##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission
File Number 1-14523
 TRIO-TECH INTERNATIONAL
  California
    
    95-2086631(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)16139 WyandotteVan Nuys, California
    
    91406(Address of principle executive offices)
    
    (Zip Code)
 818-787-7000
 14731 Califa Street, Van Nuys, California 91411
  þ o
  Large accelerated
filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting
company þ(Do not check if a smaller reporting company)
 o þ




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##### 



TRIO-TECH   INTERNATIONAL  INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION
AND SIGNATURE
 PagePart I.
    
    Financial InformationItem 1.
    
    Financial Statements(a) Condensed Consolidated Balance Sheets as of December 31, 2007 (Unaudited) and June 30, 2007
    
    
    4(b) Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and
Six Months Ended December 31, 2007 (Unaudited) and December 31, 2006 (Unaudited)
    
    
    5(c) Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2007
(Unaudited) and December 31, 2006 (Unaudited)
    
    
    6(d) Notes to Consolidated Financial Statements (Unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    31Item 4T.
    
    Controls and Procedures
    
    
    32Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    33Item 1A.
    
    Risk Factors
    
    
    33Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3.
    
    Defaults upon Senior Securities
    
    
    33Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    33Item 5.
    
    Other Information
    
    
    34Item 6.
    
    Exhibits
    
    
    34Signatures
    
    
    35ExhibitsCertificationsEXHIBIT 10.1EXHIBIT 10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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FORWARD-LOOKING STATEMENTS
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PART I. FINANCIAL INFORMATION
 
 ITEM
1. FINANCIAL STATEMENTS
 TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
 December 31,
    
    
    June 30,2007
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    5,316
    
    
    $
    7,135Short-term deposits
    
    
    8,890
    
    
    
    7,815Trade accounts receivable, less allowance for doubtful accounts of $42 and $42
    
    
    10,633
    
    
    
    7,410Other receivables
    
    
    364
    
    
    
    245Inventories, less provision for obsolete inventory
of $816 and $786
    
    
    2,473
    
    
    
    1,946Prepaid expenses and other current assets
    
    
    283
    
    
    
    122Asset held for sale
    
    
    212
    
    
    
    Total current assets
    
    
    28,171
    
    
    
    24,673INVESTMENT IN CHINA (Note 10)
    
    
    2,057
    
    
    
    PROPERTY, PLANT AND EQUIPMENT, Net
    
    
    7,667
    
    
    
    7,458OTHER INTANGIBLE ASSETS, Net
    
    
    166
    
    
    
    212OTHER ASSETS
    
    
    404
    
    
    
    445TOTAL ASSETS
    
    $
    38,465
    
    
    $
    32,788LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    3,386
    
    
    $
    2,265Accrued expenses
    
    
    3,533
    
    
    
    4,354Advances from buyer
    
    
    21
    
    
    
    Income taxes payable
    
    
    836
    
    
    
    948Current portion of notes payable
    
    
    1,428
    
    
    
    536Current portion of capital leases
    
    
    112
    
    
    
    125Total current liabilities
    
    
    9,316
    
    
    
    8,228NOTES PAYABLE, net of current portion
    
    
    2,179
    
    
    
    139CAPITAL LEASES, net of current portion
    
    
    118
    
    
    
    155DEFERRED TAX LIABILITIES
    
    
    396
    
    
    
    373TOTAL LIABILITIES
    
    $
    12,009
    
    
    $
    8,895MINORITY INTEREST
    
    
    2,830
    
    
    
    2,459SHAREHOLDERS EQUITY:Common stock; no par value, 15,000,000 shares authorized;
3,225,930 shares issued and outstanding as of December 31, 2007,
and at June 30, 2007
    
    
    10,361
    
    
    
    10,361Paid-in capital
    
    
    818
    
    
    
    460Retained earnings
    
    
    11,051
    
    
    
    10,135Accumulated other comprehensive income
    
    
    1,396
    
    
    
    478Total shareholders equity
    
    
    23,626
    
    
    
    21,434TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    38,465
    
    
    $
    32,788
 See accompanying notes to condensed consolidated financial statements.
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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
UNAUDITED (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
 
 Six Months Ended
    
    
    Three Months EndedDec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    (Unaudited)
    
    (Unaudited)
    
    (Unaudited)RevenueProducts
    
    $
    13,708
    
    
    $
    14,772
    
    
    $
    7,201
    
    
    $
    8,794Services
    
    
    11,213
    
    
    
    9,171
    
    
    
    5,670
    
    
    
    5,27324,921
    
    
    
    23,943
    
    
    
    12,871
    
    
    
    14,067Cost of SalesCost of products sold
    
    
    11,468
    
    
    
    12,461
    
    
    
    5,939
    
    
    
    7,648Cost of services rendered
    
    
    7,216
    
    
    
    5,658
    
    
    
    3,737
    
    
    
    3,06918,684
    
    
    
    18,119
    
    
    
    9,676
    
    
    
    10,717Gross Margin
    
    
    6,237
    
    
    
    5,824
    
    
    
    3,195
    
    
    
    3,350Operating ExpensesGeneral and administrative
    
    
    4,069
    
    
    
