Overview
The following should be read in conjunction with the condensed consolidated
financial statements and notes in Item I above and with the audited consolidated
financial statements and notes, the information under the headings "Management's
discussion and analysis of financial condition and results of operations" in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
Trio-Tech International ("TTI") was incorporated in 1958 under the laws of the
State of California. As used herein, the term "Trio-Tech" or "Company" or "we"
or "us" or "Registrant" includes Trio-Tech International and its subsidiaries
unless the context otherwise indicates. Our mailing address and executive
offices are located at Block 1008 Toa Payoh North, Unit 03-09 Singapore 318996,
and our telephone number is (65) 6265 3300.
The Company is a provider of reliability test equipment and services to the
semiconductor industry. Our customers rely on us to verify that their
semiconductor components meet or exceed the rigorous reliability standards
demanded for aerospace, communications and other electronics products.
During the three months ended September 30, 2022, TTI generated approximately
99.9% of its revenue from its three core business segments in the test and
measurement industry, i.e., manufacturing of test equipment, testing services
and distribution of test equipment. The Real Estate segment contributed only
0.01% to the total revenue during the three months ended September 30, 2022.
Manufacturing
TTI develops and manufactures an extensive range of test equipment used in the
"front-end" and the "back-end" manufacturing processes of semiconductors. Our
equipment includes leak detectors, autoclaves, centrifuges, burn-in systems and
boards, HAST testers, temperature-controlled chucks, wet benches and more.
Testing
TTI provides comprehensive electrical, environmental, and burn-in testing
services to semiconductor manufacturers in our testing laboratories in Asia and
the United States ("U.S."). Our customers include both manufacturers and end
users of semiconductor and electronic components who look to us when they do not
want to establish their own facilities. The independent tests are performed to
industry and customer specific standards.
Distribution
In addition to marketing our proprietary products, we distribute complementary
products made by manufacturers mainly from the U.S., Europe, and Taiwan. The
products include environmental chambers, handlers, interface systems, vibration
systems, shaker systems, solderability testers and other semiconductor
equipment. Besides equipment, we also distribute a wide range of components such
as connectors, sockets, LCD display panels and touch screen panels. Furthermore,
our range of products are mainly targeted for industrial products rather than
consumer products whereby the life cycle of the industrial products can last
from three years to seven years.
Real Estate
Our real estate segment generates investment income from the investments made
and rental revenue received from real estate that we purchased in Chongqing,
China.
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Critical Accounting Estimates & Policies
The preparation of our Condensed Consolidated Financial Statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions in applying our accounting
policies that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We base
these estimates and assumptions on historical experience and evaluate them on an
ongoing basis to ensure that they remain reasonable under current conditions.
Actual results could differ from those estimates. We discuss the development and
selection of the critical accounting estimates with the Audit Committee of our
Board of Directors on a quarterly basis, and the Audit Committee has reviewed
our related disclosure in this Quarterly Report on Form 10-Q.
There have been no material changes in our critical accounting estimates and
policies since our Annual Report on Form 10-K for the fiscal year ended June 30,
2022. Refer to Note 1 "Basis of Presentation And Summary of significant
Accounting Policies" to our Condensed Consolidated Financial Statements for
additional details. In addition, please refer to "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in Part II,
Item 7 of our Annual Report on Form 10-K for our fiscal year ended June 30, 2022
for a complete description of our critical accounting policies and estimates.
First Quarter Fiscal Year 2023 Highlights
? Total revenue increased by $1,768, or 17.4%, to $11,939 in the first quarter of
Fiscal 2023, compared to $10,171 for the same period in the fiscal year ended
June 30, 2022 ("Fiscal 2022").
? Manufacturing segment revenue increased by $23, or 0.6% to $3,585 for the first
quarter of Fiscal 2023, compared to $3,562 for the same period in Fiscal 2022.
? Testing segment revenue increased by $1,764, or 38.3%, to $6,364 for the first
quarter of Fiscal 2023, compared to $4,600 for the same period in Fiscal 2022.
