(59)
|
|
Accounts payable and accrued expenses
|
(236)
|
(136)
|
|
Income taxes payable
|
(23)
|
(93)
|
|
Operating lease liabilities
|
(174)
|
(202)
|
|
Net Cash Provided by Operating Activities
|
463
|
990
|
|
|
|
|
|
Cash Flow from Investing Activities
|
|
|
|
Investment in unrestricted term deposits,
net (Note
1a)
|
-
|
(1,165)
|
|
Short-term
advances
|
(6)
|
|
|
Additions
to property, plant and equipment
|
(87)
|
(500)
|
|
Net Cash Used in Investing Activities
|
(93)
|
(1,665)
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
Payment
on lines of credit
|
(174)
|
(604)
|
|
Payment
of bank loans
|
(103)
|
(122)
|
|
Payment
of finance leases
|
(54)
|
(65)
|
|
Dividends
paid on non-controlling interest
|
(122)
|
-
|
|
Proceeds
from exercising stock options
|
34
|
-
|
|
Proceeds
from lines of credit
|
-
|
410
|
|
Proceeds
from bank loans
|
208
|
-
|
|
Proceeds
from principal of finance lease
|
-
|
44
|
|
Net Cash Used in Financing Activities
|
(211)
|
(337)
|
|
|
|
|
|
Effect of Changes in Exchange Rate
|
575
|
(173)
|
|
|
|
|
|
Net increase/(decrease) in cash, cash equivalents, and restricted
cash
|
734
|
(1,185)
|
|
Cash, cash equivalents, and restricted cash at beginning of
period
|
5,810
|
6,569
|
|
Cash, cash equivalents, and restricted cash at end of
period
|
$6,544
|
$5,384
|
|
|
|
|
|
Supplementary Information of Cash Flows
|
|
|
|
Cash
paid during the period for:
|
|
|
|
Interest
|
$67
|
$61
|
|
Income
taxes
|
$45
|
$124
|
|
|
|
|
|
Non-Cash Transactions
|
|
|
|
Finance lease of property, plant and equipment
|
$-
|
$44
|
|
Reconciliation of cash, cash equivalents, and restricted
cash
|
|
|
|
Cash
|
4,849
|
3,710
|
|
Restricted term-deposits in non-current assets
|
1,695
|
1,674
|
|
Total cash, cash equivalents, and restricted cash shown in the
statements of cash flows
|
$6,544
|
$5,384
|
See notes to condensed consolidated financial
statements.
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.
TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF
SHARES)
1. ORGANIZATION AND BASIS OF PRESENTATION
Trio-Tech International (“the Company” or
“TTI” 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 first quarter of fiscal
year 2021, TTI conducted business in four business segments:
Manufacturing, Testing Services, Distribution and Real Estate. TTI
has subsidiaries in the U.S., Singapore, Malaysia, Thailand,
Indonesia and China as follows:
|
|
Ownership
|
Location
|
|
Express Test Corporation (Dormant)
|
100%
|
Van
Nuys, California
|
|
Trio-Tech Reliability Services (Dormant)
|
100%
|
Van
Nuys, California
|
|
KTS Incorporated, dba Universal Systems (Dormant)
|
100%
|
Van
Nuys, California
|
|
European Electronic Test Centre (Dormant)
|
100%
|
Dublin,
Ireland
|
|
Trio-Tech International Pte. Ltd.
|
100%
|
Singapore
|
|
Universal (Far East) Pte. Ltd. *
|
100%
|
Singapore
|
|
Trio-Tech International (Thailand) Co. Ltd. *
|
100%
|
Bangkok,
Thailand
|
|
Trio-Tech (Bangkok) Co. Ltd.
|
100%
|
Bangkok,
Thailand
|
|
Trio-Tech (Malaysia) Sdn. Bhd.
(55% owned by Trio-Tech International Pte. Ltd.)
|
55%
|
Penang
and Selangor, Malaysia
|
|
Trio-Tech (Kuala Lumpur) Sdn. Bhd.
|
55%
|
Selangor,
Malaysia
|
|
(100% owned by Trio-Tech Malaysia Sdn. Bhd.)
|
|
|
|
Prestal Enterprise Sdn. Bhd.
|
76%
|
Selangor,
Malaysia
|
|
(76% owned by Trio-Tech International Pte. Ltd.)
|
|
|
|
Trio-Tech (SIP) Co., Ltd. *
|
100%
|
Suzhou,
China
|
|
Trio-Tech (Chongqing) Co. Ltd. *
|
100%
|
Chongqing,
China
|
|
SHI International Pte. Ltd. (Dormant)
(55% owned by Trio-Tech International Pte. Ltd)
|
55%
|
Singapore
|
|
PT SHI Indonesia (Dormant)
(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 United States
Generally Accepted Accounting Principles (“GAAP”) for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. All significant
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
three months ended September 30, 2020 are not necessarily
indicative of the results that may be expected for the fiscal year
ending June 30, 2021. Certain
accounting matters that generally require consideration of
forecasted financial information were assessed regarding impacts
from the COVID-19 pandemic as of September 30, 2020 and through the
Quarterly Report dated November 13, 2020 using reasonably available
information as of those dates. Those accounting matters assessed
included, but were not limited to, allowance for doubtful accounts,
the carrying value of long-lived tangible assets and the valuation
allowances for tax assets. While the assessments resulted in no
material impacts to the consolidated financial statements as of and
for the quarter ended September 30, 2020, the Company believes the
full impact of the pandemic remains uncertain and the Company will
continue to assess if ongoing developments related to the pandemic
may cause future material impacts to our consolidated financial
statements. As of September 30, 2020, the Company had cash and cash
equivalents and short-terms deposits totalling $11,527 and unused
line of credit of $5,621. We finance operations primarily through
our existing cash balances, cash collected from operations, bank
borrowings and capital lease financing. We believe these sources
are sufficient to fund our operations for the foreseeable
future. 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, 2020.
The Company’s operating results are presented based on the
translation of foreign currencies using the respective
quarter’s average exchange rate.
Basis of Presentation and Summary of Significant Accounting
Policies
Leases-Lessee
Accounting Standards Codification ("ASC") Topic 842 introduces new
requirements to increase transparency and comparability among
organizations for leasing transactions for both lessees and
lessors. It requires a lessee to record a right-of-use asset and a
lease liability for all leases with terms longer than 12 months.
These leases will be either finance or operating, with
classification affecting the pattern of expense
recognition.
The standard provided an alternative modified retrospective
transition method. Under this method, the cumulative effect
adjustment to the opening balance of retained earnings is
recognized on the date of adoption (July 1, 2019). The Company
adopted ASC 842 as of July 1, 2019, and applied the alternative
modified retrospective transition method requiring application of
the new guidance to all leases existing at, or entered into on or
after, the date of adoption, i.e., July 1,
2019.
The Company applies the guidance in ASC 842 to individual leases of
assets. When the Company receives substantially all the economic
benefits from and directs the use of specified property, plant and
equipment, transactions give rise to leases. The Company’s
classes of assets include real estate leases.
Operating leases are included in operating lease right-of-use
("ROU") assets, current portion and long-term portion of operating
leases in our consolidated balance sheets. ROU assets represent our
right to use an underlying asset for the lease term and lease
liabilities represent our obligation to make lease payments arising
from the lease. Finance leases are included in plant and equipment,
current portion and long-term portion of finance leases in our
consolidated balance sheets.
The Company has elected the practical expedient within ASC 842 to
not separate lease and non-lease components within lease
transactions for all classes of assets. Additionally, the Company
has elected the short-term lease exception for all classes of
assets, does not apply the recognition requirements for leases of
12 months or less, and recognizes lease payments for short-term
leases as expense either straight-line over the lease term or as
incurred depending on whether the lease payments are fixed or
variable. These elections are applied consistently for all
leases.
As part of applying the transition method, the Company has elected
to apply the package of transition practical expedients within the
new guidance. As required by the new standard, these expedients
have been elected as a package and are consistently applied across
the Company’s lease portfolio. Given this election, the
Company need not reassess:
●
whether
any expired or existing contracts are or contain
leases
●
the
lease classification for any expired or existing
leases
●
treatment
of initial direct costs relating to any existing
leases
When discount rates implicit in leases cannot be readily
determined, the Company uses the applicable incremental borrowing
rate at lease commencement to perform lease classification tests on
lease components and to measure lease liabilities and ROU assets.
The incremental borrowing rate used by the Company was based on
baseline rates and adjusted by the credit spreads commensurate with
the Company’s secured borrowing rate over a similar term. At
each reporting period when there is a new lease initiated, the
rates established for that quarter will be used.
In applying the alternative modified retrospective transition
method, the Company measured lease liabilities at the present value
of the sum of remaining minimum rental payments (as defined under
ASC Topic 840). The present value of lease liabilities has been
measured using the Company’s incremental borrowing rates as
of July 1, 2019 (the date of initial application). Additionally,
ROU assets for these operating leases have been measured as the
initial measurement of application lease liabilities adjusted for
reinstatement liabilities.
Leases-Lessor
For the Company as lessor, all our leases will continue to be
classified as operating leases under the new standard. We do not
expect the new standard to have a material effect on our financial
statements and we do not expect a significant change in our leasing
activities between now and adoption.
2. NEW ACCOUNTING
PRONOUNCEMENTS
In October 2020, FASB issued
ASU2020-10: Codification
Improvements. This update
contains amendments that improve the consistency of the
Codification by including all disclosure guidance in the
appropriate Disclosure Section (Section 50). Many of the amendments
arose because the Board provided an option to give certain
information either on the face of the financial statements or in
the notes to financial statements and that option only was included
in the Other Presentation Matters Section (Section 45) of the
Codification. The option to disclose information in the notes to
financial statements should have been codified in the Disclosure
Section as well as the Other Presentation Matters Section (or other
Section of the Codification in which the option to disclose in the
notes to financial statements appears). The amendments in this
Update do not change GAAP and, therefore, are not expected to
result in a significant change in practice. The amendments
are effective for the Company for fiscal years beginning after
December 15, 2020, including interim period within those fiscal
years. Early adoption is permitted. Adoption shall be applied
retrospectively. The Company is currently evaluating the impacts of
the provisions of ASU 2020-10 on its consolidated financial
statements and related disclosures.
In
August 2020, the FASB issued ASU 2020-06: Debt – Debt with Conversion and Other
options (Subtopic 470-20) and Derivative and Hedging –
Contracts in Entity’s Own Equity (Subtopic 815-40).
This ASU reduces the number of accounting models for convertible
debt instruments and convertible preferred stock and amends the
guidance for the derivatives scope exception for contracts in an
entity’s own equity to reduce form-over-substance-based
accounting conclusion. In addition, this ASU improves and amends
the related EPS guidance. These amendments are effective for the
Company for fiscal years beginning after December 15, 2023,
including interim period within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after
December 15, 2020, including interim periods within those fiscal
years. Adoption is either a modified retrospective method or a
fully retrospective method of transition. The Company is currently
evaluating the impacts of the provisions of ASU 2020-06 on its
consolidated financial statements and related
disclosures.
In
March 2020, FASB issued ASU 2020-04 ASC Topic 848: Reference Rate Reform: Facilitation of the
Effects of Reference Rate Reform on Financial Reporting,
which provides optional expedients and exceptions for applying U.S.
GAAP to contracts, hedging relationships and other transactions
affected by the discontinuation of the London Interbank Offered
Rate (“LIBOR”) or by another reference rate expected to
be discontinued. The amendments are effective for all entities as
of March 12, 2020, and the Company may elect to apply the
amendments prospectively through December 31, 2022. The Company is
currently evaluating the impacts of the provisions of ASU 2020-04
on its consolidated financial statements and related
disclosures.