    3,150
    
    
    
    2,424
    
    
    
    1,704Selling
    
    
    277
    
    
    
    398
    
    
    
    153
    
    
    
    207Research and development
    
    
    38
    
    
    
    34
    
    
    
    19
    
    
    
    17Impairment loss
    
    
    16
    
    
    
    172
    
    
    
    16
    
    
    
    172Total operating expenses
    
    
    4,400
    
    
    
    3,754
    
    
    
    2,612
    
    
    
    2,100Income from Operations
    
    
    1,837
    
    
    
    2,070
    
    
    
    583
    
    
    
    1,250Other Income (Expenses)Interest expense
    
    
    (164
    )
    
    
    (66
    )
    
    
    (79
    )
    
    
    (37
    )Other (expense) income
    
    
    (191
    )
    
    
    110
    
    
    
    (141
    )
    
    
    73Total other (expense) income
    
    
    (355
    )
    
    
    44
    
    
    
    (220
    )
    
    
    36Income Before Income Taxes
    
    
    1,482
    
    
    
    2,114
    
    
    
    363
    
    
    
    1,286Income Tax Provision
    
    
    314
    
    
    
    478
    
    
    
    142
    
    
    
    453Income Before Minority Interest
    
    
    1,168
    
    
    
    1,636
    
    
    
    221
    
    
    
    833Minority interest
    
    
    (252
    )
    
    
    (81
    )
    
    
    (56
    )
    
    
    (34
    )Net Income Attributed to Common Shares
    
    
    916
    
    
    
    1,555
    
    
    
    165
    
    
    
    799EARNINGS PER SHARE:Basic earnings per share
    
    $
    0.28
    
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    0.25Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    0.25Weighted Average Shares Outstanding:Basic
    
    
    3,226
    
    
    
    3,220
    
    
    
    3,226
    
    
    
    3,221Diluted
    
    
    3,259
    
    
    
    3,232
    
    
    
    3,228
    
    
    
    3,233Comprehensive Income:Net income
    
    $
    916
    
    
    $
    1,555
    
    
    $
    165
    
    
    $
    799Foreign currency translation adjustment
    
    
    918
    
    
    
    508
    
    
    
    702
    
    
    
    482Comprehensive Income
    
    $
    1,834
    
    
    $
    2,063
    
    
    $
    867
    
    
    $
    1,281
 See accompanying notes to condensed consolidated financial statements.
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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, UNAUDITED (IN THOUSANDS)
 Dec. 31,
    
    
    Dec. 31,2007
    
    
    2006(unaudited)
    
    (unaudited)Cash Flow from Operating ActivitiesNet income
    
    $
    916
    
    
    $
    1,555Adjustments to reconcile net income to
net cash flow (used in) provided by operating activitiesDepreciation and amortization
    
    
    1,528
    
    
    
    1,124Bad debts expense, net
    
    
    
    
    
    
    119Inventory provision
    
    
    35
    
    
    
    144Accrued interest expense net accrued interest income
    
    
    (53
    )
    
    
    (45
    )Impairment loss
    
    
    16
    
    
    
    172Stock compensation
    
    
    358
    
    
    
    3Gain on sale of property
    
    
    
    
    
    
    (40
    )Deferred tax provision
    
    
    23
    
    
    
    21Minority interest
    
    
    265
    
    
    
    81Changes in operating assets and liabilitiesAccounts receivables
    
    
    (3,223
    )
    
    
    (3,424
    )Other receivables
    
    
    (119
    )
    
    
    99Other assets
    
    
    41
    
    
    
    (146
    )Inventories
    
    
    (562
    )
    
    
    (2,334
    )Prepaid expenses and other liabilities
    
    
    (161
    )
    
    
    (50
    )Accounts payable and accrued liabilities
    
    
    321
    
    
    
    2,810Income tax payable
    
    
    (112
    )
    
    
    221Net cash (used in) provided by operating activities
    
    
    (727
    )
    
    
    310Cash Flow from Investing ActivitiesProceeds from short-term deposits matured
    
    
    21,443
    
    
    
    7,063Investments in short-term deposits
    
    
    (22,416
    )
    
    
    (4,707
    )Additions to property, plant and equipment
    
    
    (1,493
    )
    
    
    (2,020
    )Proceeds from sale of equipment
    
    
    
    
    
    
    49Investment in Chongqing, China
    
    
    (2,057
    )
    
    
    Net cash (used in) provided by investing activities
    
    
    (4,523
    )
    
    
    385Cash Flow from Financing ActivitiesNet borrowings on lines of credit
    
    
    
    
    
    
    1,831Repayment of bank loans and capital leases
    
    
    (854
    )
    
    
    (463
    )Proceeds from long-term bank loans and capital leases
    
    
    3,687
    
    
    
    6Proceeds from exercising stock options
    
    
    
    
    
    
    16Proceeds from 10% shareholder on the short swing profit of the Company stock
    
    
    
    
    
    
    118Dividends paid to minority interest
    
    
    
    
    
    
    (42
    )Net cash provided by financing activities
    
    
    2,833
    
    
    
    1,466Effect of Changes in Exchange Rate
    
    
    598
    
    
    
