UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




ý
                
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended March 31, 2009ORo
                
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from ________________ to
      ________________





Commission
file number:  1-14523





TRIO-TECH   INTERNATIONAL


(Exact
name of registrant as specified in its charter)





California
            
            95-2086631(State
      or other jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      No.)16139
      Wyandotte StreetVan
      Nuys, California
            
            91406(Address
      of principal executive offices)
            
            (Zip
      Code)





818-787-7000


(Registrant’s
telephone number, including area code)





(None)


(Former
name, former address and former fiscal year, if changed since last
report)





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 RNo  o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).


Yes  o   No o








Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer
              o
              Accelerated
      filer
              oNon-accelerated
      filer
              o
              Smaller
      reporting company
              R(Do
      not check if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).




Yes oNo  R





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





Class
            
            Outstanding
      at May 11, 2009[Common
      Stock, $0.01 par value per share]
            
            3,227,430
      shares





TRIO-TECH    INTERNATIONAL


INDEX
TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND
SIGNATURES




PagePart I.
            Financial InformationItem 1.
            Financial Statements(a) Condensed Consolidated Balance Sheets as of March 31, 2009
      (Unaudited) and June 30, 2008
            2(b) Condensed Consolidated Statements of Operations and
      Comprehensive Income for the Three and Nine Months Ended March 31, 2009
      (Unaudited) and March 31, 2008 (Unaudited)
            3(c) Condensed Consolidated Statements of Cash Flows for the
      Nine Months Ended March 31, 2009(Unaudited) and March 31, 2008
      (Unaudited)
            4(d) Notes to Consolidated Financial Statements
      (Unaudited)
            5Item 2.
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            25Item 3.
            Quantitative and Qualitative Disclosures about Market
      Risk
            46Item 4T.
            Controls and Procedures
            46Part II.
            Other InformationItem 1.
            Legal Proceedings
            47Item 1A.
            Risk Factors
            47Item 2.
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            47Item 3.
            Defaults upon Senior Securities
            47Item 4.
            Submission of Matters to a Vote of Security
      Holders
            47Item 5.
            Other Information
            47Item 6.
            Exhibits
            47Signatures
            
            48ExhibitsCertifications


-i-
 Table of Contents




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 Southeast Asia, including
currency fluctuations and devaluation, currency restrictions, local laws and
restrictions and possible social, political and economic instability; changes in
U.S. and global financial and equity markets, including market disruptions and
significant interest rate fluctuations; and other economic, financial and
regulatory factors beyond the Company’s control. We believe customers have
tightened and will continue to tighten their spending, resulting in a decline in
the demand for electronic products and semiconductor equipment. See the
discussions elsewhere in this Form 10-Q, including under the heading “Certain
Risks That May Affect Our Future Results,” for more information. 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.





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. Important factors that could cause or
contribute to such material differences include those discussed in
“Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K. You
are cautioned not to place undue reliance on such forward-looking
statements.


-1-
 Table of Contents


PART I.
FINANCIAL INFORMATION


ITEM
1. FINANCIAL STATEMENTS




TRIO-TECH
INTERNATIONAL AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCESHEETS (IN THOUSANDS, EXCEPT NUMBER OF SHARES)





March
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2008ASSETS
                      
                      
                      (Unaudited)CURRENT
      ASSETS:Cash
                      
                      $
                      6,692
                      
                      $
                      6,600Short-term
      deposits
                      
                      5,330
                      
                      
                      7,746Trade
      accounts receivable, less allowance for doubtful
                      
                      3,501
                      
                      
                      5,702accounts
      of $165 and $51Inventories,
      less provision for obsolete inventoryof
      $689 and $880
                      
                      1,325
                      
                      
                      2,449Prepaid
      expenses and other current assets
                      
                      496
                      
                      
                      934Total
      current assets
                      
                      17,344
                      
                      
                      23,431INVESTMENT
      IN CHINA (Note 9)
                      
                      3,015
                      
                      
                      2,267PROPERTY,
      PLANT AND EQUIPMENT, Net
                      
                      6,353
                      
                      
                      8,136OTHER
      INTANGIBLE ASSETS, Net
                      
                      25
                      
                      
                      112OTHER
      ASSETS
                      
                      1,100
                      
                      
                      813TOTAL
      ASSETS
                      $
                      27,837
                      
                      $
                      34,759LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                      $
                      615
                      
                      $
                      2,586Accrued
      expenses
                      
                      1,913
                      
                      
                      3,036Income
      taxes payable
                      
                      270
                      
                      
                      397Current
      portion of notes payable
                      
                      1,742
                      
                      
                      1,403Current
      portion of capital leases
                      
                      75
                      
                      
                      106Total
      current liabilities
                      
                      4,615
                      
                      
                      7,528NOTES
      PAYABLE, net of current portion
                      
                      --
                      
                      
                      1,620CAPITAL
      LEASES, net of current portion
                      
                      69
                      
                      
                      143DEFERRED
      TAX LIABILITIES
                      
                      426
                      
                      
                      510OTHER
      LIABILITIES
                      
                      9
                      
                      
                      9TOTAL
      LIABILITIES
                      $
                      5,119
                      
                      $
                      9,810MINORITY
      INTEREST
                      
                      2,804
                      
                      
                      2,808SHAREHOLDERS'
      EQUITY:Common
      stock; no par value, 15,000,000 shares authorized;3,227,430
      and 3,226,430 shares issued and outstanding as of
                      
                      10,365
                      
                      
                      10,362March
      31, 2009 and June 30, 2008, respectivelyPaid-in
      capital
                      
                      1,229
                      
                      
                      928Retained
      earnings
                      
                      7,518
                      
                      
                      8.825Accumulated
      other comprehensive income
                      
                      802
                      
                      
                      2,026Total
      shareholders' equity
                      
                      19,914
                      
                      
                      22,141TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                      $
                      27,837
                      
                      $
                      34,759





See
accompanying notes to condensed consolidated financial statements.


-2-
 Table of Contents


TRIO-TECH INTERNATIONAL AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTSOF OPERATIONS AND COMPREHENSIVE
INCOME
 UNAUDITED
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)


Nine Months Ended
                    
                    
                    Three
      Months EndedMarch
      31,
                    
                    
                    March
      31,
                    
                    
                    March
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)RevenueProducts
                    
                    $
                    7,688
                    
                    
                    $
                    18,190
                    
                    
                    $
                    1,722
                    
                    
                    $
                    4,482Services
                    
                    
                    7,682
                    
                    
                    
                    15,186
                    
                    
                    
                    1,856
                    
                    
                    
                    3,97315,370
                    
                    
                    
                    33,376
                    
                    
                    
                    3,578
                    
                    
                    
                    8,455Cost
      of SalesCost
      of products sold
                    
                    
                    6,213
                    
                    
                    
                    15,716
                    
                    
                    
                    1,316
                    
                    
                    
                    4,248Cost
      of services rendered
                    
                    
                    5,793
                    
                    
                    
                    10,014
                    
                    
                    
                    1,521
                    
                    
                    
                    2,79812,006
                    
                    
                    
                    25,730
                    
                    
                    
                    2,837
                    
                    
                    
                    7,046Gross
      Margin
                    
                    
                    3,364
                    
                    
                    
                    7,646
                    
                    
                    
                    741
                    
                    
                    
                    1,409Operating
      ExpensesGeneral
      and administrative
                    
                    
                    4,442
                    
                    
                    
                    6,144
                    
                    
                    
                    1,103
                    
                    
                    
                    2,075Selling
                    
                    
                    279
                    
                    
                    
                    466
                    
                    
                    
                    73
                    
                    
                    
                    189Research
      and development
                    
                    
                    30
                    
                    
                    
                    45
                    
                    
                    
                    10
                    
                    
                    
                    7Impairment
      loss
                    
                    
                    615
                    
                    
                    
                    457
                    
                    
                    
                    95
                    
                    
                    
                    441Loss
      on disposal of property, plant & equipment
                    
                    
                    (138
                    )
                    
                    
                    11
                    
                    
                    
                    16
                    
                    
                    
                    11Total
      operating expenses
                    
                    
                    5,228
                    
                    
                    
                    7,123
                    
                    
                    
                    1,297
                    
                    
                    
                    2,723Income
      (Loss ) from Operations
                    
                    
                    (1,864
                    )
                    
                    
                    523
                    
                    
                    
                    (556
                    )
                    
                    
                    (1,314
                    )Other
      Income (Expenses)Interest
      expense
                    
                    
                    (129
                    )
                    
                    
                    (257
                    )
                    
                    
                    (25
                    )
                    
                    
                    (93
                    )Other
      income(expenses)
                    
                    
                    751
                    
                    
                    
                    (224
                    )
                    
                    
                    181
                    
                    
                    
                    (33
                    )Total
      other income (expenses) income
                    
                    
                    622
                    
                    
                    
                    (481
                    )
                    
                    
                    156
                    
                    
                    
                    (126
                    )Income
      (Loss) Before Income Taxes
                    
                    
                    (1,242
                    )
                    
                    
                    42
                    
                    
                    
                    (400
                    )
                    
                    
                    (1,440
                    )Income
      Tax Provision (Benefits)
                    
                    
                    (103
                    )
                    
                    
                    268
                    
                    
                    
                    (139
                    )
                    
                    
                    (46
                    )Loss
      Before Minority Interest
                    
                    
                    (1,139
                    )
                    
                    
                    (226
                    )
                    
                    
                    (261
                    )
                    
                    
                    (1,394
                    )Minority
      interest
                    
                    
                    168
                    
                    
                    
                    269
                    
                    
                    
                    (99
                    )
                    
                    
                    17Net
      Loss Attributable to Common Shares
                    
                    
                    (1,307
                    )
                    
                    
                    (495
                    )
                    
                    
                    (162
                    )
                    
                    
                    (1,411
                    )LOSS
      PER SHARE:Basic
      loss per share
                    
                    $
                    (0.41
                    )
                    
                    $
                    (0.15
                    )
                    
                    $
                    (0.05
                    )
                    
                    $
                    (0.44
                    )Diluted
      loss per share
                    
                    $
                    (0.41
                    )
                    
                    $
                    (0.15
                    )
                    
                    $
                    (0.05
                    )
                    
                    $
                    (0.44
                    )Weighted
      Average Shares Outstanding:Basic
                    
                    
                    3,227
                    
                    
                    
                    3,226
                    
                    
                    
                    3,227
                    
                    
                    
                    3,226Diluted
                    
                    
                    3,227
                    
                    
                    
                    3,253
                    
                    
                    
                    3,227
                    
                    
                    
                    3,210Comprehensive
      Income (Loss):Net
      loss
                    
                    $
                    (1,307
                    )
                    
                    $
                    (495
                    )
                    
                    $
                    (162
                    )
                    
                    $
                    (1,411
                    )Foreign
      currency translation adjustment
                    
                    
                    (1,224
                    )
                    
                    
                    1,676
                    
                    
                    
                    (546
                    )
                    
                    
                    758Comprehensive
      Income (Loss)
                    
                    $
                    (2,531
                    )
                    
                    $
                    1,181
                    
                    
                    $
                    (708
                    )
                    
                    $
                    (653
                    )


See
accompanying notes to condensed consolidated financial statements.


-3-
 Table of Contents


TRIO-TECH
INTERNATIONAL AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS,
UNAUDITED (IN THOUSANDS)





Nine
      Months EndedMarch
      31,
                        
                        
                        March
      31,2009
                        
                        
                        2008(Unaudited)
                        
                        
                        (Unaudited)Cash
      Flow from Operating ActivitiesNet
      loss
                        
                        $
                        (1,307
                        )
                        
                        $
                        (495
                        )Adjustments
      to reconcile net income tonet
      cash flow provided by operating activitiesDepreciation
      and amortization
                        
                        
                        1,632
                        
                        
                        
                        2,262Bad
      debts expense, net
                        
                        
                        114
                        
                        
                        
                        2Inventory
      provision
                        
                        
                        191
                        
                        
                        
                        36Interest
      income on short-term deposits
                        
                        
                        (54
                        )
                        
                        
                        (39
                        )Impairment
      loss
                        
                        
                        615
                        
                        
                        
                        457Stock
      compensation
                        
                        
                        301
                        
                        
                        
                        390Loss
      (gain) on sale of property
                        
                        
                        (138
                        )
                        
                        
                        11Investment
      income
                        
                        
                        (211
                        )
                        
                        
                        --Deferred
      tax provision
                        
                        
                        (84
                        )
                        
                        
                        126Minority
      interest
                        
                        
                        (4
                        )
                        
                        
                        268Changes
      in operating assets and liabilities,net
      of acquisition effectsAccounts
      receivables
                        
                        
                        2,087
                        
                        
                        
                        325Other
      receivables
                        
                        
                        --
                        
                        
                        
                        (437
                        )Other
      assets
                        
                        
                        (296
                        )
                        
                        
                        (200
                        )Inventories
                        
                        
                        933
                        
                        
                        
                        (234
                        )Prepaid
      expenses and other liabilities
                        
                        
                        438
                        
                        
                        
                        (100
                        )Accounts
      payable and accrued liabilities
                        
                        
                        (2,935
                        )
                        
                        
                        (548
                        )Income
      tax payable
                        
                        
                        (127
                        )
                        
                        
                        (404
                        )Net
      cash provided by operating activities
                        
                        
                        1,155
                        
                        
                        
                        1,421Cash
      Flow from Investing ActivitiesProceeds
      from short-term deposit matured
                        
                        
                        3,192
                        
                        
                        
                        25,537Investments
      in short-term deposits
                        
                        
                        (687
                        )
                        
                        
                        (25,946
                        )Additions
      to property, plant and equipment
                        
                        
                        (1,107
                        )
                        
                        
                        (2,507
                        )Investment
      in Chongqing, China
                        
                        
                        (529
                        )
                        
                        
                        (2,931
                        )Proceeds
      from sale of property
                        
                        
                        178
                        
                        
                        
                        15Net
      cash provided by (used in) investing activities
                        
                        
                        1,047
                        
                        
                        
                        (5,832
                        )Cash
      Flow from Financing ActivitiesNet
      borrowings on lines of credit
                        
                        
                        --
                        
                        
                        
                        22Repayment
      of bank loans and capital leases
                        
                        
                        (1,085
                        )
                        
                        
                        (1,305
                        )Proceeds
      from long-terms bank loans and capital leases
                        
                        
                        --
                        
                        
                        
                        3,837Proceeds
      from exercising stock options
                        
                        
                        3
                        
                        
                        
                        1Paid
      dividends
                        
                        
                        --
                        
                        
                        
                        (354
                        )Net
      cash provided by (used in) financing activities
                        
                        
                        (1,082
                        )
                        
                        
                        2,201Effect
      of Changes in Exchange Rate
                        
                        
                        (1,028
                        )
                        
                        
                        1,033NET
      INCREASE(DECREASE) IN CASH
                        
                        
                        92
                        
                        
                        
                        (1,177
                        )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                        
                        
                        6,600
                        
                        
                        
                        7,135CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                        
                        $
                        6,692
                        
                        
                        $
                        5,958Supplementary
      Information of Cash FlowsCash
      paid during the period for:Interest
                        
                        $
                        132
                        
                        
                        $
                        186Income
      taxes
                        
                        $
                        --
                        
                        
                        $
                        732Nom-Cash
      TransactionsNon-cash
      investment for the investment in Chongqing, China (Note 9)
                        
                        $
                        501
                        
                        
                        $
                        --Capital
      lease of property, plant and equipment
                        
                        $
                        9
                        
                        
                        $
                        --Declaration
      of cash dividends to be paid
                        
                        $
                        --
                        
                        
                        $
                        354





See
accompanying notes to condensed consolidated financial statements.