In June
2016, FASB issued ASU 2016-13 ASC Topic 326: Financial Instruments — Credit
Losses (“ASC Topic 326”) for the measurement of
all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions,
and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to
better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted,
although the inputs to those techniques will change to reflect the
full amount of expected credit losses. ASC Topic 326 is effective
for the Company for annual periods beginning after December 15,
2022. The Company is currently evaluating the potential impact of
this accounting standard update on its consolidated financial
statements.
Other new pronouncements issued but not yet effective until after
September 30, 2020 are not expected to have a significant effect on
the Company’s consolidated financial position or results of
operations.
3. TERM
DEPOSITS
|
|
Sep.
30,
2020
(Unaudited)
|
June
30,
2020
|
|
|
|
|
|
Short-term
deposits
|
$6,696
|
$6,887
|
|
Currency
translation effect on short-term deposits
|
(18)
|
(190)
|
|
Total short-term deposits
|
6,678
|
6,697
|
|
Restricted
term deposits
|
1,661
|
1,712
|
|
Currency
translation effect on restricted term deposits
|
34
|
(52)
|
|
Total restricted term deposits
|
1,695
|
1,660
|
|
Total term deposits
|
$8,373
|
$8,357
|
Restricted deposits represent the amount of cash pledged to secure
loans payable to financial institutions and serve as collateral for
public utility agreements such as electricity and water, and
performance bonds related to customs duty payable. Restricted
deposits are classified as 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, which do not qualify as cash equivalents.
4. TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Accounts receivable are customer obligations due under normal trade
terms. The Company performs continuing credit evaluations of its
customers’ financial conditions, and although management
generally does not require collateral, letters of credit may be
required from the customers in certain circumstances.
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
September 30, 2020 and June 30, 2020 was
adequate.
The
following table represents the changes in the allowance for
doubtful accounts:
|
|
Sept.
30,
2020
(Unaudited)
|
June
30,
2020
|
|
Beginning
|
$314
|
$263
|
|
Additions charged
to expenses
|
-
|
351
|
|
Recovered
|
(5)
|
(284)
|
|
Write-off
|
-
|
(9)
|
|
Currency
translation effect
|
9
|
(7)
|
|
Ending
|
$318
|
$314
|
5. LOANS RECEIVABLE FROM PROPERTY DEVELOPMENT
PROJECTS
The following table presents Trio-Tech (Chongqing) Co. Ltd
(“TTCQ”)’s loan receivable from property
development projects in China as of September 30,
2020.
|
|
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
|
294
|
|
Less:
allowance for doubtful receivables
|
|
(2,000)
|
(294)
|
|
Net loan receivables from property development
projects
|
|
-
|
-
|
|
|
|
|
|
|
Long-term loan receivables
|
|
|
|
|
Jun
Zhou Zhi Ye
|
Oct
31, 2016
|
5,000
|
734
|
|
Less:
transfer – down-payment for purchase of investment
property
|
|
(5,000)
|
(734)
|
|
Net loan receivables from property development
projects
|
|
-
|
-
|
The short-term loan receivables amounting to renminbi
(“RMB”) 2,000, or approximately $294 arose due to TTCQ
entering into a Memorandum Agreement with JiangHuai Property
Development Co. Ltd. (“JiangHuai”) to invest in their
property development projects (Project - Yu Jin Jiang An) located
in Chongqing City, China in fiscal 2011. Based on TTI’s
financial policy, a provision for doubtful receivables of $294 on
the investment in JiangHuai was recorded during fiscal 2014. TTCQ
did not generate other income from JiangHuai for the quarter ended
September 30, 2020 or for the fiscal year ended June 30, 2020. TTCQ
is in the legal process of recovering the outstanding amount of
$294.
The loan amounting to RMB 5,000, or approximately $734 arose due to
TTCQ entering into a Memorandum Agreement with JiaSheng Property
Development Co. Ltd. (“JiaSheng”) to invest in their
property development projects (Project B-48 Phase 2) located in
Chongqing City, China in fiscal 2011. The amount was unsecured and
repayable at the end of the term. The book value of the loan
receivable approximates its fair value. During fiscal year 2015,
the loan receivable was transferred to down payment for purchase of
investment property that is being developed in the Singapore Themed
Resort Project (See Note 8).
6. INVENTORIES
Inventories consisted of the following:
|
|
Sept.
30,
2020
(Unaudited)
|
June
30,
2020
|
|
|
|
|
|
Raw
materials
|
$1,238
|
$1,281
|
|
Work
in progress
|
1,009
|
968
|
|
Finished
goods
|
278
|
422
|
|
Inventories
in transit
|
7
|
-
|
|
Currency
translation effect
|
32
|
(71)
|
|
Less:
provision for obsolete inventories
|
(692)
|
(678)
|
|
|
$1,872
|
$1,922
|
The
following table represents the changes in provision for obsolete
inventories:
|
|
Sept.
30,
2020
(Unaudited)
|
June
30,
2020
|
|
|
|
|
|
Beginning
|
$678
|
$673
|
|
Additions
charged to expenses
|
6
|
26
|
|
Usage
– disposition
|
-
|
(8)
|
|
Currency
translation effect
|
8
|
(13)
|
|
Ending
|
$692
|
$678
|
7. INVESTMENT
PROPERTIES
The following table presents the Company’s investment in
properties in China as of September 30, 2020. The exchange rate is
based on the market rate as of September 30, 2020.
|
|
Investment
Date / Reclassification Date
|
Investment
Amount (RMB)
|
Investment Amount
(U.S. Dollars)
|
|
Purchase of rental
property – Property I – MaoYe Property
|
Jan 04,
2008
|
5,554
|
894
|
|
Currency
translation
|
|
-
|
(87)
|
|
Reclassification as
“Assets held for sale”
|
July 01,
2019
|
(5,554)
|
(807)
|
|
Reclassification
from “Assets held for sale”
|
Mar 31,
2020
|
2,024
|
301
|
|
|
2,024
|
301
|
|
|
Purchase
of rental property – Property II -
JiangHuai
|
Jan 06,
2010
|
3,600
|
580
|
|
Purchase
of rental property – Property III - Fu Li
|
Apr 08,
2010
|
4,025
|
648
|
|
Currency
translation
|
|
-
|
(113)
|
|
Gross investment in
rental property
|
|
9,649
|
1,416
|
|
Accumulated
depreciation on rental property
|
Sep 30,
2020
|
(6,678)
|
(984)
|
|
Reclassified as
“Assets held for sale”-Mao Ye Property
|
July 01,
2019
|
2,822
|
410
|
|
Reclassification
from “Assets held for sale”-Mao Ye
Property
|
Mar 31,
2020
|
(1,029)
|
(143)
|
|
|
(4,885)
|
(717)
|
|
|
Net
investment in property – China
|
|
4,764
|
699
|
The following table presents the Company’s investment in
properties in China as of June 30, 2020. The exchange rate is based
on the market rate as of June 30, 2020.
|
|
Investment
Date / Reclassification Date
|
Investment
Amount (RMB)
|
Investment Amount
(U.S. Dollars)
|
|
Purchase
of rental property – Property I – MaoYe
Property
|
Jan
04, 2008
|
5,554
|
894
|
|
Currency
translation
|
|
-
|
(87)
|
|
Reclassification
as “Assets held for sale”
|
July
01, 2019
|
(5,554)
|
(807)
|
|
Reclassification
from “Assets held for sale”
|
Mar
31, 2020
|
2,024
|
301
|
|
|
2,024
|
301
|
|
|
Purchase
of rental property – Property II -
JiangHuai
|
Jan
06, 2010
|
3,600
|
580
|
|
Purchase
of rental property – Property III - Fu Li
|
Apr
08, 2010
|
4,025
|
648
|
|
Currency
translation
|
|
-
|
(166)
|
|
Gross
investment in rental property
|
|
9,649
|
1,363
|
|
Accumulated
depreciation on rental property
|
June
30, 2020
|
(6,558)
|
(940)
|
|
Reclassified
as “Assets held for sale”-Mao Ye Property
|
July
01, 2019
|
2,822
|
410
|
|
Reclassification
from “Assets held for sale”-Mao Ye
Property
|
Mar
31, 2020
|
(1,029)
|
(143)
|
|
|
(4,765)
|
(673)
|
|
|
Net investment in property – China
|
|
4,884
|
690
|
Rental Property I - Mao Ye Property
In fiscal 2008, TTCQ purchased an office in Chongqing, China from
MaoYe Property Ltd. (“MaoYe”), for a total cash
purchase price of RMB 5,554, or approximately $894.
Property purchased from MaoYe generated a rental income of
$nil during the three months ended
September 30, 2020 as compared to $8 for the same period in last
fiscal year.
Depreciation
expense for MaoYe was $4 for the three months ended September 30,
2020 and 2019, respectively.
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 had yet to receive
the title deed for these properties. TTCQ was in the legal process
of obtaining the title deed until the developer encountered cash
flow difficulties in the recent years. Since fiscal year 2018,
JiangHuai has been under liquidation and is now undergoing asset
distribution. Nonetheless, this is not expected to affect the
property’s market value but, in view of the COVID-19 pandemic
and current economic situation, it is likely to be more tedious and
time-consuming for the Court in their execution of the
sale.
Property
purchased from JiangHuai did not generate any rental income for the
three months ended September 30, 2020 and 2019.
Depreciation
expense for JiangHuai was $6 for the three months ended September
30, 2020 and 2019, respectively.
Rental Property III – FuLi
In fiscal 2010, TTCQ entered into a Memorandum Agreement with
Chongqing FuLi Real Estate Development Co. Ltd.
(“FuLi”) to purchase two commercial properties totaling
311.99 square meters (“office space”) located in Jiang
Bei District Chongqing. The total purchase price committed and paid
was RMB 4,025, or approximately $648. The development was
completed, the property was handed over to TTCQ in April 2013 and
the title deed was received during the third quarter of fiscal
2014.
One of the two commercial properties was leased by TTCQ to a third
party under a lease providing for a rent increase of 6% every year
on May 1, commencing in 2019 until the rental agreement expires on
April 30, 2021. The agreement was terminated in April 2020 due to
the current slow and cautious market rental conditions. Management
is still actively looking for a tenant for this
property.
For the other leased property, TTCQ renewed the lease agreement to
rent out the 161 square meter space at a monthly rate of RMB10, or
approximately $1, from November 1, 2019 to October 31,
2020.
Properties purchased from Fu Li generated a rental income of
$4 for the three months ended
September 30, 2020, and $9 for the same period in the last fiscal
year.
Depreciation expense for Fu Li was $7 for the three months ended
September 30, 2020 and 2019, respectively.
Summary
Total rental income for all investment properties in China
was $4 for the three months ended September 30, 2020 and $17 for
the same period in the last fiscal year.
Depreciation
expenses for all investment properties in China were $17 for the
three months ended September 30, 2020 and $18 for the same period
in the last fiscal year.
8. OTHER ASSETS
Other
assets consisted of the following:
|
|
Sept.