    309NET (DECREASE) INCREASE IN CASH
    
    
    (1,819
    )
    
    
    2,470CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    7,135
    
    
    
    2,551CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    5,316
    
    
    $
    5,021
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Dec. 31,
    
    
    Dec. 31,2007
    
    
    2006Supplementary Information Of Cash FlowsCash paid during the period for:Interest
    
    $
    117
    
    
    $
    66Income taxes
    
    $
    477
    
    
    $
    254Non-Cash TransactionsCapital lease of property, plant and equipment
    
    $
    
    
    
    $
    30Declaration of cash dividends to be paid
    
    $
    
    
    
    $
    323Assets held for sale
    
    $
    (212
    )
    
    $
    Carrying value of property reclassified from property, plant and equipment
    
    $
    212
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements.
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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 PRESENTATIONTrio-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, CaliforniaEuropean Electronic Test Centre(Operation ceased on November 1, 2005)
    
    100%
    
    Dublin, IrelandTrio-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
    
    55%
    
    Selangor, MalaysiaTrio-Tech 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
   Change in Estimate:
  8




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2.
    
    SUBSEQUENT EVENTOn 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
RMB5,554 (Chinese yuan), equivalent to approximately US$762 based on the exchange rate on
December 31, 2007 published by the Federal Reserve System. Under the terms of the agreement,
the Company paid the purchase price in full on January 4, 2008.
 3.
    
    NEW ACCOUNTING PRONOUNCEMENTSIn December 2007, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 141 (Revised 2007), Business Combinations, or SFAS No.
141R. SFAS No. 141R will change the accounting for business combinations in a number of
areas including the treatment of contingent considerations, pre-acquisition contingencies,
transaction costs, in-process research and development, and restructuring costs. Under SFAS
No. 141R, an acquiring entity will be required to recognize all the assets acquired and
liabilities assumed in a transaction at the acquisition-date fair value with limited
exceptions. SFAS No. 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. The Company believes the adoption of SFAS 141R will have an
impact on the accounting for future acquisitions.In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements  An Amendment of ARB No. 51,
or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS
No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company
has not completed our evaluation of the potential impact, if any, of the adoption of SFAS No.
160 on its consolidated financial position, results of operations and cash flows.In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities or SFAS No. 159. SFAS No.
159 permits, but does not require, entities to choose to measure eligible items at fair
value. The objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting provisions.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007,
provided that a company also elects to apply the provisions of SFAS No. 157, Fair Value
Measurements.Management is in the process of assessing if this statement will have a
material impact on the Companys financial statements once adopted.In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements or SFAS No. 157. SFAS No. 157 clarifies the definition of fair value,
establishes a framework for measuring fair value and expands the disclosures on fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
There is partial delay in applying FAS 157 to non-financial assets and liabilities measured
on a non-recurring basis. The Company is currently evaluating the impact adoption may have on
its financial condition or results of operations.In June 2007, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-11,
Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (EITF 06-11).
EITF 06-11 requires that tax benefits generated by dividends paid during the vesting period on certain equity-classified share-based
compensation awards be classified as additional paid-in capital and included in a pool of
excess tax benefits available to absorb tax deficiencies from share-
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based payment awards. EITF 06-11 will be effective on July 1, 2008 and is to be applied on a prospective basis.
The Company does not expect that the adoption of this EITF will have a material impact on its
consolidated results of operations or financial position.
 4.
    
    INVENTORIESInventories consisted of the following:
 Dec. 31,2007
    
    
    June 30,(Unaudited)
    
    
    2007Raw materials
    
    $
    1,529
    
    
    $
    1,295Work in progress
    
    
    1,501
    
    
    
    1,210Finished goods
    
    
    259
    
    
    
    222Less: provision for obsolete inventory
    
    
    (816
    )
    
    
    (781
    )$
    2,473
    
    
    $
    1,946
 5.
    
    STOCK OPTIONSAs of December 31, 2007, the Company had 13,050 shares of stock options outstanding under the
1998 Employee Option Plan, which 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 forms of non-qualified
options and restricted stock. These two plans are administered by the Board, which also
establishes the terms of the awards.Effective July 1, 2005, 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 was 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
  Six Months Ended
    
    Year EndedDecember 31, 2007
    
    June 30, 2007Expected volatility
    
    
    110.91
    %
    
    
    73.22-98.51
    %Risk free interest rate
    
    
    3.1
    %
    
    
    4.5
    %Expected life (years)
    
    
    2.00
    
    
    
    2.00
  2007 Employee Stock Option Plan
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Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding at July 1, 2007
    
    
    Granted
    
    
    50,000
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    50,000
    
    
    $
    9.57
    
    
    
    4.93
    
    
    
    Exercisable at December 31, 2007
    
    
    12,500
    
    
    $
    9.57
    
    
    
    4.93
    
    
    
    
  Weighted-Average Grant-DateOptions
    
    
    Fair ValueNon-vested at July 1, 2007
    
    
    
    
    
    
    Granted
    
    
    50,000
    
    
    $
    5.55Vested
    
    
    (12,500
    )
    
    $
    5.55Forfeited
    
    
    
    
    