? Distribution segment revenue decreased by $16, or 0.0%, to $1,982 for the first
quarter of Fiscal 2023, compared to $1,998 for the same period in Fiscal 2022.
? Real estate segment rental revenue decreased by $3, or 27.3% to $8 for the
first quarter of Fiscal 2023, compared to $11 for the same period in Fiscal
2022.
? The overall gross profit margin decreased by 0.9% to 30.3% for the first
quarter of Fiscal 2023, from 31.2% for the same period in Fiscal 2022.
? General and administrative expense increased by $325, or 16.4%, to $2,305 for
the first quarter of Fiscal 2023, from $1,980 for the same period in Fiscal
2022.
? Selling expense increased by $26, or 17.7%, to $173 for the first quarter of
Fiscal 2023, from $147 for the same period in Fiscal 2022.
? Other income increased by $18, or 11.2%, to $179 for the first quarter of
Fiscal 2023, from $161 for the same period in Fiscal 2022.
? Income from operations was $1,067 for the first quarter of Fiscal 2023, an
increase of $97 as compared to $970 for the same period in Fiscal 2022.
? Income tax expense was $225 in the first quarter of Fiscal 2023, an increase of
$45 as compared to $180 in the same period in Fiscal 2022.
? During the first quarter of Fiscal 2023, income from continuing operations
before non-controlling interest, net of tax was $977, as compared to income
from continuing operations before non-controlling interest of $923 for the same
period in Fiscal 2022.
? Net income attributable to non-controlling interest for the first quarter of
Fiscal 2023 was $96, an improvement of $85 as compared to $11 in the same
period in Fiscal 2022.
? Basic earnings per share for the first quarter of Fiscal 2023 was $0.22, as
compared to earnings per share of $0.23 for the same period in Fiscal 2022.
? Diluted earnings per share for the first quarter of Fiscal 2023 was $0.21, as
compared to earnings per share of $0.23 for the same period in Fiscal 2022.
? Total assets increased by $384 to $43,805 as of September 30, 2022, compared to
$43,421 as of June 30, 2022.
? Total liabilities increased by $568 to $15,987 as of September 30, 2022,
compared to $15,419 as of June 30, 2022.
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Results of Operations and Business Outlook
The following table sets forth our revenue components for three months ended
September 30, 2022 and 2021.
Revenue Components Three Months Ended
Sept. 30,
2022 2021
Manufacturing 30.0 % 35.0 %
Testing Services 53.3 % 45.2 %
Distribution 16.6 % 19.6 %
Real Estate 0.1 % 0.1 %
Total 100.0 % 100.0 %
Revenue for the three months ended September 30, 2022, was $11,939, an increase
of $1,768 from $10,171, when compared to the revenue for the same period of the
prior fiscal year. As a percentage, revenue increased by 17.4% for the three
months ended September 30, 2022, when compared to revenue for the same period of
the prior year.
For the three months ended September 30, 2022, there was an increase in revenue
in Testing segment when compared to the same period of the prior fiscal year.
Manufacturing and Distribution segments revenue remained almost at the same
level as the same period of prior year.
Total revenue into and within China, the Southeast Asia regions and other
countries (except revenue into and within the United States) increased by
$1,774, or 18.3%, to $11,446 for the three months ended September 30, 2022, as
compared with $9,672 for the same period of Fiscal 2022.
Total revenue into and within the U.S. was $493 for the three months ended
September 30, 2022, a decrease of $6 from $499 for the same period of the prior
year.
Revenue within our four current segments for the three months ended September
30, 2022, is discussed below.
Manufacturing Segment
Revenue in the manufacturing segment as a percentage of total revenue was 30.0%
for the three months ended September 30, 2022, a decrease of 5% of total revenue
when compared to 35.0% in the same period of Fiscal 2022. The absolute amount of
revenue increased by $23 to $3,585 for the three months ended September 30,
2022, compared to $3,562, for the same period of Fiscal 2022.
Testing Services Segment
The testing segment's revenue was 53.3% for the three months ended September 30,
2022, representing an increase of 8.1%, compared to 45.2% for the same period of
Fiscal 2022. The absolute amount of revenue increased by $1,764 to $6,364 from
$4,600 for the three months ended September 30, 2022, as compared to the same
period of Fiscal 2022.
