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 March 31, 2006

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

For the Transition Period from                      to                     

TRIO-TECH INTERNATIONAL

(Exact name of Registrant as specified in its Charter)

California		95-2086631
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
14731 Califa Street
Van Nuys, California		91411
(Address of principal executive offices)		(Zip Code)

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

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock outstanding as of May 11, 2006_is 3,219,157.

 

 

TRIO-TECH INTERNATIONAL
INDEX TO CONSOLIDATED FINANCIAL INFORMATION, OTHER INFORMATION AND SIGNATURES

		Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2006 (Unaudited) and June 30, 2005			3
Consolidated Statements of Operations and Comprehensive Income (loss) for the Three and Nine Months Ended March 31, 2006 (Unaudited) and March 31, 2005 (Unaudited)			4
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2006 (Unaudited) and March 31, 2005 (Unaudited)			5
Notes to Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures about Market Risk			35
Item 4. Controls and Procedures			37
Part II. Other Information
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 3. Defaults upon Senior Securities			38
Item 4. Submission of Matters to a Vote of Security Holders			38
Item 5. Other Information			38
Item 6. Exhibits			38
Signatures			39
Exhibit 31.1
Exhibit 31.2
Exhibit 32

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

		Mar 31,				June 30,
		2006				2005
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	2,795			$	1,439
Short-term deposits			8,522				3,211
Trade accounts receivable, less allowance for doubtful accounts of $175 and $147, respectively			5,219				4,178
Other receivables			333				142
Inventories, less provision for obsolete inventory of $431 and $428, respectively			1,566				1,584
Prepaid expenses and other current assets			158				76
Total current assets			18,593				10,630
PROPERTY, PLANT AND EQUIPMENT, Net			7,228				7,176
OTHER INTANGIBLE ASSETS, Net			340				386
OTHER ASSETS			157				138
ADVANCES TO SELLER			—				15
TOTAL ASSETS		$	26,318			$	18,345
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Lines of credit		$	225			$	336
Accounts payable			1,818				1,681
Accrued expenses			2,615				2,598
Income tax payable			268				168
Current portion of notes payable			900				655
Current portion of capital leases			127				123
Current portion of deferred tax liabilities			287				275
Total current liabilities			6,240				5,836
NOTES PAYABLE, net of current portion			817				634
CAPITAL LEASES, net of current portion			254				110
DEFERRED TAX LIABILITIES			453				407
TOTAL LIABILITIES			7,764				6,987
MINORITY INTEREST			2,063				2,061
SHAREHOLDERS’ EQUITY:
Common stock; no par value, 15,000,000 shares authorized;
3,219,407 shares issued and outstanding as at Mar. 31, 2006, and			10,338				9,554
2,976,042 shares issued and outstanding as at Jun. 30, 2005, and
Paid-in capital			334				284
Accumulated retained earnings (deficit)			6,446				(298	)
Accumulated other comprehensive loss-translation adjustments			(627	)			(243	)
Total shareholders’ equity			16,491				9,297
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	26,318			$	18,345

See notes to condensed consolidated financial statements.

