---




---




UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q





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




For the Quarterly Period Ended September 30, 2001





OR





| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------




Commission File Number 0-13914





TRIO-TECH INTERNATIONAL


(Exact name of Registrant as specified in its Charter)





California

95-2086631(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification Number)355 Parkside DriveSan Fernando, California

91340(Address of principal executive offices)

(Zip Code)





Registrants Telephone Number: 818-365-9200





Indicate by check mark whether the registrant (1) has filed all reports required to
be filed with the Commission 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  x    No  ̈





Number of shares of common stock outstanding as of November 2, 2001 is 2,927,596





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---




TRIO-TECH INTERNATIONAL





INDEX TO CONSOLIDATED FINANCIAL INFORMATION,


OTHER INFORMATION AND SIGNATURES





PagePart I.

Financial InformationItem 1.

Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of Sept. 30, 2001 and June 30, 2001 (Unaudited)


3Condensed Consolidated Statements of Operations and Comprehensive(Loss) Income for the      Three Months Ended Sept. 30, 2001 and Sept. 30, 2000
(Unaudited)


4Condensed Consolidated Statements of Cash Flows for the Three Months Ended Sept. 30, 2001and Sept. 30, 2000 (Unaudited)


5Notes to Condensed Consolidated Financial Statements (Unaudited)


6Item 2.

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


11Item 3.

Quantitative and Qualitative Disclosures about Market Risk


13Part II.

Other InformationItem 1.

Legal Proceedings


14Item 2.

Changes in Securities and Use of Proceeds


14Item 3.

Defaults Upon Senior Securities


14Item 4.

Submission of Matters to a Vote of Security Holders


14Item 5.

Other Information


14Item 6.

Exhibits and Reports on Form 8-K


14Signatures


14







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TRIOTECH INTERNATIONAL AND SUBSIDIARIES





ITEM 1.    
CONSOLIDATED FINANCIAL STATEMENTS





CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited, in thousands, except share amounts)





Sept. 30, 2001

June 30, 2001(a)ASSETSCURRENT ASSETS:Cash

$   1,141


$   1,149Cash deposits

6,886


7,693Trade accounts receivable, less allowance for doubtful accounts
of $181 at Sept. 30,                2001 and $174 at June 30, 2001

4,182


4,432Other receivables

161


162Inventories

2,002


1,918Prepaid expenses and other current assets

207


147Total
current assets

14,579


15,501PROPERTY, PLANT AND EQUIPMENT, Net

7,508


7,534OTHER ASSETS, Net

1,079


1,115TOTAL ASSETS

$23,166


$24,150LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Line of credit

$         40


$       Accounts payable

2,220


2,646Accrued expenses

3,466


3,689Income taxes payable

185


168Current portion of long-term debt and capitalized leases

1,059


1,096Total
current liabilities

6,970


7,599LONG-TERM DEBT AND CAPITALIZED LEASES, net of current portion

1,654


1,745DEFERRED INCOME TAXES

668


649MINORITY INTEREST

2,536


2,548COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY:Common stock; no par value, authorized, 15,000,000 shares;
issued and outstanding                2,927,596 shares at Sept. 30, 2001 and June 30, 2001, respectively

9,423


9,423Retained earnings

2,489


2,889Accumulated other comprehensive loss

(574
)

(703
)Total
shareholders equity

11,338


11,609TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

$23,166


$24,150


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|(a) |  | Derived from audited consolidated financial statements included in the Form 10K for the fiscal year ended June 30, 2001.
|--- |  | ------------------------------------------------------------------------------------------------------------------------




See notes to condensed consolidated financial statements.