During the third quarter of Fiscal 2022, the Company incorporated Trio-Tech
(Jiangsu) Co. Ltd. ("TTJS"), located in Suzhou, China together with Suzhou
Anchuang Technology Management L.L.P. ("SATM") to provide subcontract services
in the semiconductor and/or other related services in the electronics industry,
mainly in Suzhou, China. The joint venture contributed 22% of revenue in the
testing segment for the three months ended September 30, 2022.
The revenue in the testing segment from one customer accounted for 30.8% and
40.4% of our revenue in the testing segment for the three months ended September
30, 2022 and 2021, respectively. The future revenue in the testing segment will
be affected by the demands of this customer if the customer base cannot be
increased. Demand for testing services varies from country to country, depending
on any changes taking place in the market and our customers' forecasts. As it is
challenging to forecast fluctuations in the market accurately, management
believes it is necessary to maintain testing facilities in close proximity to
the customers in order to make it convenient for them to send us their newly
manufactured parts for testing and to enable us to maintain a share of the
market.
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Distribution Segment
Revenue in the distribution segment was 16.6% as a percentage of total revenue
for the three months ended September 30, 2022, a decrease of 3%, compared to the
same period of Fiscal 2022. The absolute amount of revenue decreased by $16 to
$1,982 from $1,998 for the three months ended September 30, 2022, compared to
the same period of Fiscal 2022.
Demand for the distribution segment varies depending on the demand for our
customers' products, the changes taking place in the market, and our customers'
forecasts. Hence it is difficult to forecast fluctuations in the market
accurately.
Real Estate Segment
The real estate segment accounted for 0.1% of total revenue for the three months
ended September 30, 2022. The absolute amount of revenue decreased by $3 to $8
from $11 and remained comparable for the three months ended September 30, 2022,
compared to the same period of Fiscal 2022.
Uncertainties and Remedies
There are several influencing factors which create uncertainties when
forecasting performance, such as the constantly changing nature of technology,
specific requirements from the customer, decline in demand for certain types of
burn-in devices or equipment, decline in demand for testing services and
fabrication services, and other similar factors. One factor that influences
uncertainty is the highly competitive nature of the semiconductor industry.
Another is that some customers are unable to provide a forecast of the products
required in the upcoming weeks; hence it is difficult to plan for the resources
needed to meet these customers' requirements due to short lead time and
last-minute order confirmation. This will normally result in a lower margin for
these products as it is more expensive to purchase materials in a short time
frame. However, the Company has taken certain actions and formulated certain
plans to deal with and to help mitigate these unpredictable factors. For
example, in order to meet manufacturing customers' demands upon short notice,
the Company maintains higher inventories but continues to work closely with its
customers to avoid stockpiling. We believe that we have improved customer
service through our efforts to keep our staff up to date on the newest
technology and stressing the importance of understanding and meeting the
stringent requirements of our customers. Finally, the Company is exploring new
markets and products, looking for new customers, and upgrading and improving
burn-in technology while at the same time searching for improved testing methods
for higher technology chips.
The Company's primary exposure to movements in foreign currency exchange rates
relates to non-U.S. dollar-denominated sales and operating expense in its
subsidiaries. Strengthening of the U.S. dollar relative to foreign currencies
adversely affects the U.S. dollar value of the Company's foreign
currency-denominated sales and earnings, and generally leads the Company to
raise international pricing, potentially reducing demand for the Company's
products. Margins on sales of the Company's products in foreign countries and on
sales of products that include components obtained from foreign suppliers could
be materially adversely affected by foreign currency exchange rate fluctuations.
In some circumstances, for competitive or other reasons, the Company may decide
not to raise local prices to fully offset the dollar's strengthening, or at all,
which would adversely affect the U.S. dollar value of the Company's foreign
currency-denominated sales and earnings. Conversely, a strengthening of foreign
currencies relative to the U.S. dollar, while generally beneficial to the
Company's foreign currency denominated sales and earnings, could cause the
Company to reduce international pricing, thereby limiting the benefit.