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

		Nine Months Ended								Three Months Ended
		Mar. 31,				Mar. 31,				Mar. 31,				Mar. 31,
		2006				2005				2006				2005
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
NET SALES
— PRODUCT SALES		$	8,888			$	10,875			$	3,018			$	3,038
— SERVICES			10,711				8,286				3,451				2,846
			19,599				19,161				6,469				5,884
COST OF SALES
— COST OF GOODS SOLD			7,214				8,914				2,299				2,510
— COSTS OF SERVICES RENDERED			6,923				5,632				2,398				1,953
			14,137				14,546				4,697				4,463
GROSS PROFIT			5,462				4,615				1,772				1,421
OPERATING EXPENSES:
General and administrative			3,837				3,450				1,261				1,082
Director and officer bonuses			705				0				—				(9	)
Selling			768				889				253				339
Research and development			53				77				20				20
Impairment Loss			15				—				—				—
Gain on disposal of property, plant & equipment			22				—				22				—
Total			5,400				4,416				1,556				1,432
INCOME (LOSS) FROM OPERATIONS			62				199				216				(11	)
OTHER INCOME (EXPENSE)
Interest expense			(111	)			(129	)			(37	)			(42	)
Other income			196				81				84				39
Total			85				(48	)			47				(3	)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			147				151				263				(14	)
INCOME TAXES			290				25				106				(26	)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST			(143	)			126				157				12
MINORITY INTEREST			36				17				17				(4	)
(LOSS) INCOME FROM CONTINUING OPERATIONS			(107	)			143				174				8
DISCONTINUED OPERATION (NOTE 9)
INCOME FROM DISCONTINUED OPERATION			8,459				16				—				14
NET INCOME		$	8,352			$	159			$	174			$	22
BASIC EARNINGS (LOSS) PER SHARE
Basic (loss) earnings per share from Continuing operations		$	(0.03	)		$	0.05			$	0.05			$	0.01
Basic earnings per share from Discontinued operation			2.74				—				—				—
Basic earnings per share from Net income		$	2.71			$	0.05			$	0.05			$	0.01
DILUTED EARNINGS (LOSS) PER SHARE
Diluted (loss) earnings per share from Continuing operations		$	(0.03	)		$	0.05			$	0.05			$	0.01
Diluted earnings per share from Discontinued operation			2.74				—				—				—
Diluted earnings per share from Net income		$	2.71			$	0.05			$	0.05			$	0.01
WEIGHTED AVERAGE NUMBER OF COMMON AND POTENTIAL COMMON SHARES OUTSTANDING
Basic			3,080				2,966				3,211				2,966
Diluted			3,080				3,035				3,225				3,031
COMPREHENSIVE INCOME (LOSS):
Net income		$	8,352			$	159			$	174			$	22
Foreign currency translation adjustment			(384	)			214				363				(64	)
COMPREHENSIVE INCOME (LOSS)		$	7,968				373			$	537				(42	)

See notes to condensed consolidated financial statements.

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

		Nine Months Ended
		Mar 31,				Mar 31,
		2006				2005
		(unaudited)				(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	8,352			$	159
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,229				1,095
Bad debt expense, net			113				23
Inventory provision			3				—
Interest income on short-term deposits			(139	)			(37	)
Impairment loss			15				—
Stock compensation			50				—
Gain on sale of property — discontinued operation			(8,909	)			—
Loss on sale of equipment			22				—
Deferred tax provision			58				40
Minority interest			(36	)			(17	)
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable, net			(1,154	)			(199	)
Other receivables			(183	)			(26	)
Other assets			(19	)			(414	)
Inventories			15				29
Prepaid expenses and other current assets			(82	)			(52	)
Accounts payable and accrued expenses			154				(290	)
Income tax payable			100				25
Net cash (used in) provided by operating activities			(411	)			336
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturing short-term deposits			9,815				4,896
Investments in short-term deposits			(14,987	)			(2,553	)
Capital expenditures			(952	)			(1,691	)
Acquisition of a company in China			(138	)			—
Acquisition of business in Malaysia			—				(1,126	)
Proceeds from sale of property — discontinued operation			8,401				—
Proceeds from sale of equipment			137				—
Advances to seller			—				—
Net cash provided by (used in) investing activities			2,276				(474	)

TRIO-TECH INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)

		Nine Months Ended
		Mar 31,				Mar 31,
		2006				2005
		(unaudited)				(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments and borrowings on lines of credit			(111	)			—
Principal payments of debt and capital leases			(756	)			(637	)
Proceeds from long-term debt			1,045				683
Dividends paid to minority interest			(28	)			(54	)
Dividends paid to shareholders			(1,608	)			—
Cash received from stock options exercised			784				5
Net cash used by financing activities			(674	)			(3	)
EFFECT OF CHANGES IN EXCHANGE RATES			165				33
NET INCREASE (DECREASE) IN CASH			1,356				(108	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			1,439				1,357
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	2,795			$	1,249
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest		$	114			$	138
Income taxes		$	2,121			$	(14	)
NON-CASH INVESTING AND FINANCING ACTIVITIES
Capitalization of property, plant and equipment paid in advance		$	—			$	365
Deposit for the acquisition of business in Malaysia paid in advance		$	—			$	92
Bank guarantee note for acquisition of business in Malaysia		$	—			$	395
Capital lease of property, plant and equipment		$	287			$	—

See notes to condensed consolidated financial statements.