    
    Non-vested at December 31, 2007
    
    
    37,500
    
    
    $
    5.55
 2007 Directors Equity Incentive Plan
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Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding at July 1, 2007
    
    
    Granted
    
    
    50,000
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    50,000
    
    
    $
    9.57
    
    
    
    4.93
    
    
    
    Exercisable at December 31, 2007
    
    
    50,000
    
    
    $
    9.57
    
    
    
    4.93
    
    
    
    
 1998 Stock Option Plan
  Weighted-AverageWeighted-Average
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding at July 1, 2007
    
    
    13,050
    
    
    $
    3.03Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    13,050
    
    
    $
    3.03
    
    
    
    0.74
    
    
    $
    80,040Exercisable at December 31, 2007
    
    
    13,050
    
    
    $
    3.03
    
    
    
    0.74
    
    
    $
    80,040
  Weighted AverageGrant DateNon-vested Options
    
    Shares
    
    Fair ValueNon-vested at July 1, 2007
    
    
    1,375
    
    
    $
    1.31Granted
    
    
    
    
    
    
    Vested
    
    
    (1,375
    )
    
    $
    1.31Forfeited
    
    
    
    
    
    
    Non-vested at December 31, 2007
    
    
    
    
    
    
    
 12




---



##### Table of Contents



6.
    
    EARNINGS PER SHARE
 Earnings per
Share
     Six Months Ended
    
    
    Three Months EndedDec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Net income attributable to common shares
    
    $
    916
    
    
    $
    1,555
    
    
    $
    165
    
    
    $
    799Basic Earnings Per Share
    
    $
    0.28
    
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    0.25Diluted Earnings Per Share
    
    $
    0.28
    
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    0.25Weighted average number of common shares outstanding  basic
    
    
    3,226
    
    
    
    3,221
    
    
    
    3,226
    
    
    
    3,221Dilutive effect of stock options
    
    
    33
    
    
    
    12
    
    
    
    2
    
    
    
    12Number of shares used to compute earnings per share  diluted
    
    
    3,259
    
    
    
    3,233
    
    
    
    3,228
    
    
    
    3,233
 7.
    
    ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
   13




---



##### Table of Contents



Dec. 31,2007
    
    
    June 30,(Unaudited)
    
    
    2007Beginning
    
    $
    42
    
    
    $
    225Additions charged to expenses
    
    
    15
    
    
    
    18Recovered
    
    
    (15
    )
    
    
    (159
    )Actual write-offs
    
    
    
    
    
    
    (42
    )Ending
    
    $
    42
    
    
    $
    42
 8.
    
    WARRANTY ACCRUAL
  Dec. 31,2007
    
    
    June 30,(Unaudited)
    
    
    2007Beginning
    
    $
    211
    
    
    $
    142Additional accruals
    
    
    
    
    
    
    74Warranty expenses incurred
    
    
    (14
    )
    
    
    (3
    )Reverse
    
    
    (7
    )
    
    
    (2
    )Ending
    
    $
    190
    
    
    $
    211
 9.
    
    LONG TERM DEBT
  CalendarAs of December 31,
    
    Year 2007
    
    
    Calendar Year 2008
    
    
    Calendar Year 2009
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueLoan:Denominated in
Singapore dollars;
interest is at the
banks prime rate
(2.51% at December
31, 2007) plus 3.0%
per annum
    
    $
    1,329
    
    
    $
    1,279
    
    
    $
    846
    
    
    $
    
    
    
    $
    3,454
    
    
    $
    3,454
 10.
    
    ADOPTION OF FIN 48
  14




---



##### Table of Contents



11.
    
    INVESTMENT IN CHONGQING, CHINAIn 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 RMB20,000 (Chinese yuan), or equivalent to approximately US$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 its capital injection obligation. The
source of the funds was from the proceeds of disposing 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 RMB10,000, equivalent to
approximately $1,371 based on the exchange rate on December 31, 2007 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 cost method as the
Company accounted for less than 20% equity of this joint venture.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 were 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 respective parties in order to finance the increase in
construction costs. The Supplement Agreement does 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 RMB9,000, or approximately
US$1,234 based on the exchange rate as of December 31, 2007 published by the Federal Reserve
Statistical Release. By infusing the additional capital of RMB9,000, the Company increased
its equity ratio from 16% to 24% of the total capital infused by both parties. However, the
profit sharing percentage remains at 20% as specified in the original Memorandum Agreement
because management of the Company believes that the return on the total investment is still
reasonable. On December 17, 2007, Trio-Tech (Chongqing) Co., Ltd. received a list of
additional costs incurred for this project, which were RMB4,000 less than the estimated costs
of RMB9,000. Accordingly, the Company only transferred RMB5,000, approximately $686, from
its bank account into the special bank account jointly monitored by both Trio-Tech
(Chongqing) Co., Ltd. and Jiasheng. After that extra infusion, the equity ratio owned by the
Company in that joint venture was 20%. As Jiasheng is responsible for the daily business
operations and development of that project and the Company has been a passive investor role
since the inception of this joint venture, the cost method of accounting was still
applicable. There was no operating activity in Trio-Tech (Chongqing) Co., Ltd in the six
months ended December 31, 2007, and there was no income generated from the entity during this
period.12.
    