30, 2020
(Unaudited)
|
June
30,
2020
|
|
Down
payment for purchase of investment properties *
|
$1,645
|
$1,645
|
|
Down
payment for purchase of property, plant and equipment
|
69
|
8
|
|
Deposits
for rental and utilities
|
166
|
171
|
|
Currency
translation effect
|
(142)
|
(215)
|
|
Total
|
$1,738
|
$1,609
|
* Down payment for purchase of investment properties
included:
|
|
RMB
|
US
Dollars
|
|
Original investment
(10% of Jun Zhou equity)
|
$10,000
|
$1,606
|
|
Less: Management
Fee
|
(5,000)
|
(803)
|
|
Net
Investment
|
5,000
|
803
|
|
Less: Share of loss
on Joint Venture
|
(137)
|
(22)
|
|
Net
Investment as down payment(Note *a)
|
4,863
|
781
|
|
Loans
Receivable
|
5,000
|
814
|
|
Interest
Receivable
|
1,250
|
200
|
|
Less: Impairment of
Interest
|
(906)
|
(150)
|
|
Transferred
to down payment(Note *b)
|
5,344
|
864
|
|
*
Down payment for purchase of investment properties
|
10,207
|
1,645
|
a)
On
December 2, 2010, the Company signed a Joint Venture agreement
(“agreement”) with Jia Sheng Property Development Co.
Ltd. (“Developer”) to form a new company, Jun Zhou Co.,
Limited (“Joint Venture” or “Jun Zhou”) to
joint develop the “Singapore Themed Park” project (the
“project”), where the Company paid RMB10 million for
the 10% investment in the joint venture. The Developer paid Company
management fee of RMB5 million in cash upon signing of the
agreement with a remaining fee of RMB5 million payable upon
fulfilment of certain conditions in accordance with the agreement.
The Company further reduced its investment by RMB137, or
approximately $22 towards the losses from operations incurred by
the joint venture.
On October 2, 2013, the Company disposed its
entire 10% interest in the joint venture. The Company recognized
the disposal of its 10% investment in Jun Zhou based on the
recorded net book value of RMB5 million or equivalent to US$803K,
from net considerations paid, in accordance with US GAAP under ASC
Topic 845 Non-monetary
Consideration, and it’s
presented under “Other Assets” as non-current assets to
defer the recognition of the gain on the disposal of the 10%
interest in joint venture investment until such time that the
consideration is paid, so that the gain can be
ascertained.
b)
Amounts
of RMB 5,000 or approximately $814 as disclosed in Note 5, plus the
interest receivable on long term loan receivable of RMB 1,250 or
approximately $200 and impairment on interest of RMB 906 or
approximately $150.
The
shop lots are to be delivered to TTCQ upon completion of the
construction of the shop lots in Singapore Themed Resort Project.
The initial targeted date of completion was December 31, 2016.
Based on discussion with the developers, the completion date is
currently estimated to be December 31, 2022. The delay was
primarily due to the time needed by the developers to work with
various parties to inject sufficient funds into this
project.
9. LINES OF CREDIT
Carrying value of the Company’s lines of credit approximates
its fair value because the interest rates associated with the lines
of credit are adjustable in accordance with market situations when
the Company borrowed funds with similar terms and remaining
maturities.
The Company’s credit rating provides it with readily and
adequate access to funds in global markets.
As of September 30, 2020, the Company had certain lines of credit
that are collateralized by restricted deposits.
|
Entity with
|
Type of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%,
SIBOR rate
+1.25% and LIBOR rate
+1.30%
|
-
|
$4895
|
$4,895
|
|
Trio-Tech International Pte. Ltd., Singapore
|
Lines of
Credit
|
Ranging from 1.85%
to 5.5%
|
-
|
$365
|
$365
|
|
Trio-Tech Malaysia
Sdn. Bhd.
|
Revolving
Credit
|
Cost of Funds Rate
+2%
|
-
|
$361
|
$361
|
As of June 30, 2020, the Company had certain lines of credit that
are collateralized by restricted deposits.
|
Entity with
|
Type of
|
Interest
|
Expiration
|
Credit
|
Unused
|
|
Facility
|
Facility
|
Rate
|
Date
|
Limitation
|
Credit
|
|
Trio-Tech
International Pte. Ltd., Singapore
|
Lines
of Credit
|
Ranging
from 1.85% to 5.5%,
SIBOR
rate +1.25% and LIBOR
rate +1.30%
|
-
|
$4,806
|
$4,806
|
|
Universal
(Far East) Pte. Ltd.
|
Lines of Credit
|
Ranging from 1.85% to 5.5%
|
-
|
$359
|
$187
|
|
Trio-Tech
Malaysia Sdn. Bhd.
|
Revolving Credit
|
Cost of Funds Rate +2%
|
-
|
$350
|
$350
|
10. ACCRUED EXPENSES
Accrued
expenses consisted of the following:
|
|
Sept.
30, 2020
(Unaudited)
|
June
30, 2020
|
|
Payroll
and related costs
|
$1,113
|
$1,185
|
|
Commissions
|
78
|
104
|
|
Customer
deposits
|
18
|
30
|
|
Legal
and audit
|
315
|
315
|
|
Sales
tax
|
48
|
19
|
|
Utilities
|
81
|
80
|
|
Warranty
|
10
|
12
|
|
Accrued
purchase of materials and property, plant and
equipment
|
488
|
186
|
|
Provision
for re-instatement
|
291
|
300
|
|
Deferred
income
|
82
|
88
|
|
Contract
liabilities
|
471
|
476
|
|
Other
accrued expenses
|
354
|
287
|
|
Currency
translation effect
|
200
|
(77)
|
|
Total
|
$3,549
|
$3,005
|
11. 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.
|
|
Sept.
30,
2020
(Unaudited)
|
June
30,
2020
|
|
Beginning
|
$12
|
$39
|
|
Additions
charged to cost and expenses
|
-
|
1
|
|
Reversal
|
(2)
|
(27)
|
|
Currency
translation effect
|
-
|
(1)
|
|
Ending
|
$10
|
$12
|
12. BANK LOANS PAYABLE
Bank loans payable consisted of the following:
|
|
Sept.
30, 2020
(Unaudited)
|
June
30, 2020
|
|
Note
payable denominated in RM for expansion plans in Malaysia, maturing
in August 2028, bearing interest at the bank’s prime rate
less 2.00% (3.85% at September 30, 2020 and June 30, 2020,
respectively) per annum, with monthly payments of principal plus
interest through August 2028, collateralized by the acquired
building with a carrying value of $2,621 and $2,543, as at
September 30, 2020 and June 30, 2020, respectively.
|
2,113
|
2,295
|
|
|
|
|
|
Financing
arrangement at fixed interest rate 3.2% per annum, with monthly
payments of principal plus interest through July 2025.
|
199
|
-
|
|
|
|
|
|
Total bank loans
payable
|
$2,312
|
$2,295
|
|
Current
portion of bank loans payable
|
413
|
384
|
|
Currency
translation effect on current portion of bank loans
|
12
|
(14)
|
|
Current portion of bank loans payable
|
425
|
370
|
|
Long-term
portion of bank loans payable
|
1,899
|
1,911
|
|
Currency
translation effect on long-term portion of bank loans
|
57
|
(75)
|
|
Long-term portion of bank loans payable
|
$1,956
|
$1,836
|
Future minimum payments (excluding interest) as at September 30,
2020 were as follows:
|
Remainder of fiscal
2021
|
$429
|
|
2022
|
442
|
|
2023
|
457
|
|
2024
|
397
|
|
2025
|
201
|
|
Thereafter
|
455
|
|
Total obligations
and commitments
|
$2,381
|
Future minimum payments (excluding interest) as at June 30, 2020
were as follows:
|
2021
|
$370
|
|
2022
|
384
|
|
2023
|
400
|
|
2024
|
403
|
|
2025
|
158
|
|
Thereafter
|
491
|
|
Total
obligations and commitments
|
$2,206
|
13. COMMITMENTS AND CONTINGENCIES
Trio-Tech
(Malaysia) Sdn. Bhd. has capital commitments for the purchase of
equipment and other related infrastructure costs amounting to RM
571, or approximately $188 as at September 30, 2020, as
compared to no capital commitment as
at June 30, 2020.
Trio-Tech
(Tianjin) Co. Ltd. in China has no capital commitments for the
purchase of equipment and other related infrastructure costs as at
September 30, 2020, as compared to no capital commitment as at June
30, 2020.
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.
14. BUSINESS
SEGMENTS
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.
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 primary purpose
for which the equipment was acquired.
Significant Judgments
The Company’s arrangements with its customers include various
combinations of products and services, which are generally capable
of being distinct and accounted for as separate performance
obligations. A product or service is considered distinct if it is
separately identifiable from other deliverables in the arrangement
and if a customer can benefit from it on its own or with other
resources that are readily available to the customer.
The Company allocates the transaction price to each performance
obligation on a relative standalone selling price basis
(“SSP”). Determining the SSP for each distinct
performance obligation and allocation of consideration from an
arrangement to the individual performance obligations and the
appropriate timing of revenue recognition are significant judgments
with respect to these arrangements. The Company typically
establishes the SSP based on observable prices of products or
services sold separately in comparable circumstances to similar
clients. The Company may estimate SSP by considering internal
costs, profit objectives and pricing practices in certain
circumstances.
Warranties, discounts and allowances are estimated using historical
and recent data trends. The Company includes estimates in the
transaction price only to the extent that a significant reversal of
revenue is not probable in subsequent periods. The Company’s
products and services are generally not sold with a right of
return, nor has the Company experienced significant returns from or
refunds to its customers.
Manufacturing
The Company primarily derives revenue from the sale of both
front-end and back-end semiconductor test equipment and related
peripherals, maintenance and support of all these products,
installation and training services and the sale of spare parts. The
Company’s revenues are measured based on consideration
stipulated in the arrangement with each customer, net of any sales
incentives and amounts collected on behalf of third parties, such
as sales taxes.
The Company recognizes revenue at a point in time when the Company
has satisfied its performance obligation by transferring control of
the product to the customer. The Company uses judgment to evaluate
whether the control has transferred by considering several
indicators, including:
●
whether
the Company has a present right to payment;
●
the
customer has legal title;
●
the
customer has physical possession;
●
the
customer has significant risk and rewards of ownership;
and
●
the
customer has accepted the product, or whether customer acceptance
is considered a formality based on history of acceptance of similar
products (for example, when the customer has previously accepted
the same equipment, with the same specifications, and when we can
objectively demonstrate that the tool meets all the required
acceptance criteria, and when the installation of the system is
deemed perfunctory).
Not all indicators need to be met for the Company to conclude that
control has transferred to the customer. In circumstances in which
revenue is recognized prior to the product acceptance, the portion
of revenue associated with its performance obligations of product
installation and training services are deferred and recognized upon
acceptance.
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 renders testing services to manufacturers and
purchasers of semiconductors and other entities who either lack
testing capabilities or whose in-house screening facilities are
insufficient. The Company primarily derives testing revenue from
burn-in services, manpower supply and other associated services.
SSP is directly observable from the sales orders. Revenue is
allocated to performance obligations satisfied at a point in time
depending upon terms of the sales order. Generally, there is no
other performance obligation other than what has been stated inside
the sales order for each of these sales.
Terms of contract that may indicate potential variable
consideration include warranty, late delivery penalty and
reimbursement to solve 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 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.
All inter-segment revenue was from the manufacturing segment to the
testing and distribution segments. Total inter-segment revenue was
$92 for the three months ended September 30, 2020, as compared to
$381 for the same period 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.
The following segment information is unaudited for the three months
ended September 30, 2020 and September 30, 2019:
Business Segment Information:
|
|
Three Months
Ended
Sept. 30,
|
Net
Revenue
|
Operating
Income / (Loss) |
Total
Assets
|
Depr.