-4-
 Table of Contents


TRIO-TECH
INTERNATIONAL AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE
AND NUMBER OF SHARES)





1.           
ORGANIZATION AND BASIS OF PRESENTATION





Trio-Tech
International (“the Company” or “TTI” hereafter) was incorporated in fiscal 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. TTI conducts business in three
business segments: Testing Services, Manufacturing and
Distribution.  TTI has subsidiaries in the U.S., Singapore, Malaysia,
Thailand, and China as follows:





Ownership
                  
                  LocationExpress
      Test Corporation (dormant)
                  100%
                  
                  Van
      Nuys, CaliforniaTrio-Tech
      Reliability Services (dormant)
                  100%
                  
                  Van
      Nuys, CaliforniaKTS
      Incorporated, dba Universal Systems (dormant)
                  100%
                  
                  Van
      Nuys, CaliforniaTrio-Tech
      International Pte. Ltd.
                  100%
                  
                  SingaporeUniversal
      (Far East) Pte. Ltd.
                  100%
                  
                  SingaporeTrio-Tech Thailand
                  100%
                  
                  Bangkok,
      ThailandTrio-Tech
      Bangkok
                  100%
                  
                  Bangkok,
      ThailandTrio-Tech Malaysia
                  55%
                  
                  Penang
      and Selangor, MalaysiaTrio-Tech
      Kuala Lumpur – 100% owned by Trio-Tech Malaysia
                  55%
                  
                  Selangor,
      MalaysiaPrestal
      Enterprise Sdn. Bhd.
                  76%
                  
                  Selangor,
      MalaysiaTrio-Tech
      (SIP) Co. Ltd.
                  100%
                  
                  Suzhou,
      ChinaTrio-Tech
      (Shanghai) Co. Ltd.
                  100%
                  
                  Shanghai,
      ChinaTrio-Tech
      (Chongqing) Co. Ltd
                  100%
                  
                  Chongqing,
      China




The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of
America (“US GAAP” hereafter) 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
consolidated financial statements are presented in U.S. dollars.  The
accompanying financial statements do not include all the information and
footnotes required by US 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 nine months ended March 31, 2009
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 2009.  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, 2008.





Reclassification:— Certain reclassifications
have been made to the previous year’s financial statements to conform to current
year presentation, with no effect on previously reported net
income.


-5-
 Table of Contents




Change in Estimate:
During the second quarter of fiscal year 2009, our Singapore operations reversed
approximately $159 in accruals based on new and updated
information.  This was related to the bonuses provision and annual
leave provision that were included in accrued expenses at September 30,
2008.  The provision for bonuses in the amount of $118 was based on
the Company’s policy and guidelines related to bonuses, the financial results of
the Singapore operation, group objectives and individual employee performance
set up at the beginning of fiscal year 2009, and employee headcount on June 30,
2008.  As our Singapore operations suffered higher than expected
operating losses during the six months ended December 31, 2008, management
believed that the Singapore operations would not be able to meet the criteria of
the initial financial objectives created at the beginning of fiscal
2009.  The Company does not have any legal or contractual obligation
for the payment of bonuses. Accordingly, the over-provision of $159 was reversed
during the second quarter of fiscal 2009.





These
changes in estimate decreased the cost of sales by $84 and decreased general and
administrative expenses by $75. The net impact was an increase in net income for
the nine months ended March 31, 2009 of $159, or $0.05 per basic and diluted
share.





2.           NEW
ACCOUNTING PRONOUNCEMENTS




In April
2009, the FASB issued Staff Position (“FSP”) FAS 157-4, Determining Fair Value When the
Volume or Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (“FSP
FAS157-4”). FSP FAS 157-4 provides additional guidance for estimating fair value
in accordance with SFAS No. 157 when the volume and level of activity for
the asset or liability have significantly decreased and requires that companies
provide interim and annual disclosures of the inputs and valuation technique(s)
used to measure fair value. FSP FAS 157-4 is effective for interim and annual
reporting periods ending after June 15, 2009 and is to be applied
prospectively. The Company does not expect the adoption of FSP FAS 157-4 to have
a significant impact on its financial statements.




In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-than-Temporary Impairments. FSP FAS 115-2 and FAS 124-2 amends the
other-than-temporary impairment guidance to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements. FSP FAS 115-2 and FAS 124-2 are effective for interim
and annual reporting periods ending after June 15, 2009. The Company does
not expect the adoption of FSP FAS 115-2 and FAS 124-2 to have a significant
impact on its financial statements.




In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. FSP FAS 107-1 and APB 28-1 require disclosures
about fair value of financial instruments for interim reporting periods of
publicly traded companies as well as in annual financial statements. FSP FAS
107-1 and APB 28-1 are effective for interim and annual reporting periods ending
after June 15, 2009. Company does not believe that the  adoption
of FSP 107-1 and APB 28-1 will have an impact on the Company’s financial
statements.





We
adopted Financial Accounting Standards Board (“FASB”) Statement of Financial
Accounting Standard (“SFAS”) No. 157, Fair Value Measurements
(“SFAS 157”) on July 1, 2008 for financial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. SFAS 157 defines fair value, establishes a framework for measuring fair
value as required by other accounting pronouncements and expands fair value
measurement disclosures. The provisions of SFAS 157 are applied prospectively
upon adoption and do not have a material impact on our consolidated financial
statements. The disclosures required by SFAS 157 are included in Note 11, Fair Value Measurement, to
these consolidated financial statements.


-6-
 Table of Contents




We
adopted SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities—Including an
Amendment of FASB Statement No. 115 (“SFAS 159”) as of July 1, 2008.
SFAS 159 permits entities to elect to measure many financial instruments and
certain other items at fair value. We did not elect the fair value option for
any assets or liabilities which were not previously carried at fair value.
Accordingly, the adoption of SFAS 159 had no impact on our consolidated
financial statements.





In April
2008, the Financial Accounting Standards Board
(“FASB”) issued FASB Staff Position (“FSP”) No. SFAS
142-3, Determination of the
Useful Life of Intangible Assets (“FSP SFAS 142-3”). FSP SFAS 142-3
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, Goodwill
and Other Intangible Assets (“SFAS 142”). FSP SFAS 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008
and must be applied prospectively to intangible assets acquired after the
effective date. The adoption of this statement is not expected to have a
material impact on our consolidated financial position or results of
operations.





In March
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with U.S. GAAP. This statement is effective from
November 2008 when the SEC approved the Public Company Accounting Oversight
Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.The
implementation of this statement did not have an impact on the Company’s results
of operations or financial position.





In March
2008, The Financial Accounting Standards Board (“FASB”) issued FASB Statement
No. 161, Disclosures about
Derivative Instruments and Hedging Activities. The new standard is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows. It is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged.The Company has not
completed its evaluation of the potential impact, if any, of the adoption of
SFAS No. 161 on its consolidated financial position, results of operations and
cash flows.








3.           
INVENTORIES





Inventories
consisted of the following:


March
      31,
                      
                      
                      June
      30,2009
                      
                      
                      2008(Unaudited)Raw
      materials
                      
                      $
                      1,041
                      
                      
                      $
                      1,297Work
      in progress
                      
                      
                      812
                      
                      
                      
                      1,797Finished
      goods
                      
                      
                      161
                      
                      
                      
                      235Less:
      provision for obsolete inventory
                      
                      
                      (689
                      )
                      
                      
                      (880
                      )$
                      1,325
                      
                      
                      $
                      2,449




-7-
 Table of Contents





4.           
STOCK OPTIONS





As of
March 31, 2009, the Company had 2,750 shares of stock options outstanding under
the 1998 Employee Option Plan, which plan was terminated on December 2, 2005 by
the Company’s Board of Directors.





On
September 24, 2007, the Company’s Board of Directors unanimously adopted the
2007 Employee Stock Option Plan and the 2007 Directors Equity Incentive Plan,
which were approved by the shareholders on December 3, 2007.  The 2007
Employee Stock Option Plan provides for awards of up to 300,000 shares of the
Company’s Common Stock to employees, consultants and advisors.  The
2007 Directors Equity Incentive Plan provides for awards of up to 200,000 shares
of the Company’s Common Stock to the members of the Board of Directors in the
form of non-qualified options and restricted stock. These two plans are
administered by the Board, which also establishes the terms of the awards.





The
Company adopted the fair value recognition provisions of Statement of Financial
Accounting Standard No. 123R, Share-Based Payment (SFAS No
123R), which requires the measurement and recognition of compensation expense
for all stock-based payment awards made to the Company’s employees and directors
including stock options and employee stock purchases.  Stock-based
compensation expense for stock options and employee stock purchases granted
subsequent to July 1, 2005 were based on the grant-date fair value estimated in
accordance with the provisions of SFAS No. 123R.  During the
process of estimating the fair value of the stock options granted and
recognizing share-based compensation, the following assumptions were
adopted.





Assumptions





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


Nine
      Months Ended
                
                
                Year
      EndedMarch
      31, 2009
                
                
                June
      30, 2008Expected
      volatility
                
                
                107.18
                %
                
                
                110.91-117.70
                %Risk-free
      interest rate
                
                
                2.48
                %
                
                
                2.90
                %Expected
      life (years)
                
                
                2.00
                
                
                
                2.00





The
expected volatilities are based on the historical volatility of the Company’s
stock.  The observation is made on a weekly basis.  The
observation period covered is consistent with the expected life of
options.  The expected life of stock options is based on the
historical experience of similar stock options granted and
observed.  The risk-free rate is consistent with the expected terms of
the stock options and is based on the United States Treasury yield curve in
effect at the time of grant.


-8-
 Table of Contents





2007 Employee Stock Option
Plan





The Company’s 2007
Employee Stock Option Plan (the “2007 Employee Plan”), which is
shareholder-approved, permits the grant of stock options to its employees of up
to 300,000 shares of Common Stock.  Under the 2007 Employee Plan, all
options must be granted with an exercise price of not less than “fair market
value” as of the grant date and theoptions granted should 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. They shall be exercisable
(a) immediately as of the effective date of the stock option agreement granting
the Option, or (b) in accordance with a schedule related to the date of the
grant of the Option, the date of first employment, or such other date as may be
set by the Compensation Committee.  Generally, options granted under
the 2007 Employee Plan are exercisable within five years after the date of
grant, and vest over the period as follows: 25% vesting on the grant date and
the remaining balance vesting in equal installments on the next three succeeding
anniversaries of the grant date.  The share-based compensation will be
recognized in terms of the grade method over the vesting period. Certain option
awards provide for accelerated vesting if there is a change in control (as
defined in the 2007 Employee Plan).





During
the first quarter of fiscal 2009, pursuant to the 2007 Employee Plan, 50,000
shares of stock options were granted to certain officers and employees with an
exercise price equal to the fair market value of the Company’s Common Stock (as
defined under the 2007 Employee Plan in conformity with Regulation 409A of the
Internal Revenue Code of 1986, as amended) at the date of
grant.  These options vest over the period as follows: 25% vesting on
the grant date, and the balance vesting in equal installments on the next three
succeeding anniversaries of the grant date.  The fair market value of
50,000 shares of the Company’s Common Stock issuable upon exercise of stock
options granted was approximately $136 based on the fair value of $2.71 per
share determined by using the Black Scholes option pricing model.





The
Company recognized stock-based compensation expense of approximately $138 in the
nine months ended March 31, 2009 under the 2007 Employee
Plan.  Unamortized stock-based compensation of $105 based on fair
value on the grant date related to options granted under the 2007 Employee Plan
is expected to be recognized over a period of three years.





As of
March 31, 2009, there were 32,750 shares of vested employee stock options. The
weighted-average exercise price was $7.79 and the weighted average remaining
contractual term was 4.05 years. The total intrinsic value of vested employee
stock options during the three months ended March 31, 2009 was
zero.  A
summary of option activities under the 2007 Employee Plan during the nine months
ended March 31, 2009 is presented as follows:


-9-
 Table of Contents





Weighted-
      Average Exercise
                  
                  
                  Weighted
      - Average Remaining Contractual
                  
                  
                  Aggregate
      IntrinsicOptions
                  
                  
                  Price
                  
                  
                  Term (Years)
                  
                  
                  ValueOutstanding
      at July 1, 2008
                  
                  
                  44,000
                  
                  
                  $
                  9.57
                  
                  
                  
                  3.68
                  
                  
                  
                  --Granted
                  
                  
                  50,000
                  
                  
                  $
                  4.81
                  
                  
                  
                  4.28
                  
                  
                  
                  --Exercised
                  
                  
                  --
                  
                  
                  
                  --Forfeited
      or expired
                  
                  
                  (4,000
                  )
                  
                  $
                  8.38Outstanding
      at March 31,
      2009
                  
                  
                  90,000
                  
                  
                  $
                  6.98
                  
                  
                  
                  4.00
                  
                  
                  
                  --Exercisable
      at March 31,
      2009
                  
                  
                  32,750
                  
                  
                  $
                  7.79
                  
                  
                  
                  4.05
                  
                  
                  
                  --





A summary
of the status of the Company’s non-vested employee stock options during the nine
month period ended March 31, 2009 is presented below:


Weighted-Average
      Grant-DateOptions
                  
                  
                  Fair ValueNon-vested
      at July 1, 2008
                  
                  
                  33,000
                  
                  
                  $
                  5.55Granted
                  
                  
                  50,000
                  
                  
                  $
                  2.71Vested
                  
                  
                  (21,750
                  )
                  
                  $
                  3.95Forfeited
                  
                  
                  (4,000
                  )
                  
                  $
                  4.84Non-vested
      at March 31,
      2009
                  
                  
                  57,250
                  
                  
                  $
                  3.73





-10-
 Table of Contents


2007 Directors Equity
Incentive Plan





The 2007
Directors Equity Incentive Plan (the “2007 Directors Plan”), which is
shareholder-approved, permits the grant of 200,000 shares of Common Stock to its
duly elected non-employee directors in the form of non-qualified options and
restricted stock. The exercise price of the non-qualified options is 100% of the
fair market value of the underlying shares on the grant date.  The
options have five-year contractual terms and are generally exercisable
immediately as of the grant date.





During
the first quarter of 2009, pursuant to the 2007 Directors Plan, 60,000 shares of
stock options were granted to our directors with an exercise price equal to the
fair market value of our Common Stock (as defined under the 2007 Directors Plan
in conformity with Regulation 409A or the Internal Revenue Code of 1986, as
amended) at the date of grant.  The fair market value of 60,000 shares
of the Company’s Common Stock issuable upon exercise of stock options granted
was approximately $163 based on the fair value of $2.71 per share determined by
the Black Scholes option pricing model.  There were no options
exercised during the nine month period ended March 31, 2009.  The
Company recognized stock-based compensation expense of $163 in the nine month
period ended March 31, 2009 under the 2007 Directors Plan.