    ASSETS HELD FOR SALEIn the first quarter of fiscal 2008, the Company initiated a plan to sell the property
located in Malaysia and ceased the depreciation of that property in accordance with SFAS No.
144. The book value of this asset was $217 at December 31, 2007. In late December 2007, the
Company entered into a definite sale and purchase agreement with a buyer with a selling price
of RM700 (Malaysia ringgit), equivalent to approximately to US$212, and received a deposit of
RM70, equivalent to approximately US$21, based on the exchange rate as of December 31, 2007
published by the Federal Reserve Statistical Release. It is anticipated that the sale will
be consummated in the third quarter of fiscal 2008. Accordingly, the Company believes that
the assets held for sale should be presented as part of current assets. In accordance with
SFAS No 144, the asset held for sale was recorded at the lower of fair value less cost to
sell of $212. Impairment loss of $5 was recorded for the six months ended December 31, 2007.13.
    
    BUSINESS SEGMENTSThe 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 expense have been made based on the primary purpose for which the equipment was
acquired.
 15




---



##### Table of Contents



All inter-segment sales were sales from the manufacturing segment to the testing and
distribution segments. Total inter-segment sales were $92 and $61 for the six months ended
December 31, 2007 and 2006, respectively. Corporate assets mainly consisted of cash and
prepaid expenses. Corporate expenses mainly consisted of salaries, insurance, professional
expenses and directors fees.
  Business Segment Information:
 Quarter
    
    
    
    
    
    Operating
    
    
    
    
    
    Depr.Ended
    
    Net
    
    Income
    
    Total
    
    and
    
    CapitalDec. 31
    
    Sales
    
    (loss)
    
    Assets
    
    Amort.
    
    ExpendituresManufacturing
    
    
    2007
    
    
    $
    7,085
    
    
    $
    466
    
    
    $
    4,086
    
    
    $
    67
    
    
    $
    1822006
    
    
    $
    8,196
    
    
    $
    250
    
    
    $
    3,698
    
    
    $
    52
    
    
    $
    34Testing Services
    
    
    2007
    
    
    
    5,670
    
    
    
    645
    
    
    
    33,445
    
    
    
    664
    
    
    
    7572006
    
    
    
    5,273
    
    
    
    942
    
    
    
    31,101
    
    
    
    610
    
    
    
    1,710Distribution
    
    
    2007
    
    
    
    116
    
    
    
    (61
    )
    
    
    566
    
    
    
    (8
    )
    
    
    92006
    
    
    
    598
    
    
    
    28
    
    
    
    811
    
    
    
    4
    
    
    
    1Corporate and
    
    
    2007
    
    
    
    
    
    
    
    (467
    )
    
    
    368
    
    
    
    
    
    
    
    Unallocated
    
    
    2006
    
    
    
    
    
    
    
    30
    
    
    
    562
    
    
    
    
    
    
    
    Total Company
    
    
    2007
    
    
    $
    12,871
    
    
    $
    583
    
    
    $
    38,465
    
    
    $
    723
    
    
    $
    9482006
    
    
    $
    14,067
    
    
    $
    1,250
    
    
    $
    36,172
    
    
    $
    666
    
    
    $
    1,745
 Business Segment Information:
 SixMonths
    
    
    
    
    
    Operating
    
    
    
    
    
    Depr.Ended
    
    Net
    
    Income
    
    Total
    
    and
    
    CapitalDec. 31
    
    Sales
    
    (loss)
    
    Assets
    
    Amort.
    
    ExpendituresManufacturing
    
    
    2007
    
    
    $
    13,481
    
    
    $
    792
    
    
    $
    4,086
    
    
    $
    107
    
    
    $
    2152006
    
    
    $
    13,679
    
    
    $
    690
    
    
    $
    3,698
    
    
    $
    94
    
    
    $
    148Testing Services
    
    
    2007
    
    
    
    11,213
    
    
    
    1,663
    
    
    
    33,445
    
    
    
    1,412
    
    
    
    1,2672006
    
    
    
    9,171
    
    
    
    1,344
    
    
    
    31,101
    
    
    
    1,022
    
    
    
    1,901Distribution
    
    
    2007
    
    
    
    227
    
    
    
    (83
    )
    
    
    566
    
    
    
    9
    
    
    
    92006
    
    
    
    1,093
    
    
    
    (9
    )
    
    
    811
    
    
    
    8
    
    
    
    1Corporate and
    
    
    2007
    
    
    
    
    
    
    
    (535
    )
    
    
    368
    
    
    
    
    
    
    
    2Unallocated
    
    
    2006
    
    
    
    
    
    
    
    45
    
    
    
    562
    
    
    
    
    
    
    
    Total Company
    
    
    2007
    
    
    $
    24,921
    
    
    $
    1,837
    
    
    $
    38,465
    
    
    $
    1,528
    
    
    $
    1,4932006
    
    
    $
    23,943
    
    
    $
    2,070
    
    
    $
    36,172
    
    
    $
    1,124
    
    
    $
    2,050
 16




---



##### Table of Contents



Geographic Area Information:
 Elimin-Quarter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ationsEnded
    