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 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 test 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 industry segments: Testing Services, Manufacturing and Distribution. TTI has subsidiaries located in the U.S., Ireland, Singapore, Malaysia, Thailand and China as follows:

		Ownership				Location
Express Test Corporation (Dormant)			100	%		Van Nuys, California
Trio-Tech Reliability Services (Dormant)			100	%		Van Nuys, California
KTS Incorporated, dba Universal Systems (Dormant)			100	%		Van Nuys, California
European Electronic Test Centre (Operation ceased on November 1, 2005)			100	%		Dublin, Ireland
Trio-Tech International Pte. Ltd.			100	%		Singapore
Universal (Far East) Pte. Ltd.			100	%		Singapore
Trio-Tech Thailand			100	%		Bangkok, Thailand
Trio-Tech Bangkok			100	%		Bangkok, Thailand
Trio-Tech Malaysia			55	%		Penang and Selangor, Malaysia
Trio-Tech Kuala Lumpur — 100% owned by			55	%		Selangor, Malaysia
Trio-Tech Malaysia
Prestal Enterprise Sdn. Bhd.			76	%		Selangor, Malaysia
Trio-Tech (Suzhou) Co. Ltd.			100	%		Suzhou, China
Trio-Tech (Shanghai) Co. Ltd			100	%		Shanghai, China

		The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. All significant inter-company accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements are presented in U.S. dollars. The accompanying financial statements do not include all the information and footnotes required by generally accepted accounting principles 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, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2006. 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, 2005.
2.		INVENTORIES
		Inventories consist of the following:

		Mar. 31,
		2006				June 30,
		(Unaudited)					2005
Raw materials		$	828			$	842
Work in progress			978				608
Finished goods			191				562
Less: provision for obsolete inventory			(431	)			(428	)
		$	1,566			$	1,584

3.		STOCK OPTIONS
		As of March 31, 2006, the Company had two share-based compensation plans, which are described below. The Company historically adopted the APB No. 25 approach – intrinsic value method – and presented the pro forma information in line with the requirements of SFAS No. 123. Historically, the stock based compensation cost has been charged against income, which was $0, $0, and $14 (related to the Directors’ Option Plan) for the fiscal years ended June 30, 2005, 2004 and 2003, respectively. There was no income tax benefit related to share-based compensation for the fiscal years ended June 30, 2005, 2004, and 2003, respectively, as the Company did not claim a deduction for corporate income tax purposes.
		Effective July 1, 2005, the Company adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123R, “Share-Based Payments,” using the modified prospective application method. Under this transition method, compensation cost recognized during the nine months ended March 31, 2006 included the applicable amounts of: (a) compensation cost of all share-based payments granted prior to, but not yet vested as of, July 1, 2005 (based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123) and (b) compensation cost for all share-based payments granted subsequent to July 1, 2005 (based on the grant-date fair value estimated in accordance with the new provisions of SFAS No. 123R). Amortization of unrecognized fair value of the non-vested options as of July 1, 2005 was $14 and $7 for the nine months and three months ended March 31, 2006, respectively. Options to purchase 30,000 shares of the Company’s common stock were issued on July 7, 2005 under the Directors’ Plan. The fair value of 30,000 shares of the Company’s common stock issuable upon exercise of stock options granted under the Directors’ Plan was $34 disclosed in Form 10-Q for the quarter ended September 30, 2005, a fair value of $1.13 per share. No options were granted under the 1998 Stock Option Plan during the nine months ended March 31, 2006. On November 14, 2005, an option to purchase 750 shares of the Company’s common stock was issued to a consultant in connection with his services rendered to the Company and the stock options were not issued pursuant to the 1998 Stock Option Plan or the Directors’ Stock Option Plan. The exercise price under the option was $2.66, which was lower than the fair market value of the stock on the grant date of the option. The option was exercisable immediately upon grant. The fair value of the 750 shares of the Company’s common stock issuable upon exercise of such option was approximately $2 based on the fair value at $2.92 per share determined by the Black Scholes option pricing model.
		Assumptions
		The disclosure of the above fair value for these awards was estimated using the Black-Scholes option pricing model with the assumptions listed below:

		Nine months
		Ended				Years Ended
		March 31,				June 30,				June 30,				June 30,
		2006				2005				2004				2003
Expected Volatility			49.50-51.12	%			33.5 - 36.8	%			41.9	%			37.2	%
Weighted average volatility			49.54	%			33.9	%			41.9	%			37.2	%
Risk free interest rate			3.71-4.50	%			2.89 - 3.27	%			2.76	%			2.27 - 2.93	%
Expected life (years)			2.00				2.00				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 terms of options. The expected terms of stock options are based on the average vesting period on a basis consistent with the historical experience of the similar option grants. The risk-free rate is consistent with the expected terms of stock options and based on the U.S. Treasury yield curve in effect at the time of grant.