Additionally, strengthening of foreign currencies may also increase the
Company's cost of product components denominated in those currencies, thus
adversely affecting gross margins.
In December 2019, COVID-19 was reported to have surfaced in China, resulting in
shutdowns of manufacturing and commerce in the months that followed. Since then,
the COVID-19 pandemic has spread to multiple countries worldwide and has
resulted in authorities implementing numerous measures to try to contain the
disease and slow its spread, such as travel bans and restrictions, quarantines,
shelter-in-place orders and shutdowns. These measures have created significant
uncertainty and economic disruption, both short-term and potentially long-term.
The degree to which COVID-19 impacts our results will depend on future
developments, which are highly uncertain and cannot be predicted, including but
not limited to the duration and spread of the pandemic, its severity, the action
to contain the virus or treat its impact, and how quickly and to what extent
normal economic and operating conditions can resume. Even after the COVID-19
pandemic has subsided, we may experience material adverse impacts on our
business as a result of the global economic impact and any recession that has
occurred or may occur in the future. There are no comparable recent events that
provide guidance as to the effect the spread of COVID-19 as a global pandemic
may have, and, as a result, the ultimate impact of the pandemic on our
operations and financial results is highly uncertain and subject to change.
We also continue to consider the potential impact of increasing inflation on our
business operations. Although no material impairment or other material adverse
effects have been identified to date related to such factors, there is
substantial uncertainty in the nature and degree of their continued effects over
time. That uncertainty could affect management's accounting estimates and
assumptions, which could result in greater variability in a variety of areas
that depend on these estimates and assumptions as additional events and
information become known. Further, although we have not experienced any material
adverse effects on our business due to increasing inflation, it has raised
operating costs and, in the future, could impact demand or pricing of our
products, foreign exchange rates or manpower costs. We are actively monitoring
the effects these disruptions and increasing inflation could have on our
business operations.
On August 9, 2022, the CHIPS and Science Act of 2022 (CHIPS Act) was enacted in
the United States. The CHIPS Act will provide financial incentives to the
semiconductor industry which are primarily directed at manufacturing activities
within the United States. We continue to evaluate the business impact and
potential opportunities related to the CHIPS Act. As of date, we do not see any
direct effect of the Act on the Company in the foreseeable future.
There are legal and operational risks associated with having operations in
China. These risks could result in a material change in our operations and/or
the value of our common stock or could limit or hinder our ability to offer or
continue to offer securities to investors and cause the value of such securities
to significantly decline or be worthless. In recent past, the Peoples Republic
of China ("PRC") government initiated a series of regulatory actions and
statements to regulate business operations in China with little advance notice,
including cracking down on illegal activities in the securities market,
enhancing supervision over China-based companies listed overseas using variable
interest entity structure, adopting new measures to extend the scope of
cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.
The Company and its subsidiaries do not have any variable interest entities
based in China. Our business primarily consists of semiconductor testing and
burn-in services for the automotive industry, avionics, and others. Our
businesses are not impacted by anti-monopoly policies, variable interest
entities policies, or data security policies, nor are our businesses subject to
extraordinary oversight from the Chinese government.
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Comparison of the Three Months Ended September 30, 2022, and September 30, 2021
The following table sets forth certain consolidated statements of income data as
a percentage of revenue for the three months ended September 30, 2022 and 2021
respectively:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Revenue 100.0 % 100.0 %
Cost of sales 69.7 % 68.8 %
Gross Margin 30.3 % 31.2 %
Operating expense
General and administrative 19.3 % 19.4 %
Selling 1.4 % 1.4 %
Research and development 0.6 % 1.0 %
Total operating expense 21.3 % 21.8 %
Income from Operations 9.0 % 9.4 %
Overall Gross Margin
Overall gross margin as a percentage of revenue decreased by 1.0% to 30.3% for
the three months ended September 30, 2022, from 31.2% for the same period of
Fiscal 2022.