And
Amor.
|
Captial
Expenditures |
|
Manufacturing
|
2020
|
$2,625
|
(18)
|
10,383
|
106
|
67
|
|
|
2019
|
$3,317
|
(12)
|
9,434
|
86
|
19
|
|
|
|
|
|
|
|
|
|
Testing
Services
|
2020
|
2,954
|
(337)
|
20,848
|
579
|
20
|
|
|
2019
|
4,390
|
68
|
22,138
|
681
|
520
|
|
|
|
|
|
|
|
|
|
Distribution
|
2020
|
1,258
|
124
|
758
|
-
|
-
|
|
|
2019
|
2,099
|
204
|
785
|
1
|
-
|
|
|
|
|
|
|
|
|
|
Real
Estate
|
2020
|
4
|
(27)
|
3,722
|
17
|
-
|
|
|
2019
|
17
|
(17)
|
3,577
|
18
|
-
|
|
|
|
|
|
|
|
|
|
Fabrication
|
2020
|
-
|
-
|
25
|
-
|
-
|
|
Services
*
|
2019
|
-
|
-
|
27
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Corporate
&
|
2020
|
-
|
(69)
|
92
|
-
|
-
|
|
Unallocated
|
2019
|
-
|
(21)
|
157
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Total
Company
|
2020
|
$6,841
|
(327)
|
35,828
|
702
|
87
|
|
|
2019
|
$9,823
|
222
|
36,118
|
786
|
539**
|
* Fabrication services is a discontinued operation.
**Amount reflecting additions of property, plant & equipment amounted to $539
offset by a trade-in value of $39 from the disposal during the
three months ended September 30, 2019
15. OTHER
INCOME
Other income consisted of the following:
|
|
Three
Months Ended September 30,
|
|
|
|
2020
|
2019
|
|
Interest
income
|
40
|
32
|
|
Other
rental income
|
21
|
30
|
|
Exchange
(gain)/loss
|
(44)
|
5
|
|
Bad
debt recovery
|
-
|
11
|
|
Dividend
income
|
2
|
-
|
|
Government
grant
|
154
|
-
|
|
Other
miscellaneous income
|
38
|
32
|
|
Total
|
$211
|
$110
|
During
the first quarter of fiscal year 2021, the Company received
government grants amounting to $154, of which $142 were the
financial assistance received from the Singapore and Malaysia
governments amid the COVID-19 pandemic.
16. 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 2014 to 2020 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 Tax
Cuts and Jobs Act (the “Tax Act”) was enacted on
December 22, 2017, and reduces the U.S. federal corporate tax rate
from 35% to 21%, eliminated corporate Alternative Minimum Tax,
modified rules for expensing capital investment, and limited the
deduction of interest expense for certain companies. The 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 foreign earnings,
and new measures to curtail base erosion and promote U.S.
production.
Due to
the enactment of Tax Act, the Company is subject to a tax on global intangible low-taxed income
(“GILTI”). GILTI is a tax on foreign income
in excess of a deemed return on tangible assets of foreign
corporations. Companies subject to GILTI have the option to account
for the GILTI tax as a period cost if and when incurred, or to
recognize deferred taxes for temporary differences including
outside basis differences expected to reverse as GILTI. The Company
has elected to account for GILTI as a period cost. GILTI expense is
$Nil for the period ended September 30, 2020.
The Company's income tax expense was $7 and $Nil for the three
months ended September 30, 2020 and September 30, 2019,
respectively. Our effective tax rate (“ETR”) from
continuing operations was 5% and 0% for the quarter ended September
30, 2020 and September 30, 2019 respectively.
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 no unrecognized
tax benefits or related accrued penalties or interest expenses at
September 30, 2020.
In
assessing the ability to realize the deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based on these criteria, management believes it is more
likely than not the Company will not realize the benefits of the
federal, state, and foreign deductible differences. Accordingly, a
full valuation allowance has been established.
17. CONTRACT BALANCES
The
timing of revenue recognition, billings and collections may result
in billed accounts receivable, unbilled receivables (contract
assets), and customer advances and deposits (contract liabilities).
The Company’s payment terms and conditions vary by contract
type, although terms generally include a requirement of payment of
70% to 90% of total contract consideration within 30 to 60 days of
shipment with the remainder payable within 30 days of acceptance.
In instances where the timing of revenue recognition differs from
the timing of invoicing, the Company has determined that its
contracts generally do not include a significant financing
component.
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.
|
|
Sept.
30, Jun 30,
|
|
|
|
2020
(Unaudited)
|
2020
|
|
Trade
Accounts Receivable
|
5,745
|
5,951
|
|
Accounts
Payable
|
2,024
|
2,590
|
|
Contract
Assets
|
255
|
216
|
|
Contract
Liabilities
|
471
|
476
|
Remaining Performance Obligation
As at September 30, 2020, the Company had $478 of remaining
performance obligations, which represents our obligation to deliver
products and services. Given the profile of contract terms,
approximately 69 percent of this amount is expected to be
recognized as revenue over the next two years with the remaining of
the amount expected to be recognized between three and five
years.
Refer to note 14 “Business Segments” of the
Notes to Condensed Consolidated Financial Statements for information related to
revenue.
18. EARNINGS PER SHARE
The Company adopted ASC Topic 260, Earnings Per Share.
Basic Earnings Per Share
(“EPS”) 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.
Options
to purchase 751,000 shares of Common Stock at exercise prices
ranging from $2.53 to $5.98 per share were outstanding as of
September 30, 2020. 220,500 stock options were excluded in the
computation of diluted EPS for the three months ended September 30,
2020 because they were anti-dilutive.
Options
to purchase 673,500 shares of Common Stock at exercise prices
ranging from $2.69 to $5.98 per share were outstanding as of
September 30, 2019. 242,125 stock options were excluded in the
computation of diluted EPS for the three months
ended September 30, 2020 because they were
anti-dilutive.
The following table is a reconciliation of the weighted average
shares used in the computation of basic and diluted EPS for the
period presented herein:
|
|
Three
Months Ended
|
|
|
|
September
30,
|
|
|
|
2020
(Unaudited)
|
2019
(Unaudited)
|
|
(Loss)
/ Income attributable to Trio-Tech International common
shareholders from continuing operations, net of tax
|
$(5)
|
$274
|
|
Loss
attributable to Trio-Tech International common shareholders from
discontinued operations, net of tax
|
(3)
|
(1)
|
|
Net (loss) / income attributable to Trio-Tech International common
shareholders
|
$(8)
|
$273
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic
|
3,686
|
3,673
|
|
Dilutive
effect of stock options
|
80
|
17
|
|
Number
of shares used to compute earnings per share –
diluted
|
3,766
|
3,690
|
|
|
|
|
|
Basic
earnings per share from continuing operations attributable to
Trio-Tech International
|
-
|
0.07
|
|
|
|
|
|
Basic
earnings per share from discontinued operations attributable to
Trio-Tech International
|
-
|
-
|
|
Basic earnings
per share from net income attributable to Trio-Tech
International
|
$-
|
$0.07
|
|
|
|
|
|
Diluted
earnings per share from continuing operations attributable to
Trio-Tech International
|
-
|
0.07
|
|
|
|
|
|
Diluted
earnings per share from discontinued operations attributable to
Trio-Tech International
|
-
|
-
|
|
Diluted
earnings per share from net income attributable to Trio-Tech
International
|
$-
|
$0.07
|
|
|
|
|
19. 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 during the term of such plan to increase
the number of shares covered thereby. As of the 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 covered an aggregate of 500,000 shares of the Company’s
Common Stock. Each of those plans terminated by its respective
terms on September 24, 2017. These two plans were administered by
the Board, which also established the terms of the
awards.
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. Each of
these plans is administered by the Board of Directors of the
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:
|
|
Three
Months Ended
September
30,
|
|
|
|
2020
|
2019
|
|
Expected
volatility
|
45.38%to
65.49%
|
45.38%to
97.48%
|
|
Risk-free interest
rate
|
0.30% to
2.35%
|
0.30% to
2.35%
|
|
Expected life
(years)
|
2.5 -3.25
|
2.5 -3.25
|
The
expected volatilities are based on the historical volatility of the
Company’s stock. Due to lower volatility, the observation is
made on a daily basis for the three months ended September 30,
2020. 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 on the next three succeeding
anniversaries of the grant date. The share-based compensation will
be recognized in terms of the grade method on a straight-line basis
for each separately vesting portion of the award. Certain option
awards provide for accelerated vesting if there is a change in
control (as defined in the 2017 Employee Plan).
During
the first quarter of fiscal year 2021, the Company did not grant
any options pursuant to the 2017 Employee Plan. There were no stock
options exercised during the three-month period ended September 30,
2020. The Company recognized $6 stock-based compensation expenses
during the three months ended September 30, 2020.
During the first quarter of fiscal year 2020, the Company did not
grant any options pursuant to the 2017 Employee Plan. There were no
stock options exercised during the three-month period ended
September 30, 2019. The Company recognized $8 stock-based
compensation expenses during the three months ended September 30,
2019.
As of
September 30, 2020, there were vested stock options granted under
the 2017 Employee Plan covering a total of 98,000 shares of Common
Stock. The weighted-average exercise price was $4.44 and the
weighted average remaining contractual term was 3.16
years.
As of September 30, 2019, there were vested stock options granted
under the 2017 Employee Plan covering a total of 49,000 shares of
Common Stock. The weighted-average exercise price was $4.97 and the
weighted average remaining contractual term was 3.86
years.
A
summary of option activities under the 2017 Employee Plan during
the three months period ended September 30, 2020 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2020
|
196,000
|
$3.92
|
3.72
|
$36
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding at
September 30, 2020
|
196,000
|
3.92
|
3.47
|
62
|
|
Exercisable at
September 30, 2020
|
98,000
|
4.44
|
3.16
|
18
|
A
summary of the Company’s non-vested employee stock options
during the three months ended September 30, 2020 is presented
below:
|
|
Options
|
Weighted Average
Grant-Date
Fair
Value
|
|
|
|
|
|
Non-vested at July
1, 2020
|
98,000
|
$3.39
|
|
Granted
|
-
|
-
|
|
Vested
|
--
|
-
|
|
Forfeited
|
-
|
-
|
|
Non-vested at
September 30, 2020
|
98,000
|
$3.39
|
|
|
|
|
A
summary of option activities under the 2017 Employee Plan during
the three months period ended September 30, 2019 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2019
|
136,000
|
$4.53
|
4.28
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding at September 30,
2019
|
136,000
|
4.53
|
4.02
|
19.2
|
|
Exercisable at September 30,
2019
|
49,000
|
4.97
|
3.86
|
5
|
A
summary of the Company’s non-vested employee stock options
during the three months ended September 30, 2019 is presented
below:
|
|
Options
|
Weighted Average
Grant-Date
Fair
Value
|
|
|
|
|
|
Non-vested
at July 1, 2019
|
87,000
|
$4.28
|
|
Granted
|
-
|
-
|
|
Vested
|
---
|
-
|
|
Forfeited
|
-
|
-
|
|
Non-vested at September 30,
2019
|
87,000
|
$4.28
|
2007 Employee Stock Option Plan
The
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 2007 Employee Plan
permitted the issuance of options to employees.
As the
2007 Plan has terminated, the Company did not grant any options
pursuant to the 2007 Employee Plan during the three months ended
September 30, 2020 and September 30, 2019
respectively.