    United
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    and
    
    TotalDec. 31
    
    States
    
    China
    
    Countries
    
    Singapore
    
    Thailand
    
    Malaysia
    
    Other
    
    CompanyNet sales to
    
    
    2007
    
    
    $
    1,584
    
    
    $
    553
    
    
    $
    529
    
    
    $
    7,140
    
    
    $
    559
    
    
    $
    2,539
    
    
    $
    (33
    )
    
    $
    12,871customers
    
    
    2006
    
    
    $
    3,486
    
    
    $
    2,008
    
    
    $
    43
    
    
    $
    6,313
    
    
    $
    634
    
    
    $
    1,636
    
    
    $
    (53
    )
    
    $
    14,067Operating
    
    
    2007
    
    
    
    102
    
    
    
    45
    
    
    
    37
    
    
    
    579
    
    
    
    45
    
    
    
    242
    
    
    
    (467
    )
    
    
    583Income
    
    
    2006
    
    
    
    277
    
    
    
    178
    
    
    
    4
    
    
    
    560
    
    
    
    56
    
    
    
    145
    
    
    
    30
    
    
    
    1,250Long-lived
    
    
    2007
    
    
    
    4
    
    
    
    1,019
    
    
    
    
    
    
    
    2,456
    
    
    
    858
    
    
    
    3,536
    
    
    
    (40
    )
    
    
    7,833Assets
    
    
    2006
    
    
    
    14
    
    
    
    903
    
    
    
    
    
    
    
    4,082
    
    
    
    774
    
    
    
    2,688
    
    
    
    (40
    )
    
    
    8,421
 Geographic Area Information:
 Six
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Elimin-Months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ationsEnded
    
    United
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    and
    
    TotalDec. 31
    
    States
    
    China
    
    Countries
    
    Singapore
    
    Thailand
    
    Malaysia
    
    Other
    
    CompanyNet sales to
    
    
    2007
    
    
    $
    3,044
    
    
    $
    772
    
    
    $
    917
    
    
    $
    12,712
    
    
    $
    1,073
    
    
    $
    6,495
    
    
    $
    (92
    )
    
    $
    24,921customers
    
    
    2006
    
    
    $
    3,851
    
    
    $
    3,391
    
    
    $
    225
    
    
    $
    12,537
    
    
    $
    1,146
    
    
    $
    2,854
    
    
    $
    (61
    )
    
    $
    23,943Operating
    
    
    2007
    
    
    
    225
    
    
    
    71
    
    
    
    78
    
    
    
    1,171
    
    
    
    107
    
    
    
    720
    
    
    
    (535
    )
    
    
    1,837Income
    
    
    2006
    
    
    
    247
    
    
    
    301
    
    
    
    10
    
    
    
    1,112
    
    
    
    102
    
    
    
    253
    
    
    
    45
    
    
    
    2,070Long-lived
    
    
    2007
    
    
    
    4
    
    
    
    1,019
    
    
    
    
    
    
    
    2,456
    
    
    
    858
    
    
    
    3,536
    
    
    
    (40
    )
    
    
    7,833Assets
    
    
    2006
    
    
    
    14
    
    
    
    903
    
    
    
    
    
    
    
    4,082
    
    
    
    774
    
    
    
    2,688
    
    
    
    (40
    )
    
    
    8,421
 17




---



##### Table of Contents



TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 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
       Recent Events
 Corporate Headquarters change of location
  Purchase of an office space in Chongqing
  18




---



##### Table of Contents



Second Quarter Fiscal 2008 Highlights
 
    
    Total revenue decreased 8.5% to $12,871 for the second quarter of fiscal 2008,
compared with revenue of $14,067 for the second quarter of fiscal 2007 as the result
of reduced revenue from product sales.
    
    Testing segment revenue increased by $397, or 7.5%, to $5,670 compared with $5,273
for the second quarter of fiscal 2007.
    
    Manufacturing segment revenue decreased by $1,111, or 13.6%, to $7,085 compared
with $8,196 for the second quarter of fiscal 2007.
    
    Distribution segment revenue decreased by $482, or 80.6%, to $116 compared with
$598 for the second quarter of fiscal 2007.
    
    Income from operations decreased by $667, or 53.4%, to $583 compared with $1,250
for the second quarter of fiscal 2007.
    
    Gross profit margins improved by 1.0% to 24.8% from 23.8% for the second quarter of
fiscal 2007.
    
    Selling expenses decreased by 0.3% from 1.5% of revenue for the second quarter of
fiscal 2008.
    
    General and administrative expenses increased by 6.7% from 12.1% of revenue for the
second quarter of fiscal 2007.
    
    General and administrative expenses in the second quarter of fiscal 2008 include
stock options expenses of $358 related to 100,000 options we granted on December 4,
2007.
    