Gross profit margin as a percentage of revenue in the manufacturing segment
decreased by 2.1% to 29.6% for the three months ended September 30, 2022, as
compared to 31.7% for the same period in Fiscal 2022. In absolute dollar
amounts, gross profits in the manufacturing segment decreased by $68 to $1,060
for the three months ended September 30, 2022, from $1,128 for the same period
in Fiscal 2022. The decrease in gross profit margin was primarily due to a
higher proportion of lower profit margin product sales for the three months
ended September 30, 2022 compared to the same period of Fiscal 2022.
Gross profit margin as a percentage of revenue in the testing segment decreased
by 2.2% to 35.2% for the three months ended September 30, 2022, compared to
37.3% in the same period of Fiscal 2022. The decrease in gross profit margin
percentage was mainly due to difference in product mix coupled with increased
manpower costs. In absolute dollar amounts, gross profit in the testing segment
increased by $521 to $2,238 for the three months ended September 30, 2022, from
$1,717 for the same period of Fiscal 2022.
Gross profit margin of the distribution segment is not only affected by the
market price of the products we distribute, but also the mix of products we
distribute, which frequently changes as a result of fluctuations in market
demand. Gross profit margin as a percentage of revenue in the distribution
segment decreased by 0.2% to 16.9% for the three months ended September 30,
2022, from 17.1% in the same period of Fiscal 2022. In absolute dollar amounts,
gross profit in the distribution segment for the three months ended September
30, 2022, was $334, indicating a decrease of $8, compared to $342 in the same
period of Fiscal 2022.
In absolute dollar amounts, for the three months ended September 30, 2022, gross
loss in the real estate segment was $10, as compared to $8 for the same period
of Fiscal 2022.
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Operating Expense
Operating Expense for the three months ended September 30, 2022 and 2021 was as
follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
General and administrative $ 2,305 $ 1,980
Selling 173 147
Research and development 73 82
Gain on disposal of property, plant and equipment 4 -
Total $ 2,555 $ 2,209
General and administrative expense increased by $325, or 16.4%, from $1,980 to
$2,305 for the three months ended September 30, 2022, compared to the same
period of Fiscal 2022. The increase in general and administrative expense was
mainly attributable to the general and administrative expense relating to the
Company's new subsidiary Trio-Tech Jiangsu, which was setup in the third quarter
of Fiscal 2022, coupled with increased manpower costs.
Selling expense increased by $26, or 17.7%, from $147 to $173 for the three
months ended September 30, 2022, compared to the same period of Fiscal 2022. The
increase in selling expense was primarily attributable to an increase in
commission costs in the distribution segment of the Singapore operations as a
result of an increase in commissionable revenue, and an increase in travel costs
due to relaxation of travel restrictions in the first quarter of Fiscal 2023,
compared to the same quarter of Fiscal 2022.
Income from Operations
Income from operations was $1,067 for the three months ended September 30, 2022,
an increase of $97, compared to profit of $970 from operations for the same
period of Fiscal 2022. The result was mainly due to the increased revenue and
gross profit margin in absolute dollars amount, offset by the higher operating
expense.
Interest Expense
Interest expense for the three months ended September 30, 2022 and 2021 were as
follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Interest expense $ 44 $ 28
Interest expense was $44 for the three months ended September 30, 2022, an
increase of $16, or 57.1%, compared to $28 for the same period of Fiscal 2022.
As of September 30, 2022, the Company had an unused line of credit of $5,289 as
compared to $5,397 at September 30, 2021.
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Other Income
Other income for the three months ended September 30, 2022 and 2021 were as
follows:
Three Months Ended
September 30,
2022 2021
(Unaudited) (Unaudited)
Interest income $ 18 $ 22
Other rental income 27 29
Exchange gain 70 34
Bad debt recovery - 2
Dividend income - -
Government grant 21 70
Other miscellaneous income 43 4
Total $ 179 $ 161
Other income increased by $18 from $161 to $179 for the three months ended
September 30, 2022 compared to the same period in Fiscal 2022. The increase was
primarily contributed by exchange gains partially offset by reduction in
government grants received during that period.