A summary
of option activities under the 2007 Directors Plan during the nine month period
ended March 31, 2009 is presented as follow:


Weighted-
      Average Exercise
                        
                        
                        Weighted
      - Average Remaining Contractual Term
                        
                        
                        Aggregate
      IntrinsicOptions
                        
                        
                        Price
                        
                        
                        (Years)
                        
                        
                        ValueOutstanding
      at July 1, 2008
                        
                        
                        60,000
                        
                        
                        $
                        9.57
                        
                        
                        
                        3.68
                        
                        
                        
                        --Granted
                        
                        
                        60,000
                        
                        
                        $
                        4.81
                        
                        
                        
                        4.28
                        
                        
                        
                        --Exercised
                        
                        
                        --
                        
                        
                        
                        --Forfeited
      or expired
                        
                        
                        --
                        
                        
                        
                        --Outstanding
      at March 31,
      2009
                        
                        
                        120,000
                        
                        
                        $
                        7.19
                        
                        
                        
                        3.98
                        
                        
                        
                        --Exercisable
      at March 31,
      2009
                        
                        
                        120,000
                        
                        
                        $
                        7.19
                        
                        
                        
                        3.98
                        
                        
                        
                        --





-11-
 Table of Contents


1998 Stock Option
Plan





A summary
of option activities under the 1998 Plan during the nine month period ended
March 31, 2009 is presented as follows:


Weighted-
      Average Exercise
                      
                      
                      Weighted
      - Average Remaining Contractual Term
                      
                      
                      Aggregate
      IntrinsicOptions
                      
                      
                      Price
                      
                      
                      (Years)
                      
                      
                      ValueOutstanding
      at July 1, 2008
                      
                      
                      12,550
                      
                      
                      $
                      3.03
                      
                      
                      
                      
                      
                      
                      --Granted
                      
                      
                      --
                      
                      
                      
                      --Exercised
                      
                      
                      (1,000
                      )
                      
                      $
                      2.66Forfeited
      or expired
                      
                      
                      (8,800
                      )
                      
                      $
                      2.66Outstanding
      at December 31, 2008
                      
                      
                      2,750
                      
                      
                      $
                      4.40
                      
                      
                      
                      0.25
                      
                      
                      
                      --Exercisable
      at December 31, 2008
                      
                      
                      2,750
                      
                      
                      $
                      4.40
                      
                      
                      
                      0.25
                      
                      
                      
                      --





The
intrinsic value of 2,750 options exercisable was zero. Cash received from
options exercised in the nine month period ended March 31, 2009 was
approximately $3. There were no unvested
stock options under the 1998 Plan as of March 31, 2009.


-12-
 Table of Contents





5.           
EARNINGS PER SHARE





The
Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings per Share(“EPS”).  Basic EPS are 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 214,750 shares of Common Stock at exercise prices ranging from $4.40
to $9.57 per share as of March 31, 2009 were excluded from the computation of
diluted earnings per share because their effect would have been
anti-dilutive.





Options
to purchase 112,550 shares of Common Stock at exercise prices ranging from $2.66
to $9.57 per share were outstanding as of March 31, 2008 and were excluded from
the computation of diluted earnings per share because their effect would have
been anti-dilutive.




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


Nine
      Months Ended
                        
                        
                        Three
      Months EndedMarch
      31,
                        
                        
                        March
      31,
                        
                        
                        March
      31,
                        
                        
                        March
      31,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008(Unaudited)
                        
                        
                        (Unaudited)
                        
                        
                        (Unaudited)
                        
                        
                        (Unaudited)Net
      loss attributable to common shares
                        
                        $
                        (1,307
                        )
                        
                        $
                        (495
                        )
                        
                        $
                        (162
                        )
                        
                        $
                        (1,411
                        )Basic
      loss per Share
                        
                        $
                        (0.41
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.44
                        )Diluted
      loss per Share
                        
                        $
                        (0.41
                        )
                        
                        $
                        (0.15
                        )
                        
                        $
                        (0.05
                        )
                        
                        $
                        (0.44
                        )Weighted
      average number of common shares outstanding - basic
                        
                        
                        3,227
                        
                        
                        
                        3,226
                        
                        
                        
                        3,227
                        
                        
                        
                        3,226Dilutive
      effect of stock options
                        
                        
                        --
                        
                        
                        
                        --
                        
                        
                        
                        --
                        
                        
                        
                        --Number
      of shares used to compute earnings per share - diluted
                        
                        
                        3,227
                        
                        
                        
                        3,226
                        
                        
                        
                        3,227
                        
                        
                        
                        3,226




-13-
 Table of Contents


6.       ACCOUNTS
RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS





Accounts
receivable are customer obligations due under normal trade terms.  The
Company sells products and services to manufacturers in the semiconductor
industry.  The Company performs continuing credit evaluations of our
customers’ financial conditions. Although the Company generally does not require
collateral, letters of credit may be required from our customers in certain
circumstances.





Senior
management of the Company reviews accounts receivable on a monthly basis to
determine if any receivables will potentially be uncollectible.  The
Company includes any accounts receivable balances that are determined to be
uncollectible in allowance for doubtful accounts.  After all attempts
to collect a receivable have failed, the receivable is written off against the
allowance.  Based on the information available, the Company believes
that its allowance for doubtful accounts for the nine months ended March 31,
2009 and the twelve months ended June 30, 2008 was adequate.





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





March
      31,
                                  
                                  
                                  June
      30,2009
                                  
                                  
                                  2008(Unaudited)Beginning
                                  $
                                  51
                                  
                                  $
                                  42Additions
      charged to expenses
                                  
                                  127
                                  
                                  
                                  24Recovered
                                  
                                  (13)
                                  
                                  
                                  (15)Actual
      write-offs
                                  
                                  --
                                  
                                  
                                  --Ending
                                  $
                                  165
                                  
                                  $
                                  51




-14-
 Table of Contents





7.           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 Company provides
warranty for products manufactured in the term of one year.  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.





The
following table represents the changes in the warranty accrual:


March
      31,
                                
                                
                                June
      30,2009
                                
                                
                                2008(Unaudited)Beginning
                                $
                                113
                                
                                $
                                211Additional
      accruals
                                
                                1
                                
                                
                                --Reversal
                                
                                --
                                
                                
                                (80)Actual
      usage
                                
                                (64)
                                
                                
                                (18)Ending
                                $
                                50
                                
                                $
                                113




-15-
 Table of Contents





8.         FASB
INTERPRETATION NO. 48 (“FIN 48”)





The
Company adopted the provisions of FIN 48 on July 1, 2007 and has had no material
adjustments to its liabilities for unrecognized income tax benefits since its
adoption.  The Company has not included any uncertain tax positions as
defined by FIN 48 in its currently filed federal or state income tax
returns. The Company had no change in the beginning balance of retained
earnings as a result of implementing FIN 48.  A reconciliation of the
beginning and the ending amount of unrecognized tax benefits is as
follows:





(in
      thousands)Balance
      at July 1, 2008
                  
                  $
                  (362
                  )Additions
      based on current year tax positions
                  
                  
                  (29
                  )Additions
      for prior year(s) tax positions
                  
                  
                  --Reductions
      for prior year(s) tax positions
                  
                  
                  213Settlements
                  
                  
                  --Expiration
      of statute of limitations
                  
                  
                  --Balance
      at March 31, 2009
                  
                  $
                  (178
                  )





The
Company accrues penalties and interest on unrecognized tax benefits when
necessary as a component of penalties and interest expenses,
respectively.  The Company had not accrued any penalties or interest
expenses relating to unrecognized benefits at July 1, 2008 and March 31,
2009.





The major
tax jurisdictions in which the Company files income tax returns are the United
States, Singapore and Malaysia.  The statute of limitations, in
general, is open for years 2002 to 2008 for tax authorities in those
jurisdictions to audit or examine income tax returns.  The Company is
under annual review by the government of Singapore.  However, the
Company is not currently under tax examination in any other
jurisdiction.





The
Company has not recognized any income tax benefit for this position during the
current quarter in accordance with the provisions of FIN 48.


-16-
 Table of Contents





9.        INVESTMENT
IN CHONGQING, CHINA





In June
2007, Trio-Tech International Pte., Ltd. established a subsidiary in Chongqing,
China.  This newly established


subsidiary,
Trio-Tech (Chongqing) Co., Ltd., has a registered capital of RMB 20,000 (Chinese
yuan), or equivalent to approximately U.S. $2,600, and is wholly owned by
Trio-Tech International Pte., Ltd. In June 2007, Trio-Tech International Pte.,
Ltd. infused $2,600 to Trio-Tech (Chongqing) Co., Ltd. to fulfill the capital
injection obligation of  Trio-Tech (Chongqing) Co., Ltd. The source of
the funds was from the proceeds from the disposition of short-term deposits by
Trio-Tech International Pte., Ltd.





On August
27, 2007, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum Agreement
with JiaSheng Property Development Co.,
Ltd. (JiaSheng hereafter) to jointly
develop a piece of property with 24.91 acres owned by JiaSheng located in Chongqing City, China, which
is intended for sale after the completion of development.  Pursuant to
the signed agreement, the capital to be invested by Trio-Tech (Chongqing) Co.,
Ltd. was RMB 10,000, equivalent to approximately U.S. $1,463 based on the
exchange rate on March 31, 2009 published by the Federal Reserve
System.  On August 28, 2007, Trio-Tech (Chongqing) Co., Ltd.
transferred the required amount from its bank account into a special bank
account jointly monitored by both Trio-Tech (Chongqing) Co., Ltd. and JiaSheng.  The investment was accounted
under the cost method.





On
October 22, 2007, the parties received approval from the Chinese District Zoning
Regulation Bureau to increase the square meters of the buildings specified in
the original Memorandum Agreement dated August 27, 2007 by 9,885 square
meters.  As a result, the construction costs of the proposed building
project also increased.  On November 15, 2007, Trio-Tech (Chongqing)
Co., Ltd. entered into a Supplement Agreement to the Memorandum Agreement dated
August 27, 2007 with JiaSheng.  The purpose of this
Supplement Agreement was to document another agreement reached by both parties
regarding the additional capital infusion to be committed by the respective
parties in order to finance the increase in construction costs. The Supplement
Agreement did not modify the terms and obligations of both parties specified in
the original Memorandum Agreement.  Under the terms of the Supplement
Agreement, the Company agreed to invest an additional RMB 9,000, or
approximately U.S. $1,317 based on the exchange rate as of March 31, 2009published by the Federal
Reserve System.   On December 17, 2007, Trio-Tech (Chongqing)
Co., Ltd. received a list of additional costs incurred for this project, which
were RMB 4,000 less than the estimated cost of RMB
9,000.  Accordingly, the Company only transferred RMB 5,000,
approximately U.S. $732, from its bank account into the special bank account
jointly monitored by both Trio-Tech (Chongqing) Co., Ltd. and JiaSheng.  After that additional
capital infusion, the equity ratio owned by the Company in that joint venture
was 20%.





In the
fourth quarter of 2008, the investment of RMB 5,000, approximately U.S. $732 based on theexchange rate as of March 31,
2009published by the
Federal Reserve System,was returned to the
Company, which reduced the investment in this project to
$1,463.  After that return of investment, the equity ratio owned by
the Company in that joint venture was 15%. The Company also recorded a profit of
RMB 750, approximately $110in investment
income in the fourth quarter of 2008.





In
October 2008, the Company received a second return on investment principal of
RMB 1,988, or $291, and investment income of RMB 1,312, or $192, from
JiaSheng.  The investment income was part of the return on investment
based on the total investment amount of RMB 15,000, or $2,195.  After the second return of
investment, the equity ratio owned by the Company in that joint venture was
13%.  This investment return was used to offset the purchase of new
commercial and residential investment property from JiaSheng as discussed
below.


-17-
 Table of Contents





In
accordance with APB 18, The
Equity Method of Accounting for Investments in Common Stock, management
believes that the cost method of accounting is appropriate.





On
January 4, 2008, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum
Agreement with MaoYe Property Ltd. to purchase an office space of 827.2 square
meters on the 35th floor of a 40 story high office building located in
Chongqing, China.  The total cash purchase price was RMB 5,554
(Chinese yuan), equivalent to approximately U.S. $813 based on the exchange rate
as of March 31,
2009published
by the Federal Reserve System.  Under the terms of the agreement, the
Company paid the purchase price in full on January 4, 2008.  The
Company rented this property to a third party on July 13, 2008. The term of the
rental agreement is five years with a monthly rental income of RMB 39, or
approximately $6 for the first three years, with an increase of 8% in the fourth
year and another 8% in the fifth year. In the nine months ended March 31, 2009,
this property generated a rental income of $54.





On
October 23, 2008, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum
Agreement with JiaSheng to purchase four units of commercial property and two
units of residential property, totaling 1,391.70 square meters, at JiaSheng
Jingyun Huafu Project located at No. 17 Puyun Avenue in Chongqing, China. The
total purchase price was RMB 7,042, approximately $1,030 based on the exchange
rate as of March 31,
2009published
by the Federal Reserve System.  In October 2008, the Company made a
cash down payment of 10% in the amount of RMB 704, or $103. In November 2008,
the Company paid an additional RMB 2,908 in cash, or $426, from internally
generated funds of the Company.  The Company and JiaSheng agreed to
offset the remaining purchase price for this commercial and residential property
with the investment returns from the No. B48 property in the BeiPei district of
Chongqing City. In addition, the Company charged JiaSheng RMB 130, or $19, in
penalties for the delay in the payment of investment principal and investment
income. The penalty was also used to offset the purchase price of the commercial
and residential property.  As of March 31, 2009, the Company paid cash
in the amount of $529, and offset amounts of $290 as the return of investment
principal, $192 as investment income and $19 as the penalties charged for this
new commercial and residential property totaling $1,031. The Company has not
received the title for this property as of the filing date of this Form 10-Q, as
the seller is in the process of making the payments of all taxes due so that the
documents can be received and the transfer can take place.





On
October 23, 2008 the Company entered into a lease agreement with JiaSheng for
the six units purchased from JiaSheng pursuant to the Memorandum
Agreement.  The lease provides for a two year term with an annual
rental income of RMB 1,392, or approximately $204. The lease started on November
1, 2008.





The
following table presents the Company’s investment in China in fiscal 2008 and
2009, which includes depreciable investment property in the amount of $1,843.
The exchange rate is based on the exchange rate on March 31, 2009 published by
the Federal Reserve System.