1998 Stock Option Plan

The Company’s 1998 Stock Option Plan (the “1998 Plan”), which is shareholder-approved, permits the grant of stock options to its employees of up to 300,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. These options have a five-year contractual life term. Awards generally vest over four years; with 25% vesting on the grant date, and the balance vesting in equal installments on the next three succeeding anniversaries of the grant date. The share-based compensation will be amortized based on an accelerated method over the four periods. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the 1998 Plan).

A summary of option activities under the 1998 Plan during the nine months ended March 31, 2006 is presented as follows:

										Weighted -
										Average
										Remaining
						Weighted- Average				Contractual				Aggregate
Stock Options		Shares				Exercise Price				Term				Intrinsic Value
Outstanding at July 1, 2005			165,000			$	3.44
Granted			—				—
Exercised			(107,615	)		$	3.20
Forfeited or expired			(28,000	)		$	4.87
Outstanding at March 31, 2006			29,385			$	2.97				2.00			$	100,884
Exercisable at March 31, 2006			14,885			$	2.94				2.00			$	51,439

The intrinsic value of the 107,615 options exercised was $243. Cash received from options exercised by employees during the nine months ended March 31, 2006 was approximately $343.

A summary of the status of the Company’s non-vested stock options during the nine months ended March 31, 2006 is presented below:

						Weighted-Average
						Grant-Date
Non-vested Options		Shares				Fair Value
Non-vested at July 1, 2005			34,750			$	0.86
Granted			—				—
Vested			(19,500	)			0.92
Forfeited			(750	)			0.68
Non-vested at March 31, 2006			14,500			$	0.80

As of March 31, 2006, there was approximately $8 of accumulated unrecognized stock compensation based on fair value on the grant date related to non-vested options granted under the 1998 Plan. Such amount is expected to be recognized during the weighted average period of 2.5 years.

Directors’ Stock Option Plan

The Directors’ Stock Option Plan (the “Directors’ Plan”), which is shareholder-approved, permits the grant of stock options to its duly elected non-employee Directors and one of the corporate officers of the Company (if he or she is also a director of the Company) and covers 300,000 shares of common stock. The Company believes that such awards better align the interests of its directors with those of its shareholders. The fair value of 30,000 shares of the Company’s common stock issuable upon exercise of stock options granted was approximately $34 based on the fair value at $1.13 per share determined by the Black Scholes option pricing model. Prior to July 1, 2003, option awards were granted with an exercise price equal to 85% of the fair market price of the Company’s stock at the grant date. Subsequent to July 1, 2003, the Board approved an amendment to the Directors’ Plan requiring options to purchase the Company’s common stock to be exercisable at a price equal to 100% of the fair market value of the underlying shares on the grant date. These options have five-year contractual terms. Options awards are exercisable immediately as of the grant date.

A summary of the activities under the Directors’ Plan during the nine months ended March 31, 2006 is presented below:

										Weighted-
						Weighted-				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
Stock Options		Shares				Price				Term				Value
Outstanding at July 1, 2005			137,000			$	3.63
Granted			30,000				3.75
Exercised			(135,000	)			3.24
Forfeited or expired			(32,000	)			5.37
Outstanding at March 31, 2006			—			$	—				—			$	—
Exercisable at March 31, 2006			—			$	—				—			$	—

The intrinsic value of the 135,000 options exercised was $393. Cash received from options exercised by directors during the nine months ended March 31, 2006 was approximately $439.

Stock Option issued not pursuant to the 1998 Plan or the Directors’ Plan

On November 14, 2005, an option to purchase 750 shares of the Company’s common stock was issued to a consultant in connection with his services rendered to the Company. The stock option was not issued pursuant to the 1998 Plan or the Directors’ Plan. The exercise price under the option was $2.66, which was lower than the fair market value of the stock on the grant date of the option and was exercisable immediately upon grant. The fair value of 750 shares of the Company’s common stock issuable upon exercise of stock options granted was approximately $2 based on the fair value at $2.92 per share determined by the Black Scholes option pricing model.