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TRIOTECH INTERNATIONAL AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND


COMPREHENSIVE (LOSS) INCOME


(Unaudited, in thousands, except per share amounts)





Three Months EndedSept. 30, 2001

Sept. 30, 2000NET SALES

$5,136



$9,158COST OF SALES

4,041



6,711GROSS PROFIT

1,095



2,447OPERATING EXPENSES:General and administrative

1,182



1,464Selling

284



706Research and development

47



49Total

1,513



2,219(LOSS) INCOME FROM OPERATIONS

(418
)


228OTHER INCOME (EXPENSE):Interest expense

(51
)


(30
)Other income

96



85Total

45



55(LOSS) INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

(373
)


283INCOME TAXES

(42
)


(68
)(LOSS) INCOME BEFORE MINORITY INTEREST

(415
)


215MINORITY INTEREST

15



(31
)NET (LOSS) INCOME

(400
)


184OTHER COMPREHENSIVE (LOSS) INCOME :Foreign currency translation adjustment

129



(152
)COMPREHENSIVE (LOSS) INCOME

$    (271
)


$       32EARNINGS (LOSS) PER SHARE:Basic

$  (0.14
)


$   0.06Diluted

$  (0.14
)


$   0.06WEIGHTED AVERAGE NUMBER OF COMMON AND POTENTIAL COMMON      SHARES OUTSTANDING:Basic

2,928



2,850Diluted

2,928



3,037








See notes to condensed
consolidated financial statements.




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited, in Thousands)





Three Months EndedSept. 30, 2001

Sept. 30, 2000CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income


$    (400
)


$    184Adjustments to reconcile net (loss) income to net cash (used in) provided by operating
     activities:Depreciation and amortization


439



353Gain on sale of property and equipment






(17
)Deferred income taxes


19



(5
)Minority interest, net


(15
)


32Changes in operating assets and liabilities:Accounts
receivable, net


250



(1,162
)Other
receivables


1



184Inventories


(84
)


(1,207
)Prepaid
expenses and other current assets


(60
)


(373
)Accounts
payable and accrued expenses


(649
)


2,102Income
taxes payable


17



118Net cash (used in)
provided by operating activities


(482
)


209CASH FLOWS FROM INVESTING ACTIVITIES:Cash deposits


807



42Capital expenditures


(209
)


(1,425
)Other assets


21



280Proceeds from sale of property and equipment


1



30Net cash provided by
(used in) investing activities


620



(1,073
)CASH FLOWS FROM FINANCING ACTIVITIES:Payments on lines of credit






(241
)Borrowings under lines of credit


40



309Principal payments of debt and capitalized leases


(308
)


(154
)Proceeds from long-term debt


89



332Issuance of common stock






112Net cash (used in)
provided by financing activities


(179
)


358EFFECT OF EXCHANGE RATE CHANGES ON CASH


33



(60
)NET DECREASE IN CASH


(8
)


(566
)CASH, BEGINNING OF PERIOD


1,149



1,956CASH, END OF PERIOD


$1,141



$1,390SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest


$       41



$       37Income taxes


$       27



$       38





See notes to condensed consolidated financial statements.




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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited, in thousands, except per share and share amounts)





Note 1.    Basis of Presentation





The interim condensed consolidated financial statements as of Sept. 30, 2001 and for the three-months ended Sept 30, 2001 and Sept. 30,
2000, respectively, are unaudited. In managements opinion, the unaudited consolidated financial statements reflect all adjustments necessary, consisting of normal recurring accruals, for a fair statement of the results for the interim periods
presented.





The interim condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Companys Annual Report for fiscal year ended June 30, 2001.





The consolidated results of operations for the three-month period ending Sept. 30, 2001, is not necessarily indicative of the results
expected for a full year.





Recently Issued Accounting
PronouncementsIn July 2001, the Financial Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS), No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 replaces Accounting Principles Board Opinion No. 16 (APB No. 16), Business Combination, and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting
related to the recognition of intangible assets and accounting for negative goodwill. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under SFAS No. 142, goodwill will be tested annually
and whenever events or circumstances occur indicating that goodwill might be impaired. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets
acquired prior to July 1, 2001 that do not meet the criteria for recognition under SFAS No. 141 will be reclassified to goodwill. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001. In connection with the
adoption of SFAS No. 142, companies will be required to perform a transitional goodwill impairment assessment. The Company has not yet determined the effects, if any, that SFAS No. 142 will have on its consolidated financial position and results of
operations. During the quarter ended Sept. 30, 2001, goodwill amortization totaled approximately $8.