Investment
                              Date
                            
                            Investment
                              Amount
                            
                            
                            Investment
                              Amount(RMB)
                            
                            
                            (U.S.
      Dollars)Investment
      in property with JiaSheng
                            08/28/07
                            
                            
                            10,000
                            
                            
                            
                            1,463Investment
      in property with JiaSheng
                            12/17/07
                            
                            
                            5,000
                            
                            
                            
                            732Purchase
      of investment property
                            01/04/08
                            
                            
                            5,554
                            
                            
                            
                            813Return
      of investment in property purchased in 2007 with JiaSheng
                            06/26/08
                            
                            
                            (5,000
                            )
                            
                            
                            (732
                            )Return
      on investment in property with JiaSheng
                            10/23/08
                            
                            
                            (1,988
                            )
                            
                            
                            (291
                            )Purchase
      of investment property
                            10/23/08
                            
                            
                            7,042
                            
                            
                            
                            1,030Total
      investments in China
                            
                            
                            RMB
      20,608
                            
                            
                            $
                            3,015


-18-
 Table of Contents




10.      BUSINESS
      SEGMENTS





The
      Company operates principally in three industry segments; the testing
      service industry (which performs structural and electronic tests of
      semiconductor devices), the designing and manufacturing of equipment
      (which equipment tests the structural integrity of integrated circuits and
      other products) and the distribution of various products from other
      manufacturers in Singapore and Southeast Asia.  The following
      net sales were based on customer location rather than subsidiary
      location.





The
      allocation of the cost of equipment, the current year investment in new
      equipment and depreciation expenses have been made based on the primary
      purpose for which the equipment was
acquired.





All
      inter-segment sales were sales from the manufacturing segment to the
      testing and distribution segments.  Total inter-segment sales
      were $144 and $108 for the nine months ended March 31, 2009 and 2008,
      respectively.  Corporate assets mainly consisted of cash and
      prepaid expenses.  Corporate expenses mainly consisted of
      salaries, insurance, professional expenses and directors’
      fees.
              
              The
      following segment information is
unaudited:








Business
      Segment Information:Quarter
                                        
                                        
                                        
                                        
                                        Operating
                                        
                                        
                                        
                                        
                                        
                                        Depr.Ended
                                        
                                        Net
                                        
                                        
                                        Income
                                        
                                        
                                        Total
                                        
                                        
                                        and
                                        
                                        
                                        CapitalMarch
      31,
                                        
                                        Sales
                                        
                                        
                                        (loss)
                                        
                                        
                                        Assets
                                        
                                        
                                        Amort.
                                        
                                        
                                        ExpendituresManufacturing
                                        2009
                                        
                                        $
                                        1,673
                                        
                                        
                                        $
                                        (112
                                        )
                                        
                                        $
                                        3,011
                                        
                                        
                                        $
                                        54
                                        
                                        
                                        $
                                        482008
                                        
                                        $
                                        4,367
                                        
                                        
                                        $
                                        (884
                                        )
                                        
                                        $
                                        3,747
                                        
                                        
                                        $
                                        67
                                        
                                        
                                        $
                                        43Testing
      services
                                        2009
                                        
                                        
                                        1,856
                                        
                                        
                                        
                                        (516
                                        )
                                        
                                        
                                        21,688
                                        
                                        
                                        
                                        499
                                        
                                        
                                        
                                        202008
                                        
                                        
                                        3,973
                                        
                                        
                                        
                                        (553
                                        )
                                        
                                        
                                        28,883
                                        
                                        
                                        
                                        661
                                        
                                        
                                        
                                        966Distribution
                                        2009
                                        
                                        
                                        49
                                        
                                        
                                        
                                        (6
                                        )
                                        
                                        
                                        73
                                        
                                        
                                        
                                        2
                                        
                                        
                                        
                                        52008
                                        
                                        
                                        115
                                        
                                        
                                        
                                        (69
                                        )
                                        
                                        
                                        424
                                        
                                        
                                        
                                        5
                                        
                                        
                                        
                                        5Corporate
      and
                                        2009
                                        
                                        
                                        -
                                        
                                        
                                        
                                        78
                                        
                                        
                                        
                                        50
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -unallocated
                                        2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        192
                                        
                                        
                                        
                                        97
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Investments
      in
                                        2009
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,015
                                        
                                        
                                        
                                        3
                                        
                                        
                                        
                                        -Chongqing,
      China
                                        2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,931
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        -Total
      Company
                                        2009
                                        
                                        $
                                        3,578
                                        
                                        
                                        $
                                        (556
                                        )
                                        
                                        $
                                        27,837
                                        
                                        
                                        $
                                        558
                                        
                                        
                                        $
                                        732008
                                        
                                        $
                                        8,455
                                        
                                        
                                        $
                                        (1,314
                                        )
                                        
                                        $
                                        36,082
                                        
                                        
                                        $
                                        734
                                        
                                        
                                        $
                                        1,014




-19-
 Table of Contents




Business
      Segment Information:NineMonths
                  
                  
                  
                  
                  Operating
                  
                  
                  
                  
                  
                  Depr.Ended
                  
                  Net
                  
                  
                  Income
                  
                  
                  Total
                  
                  
                  and
                  
                  
                  CapitalMarch
      31,
                  
                  Sales
                  
                  
                  (loss)
                  
                  
                  Assets
                  
                  
                  Amort.
                  
                  
                  ExpendituresManufacturing
                  2009
                  
                  $
                  7,473
                  
                  
                  $
                  (698
                  )
                  
                  $
                  3,011
                  
                  
                  $
                  171
                  
                  
                  $
                  1432008
                  
                  $
                  17,848
                  
                  
                  $
                  1,041
                  
                  
                  $
                  3,747
                  
                  
                  $
                  174
                  
                  
                  $
                  258Testing
      services
                  2009
                  
                  
                  7,682
                  
                  
                  
                  (1,327
                  )
                  
                  
                  21,688
                  
                  
                  
                  1,448
                  
                  
                  
                  9662008
                  
                  
                  15,186
                  
                  
                  
                  1,110
                  
                  
                  
                  28,883
                  
                  
                  
                  2,072
                  
                  
                  
                  2,233Distribution
                  2009
                  
                  
                  215
                  
                  
                  
                  31
                  
                  
                  
                  73
                  
                  
                  
                  4
                  
                  
                  
                  72008
                  
                  
                  342
                  
                  
                  
                  (152
                  )
                  
                  
                  424
                  
                  
                  
                  14
                  
                  
                  
                  14Corporate
      and
                  2009
                  
                  
                  -
                  
                  
                  
                  130
                  
                  
                  
                  50
                  
                  
                  
                  -
                  
                  
                  
                  -unallocated
                  2008
                  
                  
                  -
                  
                  
                  
                  (343
                  )
                  
                  
                  97
                  
                  
                  
                  -
                  
                  
                  
                  2Investment
      in
                  2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,015
                  
                  
                  
                  9
                  
                  
                  
                  1,030Chongqing,
      China
                  2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,931
                  
                  
                  
                  2
                  
                  
                  
                  -Total
      Company
                  2009
                  
                  $
                  15,370
                  
                  
                  $
                  (1,864
                  )
                  
                  $
                  27,837
                  
                  
                  $
                  1,632
                  
                  
                  $
                  2,1462008
                  
                  $
                  33,376
                  
                  
                  $
                  523
                  
                  
                  $
                  36,082
                  
                  
                  $
                  2,262
                  
                  
                  $
                  2,507




-20-
 Table of Contents





Geographic
      Area Information:Elimin-Quarter
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                ationsEnded
                
                United
                
                
                
                
                
                Other
                
                
                
                
                
                
                
                
                
                
                
                and
                
                
                TotalMarch
      31,
                
                States
                
                
                China
                
                
                Countries
                
                
                Singapore
                
                
                Thailand
                
                
                Malaysia
                
                
                Other
                
                
                CompanyNet
      sales to
                2009
                
                $
                326
                
                
                $
                151
                
                
                $
                173
                
                
                $
                1,069
                
                
                $
                68
                
                
                $
                1,792
                
                
                $
                (1
                )
                
                $
                3.578customers
                2008
                
                $
                1,052
                
                
                $
                467
                
                
                $
                551
                
                
                $
                2,312
                
                
                $
                471
                
                
                $
                3,618
                
                
                $
                (16
                )
                
                $
                8,455Operating
                2009
                
                
                (57
                )
                
                
                (27
                )
                
                
                (29
                )
                
                
                (190
                )
                
                
                (12
                )
                
                
                (319
                )
                
                
                78
                
                
                
                (556
                )income
      (loss)
                2008
                
                
                (183
                )
                
                
                (83
                )
                
                
                (96
                )
                
                
                (413
                )
                
                
                (84
                )
                
                
                (647
                )
                
                
                192
                
                
                
                (1,314
                )Long-lived
                2009
                
                
                6
                
                
                
                160
                
                
                
                -
                
                
                
                1,315
                
                
                
                583
                
                
                
                4,354
                
                
                
                (40
                )
                
                
                6,378assets
                2008
                
                
                5
                
                
                
                995
                
                
                
                -
                
                
                
                1,850
                
                
                
                774
                
                
                
                4,272
                
                
                
                (40
                )
                
                
                7,856





Geographic
      Area Information:Nine
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                Elimin-Months
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                ationsEnded
                
                United
                
                
                
                
                
                Other
                
                
                
                
                
                
                
                
                
                
                
                and
                
                
                TotalMarch
      31,
                
                States
                
                
                China
                
                
                Countries
                
                
                Singapore
                
                
                Thailand
                
                
                Malaysia
                
                
                Other
                
                
                CompanyNet
      sales to
                2009
                
                $
                3,729
                
                
                $
                520
                
                
                $
                640
                
                
                $
                3,821
                
                
                $
                310
                
                
                $
                6,494
                
                
                $
                (144
                )
                
                $
                15,370customers
                2008
                
                $
                4,096
                
                
                $
                1,239
                
                
                $
                1,468
                
                
                $
                15,024
                
                
                $
                1,544
                
                
                $
                10,113
                
                
                $
                (108
                )
                
                $
                33,376Operating
                2009
                
                
                (322
                )
                
                
                (68
                )
                
                
                (76
                )
                
                
                (543
                )
                
                
                (42
                )
                
                
                (942
                )
                
                
                129
                
                
                
                (1,864
                )income
      (loss)
                2008
                
                
                42
                
                
                
                (12
                )
                
                
                (18
                )
                
                
                758
                
                
                
                23
                
                
                
                73
                
                
                
                (343
                )
                
                
                523Long-lived
                2009
                
                
                6
                
                
                
                160
                
                
                
                -
                
                
                
                1,315
                
                
                
                583
                
                
                
                4,354
                
                
                
                (40
                )
                
                
                6,378assets
                2008
                
                
                5
                
                
                
                995
                
                
                
                -
                
                
                
                1,850
                
                
                
                774
                
                
                
                4,272
                
                
                
                (40
                )
                
                
                7,856


-21-
 Table of Contents
  11.          FAIR VALUE
MEASUREMENTS





In
September 2006, the Financial Accounting Standards Board issued SFAS 157,Fair Value Measurements.SFAS
157 provides enhanced guidance for using fair value to measure assets and
liabilities.  Under the standard, fair value refers to the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between participants in the market in which the reporting entity
transacts its business.  SFAS 157 clarifies the principle that fair
value should be based on the assumptions market participants would use when
pricing the asset or liability.  In support of this principle, SFAS
157 establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions.  Under the standard, fair value
measurements would be separately disclosed by level within the fair value
hierarchy.  Effective July 1, 2008, the Company adopted the provisions
of SFAS 157 as it relates to financial assets and financial liabilities. The
adoption of SFAS 157 did not have a material effect on our results of
operations, financial position or liquidity.





The
following table provides a summary of the assets and liabilities that are
measured at fair value on a recurring basis as of March 31, 2009:


Basis of Fair Value MeasurementsAs of
                                        March 31,
                                        2009
                                      
                                      
                                      Quoted Prices
      in Active Markets for Identical Assets
                                        Level
      1
                                      
                                      
                                      Significant
      Other Observable Inputs
                                        Level
      2
                                      
                                      
                                      Significant
      Unobservable Inputs
                                        Level
      3AssetsShort-term
      deposits
                                      
                                      $
                                      5,330
                                      
                                      
                                      $
                                      5,330
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      $
                                      --Total
      assets measured at fair value
                                      
                                      $
                                      5,330
                                      
                                      
                                      $
                                      5,330
                                      
                                      
                                      $
                                      --
                                      
                                      
                                      $
                                      --Percentage
      of total assets
                                      
                                      
                                      19
                                      %
                                      
                                      
                                      19
                                      %
                                      
                                      
                                      --
                                      
                                      
                                      
                                      --




As noted
above, the fair value of the Company’s short-term deposits is determined using
quoted market prices in active markets. Since the Company’s short-term deposits
are fixed rate deposits, there is an active, readily tradable market value based
on quoted prices. We based our estimates on such prices (Level 1 pricing) as of
March 31, 2009, or the measurement date. Active markets are those in which
transactions occur in significant frequency and volume to provide pricing
information on an on-going basis. Since valuations are based on quoted prices
that are readily and regularly available in an active market, the valuation of
these short-term deposits does not entail a significant degree of
judgment.


-22-
 Table of Contents





12.           MINORITY
INTEREST




Minority interest represents the
minority stockholders’ proportionate share of 45% of the equity of Trio-Tech
Malaysia.





13.         
LOAN COVENANT
VIOLATION





As the
Company suffered a loss in the first three quarters of fiscal 2009, the
Singapore operations did not fulfill one of their loan covenants which requires
the Company to maintain the debt to EBITDA ratio of no more than 2.5 times at
all times during the term of the loan. As a result, the Company has classified
all long-term debt as current liabilities. Management has communicated to the
bank and requested a waiver of this particular loan covenant. As of the filing
date of this Form 10-Q, the bank is still in the process of reviewing the
Company’s request.





14.         
IMPAIRMENT LOSS





The
Company applies the provisions of Statement of Financial Accounting Standard No.
144, Accounting for the
Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”) to property,
plant and equipment, and other intangible assets. SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable through the estimated undiscounted cash flows expected to result
from the use and eventual disposition of the asset.  Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.





For the
nine months ended March 31, 2009, the Company recorded an impairment loss of
$615, or $0.19 per diluted share, based on its examination of future
undiscounted cash flows. Of this amount, an impairment loss of $296 was related
to the fixed assets located in our Shanghai operation, $224 was for certain
testing equipment located in our Suzhou operation in China and the remaining $95
was for certain testing equipment located in our Malaysia
operation.  We believe that due to the change in demand for certain
burn-in testing services, the negative impact of the international economic
financial crisis and the semiconductor industry recession, our existing burn-in
testing facilities in the Shanghai operation became obsolete. There was little
business activity in the Shanghai operation during the six months ended December
31, 2008, and there were also no secured orders or backlogs for subsequent
periods. Therefore, as we expect no future cash flows from those assets based on
our best estimate, the carrying value of these assets was written down to zero
and the impairment loss was recorded. Business in the Suzhou operation began to
slow down in the fourth quarter of fiscal 2008, and suffered losses in the last
four quarters. The operation is currently only providing line support,
maintenance and training services for one customer.  Based on our best
estimate, there will be no future cash flows from certain identified testing
equipment. Therefore, the carrying value of these assets was written down to
zero and an impairment loss was recorded. Some testing equipment in our Malaysia
operation was beyond repairable conditions and hence was fully impaired as no
future cash flows will be generated.