A summary of the option granted not under an existing stock option plan during the nine months ended March 31, 2006 is presented as follows:

						Weighted-
						Average
						Exercise
Stock Options		Shares				Price
Outstanding at July 1, 2005			—			$	—
Granted			750				2.66
Exercised			(750	)			2.66
Expired			—				0.00
Outstanding at March 31, 2006			—			$	—
Exercisable at March 31, 2006			—			$	—

The intrinsic value of the 750 options exercised was $2. Cash received from the option exercised by the consultant during the nine months ended March 31, 2006 was approximately $2.

The following table illustrates the pro forma effect on net income and earnings per share for the nine months and three months ended March 31, 2005 as if the Company had applied the fair value recognition provision of SFAS No. 123 to stock-based employee compensation for each period presented:

		Nine Months				Three Months
		Ended				Ended
		Mar 31,				Mar 31,
		2005				2005
		(Unaudited)				(Unaudited)
Net income: as reported		$	159			$	22
Add: stock based employee compensation included in reported income			—				—
Deduct: total stock based employee compensation expense determined under fair value method for all awards			(27	)			(9	)
Pro forma net income		$	132			$	13
Earnings per share — basic
As reported		$	0.05			$	0.01
Pro forma		$	0.04			$	—
Earnings per share — diluted
As reported		$	0.05			$	0.01
Pro forma		$	0.04			$	—

4.		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 gives 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.
		Stock options to purchase 29,385 shares at exercise prices ranging from $2.66 to $4.40 per share were outstanding as of March 31, 2006. No options were excluded in the determination of common shares equivalents because the average market price of common shares was greater than the exercise price of the stock options. The resulted common shares equivalents were approximately 14,000 shares and were presented in the following table for earnings per share calculation purposes. However, 12,257 options were excluded in the computation of diluted EPS for the nine months ended March 31, 2006 since they were anti-dilutive.
		Stock options to purchase 334,000 shares at prices ranging from $2.25 to $5.63 per share were outstanding as of March 31, 2005. 97,000 options were excluded in the computation of diluted EPS because the exercise price was greater than the average market price of the common shares and therefore were anti-dilutive.
		The following table is a reconciliation of the weighted average shares used in the computation of basic and diluted EPS for the years presented herein:

		Nine Months Ended								Three Months Ended
		Mar. 31,				Mar. 31,				Mar. 31,				Mar. 31,
		2006				2005				2006				2005
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
(Loss) income from continuing operations		$	(107	)		$	143			$	174			$	8
Income from discontinued operation		$	8,459			$	16			$	—			$	14
Net income attribute to common shares		$	8,352			$	159			$	174			$	22
Basic Earnings (Loss) Per Share
Basic (loss) earnings per share from Continuing operations		$	(0.03	)		$	0.05			$	0.05			$	0.01
Basic earnings per share from Discontinued operation			2.74				—				—				—
Basic earnings per share from Net Income		$	2.71			$	0.05			$	0.05			$	0.01
Diluted (Loss) Earnings Per Share
Diluted (loss) earnings per share from Continuing operations		$	(0.03	)		$	0.05			$	0.05			$	0.01
Diluted earnings per share from Discontinued operation			2.74				—				—				—
Diluted earnings per share from Net Income		$	2.71			$	0.05			$	0.05			$	0.01
Weighted average number of common shares outstanding — basic			3,080				2,966				3,211				2,966
Dilutive effect of stock options			—				69				14				65
Number of shares used to compute earnings per share — diluted			3,080				3,035				3,225				3,031

5.		ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
		Accounts receivable are customer obligations due under normal trade terms. We sell our products and services to manufacturers in the semiconductor industry. We perform continuing credit evaluations of our customers’ financial conditions, and although we generally do not require collateral, letters of credit may be required from our customers in certain circumstances.
		Senior management reviews accounts receivable on a monthly basis to determine if any receivables will potentially be uncollectible. We include any accounts receivable balances that are determined to be uncollectible in our 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 to us, we believe our allowance for doubtful accounts for the nine months ended March 31, 2006 and the twelve months ended June 30, 2005 was adequate. However, actual write-offs might be more or less than the recorded allowance.