Note
2.    Inventories





The composition of
inventories is as follows:





Sept. 30, 2001

June 30, 2001Raw materials


$1,147


$1,180Work in progress


393


311Finished goods


462


427$2,002


$1,918




---








Note 3.    Stock Options





The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for its three Stock Option Plans. Accordingly, no compensation expense has been recognized. Had compensation cost for the Companys Plan been determined based upon the fair value at
the grant date for awards under this Plan consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, the Companys net (loss) income and (loss) earnings per
share would have been the pro forma amounts indicated below:





Three Months EndedSept. 30, 2001

Sept. 30, 2000Net (Loss) Income:AsReported

$ (400
)

$  184Proforma

$ (468
)

$ (198
)Basic (Loss) Earnings per Share:AsReported

$(0.14
)

$0.06Proforma

$(0.16
)

$(0.07
)





The preceding
calculation uses the Black Scholes option-pricing model with the assumptions listed below:





Three Months EndedSept. 30, 2001

Sept. 30, 2000Volatility

55.99
%

52.61
%Risk free interest rate

3.91
%

5.85
%Expected life (years)

2.31


3.17





Note 4.    Earnings per Share (EPS)





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





Sept. 30, 2001

Sept. 30, 2000Net (loss) income used to compute basic and diluted earnings      per share


$    (400
)



$    184Weighted average number of common shares outstandingbasic


2,928




2,850Dilutive effect of stock options and warrants







187Number of shares used to compute earnings per
sharediluted


2,928




3,037







---








The following
options and warrants were outstanding during and as of the quarter ended Sept. 30, 2001 but were not included in the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares
and therefore were anti-dilutive:





Three Months Ended Sept. 30, 2001Options and Warrants Outstanding

Options and Warrants ExercisableNumber Outstanding

Weighted Average Remaining Contractual Life

Exercise Price

Number Exercisable

Exercise Price27,000



0.20



3.67



27,000



3.6730,000



0.32



4.69



30,000



4.6922,500



0.32



3.67



22,500



3.6740,000



1.00



5.00



40,000



5.0015,000



1.00



5.00



15,000



5.0015,000



1.00



5.00



15,000



5.0069,920



1.10



5.00



69,920



5.0034,960



1.10



5.00



34,960



5.009,915



1.11



8.00



9,915



8.0075,000



1.14



5.00



75,000



5.005,000



1.19



5.00



5,000



5.0040,000



1.78



3.69



40,000



3.6914,500



1.78



4.34



10,875



4.3430,000



2.78



2.82



30,000



2.8275,500



3.49



6.00



37,750



6.0036,870



0.61



8.00



36,870



8.0037,000



3.78



5.37



37,000



5.3740,000



3.97



5.63



20,000



5.634,000



4.51



3.40



1,000



3.40622,165



2.31



4.83



557,790



4.69




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Note 5.    Long-term debt and capitalized leases





Long-term debt and capitalized leases consist of the
following:





Sept. 30, 2001Machinery loans, due in various installments through 2003 bearing interest at 6.5%,
     collateralized by equipment


$1,103Notes payable, due in various installments through 2005 bearing interest at prime plus 1.5%
     (Banks prime rate of 6.25% at Sept. 30, 2001), collateralized by equipment


615Capitalized lease obligations, due in various installments through 2008 bearing interest at
     rates ranging from 4.63% to 13.39%, collateralized by leased assets


811Mortgage loan, due in monthly installments through 2008, bearing interest at prime plus 3%
     and 3.52% (Banks prime rate of 4.61% and 4.72% at Sept. 30, 2001), collateralized by      building


1842,713Less current portion


1,059$1,654





Note 6.    Business Segments





The Company operates principally in three industry segments, the designing and
manufacturing of equipment (that tests the structural integrity of integrated circuits and other products which measure the rate of turn), the testing service industry (that performs structural and electronic tests of semiconductor devices) and the
distribution of various products from other manufacturers in Singapore and Southeast Asia.





All intersegment sales are sales from the manufacturing segment to the testing and distribution segments.





Business Segment Information:





Three Months Ended Sept. 30,

Net Sales

Operating Income (loss)

Assets

Depr. and Amort.