-23-
 Table of Contents





15.       RELATED
PARTY TRANSACTIONS





During
the second quarter of fiscal 2009, the Company purchased four units of
commercial property and two units of residential property in Chongqing China
from JiaSheng.  JiaSheng and the Company were parties to the Agreement
entered into on August 27, 2007 and the Supplement Agreement entered into on
November 15, 2007 relating to an investment in the No. B48 lot in the BeiPei
district of Chongqing, China as discussed in Note 9to the
unaudited financial statements included in this Form 10-Q.The
purchase price was approximately $1,030.




On
October 23, 2008 the Company entered into a lease agreement with JiaSheng for
the six units purchased from JiaSheng pursuant to the Memorandum
Agreement.  The lease provides for a two year term with an annual
rental income of RMB 1,392, or approximately $204. The lease started on November
1, 2008.





16.       SUBSEQUENT
EVENTS





In April
2009, Trio-Tech International Pte., Ltd. set up a new entity, SHI International
Pte Ltd. ("SHI"), in which Trio-Tech International Pte., Ltd holds 55% of the
ownership interest. On April 07, 2009, SHI entered into a Share Purchase
Agreement, pursuant to which SHI has agreed to acquire from Erni Susanto Susi,
Dwi Kartikarini and PT SAS International shares of PT SAS Heavy Industry
("SASHI") for an aggregate cash purchase price of $10 , and a goodwill
obligation of $100 . The shares of SASHI to be acquired by SHI pursuant to the
Share Purchase Agreement represent approximately 95% of the outstanding shares
of SASHI. The consummation of such purchase and sale is subject to the
satisfaction of certain conditions. SASHI engages in business in the oil and gas
industry.


-24-
 Table of Contents




TRIO-TECH
INTERNATIONAL AND SUBSIDIARIES




ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)


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, and with the information under the headings
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in the most recent Annual Report on Form
10-K.





Overview





Founded
in 1958, Trio-Tech International provides third-party semiconductor testing and
burn-in services primarily through its laboratories in Southeast
Asia.  The Company also designs, manufactures and markets equipment
and systems, and distributes semiconductor processing and testing equipment
manufactured by others.  The Company operates in three
business segments: Testing Services, Manufacturing and
Distribution.





We own
and operate facilities that provide testing services for semiconductor devices
and other electronic components to meet the requirements of military, aerospace,
industrial and commercial applications.  We currently operate five
testing facilities, one in the United States and four throughout in China and
Southeast Asia.  The Company uses its own proprietary equipment for
certain burn-in, centrifugal and leak tests, and commercially available
equipment for various other environmental tests.  The Company conducts
the majority of its testing operations in Southeast Asia with facilities in
Singapore, Malaysia and Thailand.  Our facilities require substantial
investment to construct and are largely fixed-costs assets once in
operation.  Because we own most of the testing capacity, a significant
portion of our operating costs is fixed.  In general, these costs do
not decline with reductions in customer demand or the utilization of our testing
capacity, and can adversely affect profit margins as a
result.  Conversely, as product demand rises and factory utilization
increases, the fixed costs are spread over the increased output, which may
improve profit margins.





In the
third quarter of fiscal 2008, one of our major customers ceased their advanced
burn-in testing service contract with us due to one of their product lines
reaching the end of its life cycle earlier than expected.The net sales in the
testing segment decreased by $7,504 to $7,682 for the nine months ended March
31, 2009 as the result of the loss of
revenue from this major customer.  Management took immediate
action to reduce expenses in an effort to match future cash flows and is in the
process of developing new customer relationships in China and Malaysia and
exploring new business opportunities to offset the lost testing revenue from
this contract.





Recently, there has been
widespread concern over the instability of the financial markets and their
influence on the global economy. We believe that, as a result of the credit
market crisis and other macro-economic challenges currently affecting the global
economy, the orders from our customers in our testing operations in China were
seriously reduced.During the nine months ended March 31,
2009, there was minimal business activity in our Shanghai testing operation, and
there were also no secured orders or backlogs for subsequent
periods.  Therefore, we expect no future cash flows from
the assets in the Shanghai operation.The Company recorded an
impairment loss of $296 on these assets based on its examination of future
undiscounted cash flows in the second quarter of fiscal 2009. In addition,
business in the Suzhou operation also began to slow down in the fourth quarter
of fiscal 2008 and has suffered losses in the last three quarters. The operation
is currently only providing line support, maintenance and training services for
one customer.  Based on our estimated future undiscounted cash flows,
an impairment loss of $224 was recorded for some of the testing equipment during
the second quarter of fiscal 2009. During the third quarter of fiscal 2009, we
also recorded an impairment loss of $95 for some testing equipment in our
Malaysia operation, which was beyond repairable conditions.


-25-
 Table of Contents





In the
second quarter of fiscal year 2009, we recorded  lease termination
expenses of $164 related to the future minimum rent of two idle plants in the
Singapore operation. The non-cancelable lease term for these two plants expires
in March 2011 and April 2011, because neither of these plants have any economic
benefit to the Company, management does not currently have further plans for
these units, and the ability for the Company to sublease these units does not
seem likely, according to SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities,the Company accrued the entire future
minimum rent up to the end of the lease period in the second quarter of fiscal
2009.  This provision for future rental expense increased our cost of
goods sold by $164 in the second quarter of fiscal year 2009.





Our
manufacturing segment manufactures Artic Temperature Controlled Wafer Chucks,
which are used for test, characterization and failure analysis of semiconductor
wafers, Wet Process Stations, which wash and dry wafers at a series of 100 to
300 additional processing steps after the etching or deposition of integrated
circuits, and other microelectronic substrates in what is commonly called the
“front-end”, or creation, of semiconductor circuits.  Additionally, we
also manufacture centrifuges, leak detectors, HAST (Highly Accelerated Stress
Test) systems and “burn-in" systems that are used primarily in the “back-end” of
the semiconductor manufacturing process to test finished semiconductor devices
and electronic components.





In the
United States, our manufacturing segment focused on marketing used and
refurbished equipment, which some of our customers are more willing to purchase
since it is less expensive than new equipment.





Due to
the competitive environment in the manufacturing segment, we anticipate that we
will continue to implement our cost reduction plan by outsourcing a portion of
our manufacturing process to outside suppliers, such as electrical and
mechanical fabrication houses, and seek competitively priced
materials.





Our
distribution segment operates primarily in Southeast Asia.  This
segment markets and supports distribution of our own manufactured equipment in
addition to distributing complementary products supplied by other manufacturers
that are used by our customers and other semiconductor and electronics
manufacturers.  We expanded the distribution business to include a
strategic business unit mainly to serve as a distributor of electronic
components to customers.  It is the strategy of
management to focus on the sales of our own manufactured products. We believe
this will help us to reduce our exposure to multiple risks arising from being a
mere distributor of manufactured products from others.





In June
2007, Trio-Tech International Pte., Ltd. established a subsidiary in Chongqing,
China.  This subsidiary, Trio-Tech (Chongqing) Co., Ltd., has
registered capital of RMB 20,000 (Chinese yuan), or approximately $2,600, and is
wholly owned by Trio-Tech International Pte., Ltd.  On August 27,
2007, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum Agreement with
JiaSheng Property Development Co., Ltd.
(JiaSheng) to jointly develop a piece of
property with 24.91 acres owned by JiaSheng
located in Chongqing City, China, which is intended for sale after the
completion of development.  In fiscal 2008, the Company invested an
aggregate of RMB 15,000, equivalent to approximately $2,195 based on the
exchange rate on March 31, 2009 published by the Federal Reserve System on this
project.  In the fourth quarter of 2008, the investment of RMB 5,000,
or approximately $732 was returned to the Company, which reduced the investment
in this project to $1,463.  The Company also recorded a profit of RMB
750, approximately $110 in investment income in the fourth quarter of
2008.  In October 2008, the Company received a second return on
investment principal of RMB 1,988, or $291 and investment income of RMB 1,312,
or $192 from JiaSheng.   In accordance with APB 18, The Equity Method of Accounting for
Investments in Common Stock, management recorded the transaction using
the cost method of accounting.




-26-
 Table of Contents




On
January 4, 2008, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum
Agreement with MaoYe Property Ltd. to purchase office space of 827.2 square
meters on the 35th floor of a 40 story high office building located in
Chongqing, China.  The total cash purchase price was RMB 5,554
(Chinese yuan), equivalent to approximately $813 based on the exchange rate as
of March 31, 2009 published by the Federal Reserve System.  The
Company rented this property out to a third party on July 13,
2008.  The term of the rental agreement is five years with a monthly
rental income of RMB 39, or approximately $6 for the first three years, with an
increase of 8% in the fourth year and another 8% in the fifth year. During the
nine months ended March 31, 2009, this property generated a rental income
of  $54.





On
October 23, 2008, Trio-Tech (Chongqing) Co., Ltd. entered into a Memorandum
Agreement with JiaSheng to purchase four units of commercial property and two
units of residential property, totaling 1,391.70 square meters located in
Chongqing, China. The total purchase price was RMB 7,042, equivalent to
approximately $1,030 based on the exchange rate as of March 31, 2009 published
by the Federal Reserve System.  In October 2008, the Company made a
cash down payment of 10% in the amount of RMB 704, or $103.  In
November 2008, the Company paid an additional RMB 2,908 in cash, or $426, from
internally generated funds of the Company.  The remaining balance was
offset by the investment return the Company earned related to the No. B48
property.  The Company and JiaSheng agreed to offset the investment
return from the No. B48 property in the BeiPei district of Chongqing City
against the purchase price of this commercial and residential
property.  In addition, the Company charged JiaSheng RMB130, or $19,
as penalties for the delay in the payment of investment principal and investment
income. The penalty was also used to also offset the purchase price of the
commercial and residential property.  As of March 31, 2009, the
Company paid cash in the amount of $529, and offset amounts of $290 as the
return of investment principal, $192 as investment income and $19 as the
penalties charged for this new commercial and residential property totaling
$1,030.





On
October 23, 2008, the Company entered into a lease agreement with JiaSheng for
the six units purchased from JiaSheng pursuant to the Memorandum
Agreement.  The lease provides for a two year term with an annual
rental income of RMB 1,392, or approximately $204. The lease started on November
1, 2008.





The
investment income generated by Trio-Tech (Chongqing) Co., Ltd. during the nine
months ended March 31, 2009 was included in other income in the Consolidated
Statements of Operations and Comprehensive Income.  There was no
investment income during the nine months ended March 31, 2008.





In the
context of a challenging economic environment, in order to achieve our goal of
attaining a lower breakeven point, we undertook several cost reduction measures.
Since the first quarter of fiscal 2009 ending September 30, 2008, we reduced our
headcount by approximately 48 employees.  Also, on February 27, 2008,
our Chief Executive Office, Chief Financial Officer and directors voluntarily
decreased their base salary to 50% of the base salary agreed to in July
2007.  From the second quarter of 2009 ending December 31, 2008, we
implemented four-day work weeks for all the employees in the Singapore
operation, which reduced our employee compensation by approximately 20%. These
cost cutting actions reduced our general and administrative expenses in the nine
months ended March 31, 2009.


-27-
 Table of Contents


Third Quarter Fiscal 2009
Highlights





·
            Total
      revenue decreased 57.7% to $3,578 for the third quarter of fiscal 2009,
      compared with revenue of $8,455 for the third quarter of fiscal
      2008.


·
            Testing
      segment revenue decreased by $2,117, or 53.3%, to $1,856 compared with
      $3,973 for the third quarter of fiscal
2008.


·
            Manufacturing
      segment revenue decreased by $2,694, or 61.7%, to $1,673 compared with
      $4,367 for the third quarter of fiscal
2008.


·
            Distribution
      segment revenue decreased by $66, or 57.4%, to $49 compared with $115 for
      the third quarter of fiscal 2008.


·
            Loss
      from operations decreased by $758, to $556 compared with $1,314 for the
      third quarter of fiscal 2008.


·
            Gross
      margins improved by 4.0% to 20.7% from 16.7% for the third quarter of
      fiscal 2008.


·
            Selling
      expenses decreased by $116, or 61.4%, to $73 compared with $189 for the
      third quarter of fiscal 2008.


·
            General
      and administrative expenses decreased by $972, or 46.8%, to $1,103
      compared with $2,075 for the third quarter of fiscal
  2008.


·
            Net
      loss decreased by $1,249, or 88.5%, to $162, compared to $1,411 for the
      third quarter of fiscal 2008.





The
highlights above are intended to identify some of our more significant events
and transactions during the quarter ended March 31, 2009.  These
highlights are not intended to be a full discussion of our operating results for
this quarter.  These highlights should be read in conjunction with the
following discussion and with our unaudited consolidated financial statements
and notes thereto accompanying this Quarterly Report.





Subsequent
Events





In April
2009, Trio-Tech International Pte., Ltd. set up a new entity, SHI International
Pte Ltd. ("SHI"), in which Trio-Tech International Pte., Ltd. holds 55% of the
ownership interest. On April 07, 2009, SHI entered into a Share Purchase
Agreement, pursuant to which SHI has agreed to acquire from Erni Susanto Susi,
Dwi Kartikarini and PT SAS Internasional shares of PT SAS Heavy Industry
("SASHI") for an aggregate cash purchase price of $10 , and a goodwill
obligation of $100  The shares of SASHI to be acquired by SHI pursuant
to the Share Purchase Agreement represent approximately 95% of the outstanding
shares of SASHI. The consummation of such purchase and sale is subject to the
satisfaction of certain conditions. SASHI engages in business in the oil and gas
industry.





Related
Party Transaction





During
the second quarter of fiscal 2009, the Company purchased four units of
commercial property and two units of residential property in Chongqing China
from JiaSheng.  JiaSheng and the Company are parties to the Agreement
entered into on August 27, 2007 and the Supplement Agreement entered into on
November 15, 2007 relating to an investment in the NO.B48 lot in the BeiPei
district of Chongqing, China.The purchase
price was approximately $1,030.  This purchase was made on terms no
less favorable to the Company than it could obtain in arms length
transactions.(See Note 16to the
unaudited financial statements included in this Form 10-Q)


-28-
 Table of Contents





Results of Operations and
Business Outlook





The
following table sets forth our revenue components for the nine and three months
ended March 31, 2009 and 2008, respectively.





Revenue
      ComponentsNine
      Months Ended
                          March
      31,
                        
                        Three
      Months Ended March 31,2009
                        
                        
                        
                        2008
                        
                        
                        
                        2009
                        
                        
                        
                        2008Net
      Sales:Manufacturing
                        48.6
                        %
                        
                        
                        53.5
                        %
                        
                        
                        46.7
                        %
                        
                        
                        51.6
                        %Testing
                        50.0
                        
                        
                        
                        45.5
                        
                        
                        
                        51.9
                        
                        
                        
                        47.0Distribution
                        1.4
                        
                        
                        
                        1.0
                        
                        
                        
                        1.4
                        
                        
                        
                        1.4Total
                        100.00
                        %
                        
                        
                        100.00
                        %
                        
                        
                        100.00
                        %
                        
                        
                        100.00
                        %





Net sales
for the nine and three months ended March 31, 2009 were $15,370 and $3,578,
respectively, a decrease of $18,006 and $4,877, respectively, when compared to
the same periods of the prior year.  As a percentage, total net sales
decreased by 53.9% for the nine months and decreased by 57.7% for the three
months ended March 31, 2009, when compared to total net sales for the same
periods of the prior year.