There were no options exercised during the three months ended
September 30, 2020 and September 30, 2019. The Company did not
recognize any stock-based compensation expenses during the three
months ended September 30, 2020 and September 30,
2019.
As of September 30, 2020, there were vested stock options
granted under the 2007 Employee Plan covering a total of 77,500
shares of Common Stock. The weighted-average exercise price was
$3.69 and the weighted average remaining contractual term was 0.96
years.
As of September 30, 2019, there were vested stock options granted
under the 2007 Employee Plan covering a total of 68,125 shares of
Common Stock. The weighted-average exercise price was $3.62 and the
weighted average remaining contractual term was 1.89
years.
A
summary of option activities under the 2007 Employee Plan during
the three months ended September 30, 2020 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
Outstanding at July
1, 2020
|
77,500
|
$3.69
|
1.22
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited or
expired
|
-
|
-
|
-
|
-
|
|
Outstanding at
September 30, 2020
|
77,500
|
$3.69
|
0.96
|
$6
|
|
Exercisable at
September 30, 2020
|
77,500
|
$3.69
|
0.96
|
$6
|
There were no non-vested employee stock options during the three
months ended September 30, 2020.
A summary of option activities under the 2007 Employee Plan during
the three months ended September 30, 2019 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at July 1, 2019
|
77,500
|
$3.69
|
2.22
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding
at September 30, 2019
|
77,500
|
$3.69
|
1.97
|
$14
|
|
Exercisable
at September 30, 2019
|
68,125
|
$3.62
|
1.89
|
$14
|
A
summary of the status of the Company’s non-vested employee
stock options during the three months ended September 30,
2019 is presented
below:
|
|
Options
|
Weighted Average
Grant-Date
Fair
Value
|
|
|
|
|
|
Non-vested
at July 1, 2019
|
9,375
|
$4.14
|
|
Granted
|
-
|
-
|
|
Vested
|
-
|
-
|
|
Forfeited
|
-
|
-
|
|
Non-vested at September 30,
2019
|
-
|
$4.14
|
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 exercisable immediately as of the grant
date.
During the first quarter of fiscal year 2021, the Company did not
grant any options pursuant to the 2017 Directors Plan. There
were no stock options exercised during the three months ended
September 30, 2020. The Company did
not recognize any stock-based compensation expenses during the
three months ended September 30, 2020.
During the first quarter of fiscal year 2020, the Company did not
grant any options pursuant to the 2017 Directors Plan. There were
no stock options exercised during the three months ended September
30, 2019. The Company did not recognize any stock-based
compensation expenses during the three months ended September 30,
2019.
As all the stock options granted under the 2017 Directors Plan vest
immediately on the date of grant, there were no unvested stock
options granted under the 2017 Directors Plan as of September 30,
2020.
As of September 30, 2020, there were vested stock options
granted under the 2017 Directors Plan covering a total of 240,000
shares of Common Stock. The weighted-average exercise price was
$3.93 and the weighted average remaining contractual term was 3.49
years.
As of September 30, 2019, there were vested stock options granted
under the 2017 Directors Plan covering a total of 160,000 shares of
Common Stock. The weighted-average exercise price was $4.63 and the
weighted average remaining contractual term was 4.00
years.
A
summary of option activities under the 2017 Directors Plan during
the three months ended September 30, 2020 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2020
|
240,000
|
$3.93
|
3.75
|
$48
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding at September 30,
2020
|
240,000
|
3.93
|
3.49
|
82
|
|
Exercisable at September 30,
2020
|
240,000
|
3.93
|
3.49
|
82
|
A
summary of option activities under the 2017 Directors Plan during
the three months ended September 30, 2019 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2019
|
160,000
|
$4.63
|
4.25
|
$-
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding at September 30,
2019
|
160,000
|
4.63
|
4.00
|
26
|
|
Exercisable at September 30,
2019
|
160,000
|
4.63
|
4.00
|
26
|
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 2007 Directors Plan
permitted the issuance of options to directors.
As the
2007 Plan has terminated, the Company did not grant any options
pursuant to the 2007 Directors Plan during the three months ended
September 30, 2020 and September 30, 2019.
12,500 of stock options exercised during the three months ended
September 30, 2020. The Company did not recognize any stock-based
compensation expenses during the three months ended September 30,
2020.
There were no stock options exercised during the three months ended
September 30, 2019. The Company did not recognize any stock-based
compensation expenses during the three months ended September 30,
2019.
As of September 30, 2020, there were vested stock options granted
under the 2007 Directors Plan covering a total of 237,500 shares of
Common Stock. The weighted-average exercise price was $3.36 and the
weighted average remaining contractual term was 0.61
years.
As of September 30, 2019, there were vested stock options granted
under the 2007 Directors Plan covering a total of 300,000 shares of
Common Stock. The weighted-average exercise price was $3.40 and the
weighted average remaining contractual term was 1.33
years.
A summary of option activities under the 2007 Directors Plan during
the three months ended September 30, 2020 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2020
|
250,000
|
$3.32
|
0.83
|
$22
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
(12,500)
|
2.69
|
-
|
11
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding
at September 30, 2020
|
237,500
|
$3.36
|
0.61
|
$51
|
|
Exercisable
at September 30, 2020
|
237,500
|
$3.36
|
0.61
|
$51
|
A summary of option activities under the 2007 Directors Plan during
the three months ended September 30, 2019 is presented as
follows:
|
|
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
Outstanding
at July 1, 2019
|
300,000
|
$3.40
|
1.58
|
$9
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
-
|
-
|
|
Forfeited
or expired
|
-
|
-
|
-
|
-
|
|
Outstanding
at September 30, 2019
|
300,000
|
$3.40
|
1.33
|
$97
|
|
Exercisable
at September 30, 2019
|
300,000
|
$3.40
|
1.33
|
$97
|
20. LEASES
Company as Lessor
Operating
leases where we are lessor arise from the leasing of the
Company’s commercial and residential real estate investment
property. Initial lease terms generally range from 12 to 60 months.
Depreciation expense for assets subject to operating leases is
taken into account primarily on the straight-line method over a
period of twenty years in amounts necessary to reduce the carrying
amount of the asset to its estimated residual value. Depreciation
expenses relating to the property held as investments in operating
leases was $17 for both 3 months ended September 30, 2020
and September 30, 2019.
Future
minimum rental income in China and Thailand to be received from
fiscal year 2021 to fiscal year 2022 on non-cancelable operating
leases is contractually due as follows as of September 30,
2020:
|
2021
|
$101
|
|
2022
|
117
|
|
|
$218
|
Future
minimum rental income in China and Thailand to be received from
fiscal year 2021 to fiscal year 2022 on non-cancelable operating
leases is contractually due as follows as of June 30,
2020:
|
2021
|
120
|
|
2022
|
114
|
|
|
$234
|
Company as Lessee
The Company (or an affiliate) is the lessee under operating leases
for corporate offices and research and development facilities with
remaining lease terms of 1 year to 3 years and finance leases for
plant and equipment.
Supplemental balance sheet information related to leases was as
follows (in thousands):
|
|
September
30,
|
|
|
2020
|
|
|
(Unaudited)
|
|
Finance Leases(Plant and Equipment)
|
|
|
Plant
and equipment, at cost
|
1,540
|
|
Accumulated
depreciation
|
769
|
|
Plant and equipment,
net
|
771
|
|
|
|
|
Current
portion of finance leases
|
261
|
|
Net
of current portion of finance leases
|
560
|
|
Total finance lease
liabilities
|
821
|
|
|
|
|
Operating Leases (Corporate offices, Research and development
facilities)
|
|
|
Operating
lease right-of-use assets
|
819
|
|
|
|
|
Current
portion of operating leases
|
425
|
|
Net
of current portion of operating leases
|
394
|
|
Total operating lease
liabilities
|
819
|
|
Lease Cost
|
|
|
Finance
Lease Cost:
|
|
|
Interest
on Finance Lease
|
12
|
|
Amortization
of right-of -use asset
|
15
|
|
Total
Finance Lease Cost
|
27
|
|
|
|
|
Operating
Lease Costs
|
186
|
Other
information related to leases was as follows (in thousands except
lease term and discount rate):
|
|
September 30,
|
|
|
2020
|
|
|
(Unaudited)
|
|
Cash Paid for amounts included in the measurement of lease
liabilities
|
|
|
Operating
cash flows from finance
leases
|
(10)
|
|
Operating
cash flows from operating leases
|
(174)
|
|
Finance
cash flows from finance leases
|
(54)
|
|
Right-of-use assets obtained in exchange for new operating lease
liabilities
|
-
|
|
|
|
|
Weighted-average remaining lease term:
|
|
|
Finance
leases
|
3.51
|
|
Operating
leases
|
1.62
|
|
Weighted-average Discount Rate:
|
|
|
Finance
leases
|
3.35%
|
|
Operating
leases
|
4.57%
|
As of September 30, 2020, the maturities of the Company's operating
and finance lease liabilities are as follow:
|
|
Operating Lease Liabilities
|
Finance Lease Liabilities
|
|
Fiscal Year
|
|
|
|
Remainder
of 2021
|
$452
|
255
|
|
2022
|
$308
|
199
|
|
2023
|
99
|
123
|
|
2024
|
-
|
98
|
|
2025
|
-
|
5
|
|
Total
future minimum lease payments
|
$859
|
680
|
|
Less:
amount representing interest
|
(40)
|
(62)
|
|
Present
value of net minimum lease payments
|
819
|
618
|
|
|
|
|
|
Presentation
on statement of financial position
|
|
|
|
Current
|
$425
|
224
|
|
Non-Current
|
$394
|
394
|
As of June 30, 2020, future minimum lease payments under finance
leases and non-cancelable operating leases were as
follows:
|
|
Operating Lease Liabilities
|
Finance Lease Liabilities
|
|
Fiscal Year
|
|
|
|
Remainder
of 2021
|
$509
|
265
|
|
2022
|
$317
|
211
|
|
2023
|
168
|
133
|
|
2024
|
-
|
107
|
|
2025
|
-
|
20
|
|
Total
future minimum lease payments
|
$994
|
736
|
|
Less:
amount representing interest
|
(50)
|
(70)
|
|
Present
value of net minimum lease payments
|
944
|
666
|
|
|
|
|
|
Presentation
on statement of financial position
|
|
|
|
Current
|
$477
|
231
|
|
Non-Current
|
$467
|
435
|
21. FAIR VALUE OF FINANCIAL INSTRUMENTS APPROXIMATE
CARRYING VALUE
In accordance with ASC Topics 825 and 820, the following presents
assets and liabilities measured and carried at fair value and
classified by level of fair value measurement
hierarchy:
There were no transfers between Levels 1 and 2 during the three
months ended September 30, 2020 and 2019.
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.
PPP loan (Level 2) – The carrying amount approximates its
fair value based on similar long-term debt issues available to the
Company.
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.
23. PAYCHECK PROTECTION PROGRAM LOAN
The Coronavirus Aid, Relief, and Economic Security (CARES) Act
created the Paycheck Protection Program (PPP) to provide
certain small businesses with liquidity to support their operations
during the COVID-19 pandemic. The PPP is a loan program
designed to provide a direct incentive for small businesses to keep
their employees on payroll.
The
loans have a 1% fixed interest rate and are due in two years with
payment deferred for the first six months. However, they are
eligible for forgiveness (in full or in part, including any accrued
interest) under certain conditions and are subject to audit by the
U.S. government. The loans will be
forgiven if the loan proceeds were used for eligible
purposes, including payroll, benefits, rent and utilities, and the
Company maintained its payroll levels for eight weeks.