Capital ExpendituresManufacturing


2001


$1,468


$(642
)


$   5,991


$109



$       272000


4,921


8



8,620


126



56Testing Services


2001


2,289


226



16,603


301



1692000


2,602


59



16,089


211



1,145Distribution


2001


1,379


29



354


282000


1,635


(14
)


536


16



220Corporate and unallocated


2001





(31
)


218


1



132000





175



103






4Total Company


2001


$5,136


$(418
)


$23,166


$439



$    2092000


9,158


228



25,348


353



1,425




---








Geographic Area Information:


Three Months Ended Sept. 30,

United States

Europe

Southeast Asia

Eliminations and Other

Total CompanyNet sales to customers


2001


$1,952



572




2,618



(6
)



$5,1362000


$3,091



1,886




4,351



(170
)



$9,158Operating Income (loss)


2001


$    (419
)


(99
)



131



(31
)



$    (418
)2000


$      (33
)


(106
)



192



175




$    228Property, plant and equipmentnet


2001


$    823



439




6,246








$7,5082000


$    966



236




4,285








$5,487







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|ITEM2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS (In thousands, except share amounts)
|------ |  | -------------------------------------------------------------------------------------------------------------------------




Forward-Looking Statements





The discussions of the Companys business and activities set forth in this report and in other past and future reports and announcements by the Company may contain
forward-looking statements and assumptions regarding future activities and results of operations of the Company. A forward-looking statement may, in some cases, be identified by use of terminology such as may, will,
expects, plans, anticipates, estimates, potential, believes, can impact, continue, and by other comparable terminology or by the negative of any of the
foregoing. In light of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Company hereby identifies the following factors which could cause actual results to differ materially from those reflected in
any forward-looking statement made by or on behalf of the Company: market acceptance of Company products and services; changing business conditions or technologies 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 profitability integrating acquired businesses, if any, into the Company; risks associated with conducting business internationally and especially in Southeast Asia, including currency fluctuations and devaluations, currency
restrictions, local laws and restrictions and possible social, political and economic instability; general and economic conditions; and other economic, financial and regulatory factors beyond the Companys control.





| | Three Months Ended Sept. 30, 2001 (2002) Compared to the Three Months Ended Sept. 30, 2000 (2001)
| | -----------------------------------------------------------------------------------------------------




Net sales decreased by $4,022 or 43.9% from $9,158 in 2001 to
$5,136 in 2002, due to the global down turn in the semiconductor industry and world economic conditions. We anticipate that the current fiscal year will continue to have lower sales than fiscal year 2001.





Geographically, net sales in the United States decreased $1,139 or 36.8% from $3,091 in 2001 to $1,952
in 2002. The decrease was attributable to decreases in burn in board sales, Artic Temperature Controlled Chucks and wet process benches. Net sales for the Southeast Asia operations decreased $1,733 or 39.8% from $4,351 in 2001 to $2,618 in 2002 due
mainly to lower manufacturing (down 87%), distribution (down 15.6%) and testing (down 8.6%) volumes. Net sales for Europe decreased $1,314 or 69.7% from $1,886 in 2001 to $572 in 2002 due to a decline in demand for Artic Temperature Controlled
Chucks and wet process benches.





The Manufacturing Segment sales,
Company-wide, decreased $3,453 or 70.2% from $4,921 in 2001 to $1,468 in 2002 due to a decrease in demand for the Artic Temperature Controlled Chucks, Wet Process Benches and the COBIS-II Burn-in Board Systems. The Testing Services Segment sales,
Company-wide, decreased $313 or 12% from $2,602 in 2001 to $2,289 in 2002 due to the global down turn in the semiconductor industry and world economic conditions. The Distribution Segment, Company-wide, decreased $256 or 15.7% from $1,635 in 2001 to
$1,379 in 2002 due to the decrease in demand for test equipment.





Cost of sales decreased $2,670 or 39.8% from $6,711 in 2001 to $4,041 in 2002. As a percentage of sales, it increased 5.4% from 73.3% in 2001 to 78.7% in 2002. The cost as a
percentage of sales increased due to the sharp decline in sales and change in the sales and product mix which varies depending on the mix of sector and geographic sales.





Operating expenses decreased by $706 or 31.8% from $2,219 in 2001 to $1,513 in 2002. This decrease is consistent with the level of sales
and as a percentage of sales increased by 5.1% from 24.2% in 2001 to 29.3% in 2002.