    On November 15, 2007, Trio-Tech (Chongqing) Co., Ltd. entered into a Supplement
Agreement to the Memorandum Agreement dated August 27, 2007 with Jiasheng. Under the
terms of the Supplement Agreement, the Company agreed to invest an additional
RMB9,000, or approximately US$1,234 based on the exchange rate as of December 31, 2007
published by the Federal Reserve Statistical Release. By infusing the additional
capital of RMB9,000, the Company increased its equity ratio from 16% to 24% of the
total capital infused by both parties. However, the profit sharing percentage remains
at 20% as specified in the original Memorandum Agreement because management of the
Company believes that the return on the total investment is still reasonable. On
December 17, 2007, Trio-Tech (Chongqing) Co., Ltd. received a list for additional
costs incurred for this project, which were RMB4,000 less than the estimated costs of
RMB9,000. Accordingly, the Company only transferred RMB5,000, approximately $686,
from its bank account into the special bank account jointly monitored by both
Trio-Tech (Chongqing) Co., Ltd. and Jiasheng After that extra infusion, the equity
ratio owned by the Company in that joint venture was 20%. The investment in China
increased to $2,057.
  Results of Operations and Business Outlook
  Revenue Components
 Six Months Ended December 31,
    
    Three Months Ended December 31,2007
    
    2006
    
    2007
    
    2006Net Sales:Manufacturing
    
    
    54.09
    %
    
    
    57.13
    %
    
    
    55.05
    %
    
    
    58.26
    %Testing
    
    
    45.00
    
    
    
    38.30
    
    
    
    44.05
    
    
    
    37.49Distribution
    
    
    0.91
    
    
    
    4.57
    
    
    
    0.90
    
    
    
    4.25Total
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
   19




---



##### Table of Contents



Manufacturing Segment
  Testing Segment
  Distribution Segment
  Uncertainties and Remedies
  20




---



##### Table of Contents



Comparison of the Second Quarters Ended December 31, 2007 and 2006
  Three Months Ended December 31,2007
    
    2006Net Sales
    
    
    100
    %
    
    
    100.0
    %Cost of sales
    
    
    75.2
    %
    
    
    76.2
    %Gross Margin
    
    
    24.8
    %
    
    
    23.8
    %Operating ExpensesGeneral and administrative
    
    
    18.8
    %
    
    
    12.2
    %Selling
    
    
    1.2
    %
    
    
    1.5
    %Research and development
    
    
    0.1
    %
    
    
    0.1
    %Impairment loss
    
    
    0.1
    %
    
    
    1.2
    %Total operating expenses
    
    
    20.2
    %
    
    
    15.0
    %Income from Operations
    
    
    4.6
    %
    
    
    8.8
    %
 Overall Gross Margin
     Operating Expenses
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    
    2006General and administrative
    
    $
    2,424
    
    
    $
    1,704Selling
    
    $
    153
    
    
    $
    207Research and development
    
    $
    19
    
    
    $
    17Impairment loss
    
    $
    16
    
    
    $
    172Total
    
    $
    2,612
    
    
    $
    2,100
 21




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##### Table of Contents



Income from Operations
  Interest Expense
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Interest expense
    
    $
    79
    
    
    $
    37
  Other (Expenses) Income
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Other (expenses) income
    
    $
    (141
    )
    
    $
    73
  22




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##### Table of Contents



Income Tax
   Minority Interest
  Net Income
  Earnings per Share
  Segment Information
  Manufacturing Segment
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    7,085
    
    
    $
    8,196Gross margin
    
    
    17.4
    %
    
    
    12.6
    %Income from operations
    
    $
    466
    
    
    $
    250
  23




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Testing Segment
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    5,670
    
    
    $
    5,273Gross margin
    
    
    34.1
    %
    
    
    41.8
    %Income from operations
    
    $
    645
    
    
    $
    942
  Distribution Segment
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    116
    
    
    $
    598Gross margin
    
    
    25.0
    %
    
    
    18.9
    %(Loss) Income from operations
    
    $
    (61
    )
    
    $
    28
  Corporate
  Three Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Income (loss) from operations
    
    $
    (467
    )
    
    $
    30
  24




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Comparison of the Six Months Ended December 31, 2007 and 2006
  Six Months Ended December 31,2007
    
    2006Net Sales
    
    
    100
    %
    
    
    100.0
    %Cost of sales
    
    
    75.0
    %
    
    
    75.7
    %Gross Margin
    
    
    25.0
    %
    
    
    24.3
    %Operating ExpensesGeneral and administrative
    
    
    16.3
    %
    
    
    13.1
    %Selling
    
    
    1.1
    %
    
    
    1.6
    %Research and development
    
    
    0.2
    %
    
    
    0.2
    %Impairment loss
    
    
    0.1
    %
    
    
    0.7
    %Total operating expenses
    
    
    17.7
    %
    
    
    15.6
    %Income from operations
    
    
    7.3
    %
    
    
    8.7
    %
 Overall Gross Margin
     Operating Expenses
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    
    2006General and administrative
    
    $
    4,069
    
    
    $
    3,150Selling
    
    
    277
    
    
    
    398Research and development
    
    
    38
    
    
    
    34Impairment loss
    
    
    16
    
    
    
    172Total
    
    $
    4,400
    
    
    $
    3,754
 25




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##### Table of Contents



Income from Operations
  Interest Expense
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Interest expense
    
    $
    164
    
    
    $
    66
  Other Income
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Other (expenses) income
    