In May
2020, the Company received loan proceeds in the amount of
approximately $121 under the PPP. The Company accounted for the PPP
loan as a financial liability in accordance with Accounting
Standards Codification (ASC) 470 Debt after considering the
following aspects: (1) the legal form of a PPP loan is debt
regardless of whether the Company expects the loan to be forgiven
(2) given the degree of uncertainty and complexity surrounding the
PPP loan forgiveness process, this may impact a Company’s
initial assessment.
Under
ASC 470, the Company recognizes a liability for the full amount of
PPP proceeds received and accrues interest over the term of the
loan. No additional interest was imputed at a market rate because
the guidance on imputing interest in ASC 835-30 excludes
transactions where interest rates are prescribed by a government
agency. If any amount is ultimately forgiven (i.e., the Company is
legally released from being the loan’s primary obligor in
accordance with ASC 405-20), income from the extinguishment of the
liability would be recognized in the income statement as a gain on
loan extinguishment. The Company intends to use the proceeds for
purposes consistent with the PPP. Hence, the Company expects that
its use of the loan proceeds will meet the conditions for
forgiveness of the loan. In considering the term of the loan and
payment deferred portion, the Company determined that the loan
would be presented as a current portion of $121 in the balance
sheet.
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 financial statements and notes in Item I above and
with the audited consolidated financial statements and notes, the
information under the headings “Risk Factors” and
“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, 2020.
Trio-Tech International (“TTI”) was incorporated in
1958 under the laws of the State of California. As used
herein, the term “Trio-Tech” or “Company”
or “we” or “us” or “Registrant”
includes Trio-Tech International and its subsidiaries unless the
context otherwise indicates. Our mailing address and executive
offices are located at Block 1008 Toa Payoh North, Unit 03-09
Singapore 318996, and our telephone number is (65) 6265
3300.
The Company is a provider of reliability test equipment and
services to the semiconductor industry. Our customers rely on us to
verify that their semiconductor components meet or exceed the
rigorous reliability standards demanded for aerospace,
communications and other electronics products.
TTI generated approximately 99.9% 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 September 30, 2020.
The Real Estate segment contributed only 0.1% to the total revenue
during the three months ended September 30, 2020.
Manufacturing
TTI develops and manufactures an extensive range of test equipment
used in the "front end" and the "back end" manufacturing processes
of semiconductors. Our equipment includes leak detectors,
autoclaves, centrifuges, burn-in systems and boards, HAST testers,
temperature-controlled chucks, wet benches and more.
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 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 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.
Impact of COVID-19 on our Business
In December 2019, a novel strain of coronavirus
(“COVID-19”), was reported to have surfaced in China,
resulting in shutdowns of manufacturing and commerce in the months
that followed. Since then, the COVID-19 pandemic has spread to
multiple countries worldwide and has resulted in authorities
implementing numerous measures to try to contain the disease and
slow its spread, such as travel bans and restrictions, quarantines,
shelter-in-place orders and shutdowns. These measures have created
significant uncertainty and economic disruption, both short-term
and potentially long-term.
The health and safety of our employees and our customers are a top
priority for us. In an effort to protect our employees, we took and
continue to take proactive and aggressive actions, starting with
the earliest signs of the outbreak, to adopt social distancing
policies at our locations, including working from home and
suspending employee travel. Our operations have been classified as
part of the global supply chain and essential businesses in many
jurisdictions, and employees who are working onsite are required to
adhere to strict safety measures, including the use of masks and
sanitizer, wellness screenings prior to accessing work sites,
staggered break times to prevent congregation, prohibitions on
physical contact with co-workers or customers, restrictions on
access through only a single point of entry and exit, and utilizing
video conferencing. We have also incorporated other rules such as
restricting visitors to any of our facilities that remain open and
proactively providing employees with hand sanitizer.
The most significant near-term impacts of the on-going COVID-19
pandemic on our financial performance are a decline in
customers’ volume of testing services in our Malaysia and
China Operations and customers’ order in our manufacturing
segment in our U.S. and Singapore operations.
The Company received an aggregate of $142 in government assistance
in the Singapore, and Malaysia operations to mitigate the adverse
impact on the business from the pandemic. The Company
believes that, as with other business entities in Singapore, it
will receive additional government assistance for a period to ease
the financial impact caused by the pandemic.
As of September 30, 2020, the Company had cash and cash equivalents
and short-term deposits totaling $11,527 and an unused line of
credit of $5,621. We finance operations primarily through our
existing cash balances, cash collected from operations, bank
borrowings and capital lease financing. We believe these sources
are sufficient to fund our operations for the foreseeable
future.
While we have implemented safeguards and procedures to counter the
impact of the COVID-19 pandemic, the full extent to which the
pandemic has and will directly or indirectly impact us, including
our business, financial condition, and result of operations, will
depend on future developments that are highly uncertain and cannot
be accurately predicted. This may include further mitigation
efforts taken to contain the virus or treat its impact and the
economic impact on local, regional, national and international
markets. We will continue to actively monitor the situation and may
take further actions that alter our business operations as may be
required by the governments or that we determine are in the best
interests of our employees, customers, suppliers and
stockholders.
First Quarter Fiscal Year 2021 Highlights
●
Total
revenue decreased by $2,982 or 30.3%, to $6,841 in the first
quarter of fiscal year 2021, compared to $9,823 for the same period
in fiscal year 2020.
●
Manufacturing
segment revenue decreased by $692, or 20.9%, to $2,625 for the
first quarter of fiscal year 2021, compared to $3,317 for the same
period in fiscal year 2020.
●
Testing
segment revenue decreased by $1,436, or 32.7%, to $2,954 for the
first quarter of fiscal year 2021, compared to $4,390 for the same
period in fiscal year 2020.
●
Distribution
segment revenue decreased by $841, or 40.1%, to $1,258 for the
first quarter of fiscal year 2021, compared to $2,099 for the same
period in fiscal year 2020.
●
Real
estate segment rental revenue decreased by $13 or 76.5% to $4 for
the first quarter of fiscal year 2021 compared to $17 for the same
period in fiscal year 2020.
●
The
overall gross profit margin decreased by 0.7% to 22.2% for the
first quarter of fiscal year 2021, from 22.9% for the same period
in fiscal year 2020.
●
Loss
from operations was $327 for the first quarter of fiscal year 2021,
a deterioration of $549, as compared to income from operations of
$222 for the same period in fiscal year 2020.
●
General
and administrative expenses decreased by $128, or 7.1%, to $1,660
for the first quarter of fiscal year 2021, from $1,788 for the same
period in fiscal year 2020.
●
Selling
expenses decreased by $79, or 41.6%, to $111 for the first quarter
of fiscal year 2021, from $190 for the same period in fiscal year
2020.
●
Other
income increased by $101 to $211 in the first quarter of fiscal
year 2021 compared to $110 in the same period in fiscal year
2020.
●
Income
tax expenses was $7 in the first quarter of fiscal year 2021, an
increase of $7 as compared to an income tax expense of $nil in the
same period in fiscal year 2020.
●
During
the first quarter of fiscal year 2021, loss from continuing
operations before non-controlling interest, net of tax was $160, as
compared to income from continuing operations before
non-controlling inteterst of $264 for the same period in fiscal
year 2020.
●
Net
loss attributable to non-controlling interest for the first quarter
of fiscal year 2021 was $158, an increase of $148, as compared to
$10 in the same period in fiscal year 2020.
●
Basic
Earnings per share for the first quarter of fiscal year 2021 were
$nil, as compared to earnings per share of $0.07 for the same
period in fiscal year 2020.
●
Dilutive
Earnings per share for the first quarter of fiscal year 2021 were
$nil, as compared to earnings per share of $0.07 for the same
period in fiscal year 2020.
●
Total
assets increased by $168 to $35,828 as of September 30, 2020
compared to $35,660 as of June 30, 2020.
●
Total
liabilities decreased by $224 to $10,290 as of September 30, 2020
compared to $10,514 as of June 30, 2020.
Results of Operations and Business Outlook
The following table sets forth our revenue components for the three
months ended September 30, 2020 and 2019,
respectively.
|
Revenue
Components
|
Three
Months Ended
September
30,
|
|
|
|
2020
|
2019
|
|
Revenue:
|
|
|
|
Manufacturing
|
38.3%
|
33.8%
|
|
Testing
Services
|
43.2
|
44.7
|
|
Distribution
|
18.4
|
21.3
|
|
Real
Estate
|
0.1
|
0.2
|
|
Total
|
100.0%
|
100.0%
|
Revenue for the three months ended September 30, 2020 was $6,841, a
decrease of $2,982 from $9,823 when compared to the revenue for the
same period of the prior fiscal year. As a percentage, revenue
decreased by 30.4% for the three months ended September 30, 2020
when compared to revenue for the same period of the prior
year.
For the three months ended September 30, 2020, there was a decrease
in revenue across all segments amid the global pandemic when
compared to the same period of the prior fiscal year.
Total revenue into and within China, the Southeast Asia regions and
other countries (except revenue into and within the United States)
decreased by $2,780 or 30.3%, to $6,407 for the three months ended
September 30, 2020, as compared with $9,187 for the same period of
last fiscal year.
Total revenue into and within the U.S. was $433 for the three
months ended September 30, 2020, a decrease of $203 from $636 for
the same period of the prior year.
Revenue within our four current segments for the three months ended
September 30, 2020 is discussed below.
Manufacturing Segment
Revenue in the manufacturing segment as a percentage of total
revenue was 38.3% for the three months ended September 30, 2020, an
increase of 4.5% of total revenue when compared to 33.8% in the
same period of the last fiscal year. The absolute amount of
revenue decreased by $692 to $2,625 for the three months ended
September 30, 2020, compared to $3,317, for the same period of the
last fiscal year.
Revenue in the manufacturing segment for the three months ended
September 30, 2020 decreased primarily due to the adverse impact to
the global market brought about by the global pandemic, resulting
in a decrease in orders by customers in the Singapore and U.S.
operations.
Revenue in the manufacturing segment from a major customer
accounted for 12.5% and 39.3% of our revenue in the manufacturing
segment for the three months ended September 30, 2020 and 2019,
respectively. The future revenue in our manufacturing segment will
be affected by the purchase and capital expenditure plans of this
major customer, if the customer base cannot be
increased.
Testing Services Segment
Revenue in the testing segment as a percentage of total revenue was
43.2% for the three months ended September 30, 2020, a decrease of
1.5% of the total revenue when compared to 44.7% for the same
period of the last fiscal year. The absolute amount of revenue
decreased by $1,436 to $2,954 for the three months ended
September 30, 2020, as compared to $4,390 for the same period of
the last fiscal year.
Revenue in the testing segment for the three months ended September
30, 2020 decreased primarily due to a decrease in the Malaysia and
China operations but was partially offset by an increase in the
Thailand operations. The decrease in Malaysia and China operations
was caused by a decrease in orders from the customer amid the
pandemic.
The revenue in the testing segment from a major customer accounted
for 56.3% and 66.4% of our revenue in the testing segment for the
three months ended September 30, 2020 and 2019, respectively. The
future revenue in the 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 any 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 the
customers in order to make it convenient for them to send us their
newly manufactured parts for testing and to enable us to maintain a
share of the market.
Distribution Segment
Revenue in the distribution segment as a percentage of total
revenue was 18.4% for the three months ended September 30, 2020, a
decrease of 2.9% of total revenue when compared to 21.3% in the
same period of the last fiscal year. The absolute amount of
revenue decreased by $841 to $1,258 for the three months ended
September 30, 2020, compared to $2,099 for the same period of the
last fiscal year.