		Mar. 31,
		2006				June 30,
		(Unaudited)					2005
Beginning		$	147			$	165
Additions charged to expenses			141				44
Recovered			(28	)			(62	)
Actual write-offs			(85	)			—
Ending		$	175			$	147

6.		ACQUISITION OF A SUBSIDIARY
		On January 3, 2006, the Company closed the transaction of acquiring 100% interest in Globetronics (Shanghai) Co., Ltd. pursuant to the Definitive Agreement dated November 18, 2005. Globetronics (Shanghai) Co., Ltd. (thereafter “Globetronics”) was a China-based wholly owned foreign investment enterprise (WOFIE) conducting business in the burn-in testing service segment. The name of Globetronics (Shanghai) Co. Ltd. was changed to Trio-Tech (Shanghai) Co., Ltd. upon closing. Our objectives for acquiring the burn-in testing business were to enhance the Company’s future growth opportunities, expand the Company’s present operations, and develop the China market. Beginning on January 3, 2006, the operating results of this subsidiary were included in the consolidated financial statements of the Company for the three-months ended March 31, 2006. This acquisition transaction was not considered significant to the Company.
		Pursuant to the Definitive Agreement, the purchase price was $153, which covers certain fixed assets and testing services provided to the existing customers and does not cover any other assets or liabilities of the acquired entity. In addition, the Company is not responsible for any disclosed or undisclosed liabilities incurred prior to the acquisition completion date. The Definitive Agreement also includes a management service agreement, in which the Company appointed the Seller to provide accounting services to the acquired entity for $37 during a three-month transitional period commencing on the acquisition completion date.
		In accordance with the Statement of Financial Accounting Standard (SFAS) No. 141, “Business Combinations,” the Company allocated the purchase price to the tangible assets and identifiable intangible assets acquired based on their estimated fair values. The Company estimated that the book value of the fixed assets acquired approximated the fair value of similar assets available on the market based on the information management received. The Company attributed $133 to various items of fixed assets acquired, $8 to other receivables and $12 to an identifiable intangible customer relationship. The excess purchase price over the fair value of tangible assets acquired was $12, which was attributed to the customer relationship obtained along with the acquisition transaction based on estimates and assumptions determined by the management. The economic life of this identified intangible asset was estimated to be about one year based on management assumptions. Therefore, the value of $12 will be amortized over one year on the straight-line method. No goodwill was recognized. The following total presents the allocation of purchase price (in thousands):

Purchase price (paid in cash)		$	153
Property, plant and equipment
Plant and equipment		$	121
Office equipment			6
Motor vehicle			6
Subtotal			133
Other receivables			8
Total fair value of tangible assets acquired		$	141
Identifiable intangible asset-customer relationship			12
Purchase price		$	153

Pro Forma Financial Information

The unaudited pro forma financial information presented below summarizes the combined operating results of the Company and the acquired entity for the three months ended March 31, 2005 and nine months ended March 31, 2005 as if the acquisition had occurred on July 1, 2004, and the nine months ended March 31, 2006 as if the transaction had incurred on July 1, 2005, for comparison purposes.

The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition taken place on July 1, 2004. The unaudited pro forma combined statements of operations combine the historical results of the Company and the historical results of the acquired entity for the periods described above.

PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005

		Historical
		Information of				Historical
		the Company				Information of the				Pro Forma
		(1)				Acquired Entity (2)				Adjustments (3)				Pro Forma
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		$	5,884			$	52			$	—			$	5,936
Net income (expense)		$	22			$	—			$	(3	)		$	19
Basic earnings per share		$	0.01											$	0.01
Diluted earnings per share		$	0.01											$	0.01
Basic weighted average common shares outstanding			2,966												2,966
Diluted weighted average common shares outstanding			3,031												3,031

     Note: The currency exchange rate is based on the average exchange rate of the related period.

PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2006

						Historical
		Current				Information of the
		Information of the				Acquired Entity				Pro Forma
		Company (1)				(2)				Adjustments (3)				Pro Forma
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		$	19,599			$	107			$	—			$	19,706
Net income		$	8,352			$	1			$	(6	)		$	8,347
Basic earnings per share		$	2.71											$	2.71
Diluted earnings per share		$	2.71											$	2.71
Basic weighted average common shares outstanding			3,080												3,080
Diluted weighted average common shares outstanding			3,080												3,080

PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2005

		Historical				Historical
		Information of				information of the				Pro Forma
		the Company				Acquired Entity				Adjustments
		(1)				(2)				(3)				Pro Forma
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		$	19,161			$	141			$	—			$	19,302
Net income		$	159			$	(18	)		$	(9	)		$	132
Basic earnings per share		$	0.05											$	0.04
Diluted earnings per share		$	0.05											$	0.04
Basic weighted average common shares outstanding			2,966												2,966
Diluted weighted average common shares outstanding			3,035												3,035

7.		DIVIDEND PAID TO SHAREHOLDERS
		On December 2, 2005, the Board of Directors of Registrant declared a cash dividend of fifty cents (U.S. 50¢) per share payable to the shareholders of record on January 10, 2006. The total number of shares issued and outstanding as of January 10, 2006 was 3,215,532 and the total cash dividends paid on January 25, 2006 were $1,608. The source of cash was from the proceeds from disposition of the property located in Dublin, Ireland.
8.		WARRANTY ACCRUAL

		Mar. 31,
		2006				June 30,
		(Unaudited)					2005
Beginning		$	155			$	162
Additions charged to cost and expenses			57				43
Recovered			—				—
Actual write-offs			(11	)			(50	)
Ending		$	201			$	155

9.		DISCONTINUED OPERATION AND CORRESPONDING RESTRUCTURING PLAN
		The Company’s Ireland operation, as a component of the Testing segment, suffered continued operating losses in the past three fiscal years and the cash flow was minimal for the past three years. In August 2005, the Company established a restructuring plan to close the Testing operation in Dublin, Ireland. This fact was initially disclosed in the Form 10-K for the fiscal year ended June 30, 2005. Based on the restructuring plan and in accordance with EITF 03-13, the Company presented the operation results from Ireland as a discontinued operation as the Company believed that no continued cash flow would be generated by the disposed component (Ireland subsidiary) and that the Company would have no significant continuing involvement in the operation of the discontinued component. Management of the Company initiated a plan to sell the property located in Dublin, Ireland in August 2005 and ceased the depreciation of the property in accordance with SFAS No. 144. In accordance with the restructuring plan, the Company would transfer the relevant machinery and equipment to Singapore and pay off the outstanding balance on the equipment loans, collect accounts receivable and pay off accounts payable as much as it could before moving out of Ireland. If the accounts receivable and accounts payable were not wound down before moving out of Ireland, the Company planned to have the Singapore office take over the responsibility for the collection and repayment matters. As a result, the machinery and equipment located in Dublin, Ireland was not included in the assets held for sale on the balance sheet as of September 30, 2005.
		In late September 2005, the Company entered into a Definite Sale and Purchase Agreement with a buyer through an auction process with a selling price of €8.85 million (equivalent to $10,574 U.S.) and received a deposit of €885 (equivalent to $1,057 U.S.). The sale was consummated on November 1, 2005. In accordance with SFAS No. 144, the asset held for sale was recorded at a historical carrying value of the property of $261, as of September 30, 2005, which was lower than its fair value, less the cost to sell.
		During the process of winding down the Company’s operation in Dublin, Ireland, the Company incurred general and administrative expenses of approximately $126 and one-time employment termination benefits of approximately $330 (of which $107 was paid in the quarter ended September 30, 2005) for the nine months ended March 31, 2006. In connection with the sale of the property located in Dublin, Ireland, the Company also incurred the following direct expenses including professional fees of approximately $92, commissions and other selling related expenses of approximately $40 and incurred a liability estimated at $86 to refund the industrial development agency grant by the Irish government agency. The estimated amount of $86 was subject to the clearance of the Irish government agency. These expenses were directly offset against the proceeds from selling property as these expenses were deemed as cost to sell. The tax on capital gain in Ireland from the sale of property was approximately $1,955, which was deducted from the gross proceeds from selling the property after the taxable gain was determined. The Company considered the inter-period tax allocation noting the impact of allocation was minimal as there was a loss of $450 in the Ireland entity before considering the gain from selling property and there were significant net operating losses carry-forward which cannot be used to offset the taxable capital gain. The gain realized through disposing the property in November 2005 was presented as part of income from discontinued operations in the statement of operations for the nine months ended March 31, 2006. The Company anticipates that it may incur additional costs and expenses in winding up the business of the subsidiary through which the Ireland facility was operated.
		Under the provision of SFAS No. 52, translation adjustments that result when a foreign entity’s financial statements are translated into a parent company’s or an investor’s reporting currency are separately reported in the parent company’s other comprehensive income. Foreign currency translation adjustments that are accumulated in other comprehensive income are reclassified to income only when they are realized, if the investment in the foreign entity is sold or is substantially or completely liquidated. Accordingly, the foreign currency translation adjustments on the balance sheet of the Dublin, Ireland subsidiary as of November 1, 2005 in the amount of approximately $769 were reclassified into the process of disposing of the property presented below.