Net sales
into and within China and the Southeast Asia regions and other countries (except
sales into and within the United Sates) decreased by $17,639 to $11,641 and by
$4,151 to $3,252 for the nine months and three months ended March 31, 2009,
respectively, compared to the same period of the prior year.  This
decrease was primarily due to a drop in sales in our Singapore and China
operations as a result of the instability of the financial markets and their
influence on the global economy .  Net sales into and within the
United States were $3,729 and $326 for the nine and three months ended March 31,
2009, respectively, a decrease of $367 and $726, respectively, when compared to
the same periods of the prior year.





The
decrease in net sales in the nine and three months ended March 31, 2009 can be
discussed within three segments as follows:





Manufacturing
Segment





Net sales
in the manufacturing segment as a percentage of total net sales were 48.6% and
46.7% for the nine and three months ended March 31, 2009, respectively,
representing a decrease of 4.9%, respectively, when compared to the same periods
of the prior year.  The absolute amount of net sales were $7,473 and
$1,673 for the nine and three months ended March 31, 2009 respectively, a
decrease of $10,375 and $2,694, respectively, when compared to the same periods
of the prior year. We believe
that the current worldwide economic crisis and its influence on the
international market have a negative effect on our business. The demand for our
equipments decreased, which in turn reduced our revenue.





Testing
Segment





Net sales
in the testing segment as a percentage of total net sales were 50.0% and 51.9%
for the nine and three months ended March 31, 2009, respectively, representing
an increase of 4.5% and 4.9%, respectively, of total net sales when compared to
the same periods of the prior year.  The absolute amount of net sales
in the testing segment decreased by $7,504 to $7,682 and by $2,117 to $1,856 for
the nine and three months ended March 31, 2009, respectively, compared to the
same periods of fiscal 2008.  We believe that the
economic crisis is having a significant impact on the semiconductor industry and
that China is experiencinga slowdown in its electronics manufacturing
industries.  We believe the foregoing resulted in reduced demand in
our testing services in China and Southeast Asia.


-29-
 Table of Contents




Distribution
Segment





Net sales
in the distribution segment accounted for 1.4% of total net sales for the nine
and three months ended March 31, 2009, respectively, an increase of 0.4% and
zero compared to the same periods in fiscal 2008.  The absolute amount
of net sales decreased by $127 to $215 and by $66 to $49 for the nine and three
months ended March 31, 2009, respectively, compared to the same periods in
fiscal 2008.  The drop in revenue was due to lower demand in the
current market for back-end products such as Vibration equipment and chambers
and, we believe, a saturation of equipment and electronic components in the
current market.  Product volume for the distribution segment depends
on sales activities such as placing orders, queries on products and
backlog.  Equipment and electronic component sales are very
competitive, as the products are prevalent in the market.





Uncertainties
and Remedies





There are
several influencing factors which create uncertainties when forecasting
performance, such as the ever-changing nature of technology, specific
requirements from the customer, declines in demand for certain types of burn-in
devices or equipment, and other similar factors.  One of these factors
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. Based on a number of economic
indicators, it appears that growth in global economic activity has slowed
substantially. At the present time, the rate at which the global economy will
slow has become increasingly uncertain. A continued slowing of global economic
growth will likely have a negative impact on ourgrowth
and results of operations. However, the Company has taken certain actions and
formulated certain plans to deal with and to help mitigate these unpredictable
factors. We continue to cut costs by maintaining a lean headcount, while still
keeping quality high so as to sell new products at a competitive
price.  We have also been improving our customer service by keeping
our staff updated with regard to the newest technology and stressing the
importance of understanding and meeting the stringent requirements of our
customers.  We believe customers have tightened and will continue to
tighten their spending resulting in a decline in the demand for electronic
products and semiconductor equipment. This chain effect has hit the Company’s
business, and we anticipate that will continue to affect the Company’s
business in the future. We are exploring new markets and products, looking
for new customers, and upgrading and improving burn-in technology while at the
same time searching for improved testing methods of higher technology
chips.


-30-
 Table of Contents


Comparison
of the Third Quarters Ended March 31, 2009 and 2008





The
following table sets forth certain consolidated statements of income data as a
percentage of net sales for the third quarters of fiscal 2009 and 2008,
respectively:





Three
      Months Ended
                              March
      31,2009
                            
                            
                            2008Net
      Sales
                            
                            
                            100
                            %
                            
                            
                            100.0
                            %Cost
      of sales
                            
                            
                            79.3
                            %
                            
                            
                            83.3
                            %Gross
      Margin
                            
                            
                            20.7
                            %
                            
                            
                            16.7
                            %Operating ExpensesGeneral
      and administrative
                            
                            
                            30.8
                            %
                            
                            
                            24.6
                            %Selling
                            
                            
                            2.0
                            %
                            
                            
                            2.2
                            %Research
      and development
                            
                            
                            0.3
                            %
                            
                            
                            0.1
                            %Impairment
      loss
                            
                            
                            2.7
                            %
                            
                            
                            5.2
                            %Loss
      on disposal of property, plant and equipment
                            
                            
                            0.4
                            %
                            
                            
                            0.1
                            %Total
      operating expenses
                            
                            
                            36.2
                            %
                            
                            
                            32.2
                            %Loss
      from Operations
                            
                            
                            (15.5
                            )%
                            
                            
                            (15.5
                            )%





Overall
Gross Margin





Overall
gross margin as a percentage of revenue increased by 4.0% for the three months
ended March 31, 2009, from 16.7% in the third quarter of fiscal 2008 to 20.7%,
due primarily to the increase in the gross margin in the manufacturing segment.
In terms of dollar value, the overall gross margin decreased by $668 for the
three months ended March 31, 2009, from $1,409 to $741, compared to the same
quarter of fiscal 2008 resulting from a decrease in revenue.





Gross
margin as a percentage of revenue in the manufacturing segment increased by
19.5% for the three months ended March 31, 2009, from 4.4% in the third quarter
of fiscal 2008 to 23.8% in the third quarter of fiscal 2009.  The
significant increase in gross margin was due to a decrease in sales of lower
margin burn-in systems and pass-through products in the third quarter of fiscal
2009 compared with the same period of fiscal 2008. In addition, there was a
decrease in the price of raw material in the third quarter of 2009 as some of
our suppliers lowered their price as the result of heavy competition in the
supplies market.  In absolute amounts, gross margin in the
manufacturing segment increased by $208 to $399 for the three months ended March
31, 2009, from $191 for the three months ended March 31, 2008.





Gross
margin as a percentage of revenue in the testing segment decreased by 11.6% for
the three months ended March 31, 2009, from 29.6% to 18.0%, compared to the same
quarter of fiscal 2008.  In terms of dollar amount, gross margin in
the testing segment in the third quarter of fiscal 2009 was $335, a decrease of $840 compared to $1,175 in the same
period of fiscal 2008.  The decrease in the gross margin was due
primarily to a drop in the average selling price of services in the Singapore
testing operations. Our customers changed their demands and specifications for
burn-in hours, which resulted in a lower average unit selling price for burn-in
services.  Another factor contributing to the decline in gross margin
was the fact that significant portions of our operating costs are fixed in the
testing segment; thus as product demands decrease and factory utilization
decreases, the fixed costs are spread over the decreased output, resulting in a
drop in profit margin.


-31-
 Table of Contents





Gross
margin as a percentage of revenue in the distribution segment was 14.3% for the
third quarter of fiscal 2009, a decrease by 23.1% from 37.4% in the third
quarter of fiscal 2008.  The decrease in gross profit as a percentage
of sales was due to a decrease in average sales prices in the third quarter of
fiscal 2009 compared to the same period of fiscal 2008. In absolute amounts,
gross margin was $7, a decrease of $36 from $43 in the same period of fiscal
2008. The gross margin in the distribution segment is not only affected by the
market price of our products, but also our product mix, which changes frequently
as a result of changes in market demand.





Operating
Expenses





Operating
expenses for the third quarters of fiscal 2009 and 2008 were as
follows:


Three
      Months Ended
                        March
      31,(In
      Thousands, unaudited)
                      
                      2009
                      
                      
                      2008General
      and administrative
                      
                      $
                      1,103
                      
                      
                      $
                      2,075Selling
                      
                      
                      73
                      
                      
                      
                      189Research
      and development
                      
                      
                      10
                      
                      
                      
                      7Impairment
      loss
                      
                      
                      95
                      
                      
                      
                      441Loss
      on disposal of property, plant and equipment
                      
                      
                      16
                      
                      
                      
                      11Total
                      
                      $
                      1,297
                      
                      
                      $
                      2,723





General and administrative
expenses decreased by $972, or 46.8%, compared to the same period of fiscal
2008, from $2,075 to $1,103 for the three months ended March 31,
2009.   The decrease was attributable to a decrease in payroll
expenses and a decrease in officer and executive compensation in the third
quarter of fiscal 2009.Since the third quarter of fiscal 2008
ending March 31, 2008, we undertook several cost reduction actions. We reduced
our headcount by approximately 65 employees since September 30,
2008.  In the second quarter of 2009, we implemented four-day work
weeks for all the employees in the Singapore operation, which reduced our
employee compensation by approximately 20%. On February 27, 2008, in view of
anticipated reductions in service revenue for fiscal 2008, our Chief Executive
Officer, Chief Financial Officer and directors voluntarily decreased their base
salary to 50% of the base salary agreed to in July 2007. As a result, our
compensation for the officers and executives decreased by $99 in the third
quarter of fiscal 2009.





Selling
expenses decreased by $116, or 61.4%, for the three months ended March 31, 2009,
from $189 to $73 compared to the same quarter of fiscal 2008, mainly due to a
decrease in employee headcount and a decrease in commission expenses as a result
of fewer commissionable sales in the distribution segment.





Research
and development expenses were $10 compared to $7 for the third quarter of fiscal
2008. The decrease was primarily due to a decrease in full time employee
headcount in the U.S. operation.


-32-
 Table of Contents




The
impairment loss decreased by $346 for the three months ended March 31, 2009,
from $441 to $95 compared to the same quarter of fiscal 2008.  The
impairment loss of $95 in the third quarter of fiscal year 2009 was for some
testing equipment in our Malaysia operation, which was beyond repairable
conditions. The impairment loss for the three months ended March 31, 2008
consisted of $221 from certain advanced burn-in testing equipment in the
Singapore operations as a result of the termination of the advanced burn-in
testing service contract with one of our major customers. An impairment of $75
related to the burn-in testing system in our existing burn-in facilities in
China due to change in demand for certain burn-in services, which in turn made
certain of our existing burn-in facilities obsolete. An impairment of $57
related to the building renovations for certain testing projects due to a
decrease in a customer’s order in our Shanghai operations in China. The
remaining impairment of $88 related to certain testing machinery equipment in
our Singapore operation due to a decrease our testing backlog and projected
future sales.





Loss
from Operations





Loss from
operations decreased by $758 from $1,314 for the three months ended March 31,
2008 to $556 for the three months ended March 31, 2009, mainly due to an
increase in gross margin and a decrease in operating expenses, as previously
discussed.





Interest
Expense





Interest
expense for the third quarters of fiscal 2009 and 2008 were as
follows:





Three
      Months Ended
                        March
      31,(In
      Thousands, unaudited)
                      
                      2009
                      
                      
                      2008Interest
      expense
                      
                      $
                      25
                      
                      
                      $
                      93





Interest
expenses decreased by $68 for the three months ended March 31, 2009, from $93 to
$25, primarily due to a decrease in our loan payable and capital lease
obligations. We are trying to keep our debt at a minimum in order to save
financing costs. Our credit rating provides us with ready and adequate access to
funds in global markets.  As of March 31, 2009, the Company had an
unused line of credit of $15,089.





Other
(Expenses) Income





Other
(expenses) income for the third quarters of fiscal 2009 and 2008 were as
follows:


Three
      Months Ended
                        March
      31,(In
      Thousands, unaudited)
                      
                      2009
                      
                      
                      2008Other
      (expenses) income
                      
                      $
                      181
                      
                      
                      $
                      (33
                      )





Other
income increased by $214 to $181 for the three months ended March 31, 2009 from
an expense of $33 in the same quarter of fiscal 2008, primarily due to an
increase in rental income and currency transaction gain. Currency transaction
gain increased by $206 for the three months ended March 31, 2009, from an
exchange loss of $175 to an exchange gain of $31, compared to the same quarter
of fiscal 2008.  This was attributable to the strengthening of the
U.S. dollar against foreign currency with regard to the transactions denominated
in U.S. dollars.  Rental income, which consisted mainly of space in
our Malaysia operation and investments in property in our Chongqing operation
rented to outside vendors, increased by $77 to $78 for the three months ended
March 31, 2009 compared to $1 in the same period of fiscal 2008.


-33-
 Table of Contents





Income
Tax





The net
income tax benefit for the three months ended March 31, 2009 was $139, an
increase of $93 compared to $46 for the three months ended March 31,
2008.  In the three months ended March 31, 2009, we reversed an income
tax payable in the amount of $124 from the Singapore operation, which was
provided for the potential non-deductible corporate management fee. The Company
re-evaluated its potential tax exposure from prior years and noted that a
certain provision was not required.





We
assessed our income tax liability of $178 as of March 31, 2009 in accordance
with FIN 48, which was related to the allocation of corporate management
expenses to our Singapore operation in terms of Singapore tax law.  We
did not see any potential benefits arising from this tax
position.  Accordingly, no impact of this tax position was recognized
in the statement of operations for this quarter of fiscal 2009.  We
did not include any potential income tax position in federal and state income
tax returns currently filed.





Minority
Interest





As of
March 31, 2009, we held a 55% interest in Trio-Tech Malaysia.  In the
third quarter of fiscal 2009, minority interest in the net loss of subsidiaries
was $99, an increase of $116, compared to a minority interest in the net income
of $17 for the same quarter of fiscal 2008.  The decrease in the
minority interest was attributable to an increase in the net loss generated from
the Malaysia testing operation due to the negative impact of  global
market conditions, which causes the weaker demand from our customers in that
area.





Net
loss





Net loss
was $162 in the third quarter of fiscal 2009, representing a decrease of $1,249,
from $1,411 during the same period of fiscal 2008.  The decrease in
net loss was mainly due to an improvement in gross margin, a decrease in
operating expenses, an increase in other income and income tax benefit, as
previously discussed.





Loss
per Share





Basic and
diluted loss per share for the three months ended March 31, 2009 decreased by
$0.39 to $0.05 from $0.44 per basic and diluted per share in the same quarter of
the prior fiscal year.





Segment
Information





The
revenue, gross margin and income (loss) from each segment for the third quarter
of fiscal 2009 and the third quarter of fiscal 2008, respectively, are presented
below.  As the segment revenue and gross margin for each segment have
been discussed in the previous section, only the comparison of income (loss)
from operations is discussed below.