Revenue in the distribution segment for the three months ended
September 30, 2020 decreased primarily due to a decrease in revenue
generated from customers in the Singapore operation.
Demand for the distribution segment varies depending on the demand
for our customers’ products, the changes taking place in the
market and our customers’ forecasts. Hence it is
difficult to accurately forecast fluctuations in the
market.
Real Estate Segment
The real estate segment accounted for 0.1% of total revenue for the
three months ended September 30, 2020 and 0.2% of total revenue for
three months ended September 30, 2019. The absolute amount of
revenue in the real estate segment was $4 for the three months
ended September 30, 2020 and $17 for the three months ended
September 30, 2019.
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 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 through our efforts to keep
our staff up to date on the newest technology and stressing the
importance of understanding and meeting the stringent requirements
of our customers. Finally, the Company is exploring new markets and
products, looking for new customers, and upgrading and improving
burn-in technology while at the same time searching for improved
testing methods for higher technology chips.
We are in the process of implementing an ERP System, as part of a
multi-year plan to integrate and upgrade our systems and processes.
The implementation of this ERP system was scheduled to occur in
phases over a 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.
During the third quarter of fiscal 2018, the operational and
financial systems in Singapore were substantially transitioned to
the new system. The operational and financial systems in our
Malaysia operation were substantially transitioned to the new
system during the first quarter of fiscal 2019.
The operational systems in our Tianjin and Suzhou operations were
substantially transitioned to the new system during the third
quarter of fiscal 2020. This implementation effort will continue
until the financial systems of these two operations are fully
transitioned to the new system, and until the Group's consolidation
process is substantially automated using the new
system.
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 to strengthen our
internal financial controls by automating certain manual processes
and standardizing business processes and reporting across our
organization, management will continue to evaluate and monitor our
internal controls as processes and procedures in each of the
affected areas evolve.
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.
In December 2019, COVID-19 was reported to have surfaced in China,
resulting in shutdowns of manufacturing and commerce in the months
that followed. Since then, the COVID-19 pandemic has spread to
multiple countries worldwide and has resulted in authorities
implementing numerous measures to try to contain the disease and
slow its spread, such as travel bans and restrictions, quarantines,
shelter-in-place orders and shutdowns. These measures have created
significant uncertainty and economic disruption, both short-term
and potentially long-term.
The spread of COVID-19 has caused us to modify our business
practices (including employee travel, employee work locations, and
cancellation of physical participation in meetings, events and
conferences), and we may take further actions as may be required by
government authorities or that we determine are in the best
interest of our employees, customers, partners, and suppliers.
There is no certainty that such measures will be sufficient to
mitigate the risks posed by the virus and our ability to perform
critical functions could be harmed.
The degree to which COVID-19 impacts our results will depend on
future developments, which are highly uncertain and cannot be
predicted, including but not limited to, the duration and spread of
the pandemic, its severity, the action to contain the virus or
treat its impact, and how quickly and to what extent normal
economic and operating conditions can resume. Even after the
COVID-19 pandemic has subsided, we may experience material adverse
impacts on our business as a result of the global economic impact
and any recession that has occurred or may occur in the future.
There are no comparable recent events that provide guidance as to
the effect the spread of COVID-19 as a global pandemic may have,
and, as a result, the ultimate impact of the pandemic on our
operations and financial results is highly uncertain and subject to
change.
Comparison of the Three Months Ended September 30, 2020 and
September 30, 2019
The following table sets forth certain consolidated statements of
income data as a percentage of revenue for the three months ended
September 30, 2020 and 2019 respectively:
|
|
Three
Months Ended
September
30,
|
|
|
|
2020
|
2019
|
|
Revenue
|
100.0%
|
100.0%
|
|
Cost
of sales
|
77.8
|
77.1
|
|
Gross Margin
|
22.2%
|
22.9%
|
|
Operating
expenses
|
|
|
|
General
and administrative
|
24.3%
|
18.2%
|
|
Selling
|
1.6
|
1.9
|
|
Research
and development
|
1.1
|
0.8
|
|
Gain
on disposal of property, plant and equipment
|
-
|
(0.2)
|
|
Total
operating expenses
|
27.0%
|
20.7%
|
|
(Loss) / Income from Operations
|
(4.8)%
|
2.2%
|
Overall Gross Margin
Overall gross margin as a percentage of revenue decreased by 0.7%
to 22.2% for the three months ended September 30, 2020, from 22.9%
for the same period of the last fiscal year.
Gross profit margin as a percentage of revenue in the manufacturing
segment increased by 3.2% to 26.2% for the three months ended
September 30, 2020, as compared to 23.0% for the same period in
last fiscal year. The increase in gross profit margin was primarily
due to higher proportion of sales of high profit margin products in
the three months ended September 30, 2020 as compared to the same
period in the last fiscal year. In absolute dollar amounts, gross
profits in the manufacturing segment decreased by $74 to $688 for
the three months ended September 30, 2020, from $762 for the same
period in the last fiscal year.
Gross profit margin as a percentage of revenue in the testing
segment decreased by 5.9% to 21.4% for the three months ended
September 30, 2020, from 27.3% in the same period of the last
fiscal year. Significant portions of our cost of goods
sold are fixed in the testing segment. Thus, as the
demand of services and factory utilization decreases, the fixed
costs are spread over the decreased output, which decreases the
gross profit margin. In absolute dollar amounts, gross profit in
the testing segment decreased by $567 to $632 for the three months
ended September 30, 2020 from $1,199 for the same period of
the last fiscal year.
Gross profit margin of the distribution segment is not only
affected by the market price of the products we distribute, but
also the mix of products we distribute, which changes frequently as
a result of changes in market demand. Gross profit margin as a
percentage of revenue in the distribution segment increased by 2.9%
to 16.8% for the three months ended September 30, 2020, from 13.9%
in the same period of the last fiscal year. The increase in
gross margin was due to the increase in sales of high profit margin
products in our Singapore operation as compared to the same period
of last fiscal year. In absolute dollar amounts, gross profit in
the distribution segment for the three months ended September 30,
2020 was $211 as compared to $292 in the same period of the last
fiscal year.
In absolute dollar amounts, for the three months ended September
30, 2020, gross loss in the real estate segment was $13, as
compared to $1 for the same period of last fiscal year. The
increase in gross loss was mainly due to a decrease in rental
income amid the pandemic.
Operating Expenses
Operating expenses for the three months ended September 30, 2020
and 2019 were as follows:
|
|
Three Months
Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
General
and administrative
|
$1,660
|
$1,788
|
|
Selling
|
111
|
190
|
|
Research
and development
|
75
|
76
|
|
Gain
on disposal of property, plant and equipment
|
(1)
|
(24)
|
|
Total
|
$1,845
|
$2,030
|
General and administrative expenses decreased by $128, or 7.1%,
from $1,788 to $1,660 for the three months ended September 30, 2020
compared to the same period of last fiscal year. The decrease in
general and administrative expenses was mainly attributable to the
lower payroll and staff related expenses in the Singapore, Malaysia
and China operations.
Selling expenses decreased by $79, or 41.6%, from $190 to $111 for
the three months ended September 30, 2020, compared to the same
period of the last fiscal year. The decrease in selling expenses
was primarily attributable to lower travelling expenses due to the
worldwide travel restrictions imposed to contain the spread of the
pandemic.
During the three months ended September 30, 2020, there was a gain
on disposal of property, plant and equipment of $1 as compared to
$24 in the same period of last fiscal year.
(Loss) / Income from Operations
Loss from operations was $327 for the three months ended September
30, 2020, a deterioration of $549, as compared to the income from
operations of $222 for the three months ended September 30, 2019.
The deterioration was mainly due to the decrease in gross profit
which was partially offset by the decrease in operating expenses,
as previously discussed.
Interest Expense
Interest expense for the three months ended September 30, 2020 and
2019 were as follows:
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Interest expenses
|
$37
|
$68
|
Interest expense was $37 for the three months ended September 30,
2020, a decrease of $31, or 45.6% as compared to $68 for the three
months ended September 30, 2019. The decrease was due to a decrease
in the utilization of short-term loans in the Singapore
operations. As of September 30, 2020, the Company had an
unused line of credit of $5,621 as compared to $6,250 at September
30, 2019.
Other Income
Other income for the three months ended September 30, 2020 and 2019
were as follows:
|
|
Three
Months Ended September 30,
|
|
|
|
2020
|
2019
|
|
Interest
income
|
$40
|
32
|
|
Other
rental income
|
21
|
30
|
|
Exchange
(loss)/gain
|
(44)
|
5
|
|
Bad
debt recovery
|
-
|
11
|
|
Dividend
income
|
2
|
-
|
|
Government
grant
|
154
|
-
|
|
Other
miscellaneous income
|
38
|
32
|
|
Total
|
$211
|
$110
|
Other income increased by $101 to $211 for the three months ended
September 30, 2019 from $110 as compared to the same period in the
last fiscal year. The increase was primarily due to the Company
receiving government grants of $154 from the local government in the Singapore, and
Malaysia operations, of which $142 reflects financial assistance to
mitigate the negative impact on the businesses amid the pandemic.
The increase was partially offset with the unfavorable foreign
exchange movement for the three months ended September 30,
2020.
Income Tax Expenses
The
Company's income tax expense was $7 and $nil for the three months
ended September 30, 2020 and September 30, 2019, respectively.
Although there was a decrease in the revenue across the segments,
the Company accounted for income tax
expenses for those operations which had generated taxable profit
after utilizing the tax benefits.
Non-controlling Interest
As of September 30, 2020, we held a 55% interest in Trio-Tech
(Malaysia) Sdn. Bhd., Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI
International Pte. Ltd., and PT. SHI Indonesia. We also held a 76%
interest in Prestal Enterprise Sdn. Bhd. The share of net loss from
the subsidiaries by the non-controlling interest for the three
months ended September 30, 2020 was $158, an increase of $148
compared to $10 for the same period of the previous fiscal
year. The increase in the net loss of the non-controlling
interest in the subsidiaries was attributable to the increase in
net loss generated by the Malaysia operation as compared to the
same period in the previous fiscal year.
Net (Loss) / Income Attributable to Trio-Tech International Common
Shareholders
Net loss attributable to Trio-Tech International common
shareholders for the three months ended September 30, 2020 was $8,
a deterioration of $281, as compared to a net income of $273 for
the same period last fiscal year.
Earnings per Share
Basic earnings per share from continuing operations were $nil for
the three months ended September 30, 2020 as compared to $0.07 for
the same period in the last fiscal year. Basic earnings per share
from discontinued operations were $nil for both the three months
ended September 30, 2020 and 2019.
Diluted earnings per share from continuing operations were $nil for
the three months ended September 30, 2020 as compared to $0.07 for
the same period in the last fiscal year. Diluted earnings per share
from discontinued operations were $nil for both the three months
ended September 30, 2020 and 2019.
Segment Information
The revenue, gross margin and income or loss from operations for
each segment during the first quarter of fiscal year 2021 and
fiscal year 2020 are presented below. As the revenue and gross
margin for each segment have been discussed in the previous
section, only the comparison of income or loss from operations is
discussed below.
Manufacturing Segment
The revenue, gross margin and loss from operations for the
manufacturing segment for the three months ended September 30, 2020
and 2019 were as follows
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Revenue
|
$2,625
|
$3,317
|
|
Gross margin
|
26.2%
|
23.0%
|
|
Loss from operations
|
$(18)
|
$(12)
|
Loss from operations from the manufacturing segment was $18 as
compared to $12 in the same period of the last fiscal year,
primarily due to a decrease in gross margin of $74 which was
partially offset by the decrease in operating expenses of $68.