General and Administrative (G&A) expenses decreased by $282 or 19.3% from $1,464 in 2001 to $1,182 in 2002 primarily due to implementation of cost cutting measures
which reduced the headcount and related




---

expenses such as payroll and payroll related costs such as bonuses. As a percentage of sales, G&A increased by 7% from 16% in 2001 to 23% in 2002.





Selling expenses decreased by $422 or 59.8% from $706 in 2001 to $284 in 2002 due to reductions in
amounts paid for commissions. As a percentage of sales, selling expenses decreased 2.2% from 7.7% in 2001 to 5.5% in 2002.





Research and Development expenses decreased by $2 or 4.1% from $49 in 2001 to $47 in 2002. This decrease is primarily due to decreased payroll and payroll related costs and
supplies offset by increased travel to Original Equipment Manufacturers.





The Manufacturing Segment loss from operations increased by $650 from income of $8 in 2001 to a loss of $642 in 2002 due to eroding margins and lower volumes of Artic Temperature
Controlled Chucks, Semi-Automatic Wet Process Benches and the COBIS-II Burn-in Board Systems. The Testing Services Segment income from operations increased $167 from $59 in 2001 to $226 in 2002 due to the rapid implementation of cost saving
measures. The Distribution Segment income from operations increased by $43 from a loss of $14 in 2001 to income of $29 in 2002 due to a change in sales mix from lower margin equipment to more profitable new technology products.





Interest expense increased in 2002 by $21 or 70%, from $30 in 2001 to $51 in 2002,
due to increases in lines of credit, capitalized leases and financing activity for capital expenditures.





Other income has increased by $11 or 12.9% from $85 in 2001 to $96 in 2002 primarily due to interest income.





Liquidity and Capital Resources





Net cash used by operating activities during the period ended September 30, 2001 (2002) was $482 compared to $209 provided by operating activities during the period
ended September 30, 2000 (2001). The negative cash flow from operating activities in 2002 was comprised of a decrease in accounts receivables of $250, an increase in deferred income taxes and income taxes payable of $19 and $17,
respectively, $439 of non-cash depreciation and amortization and decrease in other receivables of $1. These amounts were more than offset by negative cash flow comprised of a net loss of $400, a decrease in accounts payable and accrued expenses of
$649, $15 in minority interest, and an increase of $60 in prepaid expenses and other current assets and $84 in inventories.





Net cash provided by investing activities during 2002 was $620 compared to $1,073 used by investing activities in 2001. The decrease in net cash provided by investing activities
was a result of (1) capital expenditures of $209 which included enhancement of air conditioning for its HBI Test facilities in Southeast Asia coupled with investment in BIB Test equipment, (2) a decrease in cash deposits of $807, (3) a decrease in
other assets of $21 and (4) proceeds from sale of property and equipment of $1.





Net cash used in financing activities during 2002 was $179 compared to $358 provided by financing activities in 2001. The cash outflow from financing activities include $308 of
payments on lines of credit, long term obligations and capitalized leases, which was offset by proceeds of $129 from additional borrowing under lines of credit and long term obligations.





Cash and cash deposits have historically been the Companys primary source of liquidity. The
Company has a committed line of credit with a bank, aggregating $2,547 and lines of credit with various other banks, totaling $817, which were used to support short-term borrowing and commercial paper comprised of letters of credit, trust receipts,
shipping and bankers guarantees. These lines of credit and their anticipated cyclical increases are sufficient to finance buildups in inventories and other cash requirements.




---




Cash deposits and corporate
guarantees (the Company guarantees, but subsidiaries are the primary debtor) collateralize the first line of credit with a bank, aggregating $2,547, and contain certain debt covenants including maintaining a minimum net worth. The Company was in
compliance with all debt covenants on September 30, 2001. There were no borrowings under these lines at September 30, 2001 and these lines of credit expire between December 2001 (expected to be renewed) and July 2002. Interest rates for these lines
are from 6.97% and 9.5%.





The Company has various other machinery
term loans, capitalized lease obligations and notes payable used for financing equipment and leasehold improvements with various banks and lending institutions aggregating $2,529. The equipment and improvements financed collateralizes these loans.
Interest rates range from 4.63% to 13.39%. These term loans expire between March 2002 and January 2008 (see Note 5 to the Condensed Consolidated Financial Statements).