-34-
 Table of Contents





Manufacturing
Segment





The
revenue, gross margin and loss from operations for the manufacturing segment for
the third quarters of fiscal 2009 and 2008 were as follows:


Three
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    1,673
                    
                    
                    $
                    4,367Gross
      margin
                    
                    
                    23.8
                    %
                    
                    
                    4.4
                    %(Loss)
      from operations
                    
                    $
                    (112
                    )
                    
                    $
                    (884
                    )





Loss from
the manufacturing segment was $112, a decrease of $772 for the three months
ended March 31, 2009 from $884 in the same quarter of fiscal
2008.  The decrease in operating loss was attributable to an increase
in gross margin of $208 and a decrease in operating expenses of
$564.  Operating expenses for the manufacturing segment were $511 and
$1,075 for the three months ended March 31, 2009 and 2008,
respectively.  The decrease in operating
expenses was mainly from the decrease in payroll related expenses as a result of
a decrease in employee headcount and our cost cutting actions, as previously
discussed.





Testing
Segment





The
revenue, gross margin and loss from operations for the testing segment for the
third quarters of fiscal 2009 and 2008 were as follows:


Three
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    1,856
                    
                    
                    $
                    3,973Gross
      margin
                    
                    
                    18.0
                    %
                    
                    
                    29.6
                    %(Loss)
      from operations
                    
                    $
                    (516
                    )
                    
                    $
                    (553
                    )





Loss from
operations in the testing segment in the third quarter of fiscal 2009 was $516,
a decrease of $37, compared to $553 in the same period of fiscal
2008.  The decrease in operating loss was attributable to a decrease
in operating expenses of $877, which was offset by a decrease in gross profit of
$840. The decrease in operating expenses was mainly due to a decrease of $346 in
impairment loss in the third quarter of fiscal 2009 from $441 in the same period
of fiscal 2008. In addition, there was a decrease in payroll
related expenses as a result of a decrease in employee headcount and our cost
cutting actions, as previously discussed.





Distribution
Segment





The
revenue, gross margin and loss from operations for the distribution segment for
the third quarters of fiscal 2009 and 2008 were as follows:


Three
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2008
                    
                    
                    2008Revenue
                    
                    $
                    49
                    
                    
                    $
                    115Gross
      margin
                    
                    
                    14.3
                    %
                    
                    
                    37.4
                    %(Loss)
      from operations
                    
                    $
                    (6
                    )
                    
                    $
                    (69
                    )


-35-
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Loss from
operations in the distribution segment decreased by $63 to $6 for the three
months ended March 31, 2009, compared to $69 in the same period of fiscal 2008.
The decrease in operating loss was mainly due to a decrease in operating
expenses of $99, which was offset by a decrease in gross profit of $36.
The decrease in operating expenses was mainly due to a decrease in commission
expenses incurred in the third quarter of fiscal 2009 as the result of a
decrease in commissionable sales.





Corporate





The
income from operations for corporate for the third quarters of fiscal 2009 and
2008 were as follows:





Three
      Months Ended
                        March
      31,(In
      Thousands, unaudited)
                      
                      2009
                      
                      
                      2008Income
      from operations
                      
                      $
                      78
                      
                      
                      $
                      192





Corporate operating income
decreased by $114 to $78for the three months ended March 31, 2009,
compared to $192 in the same period of fiscal 2008.The decrease
in corporate income was mainly attributable to a decrease in corporate
management fee, which is based on the percentage of revenue imposed on all the
subsidiaries.





Comparison
of the Nine Months Ended March 31, 2009 and 2008





The
following table sets forth certain consolidated statements of (loss) income data
as a percentage of net sales for the nine months ended March 31, 2009 and 2008,
respectively:


Nine
      Months Ended
                          March
      31,2009
                        
                        
                        2008Net
      Sales
                        
                        
                        100
                        %
                        
                        
                        100
                        %Cost
      of sales
                        
                        
                        78.1
                        %
                        
                        
                        77.1
                        %Gross
      Margin
                        
                        
                        21.9
                        %
                        
                        
                        22.9
                        %Operating ExpensesGeneral
      and administrative
                        
                        
                        28.9
                        %
                        
                        
                        18.4
                        %Selling
                        
                        
                        1.8
                        %
                        
                        
                        1.4
                        %Research
      and development
                        
                        
                        0.2
                        %
                        
                        
                        0.1
                        %Impairment
      loss
                        
                        
                        4.0
                        %
                        
                        
                        1.3
                        %Loss
      on disposal of property, plant and equipment
                        
                        
                        (0.9
                        )%
                        
                        
                        0.1
                        %Total
      operating expenses
                        
                        
                        34.0
                        %
                        
                        
                        21.3
                        %Income
      (loss) from Operations
                        
                        
                        (12.1
                        )%
                        
                        
                        1.6
                        %




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Overall
Gross Margin





Overall
gross margin as a percentage of revenue decreased by 1.0% to 21.9% for the nine
months ended March 31, 2009, from 22.9% for the same period of fiscal 2008. The
decrease in the overall gross margin was due primarily to the decrease in the
gross margin in the testing segments and distribution segment. However, this was
partially offset by an increase in gross margin in the manufacturing segment. In
terms of dollar value, the overall gross margin decreased by $4,282, or 56.0%,
for the nine months ended March 31, 2009, from $7,646 to $3,364 compared to the
same period of fiscal 2008, as a result of a decrease in revenue and a decrease
in gross margin percentage.





Gross
profit margin as a percentage of revenue in the manufacturing segment increased
by 5.6% for the nine months ended March 31, 2009 compared to the same period of
fiscal 2008, from 13.3% to 18.9%.  In absolute amounts, gross profit
was $1,416, a decrease of $958, or 40.4%, for the nine months ended March 31,
2009, from $2,374 in the same period of fiscal 2008. The decrease in absolute
gross margin was due to a decrease in sales of lower margin burn-in systems and
pass-through products in the nine months ended March 31, 2009 compared with the
same period of fiscal 2008. In addition, there was a decrease in the price of
raw material as some of our suppliers lowered their price as the result of heavy
competition in the supplies market.





Gross
profit margin in the testing segment decreased by 9.5% for the nine months ended
March 31, 2009 compared to the same period of the prior year, from 34.1% to
24.6%. In absolute amount, gross profits in the testing segment were $1,889,
reflecting a decrease of $3,282, or 63.5%, for the nine months ended March 31,
2009, from $5,171 in the same period of fiscal 2008. The decrease in the gross
margin was primarily due to the decrease in sales volume. A significant portions
of our operating costs are fixed in the testing segment; thus as product demands
decrease and factory utilization decreases, the fixed costs are spread over the
decreased output, resulting in a decrease in gross margin.





Gross
profit margin as a percentage of revenue in the distribution segment decreased
by 2.1%, from 29.5% for the nine months ended March 31, 2008 to 27.4% in the
same period this fiscal year. The decrease in gross profit as a percentage of
sales was due to a decrease in average sales prices in the third quarter of
fiscal 2009 compared to the same period of fiscal 2008. In absolute amount,
gross profits decreased by $42, or 41.6%, to $59 for the nine months ended March
31, 2009 from $101 for the nine months ended March 31, 2008, due to a drop in
sales volume as previously discussed.





Operating
Expenses





The
following table presents the operating expenses for the nine months ended March
31, 2009 and 2008, respectively:





Nine
      Months Ended
                        March
      31,(In
      Thousands, unaudited)
                      
                      2009
                      
                      
                      2008General
      and administrative
                      
                      $
                      4,442
                      
                      
                      $
                      6,144Selling
                      
                      
                      279
                      
                      
                      
                      466Research
      and development
                      
                      
                      30
                      
                      
                      
                      45Impairment
      loss
                      
                      
                      615
                      
                      
                      
                      457Loss
      on disposal of property, plant and equipment
                      
                      
                      (138
                      )
                      
                      
                      11Total
                      
                      $
                      5,228
                      
                      
                      $
                      7,123




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General and administrative
expenses decreased by $1,702, or 27.7%, from $6,144 to $4,442 for the nine
months ended March 31, 2009, compared to the same period of fiscal 2008.The decrease was primarily attributable to a decrease in payroll expenses
and a decrease in officer and executive compensation in the nine months ended
March 31, 2009. Since the third quarter of fiscal 2008 ending March 31, 2009, we
undertook several cost reduction actions. We reduced our headcount by
approximately 65 employees since September 30, 2008. In the second quarter of
fiscal 2009, we implemented four-day work weeks for all the employees in the
Singapore operation, which reduced our employee compensation by approximately
25%. On February 27, 2008, in view of anticipated reductions in service revenue
for fiscal 2008, our Chief Executive Officer, Chief Financial Officer and
directors voluntarily decreased their base salary to 50% of the base salary
agreed to in July 2007. As a result, our compensation for the officers and
executives decreased by $366 during the nine months ended March 31, 2009. In
addition, in the second quarter of fiscal 2009, we reversed a portion of our
bonus payable in the Singapore operations as a result of a change in our
estimate, as discussed in Note 1 to the unaudited
financial statements included in this Form 10-Q.





Selling
expenses decreased by $187, or 40.1 %, for the nine months ended March 31, 2009,
from $466 to $279, compared to the same period of fiscal year 2008. This was
mainly due to a decrease in commission expenses as a result of fewer
commissionable sales in the distribution segment.





Research
and development costs decreased by $15 from $45 in the nine months ended March
31, 2008 to $30 in same period of 2008 due primarily to a decrease in full time
employee headcount in the U.S. operation.





The impairment loss
increased by $158 for the nine months ended March 31, 2009, from $457 to $615,
compared to the same period of fiscal 2008. The impairment loss of $615
consisted of a loss of$224 for certain testing equipment located in our
Suzhou operation, $296 was for all the fixed assets located in our Shanghai
operation in China, and the remaining $95 was for some obsolete testing
equipment in our Malaysia operation.We believe
that due to the change in demand for certain burn-in testing services and the
negative impact of the international economic financial crisis and the
semiconductor industry recession, our existing burn-in testing facilities in
Shanghai operation became obsolete. There was little business activity in
Shanghai operation during the nine months ended March 31, 2009, and there were
also no secured orders or backlogs for subsequent periods.  Therefore,
as we expect no
future cash flows from these assets based on our best estimate, the carrying
value of these assets was written down to zero and the impairment loss was
recorded.Business in the Suzhou operation began to slow down
in the fourth quarter of fiscal 2008 and suffered losses in the last four
quarters. The Suzhou operation is currently only providing line support,
maintenance and training service for one customer.  Based on our best
estimate, there will be no future cash flows from certain identified testing
equipment utilized in the Suzhou operation. Therefore, the carrying value of
such assets was written down to zero and an impairment loss was recorded. Some
testing equipment in our Malaysia operation was beyond repairable conditions and
hence was fully impaired as no future cash flows will be generated.





The impairment loss for
the nine months ended March 31, 2008 was $457. Of this loss, $11 was related to
the disposal of certain fixed asset in our Suzhou operation in China in
the second quarter of fiscal 2007. $5 was related to the asset held for sale in
Malaysia.  $221 was related to some advanced burn-in testing
equipments as the result of the termination of the advance burn-in testing
service contract with one of our major customers, and $75 was related to the
burn-in board testing system in our Shanghai operation in China due to change in
demand for certain burn-in testing services, which in turn made certain of our
existing burn-in facilities obsolete. Additionally, $57 of the impairment loss was
related to the building renovations for some testing projects due to a decrease
in the customer’s order in our Shanghai operation in China, and the remaining
impairment loss of $88 was related to some machinery and equipment in our
Singapore operation due to a decrease in customer’s backlog and projected future
sales.


-38-
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Income
/ (Loss) from Operations





Loss from
operations increased by $2,387 to $1,864 for the nine months ended March 31,
2009, from an income of $523 for the same period of fiscal year 2008. The fiscal
2009 decrease in income from operations was due to a decrease in absolute gross
margin of $4,282, which was offset partially by a decrease in operating expense
of $1,895.





Interest
Expense





The
following table presents the interest expenses for the nine months ended March
31, 2009 and 2008, respectively:





Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Interest
      expense
                    
                    $
                    129
                    
                    
                    $
                    257





Interest
expenses decreased by $128 during the nine months ended March 31, 2009, from
$257 to $129 compared to the same period of fiscal 2008, primarily due to a
decrease in our loan payable and capital lease obligations. We are trying to
keep our debt at a minimum in order to save financing costs. Our credit rating
provides us with ready and adequate access to funds in global
markets.  As of March 31, 2009, the Company had an unused line of
credit of $15,089.





Other
Income (expenses)





The
following table presents the other income (expenses) for the nine months ended
March 31, 2009 and 2008, respectively:





Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Other
      (expenses) income
                    
                    $
                    751
                    
                    
                    $
                    (224
                    )





Other
income increased by $975 to $751 for the nine months ended March 31, 2009, from
expenses of $224 in the same period of the prior year, primarily due to an
increase in rental income, currency transaction gain and investment
income.  Currency transaction gain increased by $789 for the nine
months ended March 31, 2009, from an exchange loss of $505 to an exchange gain
of $284, compared to the same period of fiscal 2008.  This was
attributable to the strengthening of the U.S. dollar against foreign currency
with regard to the transactions denominated in U.S. dollars.  Rental
income, which consisted mainly of space in the Malaysia operation and investment
property purchased in the Chongqing operation rented to outside vendors,
increased by $148 to $204 for the nine months ended March 31, 2009 compared to
$56 in the same period of fiscal 2008. In the second quarter of fiscal 2009, we
also recorded investment income of $192 relating to the investment
in the No. B48 lot in the BeiPei District in Chongqing, China and penalty income
of $19for
the delay in the payment of the return of investment from JiaSheng. This
investment income and penalty income was used to offset the purchase amount of
the commercial property and residential property that the Company purchased from
JiaSheng on October 23, 2008.


-39-
 Table of Contents





Income
Tax





Income
tax benefits for the nine months ended March 31, 2009 was $103, an increase of
$371 compared to an income tax provision of $268 for the same period of fiscal
2008. The increase in income tax benefits was mainly due to a higher income tax
benefit for the increased loss generated from our Singapore operations in the
nine months ended March 31, 2009.





We
assessed our income tax liability of $178 as of March 31, 2009 in accordance
with FIN48, which is related to the allocation of corporate management expenses
to our Singapore operation in terms of Singapore tax law.  We did not
see any potential benefits arising from this tax
position.  Accordingly, no impact of this tax position was recognized
in the statement of operations for the nine months ended March
31, 2009.  We did not include any potential income tax position
in federal and state income tax returns currently filed.





Minority
Interest





As of
March 31, 2009, we held a 55% interest in Trio-Tech Malaysia.  The
minority interest for the nine months ended March 31, 2009 in the net income of
subsidiaries was $168, a decrease of $101 compared to $269 for the same period
of the prior year. The decrease in the minority interest was attributable to a
decrease in the net income generated from the Malaysia testing operation due to
the negative impact of global market conditions, which we believe caused the
weaker demand from our customers in Malaysia.