Operating expenses for the manufacturing segment were $706 and $774
for the three months ended September 30, 2020 and 2019,
respectively. The decrease in operating expenses was mainly due to
a decrease of $24 in general and administrative expenses, $38 in
selling expenses and $6 in corporate overhead expenses. The
decrease in general and administrative expenses was mainly
attributable to a decrease in payroll related expenses in the
Singapore operations. The decrease in selling expenses was
primarily attributable to lower travelling expenses due to the
worldwide travel restrictions imposed to contain the spread of the
pandemic.
Testing Segment
The revenue, gross margin and (loss)/income from operations for the
testing segment for the three months ended September 30, 2020 and
2019 were as follows:
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Revenue
|
$2,954
|
$4,390
|
|
Gross margin
|
21.4%
|
27.3%
|
|
(Loss)/Income from operations
|
$(337)
|
$68
|
Loss from operations in the testing segment for the three months
ended September 30, 2020 was $337, a deterioration of $405 from
income from operations of $68 in the same period of the last fiscal
year. The deterioration was mainly attributable to a decrease
of gross profit margin as discussed earlier which was partially
offset by the decrease in operating expenses. Operating expenses
were $970 and $1,131 for the three months ended September 30, 2020
and 2019, respectively. The
decrease of $161 in operating expenses was mainly due to a decrease
in general and administrative expenses, which was mainly due to
lower payroll related expenses incurred in the Malaysia and China
operations.
Distribution Segment
The revenue, gross margin and income from operations for the
distribution segment for the three months ended September 30, 2020
and 2019 were as follows:
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Revenue
|
$1,258
|
$2,099
|
|
Gross margin
|
16.8%
|
13.9%
|
|
Income from operations
|
$124
|
$204
|
Income from operations was $124 for the three months ended
September 30, 2020, as compared to $204 for the same period of last
fiscal year. The decrease of $80 was mainly due to a decrease
of $81 in the gross margin, as discussed earlier. Operating
expenses were $87 and $88 for the three months ended September 30,
2020 and 2019, respectively.
Real Estate Segment
The revenue, gross margin and loss from operations for the real
estate segment for the three months ended September 30, 2020 and
2019 were as follows:
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Revenue
|
$4
|
$17
|
|
Gross margin
|
(325.0)%
|
(5.9)%
|
|
Loss from operations
|
$(27)
|
$(17)
|
Loss from operations in the real estate segment for the three
months ended September 30, 2020 was $27 compared to $17 for the
same period of last fiscal year. Operating expenses were $14
and $16 for the three months ended September 30, 2020 and 2019,
respectively.
Corporate
The loss from operations for Corporate for the three months ended
September 30, 2020 and 2019 was as
follows:
|
|
Three
Months Ended
September
30,
|
|
|
(Unaudited)
|
2020
|
2019
|
|
Loss from operations
|
$(69)
|
$(21)
|
Corporate operating loss was $69 for the three months ended
September 30, 2020, an increase of $48 from $21 in the same period
of the last fiscal year. The increase was mainly attributable
to an increase in general and administrative expenses.
Financial Condition
During the three months ended September 30, 2020 total assets
increased by $168 to $35,828 compared to $35,660 as at June 30,
2020. The increase in total assets was primarily due to an increase
in cash and cash equivalents, deferred tax assets, investment
properties, other assets and restricted term deposit, which was
partially offset by a decrease in short-term deposits, trade
account receivables, other receivables, inventory, prepaid expenses
and other current assets, property, plant and equipment and
operating lease right-of-use assets.
Cash and cash equivalents were $4,849 as at September 30, 2020,
reflecting an increase of $699 from $4,150 as at June 30,
2020, primarily due to the Company generated operating cash flow of
$463 for the three months ended September 30, 2020.
Short-term deposits were $6,678 as at September 30, 2020,
reflecting a decrease of $19 from $6,697 as at June 30,
2020.
As at September 30, 2020, the trade accounts receivable balance
decreased by $206 to $5,745, from $5,951 as at June 30, 2020,
primarily due to the decrease in revenue for the first three
months of fiscal year 2021 as compared
to the revenue in the fourth quarter of last fiscal year in the
Singapore operations. This decrease was partially offset by
the increase in revenue for the first three months of fiscal
year 2021 as compared to the revenue in the fourth quarter
of last fiscal year in the Malaysia, China, Thailand and U.S.
operations. The number of days’ sales outstanding in accounts
receivables for the Group was 77 and 68 days at the end of the
first quarter of fiscal year 2021 and the end of the last fiscal
year, respectively.
As at September 30, 2020 other receivables were $905, reflecting a
decrease of $93 from $998 as at June 30, 2020. The decrease was
primarily due to a decrease in advance payments made to suppliers
in the Singapore operation.
Inventories as at September 30, 2020 were $1,872, a decrease of
$50, as compared to $1,922 as at June 30, 2020. The decrease in
inventories was in line with a decrease in orders by customers in
the manufacturing segment of Singapore operations
Prepaid expenses
were $417 as at September 30, 2020 compared to $482 as at June 30,
2020. The decrease of $65 was primarily due to the amortization of
prepaid expenses for the period.
Investment properties’ net in China were $699 as at September
30, 2020 and $690 as at June 30, 2020. The increase was
primarily due to the foreign currency exchange movement between
June 30, 2020 and September 30, 2020. The increase was partially
offset by the depreciation charged for the
period.
Property, plant and equipment decreased by $175 from $10,310 as at
June 30, 2020, to $10,135 as at September 30, 2020, mainly due to
depreciation charged for the period and the foreign currency
exchange movement between June 30, 2020 to September 30,
2020. The decrease was partially offset by the new acquisition
of plant and equipment in the Singapore operation.
Restricted cash increased by $35 to $1,695 as at September 30,
2020, as compared to $1,660 as at June 30, 2020. This was
primarily due to the foreign currency exchange movement between
June 30, 2020 and September 30, 2020.
Other assets increased by $129 to $1,738 as at September 30, 2020,
as compared to $1,609 as at June 30, 2020. This was
mainly due to down payments made for the purchase of equipment in
the Malaysia operation.
Line of credit decreased by $172 to $nil as at September 30, 2020,
as compared to $172 as at June 30, 2020. This was due to lower
utilization of the bank facilities in the Singapore
operation.
Accounts payable decreased by $566 to $2,024 as at September 30,
2020, as compared to $2,590 as at June 30, 2020. This was due to an
increase in goods received but invoices not received in the
Singapore operation.
Accrued expenses increased by $544 to $3,549 as at September 30,
2020, as compared to $3,005 as at June 30, 2020. The increase in
accrued expenses was mainly due to an increase in the accrued
purchases in the Singapore operation.
Bank loans payable increased by $175 to $2,381 as at September 30,
2020, as compared to $2,206 as at June 30, 2020. This was due to
the increase of financing in our Malaysia operations.
Finance leases decreased by $48 to $618 as at September 30, 2020,
as compared to $666 as at June 30, 2020. This was due to the
repayment of finance leases made in the Malaysia
operations.
Operating lease right-of-use assets and the corresponding lease
liability decreased by $125 to $819, respectively as of September
30, 2020, as compared to $944 as at June 30, 2020. This was due to
the repayment made and the operating lease expenses charged for the
period.
The Company accounted for the Paycheck Protection Program amounting
to $121, which was created by the United States Coronavirus Aid,
Relief, and Economic Security (CARES) Act, as of September 30, 2020
and June 30, 2020, respectively.
Liquidity Comparison
Net cash provided by operating activities decreased by $527 to an
inflow of $463 for the three months ended September 30, 2020 from
an inflow of $990 for the same period of the last fiscal year. The
decrease in net cash inflow provided by operating activities was
primarily due to a decrease in net income by $429, and a decrease
in cash inflow of $640 from inventories. These decreases were
partially offset by an increase in cash inflow of $605 from trade
account receivables.
Net cash used in investing activities decreased by $1,572 to an
outflow of $93 for the three months ended September 30, 2020 from
an outflow of $1,665 for the same period of the last fiscal year.
The decrease in cash outflow was primarily due to a decrease in
investment in unrestricted term deposits by $1,165 and a decrease
of $413 in capital expenditures.
Net cash used in financing activities for the three months ended
September 30, 2020 was $211, representing a decrease of $126, as
compared to $337 during the three months ended September 30, 2019.
The decrease in cash outflow was mainly attributable to an increase
in cash inflow by $208 from the proceeds of bank loans, a decrease
in cash outflow of $430 from payment on lines of credit and an
increase of $34 from the proceeds of exercising stock option. These
decreases were partially offset by an increase in cash outflow of
$122 from the dividend paid on non-controlling interest and a
decrease in cash inflow of $410 from proceeds of lines of
credit.
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
Effective
as of July 1, 2019, the Company has adopted ASU 2016-02, Leases (Topic 842), 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.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND
PROCEDURES
An evaluation was carried out by the Company’s Chief
Executive Officer and Chief Financial Officer of the effectiveness
of the Company’s disclosure controls and procedures (as
defined in Rule 13a-15(e) or 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of September 30, 2020, 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 September 30, 2020, that 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, as part of a
multi-year plan to integrate and upgrade our systems and processes.
The implementation of this ERP system was scheduled to occur in
phases over a 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.
The operational systems in our Tianjin and Suzhou operations were
substantially transitioned to the new system during the third
quarter of fiscal 2020. This implementation effort will continue
until the financial systems of these two operations are fully
transitioned to the new system, and until the Group's consolidation
process is substantially automated using the new
system.
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 to strengthen our
internal financial controls by automating certain manual processes
and standardizing business processes and reporting across our
organization, management will continue to evaluate and monitor our
internal controls as processes and procedures in each of the
affected areas evolve.
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
|
|
|
|
|
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
|
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: November 13, 2020
|
-39-
Exhibit 31.1
CERTIFICATIONS
I, S. W. Yong, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trio-Tech
International, a California corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e)
and 15d–15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a–15(f) and
15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: November 13, 2020
/s/ S. W. Yong
S.
W. Yong, Chief Executive Officer
and
President (Principal Executive Officer)
Exhibit 31.2
I, Victor H.M. Ting, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trio-Tech
International, a California corporation;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a–15(e)
and 15d–15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a–15(f) and
15d–15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Dated: November 13, 2020
/s/ Victor H.M. Ting
Victor
H.M. Ting, Chief Financial Officer
and
Vice President (Principal Financial Officer)
Exhibit 32
SECTION 1350 CERTIFICATION
Each of the undersigned, S.W. Yong, President and Chief Executive
Officer of Trio-Tech International, a California corporation (the
“Company”), and Victor H.M. Ting, Vice President and
Chief Financial Officer of the Company, do hereby certify, pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge (1)
the quarterly report on Form 10-Q of the Company for the three
months ended September 30, 2020, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”),
fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and (2) the
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ S. W. Yong
Name:
S. W. Yong
Title:
President and Chief Executive Officer
Dated:
November 13, 2020
/s/ Victor H.M. Ting
Name:
Victor H.M. Ting
Title:
Vice President and Chief Financial Officer
Dated:
November 13, 2020
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise
adopting the signature that appears in typed form within the
electronic version of this written statement required by Section
906, has been provided to the Company and will be retained by the
Company and furnished to the Securities and Exchange Commission or
its staff upon request.