Income from discontinued operations for the nine months and three months ended March 31, 2006 was as follows:

		Nine Months Ended								Three Months Ended
		Mar. 31,				Mar. 31,				Mar. 31,				Mar. 31,
		2006				2005				2006				2005
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
NET SALES		$	78				490				—				233
COST OF SALES			63				412				—				185
GROSS PROFIT			15				78				—				48
OPERATING EXPENSES:
General and administrative			120				139				—				53
Employment termination benefits			330				—				—				—
Total			450				139				—				53
			(435	)			(61	)			—				(5	)
OTHER INCOME (EXPENSE)
Interest expense			(3	)			(9	)			—				(3	)
Other (expense) income			(12	)			86				—				22
Total			(15	)			77				—				19
(Loss) Income from discontinued operation			(450	)			16				—				14
Gain on sale of property			8,909				—				—				—
INCOME FROM DISCONTINUED OPERATION		$	8,459			$	16			$	—			$	14
Breakdown of gain on sale of property
Gross proceeds		$	10,574				—				—				—
Net book value of the property			(261	)			—				—				—
Grant payable to Ireland government			(86	)			—				—				—
Professional fees			(92	)			—				—				—
Commissions and related selling expenses			(40	)			—				—				—
			10,095				—				—				—
Capital gain tax			(1,955	)			—				—				—
			8,140				—				—				—
Foreign currency translation adjustments			769				—				—				—
Gain on sale of property		$	8,909			$	—			$	—			$	—

		As the Company does not provide a separate cash flow statement for the discontinued operation, the details of cash flow from the discontinued operation in Ireland is summarized as follows: the gross proceeds were approximately $10,574, cost to sell was $218, and disbursement for capital gain tax was $1,955, resulting in net proceeds of $8,401. The loss from discontinued operations of $450 was deemed as cash outflow from the operating activities of the discontinued operation; the net proceeds provided by investing activities were $8,401 from the sale of the property; the cash used in financing activities was the disbursement to pay off the outstanding equipment loan of $88. The impact of this discontinued operation was immaterial because the total revenues for fiscal years June 30, 2005 and 2004 were approximately $600 and $500, respectively. The Company believes there will not be any future significant cash flows from the discontinued operation as the outstanding accounts receivable and accounts payable are immaterial to the Company’s financial position and liquidity.
		Before moving out of Ireland, the Company wired approximately $7,800 to its Singapore subsidiary where the main operations are located. Subsequently, approximately $1,608 out of the $7,800 was wired to the U.S. corporate office for distribution of dividends to shareholders, which were paid on January 25, 2006. In addition, $705 of the $7,800 was used for bonuses to the directors and corporate officers paid in December 2005 and January 2006, respectively.

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 expense have been made on the basis of 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 $61 and $257 for the nine months ended March 31, 2006 and 2005, respectively, and $31 and $220 for the three months ended March 31, 2006 and 2005. 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				Capital
		Mar. 31,				Sales				(loss)				Assets				Amort.				Expenditures
Manufacturing			2006			$	2,685			$	192			$	3,503			$	31			$	101
			2005				2,245				(178	)			2,092				16				22
Testing Services			2006				3,451				178				21,346				402				567
			2005				2,846				89				14,309				338				883
Distribution			2006				333				(131	)			849				4				—
			2005				793				69				1,526				34				47
Corporate and unallocated			2006				—				(23	)			620				—				—
			2005				—				9				209				—				—
Total Company			2006			$	6,469			$	216			$	26,318			$	437			$	668
			2005			$	5,884			$	(11	)		$	18,136			$	388			$	952