Net
Loss





Net loss
for the nine months ended March 31, 2009 was $1,307, an increase of $812,
compared to $495 in the same period of fiscal 2008. The increase in net loss was
mainly due to a decrease in revenue, a decrease in gross margin percentage,
which was offset by a decrease in operating expenses, interest expense, and an
increase in other income and income tax benefits, as previously
discussed.





Loss
per Share





Basic and
diluted loss per share for the nine months ended March 31, 2009 increased by
$0.26 to $0.41 from basic and diluted loss of $0.15 per share in the same period
of the prior year.


-40-
 Table of Contents





Segment
Information





The
revenue, gross margin and income (loss) from each segment for the nine months
ended March 31, 2009 and 2008 are presented below. As the segment revenue and
gross margin for each segment have been discussed in the previous section, only
the comparison of income (loss) from operations is discussed below.





Manufacturing
Segment





The
following table presents the revenue, gross margin and (loss) income from
operations for the manufacturing segment for the nine months ended March 31,
2009 and 2008, respectively:


Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    7,473
                    
                    
                    $
                    17,848Gross
      margin
                    
                    
                    18.9
                    %
                    
                    
                    13.3
                    %Loss
      from operations
                    
                    $
                    (698
                    )
                    
                    $
                    (92
                    )





Loss from
operations in the manufacturing segment increased by $606 to $698 for the nine
months ended March 31, 2009 from $92 in the same period of fiscal
2008.  The increased loss was attributable to a decrease of $958 in
absolute gross margin, which was offset by a decrease of $352 in operating
expenses. Operating expenses for the manufacturing segment were $2,114 and
$2,466 for the nine months ended March 31, 2009 and 2008, respectively. The
decrease in operating expenses was mainly from the decrease in payroll related
expenses as a result of a decrease in employee headcount and our cost cutting
actions, as previously discussed.





Testing
Segment





The
following table presents the revenue, gross margin and income / (loss) from
operations for the testing segment for the nine months ended March 31, 2009 and
2008, respectively:


Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    7,682
                    
                    
                    $
                    15,186Gross
      margin
                    
                    
                    24.6
                    %
                    
                    
                    34.1
                    %Income(loss)
      from operations
                    
                    $
                    (1,327
                    )
                    
                    $
                    1,110





Loss from
the testing segment increased by $2,437, or 219.5%, to $1,327 for the nine
months ended March 31, 2009 from an income of $1,110 in the same period fiscal
2008.  The increase in operating loss was attributable to a decrease
in gross profits of $3,282, which was offset by a decrease in operating expenses
of $845.
Operating expenses were $3,216 and $4,061 for the nine months ended March 31,
2009 and 2008, respectively. The decrease in operating
expenses was mainly due to a decrease in payroll related expenses as a
result of a decrease in employee headcount and our cost cutting actions, as
previously discussed. This decrease was offset by an increase in impairment
loss of $248.


-41-
 Table of Contents





Distribution
Segment





The
following table presents the revenue, gross margin and income (loss) from
operations for the distribution segment for the nine months ended March 31, 2009
and 2009, respectively:


Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Revenue
                    
                    $
                    215
                    
                    
                    $
                    342Gross
      margin
                    
                    
                    27.4
                    %
                    
                    
                    29.5
                    %Income
      (loss) from operations
                    
                    $
                    31
                    
                    
                    $
                    (152
                    )





Income
from the distribution segment increased by $183 to $31 for the nine months ended
March 31, 2009 from an operating loss of $152 in the same period of fiscal 2008.
The increase in operating income was attributable to a decrease in operating
expenses of $225, but offset by a decrease in absolute gross margin of $42. This
decrease in operating expenses was mainly due to lower commission expenses due
to a drop in commissionable sales. Operating expenses were $28 and $253 for the
nine months ended March 31, 2009 and 2008, respectively.





Corporate





The
following table presents the (loss) income from operations for Corporate for the
nine months ended March 31, 2008 and 2007, respectively:


Nine
      Months Ended
                      March
      31,(In
      Thousands, unaudited)
                    
                    2009
                    
                    
                    2008Income
      (Loss) from operations
                    
                    $
                    130
                    
                    
                    $
                    (343
                    )




Corporate
operating income increased by $473 for the nine months ended March 31, 2009,
from an operating loss of $343 in the same period of fiscal 2008 to an operating
income of $130 this fiscal year.  The increase was mainly due to a
decrease of $89 in stock options expenses, and a decrease in officers and
executive compensation. On February 27, 2008, in view of anticipated reductions
in service revenue for fiscal 2008, our Chief Executive Officer, Chief Financial
Officer and directors voluntarily decreased their base salary to 50% of the base
salary agreed to in July 2007. As a result, our compensation for officers and
executives decreased by $366 during the nine months ended March 31,
2009.


-42-
 Table of Contents




Financial
Condition


During
the nine months ended March 31, 2009, total assets decreased by $6,922, or
19.9%, from $34,759 at June 30, 2008 to $27,837 at March 31,
3009.  The majority of the decrease was in short-term deposits,
accounts receivables, inventory and property, plant and equipment, but offset by
an increase in investment in China and other assets.




At March
31, 2009, total cash and short-term deposits were $12,022, a decrease of $2,324
from the sum of those two balances at June 30, 2008.  The decrease in
cash was mainly due to an increase in net loss of $812 in the nine months ended
March 31, 2009 and a decrease in the net borrowings from bank
loans.





At March
31, 2009, accounts receivables balance decreased by $2,201 from the balance at
June 30, 2008 due primarily to a decrease in sales in the nine months ended
March 31, 2009.  The rate of turnover of accounts receivables was 20
days at the end of the third quarter of fiscal 2009, compared with 66 days at
fiscal year-end 2008.  The improvement in the accounts receivable
turnover rate was primarily due to improvements in collection at the Singapore
operation.





Inventory
at March 31, 2008 was $1,325 a decrease of $1,124, or 45.9%, compared to $2,449
at June 30, 2008.  The decrease in inventory was mainly due to a
decrease in the purchases of inventory as a result of a slowdown in the
manufacturing segment.  The turnover of inventory was the same at the
end of the third quarter of fiscal 2009 compared with fiscal year-end 2008,
which was 21 days.





Prepaid
expenses and other current assets at March 31, 2009 were $496, a decrease of
$438 from those balances at June 30, 2008. Such decrease was primarily due to
decreased prepayments to suppliers in the Singapore and Malaysia operations
during the ordinary course of business.





Investments in China
increased by $748 from $2,267 at June 30, 2008 to $3,015 at March 31,
2009.  This is due tothe purchase of four units of commercial
property and two units of residential property from JiaSheng as previously
discussed.  The total purchase price was RMB 7,042, approximately
$1,030 based on the exchange rate as of March 31, 2009 published by the Federal
Reserve System.  The Company paid RMB 3,612 in cash, or $529, from
internally generated funds of the Company and the remaining balance due for the
purchase price was offset from investment returns from JiaSheng as noted in Note
9 to the unaudited financial statements included in this Form 10-Q.





Property,
plant and equipment decreased by $1,783 from $8,136 at June 30, 2008 to $6,353
at March 31, 2009, due to the write down of certain fixed assets in the China
operations in the second quarter of fiscal 2009 and depreciation of the
Company’s fixed assets in the ordinary course of business. Capital expenditures
were $1,116 in the nine months ended March 31, 2009 compared with $2,507 for the
same period of fiscal 2008. The decrease in capital expenditures was mainly
due to a decrease in
our investment activity during the difficult economic climate.





Depreciation
and amortization was $1,632 for the nine months ended March 31, 2009, compared
with $2,262 for the same period of fiscal 2008.  The decrease in
depreciation expenses was mainly due to the write-off of certain fixed assets in
the Singapore and China operations in the fourth quarters of fiscal year
2008as a result of
the termination of a testing service contract with one of our major customers
and change in customers’ demand for certain burn-in testing services, thus
reducing our depreciation related to those assets.


-43-
 Table of Contents





Other
assets were $1,100 at March 31, 2009, an increase of $287 from that balance at
June 30, 2008.  The increase in other assets was primarily due to an
increase of $295 for a down payment on certain fixed assets in the
Singapore operation, but was offset by a decrease of $8 for the down payment for
the deposits of rent and utilities in our China operation.





As of
March 31 2009, the outstanding loans payable was $1,742, with interest rates
ranging from 5.25% to 5.51% per annum. These loans mature from April 2009 to
August 2010. These loans are collateralized by fixed
deposits or by a corporate guarantee.





Liquidity
Comparison





Net cash
provided by operating activities decreased by $266 to $1,155 for the nine months
ended March 31, 2009 from $1,421in the same period of fiscal
2008.  The decrease in net cash provided by operating activities was
due to an increase of $812 in net loss from $495 to $1,307 during the nine
months ended March 31, 2009 as compared to the same period of the prior year and
a decrease of $1,151 in net impact from non-cash items, which are included in
computing the net income on an accrual basis, but does not affect the inflow or
outflow of cash.
This decrease was offset by an increase of $1,697 from change in balance sheet
items.





Net cash provided by
investing activities increased by $6,879 to $1,047 for the nine months ended
March 31, 2009 from net cash used by investing activities of $5,832 for the same
period of fiscal 2008.  During the nine months ended March 31, 2008,
we invested $2, 931 in Chongqing, China to jointly develop a piece of property
with 24.91 acres with JiaSheng Property Development Co. Ltd. We also invested
$792 to purchase an office space of 827.2 square meters on the 35thfloor of a 40 story high
office building located in Chongqing, China. In the same period of fiscal 2009,
wepurchased four units of commercial property and two units of
residential property from JiaSheng at the purchase price of
$1,030.  The Company made a cash down payment of 10% in the amount of
$103 in October 2008 and paid $426 in cash in November 2008, using internally
generated funds of the Company. The remaining balance was offset by the return
of investment from JiaSheng on another property in which we were invested as
discussed in Note 9 to the unaudited financial statements included in this Form
10-Q.  As of March 31, 2009 the Company paid cash in the amount of
$529, and offset amounts of $290 as the return of investment principal, $192 as
investment income and $19 as the penalties charged for this new commercial and
residential property totaling $1,030. During the nine months
ended March 31, 2009 there was an increase in net proceeds of $2,914 from short
term depositsand an increase of $163 in
the proceeds from the sale of property, plant and equipment. Capital
expenditures in cash also decreased by $1,400 in the nine months ended March 31,
2009 compared with the same period of fiscal 2008 due to a decrease in capital
expenditures caused from less customer demand.





Net cash
used by financing activities in the nine months ended March 31, 2009 was $1,082,
representing an increase of $3,283 compared to the net cash provided by
financing activities of $2,201 during the same period of fiscal
2008.  The net cash outflow was due mainly to a decrease of $3,837
from the proceeds from long-term bank loans
compared with the same period of last fiscal year.





We
believe we have the necessary financial resources to meet our projected cash
requirements for at least the next twelve months.





As the
Company suffered a loss in the nine months ended March 31, 2009, the Singapore
operations did not fulfill one of their loan covenants, which requires the
Company to maintain debt to EBITDA ratio of no more than 2.5 times at all times
during the term of the loan.  As a result, the Company has
reclassified all long term debt as current portion in the
liabilities.  The management has communicated to the bank and
requested a waiver of this particular covenant.  As of the filing date
of this Form 10-Q, the bank is still in the process of reviewing the Company’s
request.


-44-
 Table of Contents





Corporate
Guarantee Arrangement





The Company provides a corporate
guarantee of approximately $1,646 to one of its subsidiaries in Southeast Asia
to secure line-of-credit and term loans from a bank to finance the operations of
such subsidiary. With the strong financial position of the subsidiary company,
the Company believes this corporate guarantee arrangement will have no material
impact on its liquidity or capital resources.





On
January 8, 2009, Trio-Tech (Malaysia) Sdn. Bhd. entered into a Sales and
Purchase Agreement with TS Matrix Properties Sdn. Bhd. (“TSM”) whereby the
Company agreed to purchase from TSM real property totaling 7,312 square meters
inSelangor
Darul Ehsan, Malaysia. The total cash purchase price to be paid by the Company
under the Sales and Purchase Agreement is RM 12,450 (Malaysian ringgit), or
approximately $3,608.  Pursuant to the Sales and Purchase Agreement,
the Company paid TSM a 10% down payment of RM 1,245 or approximately $361
through internally generated funds.  The consummation of the
transaction contemplated by the Sale and Purchase Agreement is subject to the
satisfaction of certain conditions.  The balance of the purchase price
is expected to be paid upon completion of certain conditions through internally
generated funds and a bank loan of RM 9,625 or approximately $2,790. The Company
is still in the process of securing a bank loan from a local bank in
Malaysia.





In April
2009, Trio-Tech International Pte., Ltd. set up a new entity, SHI International
Pte Ltd. ("SHI"), in which Trio-Tech International Pte., Ltd. holds 55% of the
ownership interest. On April 07, 2009,  SHI entered into a Share
Purchase Agreement, pursuant to which SHI has agreed to acquire from Erni
Susanto Susi, Dwi Kartikarini and PT SAS Internasional shares of PT SAS Heavy
Industry ("SASHI") for an aggregate cash purchase price of $10 and a goodwill
obligation of $100. The shares of SASHI to be acquired by SHI pursuant to the
Share Purchase Agreement represent approximately 95% of the outstanding shares
of SASHI. The consummation of such purchase and sale is subject to the
satisfaction of certain conditions.





Critical Accounting
Estimates and Policies





There
have been no significant changes in the critical accounting polices disclosed in
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” included in the most recent Annual Report on Form 10-K.





We
prepare the consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America.  The
preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period.  Management periodically evaluates the estimates and judgments
made.  Management bases its estimates and judgments on historical
experience and on various factors that are believed to be reasonable under the
circumstances.  Actual results may differ from these estimates as a
result of different assumptions or conditions.


-45-
 Table of Contents





ITEM3.  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 March 31, 2009, 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.




Our
internal control system is designed 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 in the United States.  There is no assurance
that our disclosure controls or our internal controls over financial reporting
can prevent all errors.  An internal control system, no matter how
well designed and operated, has inherent limitations, including the possibility
of human error.  Because of the inherent limitations in a
cost-effective control system, misstatements due to error may occur and not be
detected.  We monitor our disclosure controls and internal controls
and make modifications as necessary.  Our intent in this regard is
that our disclosure controls and our internal controls will improve as systems
change and conditions warrant.




During
the period covered by this report, there have been no changes in the Company’s
internal control over financial reporting that have materially affected or are
reasonably likely to materially affect the Company’s internal control overall
financial reporting.


-46-
 Table of Contents


TRIO-TECH
INTERNATIONAL


PART II. OTHER
INFORMATION





Item1.   Legal Proceedings





Not
applicable





Item1A.  Risk Factors





Not
applicable





Item2.   Unregistered Sales of Equity Securities and Use
of Proceeds





Malaysian
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.





Item3.   Defaults upon Senior Securities





Not applicable





Item4.   Submission of Matters to Vote of Security
Holders





Not
applicable





Item5.   Other Information





Not applicable





Item6.   Exhibits




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


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


32      Section
1350 Certification


-47-
 Table of Contents


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:
May 14, 2009