The Company has two credit agreements that provide for mortgage loans totaling $375. Borrowings under the mortgage loans amounted to $116
and $67 as of September 30, 2001. Interest is at the banks prime rate (4.72% and 4.61% at September 30, 2001) plus 3.52% on the first loan and 3.0% on the second loan. The loans will expire in July 2007 and May 2008, respectively.





Approximately $2,756 of cash deposits are held in the
Companys 55% owned Malaysian subsidiary. $2,260 of this cash is denominated in the currency of Malaysia. Of the $2,260, $1,471 is currently available for movement, as the Central Bank of Malaysia has authorized $1,800 for movement and the
Company has utilized $329 of this authorization. In addition, approximately $4,098 is available as a dividend (after making deductions for income tax) pursuant to Malaysian regulations in force from July 1, 2000. There is an additional amount of
$1,132 that is used as collateral for the Singapore credit facility.





Material Changes in Financial Position





None





Material Changes in Results of Operations





Due to the global downturn in the economy, net sales for the Company decreased by 43.9% during the three months ended September 30, 2001 as compared to the corresponding period in
the prior year. We also are uncertain if sales will increase in the ensuing quarters of fiscal year 2002. Therefore, we believe that the current fiscal year will have lower sales than fiscal year 2001.





ITEM 3.    
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Interest Rate Risk.    We do not use derivative financial instruments in our investment portfolio. Our investment portfolio is generally comprised of
cash deposits. Our policy is to place these investments in instruments that meet high credit quality standards. These securities are subject to interest rate risk, and could decline in value if interest rates fluctuate. Due to the short duration and
conservative nature of our investment portfolio, we do not expect any material loss with respect to our investment portfolio.





Foreign Currency Exchange Rate Risk.    Although the majority of our sales, cost of manufacturing and marketing are transacted in U.S. dollars,
significant portions of our revenues are denominated in Singapore, Malaysian and other currencies. Consequently, a portion of our costs, revenues and operating margins may be affected by fluctuations in exchange rates, primarily between the U.S.
Dollar and such foreign currencies. We are also affected by fluctuations in exchange rates if there is a mismatch between our foreign currency denominated assets and liabilities. Foreign currency adjustments resulted in an increase of $129 to
shareholders equity for the three months ended September 30, 2001, a decrease of $358 to shareholders equity for the three months ended September 30, 2000 and a decrease of $50 to shareholders equity for the three months ended
September 30, 1999.




---




From time to time, we try to
partially mitigate the effects of currency fluctuations over the short term by the hedging of foreign currency exposure through U.S. Dollar borrowings and forward foreign exchange rate contracts, as well as purchasing non-Southeast Asian currency
denominated short-term instruments. We also try to reduce our risks by purchasing certain equipment and supplies in U.S. Dollars and seeking payment, when possible, in U.S. Dollars. However, we may not be successful in our attempts to mitigate our
exposure to exchange rate fluctuations. Those fluctuations could have a material adverse effect on the Companys financial results.




---




PART II.    OTHER INFORMATION





Item 1.    Legal Proceedings





Not applicable





Item 2.    Changes in Securities and Use of Proceeds





Not applicable





Item 3.    Defaults Upon Senior Securities





Not applicable





Item 4.    Submission of Matters to Vote of Security Holders





Not applicable





Item 5.    Other Information





Not applicable





Item 6.    Exhibits and Reports on Form 8-K





(a)Exhibits





None





(b)Reports on Form 8-K





The Registrant filed the following reports on Form 8-K with the Securities and Exchange Commission during the first quarter of fiscal 2002:





None




---




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.





| | TR | IO-TECH INTERNATIONAL
| | -- | ---------------------







| | /s/    VICTOR H.M.
TING
| | -----------------------

| | By | :
| | -- | -

| | Vic | tor H.M. Ting
| | --- | -------------

| | Vic | e President and Chief Financial Officer
| | --- | ---------------------------------------

| | Da | ted: November 9, 2001
| | -- | ---------------------




| | /s/    A. CHARLES
WILSON
| | ------------------------

| | By | :
| | -- | -

| | A. | Charles Wilson
| | -- | --------------

| | Ch | airman of the Board of Directors
| | -- | --------------------------------

| | Da | ted: November 9, 2001
| | -- | ---------------------