    $
    (191
    )
    
    $
    110
 26




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##### Table of Contents



Income Tax
  Minority Interest
  Net Income
  Earnings per Share
  Segment Information
  Manufacturing Segment
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    13,481
    
    
    $
    13,679Gross margin
    
    
    16.2
    %
    
    
    15.5
    %Income from operations
    
    $
    792
    
    
    $
    690
  27




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##### Table of Contents



Testing Segment
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    11,213
    
    
    $
    9,171Gross margin
    
    
    35.6
    %
    
    
    38.3
    %Income from operations
    
    $
    1,663
    
    
    $
    1,344
  Distribution Segment
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Revenue
    
    $
    227
    
    
    $
    1,093Gross margin
    
    
    25.6
    %
    
    
    17.7
    %Loss from operations
    
    $
    (83
    )
    
    $
    (9
    )
  Corporate
  Six Months Ended December 31,(In Thousands, unaudited)
    
    2007
    
    2006Income (loss) from operations
    
    $
    (535
    )
    
    $
    45
  Financial Condition
   28




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Liquidity Comparison
    29




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##### Table of Contents



Corporate Guarantee Arrangement
  Critical Accounting Estimates and Policies
   30




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
 New Office Lease Commitments
   Dec.31,
    
    June 30,2007
    
    2007(unaudited)Loans:Denominated in Singapore dollars; interest is at the banks
prime rate (4.25% at December 31, 2007
and June 30, 2007) plus 1% per annum
    
    $
    
    
    
    $
    16Denominated in Singapore dollars; interest rate is at the
banks prime rate (4.25% at December 31, 2007 and June 30,
2007) plus 1% per annum
    
    
    40
    
    
    
    150Denominated in Thailand baht; interest is at the banks
prime rate (7.00% at December 31, 2007 and June 30, 2007)
    
    
    1
    
    
    
    39Denominated in Singapore dollars; interest is at the
banks prime rate (2.48% at December 31, 2007 and June 30,
2007) plus 3.5% per annum
    
    
    
    
    
    
    309Denominated in Singapore dollars; interest is at the
banks prime rate (4.25% at December 31, 2007 and June 30,
2007) plus 1% per annum
    
    
    112
    
    
    
    161Denominated in Singapore dollars; interest is at the
banks prime rate (2.51% at December 31, 2007) plus 3.0%
per annum
    
    
    3,454
    
    
    
    Subtotal
    
    $
    3,607
    
    
    $
    675Capital leases:Denominated in Singapore dollars
with a fixed interest rate ranging from 4.19% to 6.02% per
annum
    
    $
    225
    
    
    $
    269Denominated in Malaysia ringgit
with a fixed interest rate of 4.30% per annum
    
    
    2
    
    
    
    7Denominated in U.S. dollars
with a fixed interest rate of 0.81% per annum
    
    
    3
    
    
    
    4Subtotal
    
    $
    230
    
    
    $
    280Total
    
    $
    3,837
    
    
    $
    955
 31




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##### Table of Contents



Calendar
    
    
    Calendar
    
    
    CalendarYear
    
    
    Year
    
    
    Year
    
    
    
    
    
    
    
    
    
    
    FairAs of December 31,
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    ValueLoan:Denominated in
Singapore dollars;
interest is at the
banks prime rate
(2.51% at December
31, 2007) plus 3.0%
per annum
    
    $
    1,329
    
    
    $
    1,279
    
    
    $
    846
    
    
    $
    
    
    
    $
    3,454
    
    
    $
    3,454
  Foreign Currency Exchange Rate Risk
  
 ITEM 4T. CONTROLS AND PROCEDURES
    32




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##### Table of Contents



TRIO-TECH INTERNATIONAL  PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 CERTAIN RISKS THAT MAY AFFECT OUR FUTURE RESULTS
  Possible dilutive effect of outstanding options
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to Vote of Security Holders
  Director
    
    Votes For
    
    Votes Withheld
    
    No Vote
    
    TotalJason Adelman
    
    
    1,962,226
    
    
    
    586,958
    
    
    
    676,747
    
    
    
    3,225,930Richard Horowitz
    
    
    2,149,479
    
    
    
    399,705
    
    
    
    676,747
    
    
    
    3,225,930A. Charles Wilson
    
    
    2,049,219
    
    
    
    483,465
    
    
    
    693,247
    
    
    
    3,225,930Yong Siew Wai
    
    
    1,907,890
    
    
    
    624,794
    
    
    
    693,247
    
    
    
    3,225,930
   33




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
 10.1
    
    Sales and purchase agreement on office units at Jiang Bei No. 21 Road, Chongqing10.2
    
    Tenant lease of U.S. office31.1
    
    Rule 13a-14(a) Certification of Principal Executive Officer of Registrant31.2
    
    Rule 13a-14(a) Certification of Principal Financial Officer of Registrant32
    
    Section 1350 Certification.
 34




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##### Table of Contents



SIGNATURES
  TRIO-TECH INTERNATIONALBy:
    /s/ Victor H.M. TingVICTOR H.M. TINGVice President and
Chief Financial Officer
(Principal Financial Officer)Dated: February 12, 2008 35