In the three months ended September 30, 2022, the Company received government
grants amounting to $21 from the local government in the China and Singapore
operations.
In the three months ended September 30, 2021, the Company received government
grants amounting to $70, of which $42 were the financial assistance received
from the Malaysia and Thailand governments amid the COVID-19 pandemic.
Income Tax Expense
The Company's income tax expense was $225 and $180 for the three months ended
September 30, 2022, and 2021, respectively. Income tax expense increased due to
higher net income coupled with higher GILTI tax provision.
Non-controlling Interest
As of September 30, 2022, we held a 55% interest in Trio-Tech (Malaysia) Sdn.
Bhd., Trio-Tech (Kuala Lumpur) Sdn. Bhd., SHI International Pte. Ltd., and 52%
interest in PT. SHI Indonesia. We also held a 76% interest in Prestal
Enterprise Sdn. Bhd and 51% interest in Trio-tech JiangSu Co. Ltd. The share of
non-controlling interest in the net profit from the subsidiaries for the three
months ended September 30, 2022 was $96, an increase of $85 compared to the
share of non-controlling interest in the net income from the subsidiaries of $11
for the same period of the previous fiscal year. The increase in the net income
shared by non-controlling interest in the subsidiaries was attributable to the
increase in net income generated by the China operation.
Net Income Attributable to Trio-Tech International Common Shareholders
Net income attributable to Trio-Tech International common shareholders for the
three months ended September 30, 2022, was $882, a change of $35, compared to a
net income of $917 for the same period Fiscal 2022.
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Earnings per Share
Basic earnings per share from continuing operations were $0.22 for the three
months ended September 30, 2022, compared to $0.23 for the same period in Fiscal
2022. Basic earnings per share from discontinued operations were $nil for both
the three months ended September 30, 2022 and 2021.
Diluted earnings per share from continuing operations were $0.21 for the three
months ended September 30, 2022, as compared to $0.23 for the same period in
Fiscal 2022. Diluted earnings per share from discontinued operations were $nil
for both the three months ended September 30, 2022 and 2021.
Segment Information
The revenue, gross margin and income or loss from operations for each segment
during the first quarter of Fiscal 2023 and Fiscal 2022 are presented below. As
the revenue and gross margin for each segment have been discussed in the
previous section, only the comparison of income or loss from operations is
discussed below.
Manufacturing Segment
The revenue, gross margin and income from operations for the manufacturing
segment for the three months ended September 30, 2022 and 2021 were as follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Revenue $ 3,585 $ 3,562
Gross margin 29.6 % 31.7 %
Income from operations $ 176 $ 300
Income from operations from the manufacturing segment was $176 compared to
income from operations of $300 in the same period of Fiscal 2022, primarily due
to a decrease in gross profit margin coupled with an increase in operating
expense of $56. Operating expense for the manufacturing segment were $884 and
$828 for the three months ended September 30, 2022 and 2021, respectively. The
increase in operating expense was mainly due to an increase of $30 in selling
expense and an increase of $34 in corporate overhead expense.
Testing Segment
The revenue, gross margin and income from operations for the testing segment for
the three months ended September 30, 2022 and 2021 were as follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Revenue $ 6,364 $ 4,600
Gross margin 35.2 % 37.3 %
Income from operations $ 581 $ 536
Income from operations in the testing segment for the three months ended
September 30, 2022, was $581, an increase of $45 from income from operations of
$536 in the same period of Fiscal 2022. The improvement was mainly attributable
to an increase of gross profit. Operating expense was $1,657 and $1,181 for the
three months ended September 30, 2022 and 2021, respectively. The increase of
$476 in operating expense was mainly due to an increase of $231 in general and
administrative expense and an increase of $249 in corporate expense.
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Distribution Segment
The revenue, gross margin and income from operations for the distribution
segment for the three months ended September 30, 2022 and 2021 were as follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Revenue $ 1,982 $ 1,998
Gross margin 16.9 % 17.1 %
Income from operations $ 265 $ 254
Income from operations in the distribution segment for three months ended
September 30, 2022 was $265, compared to $254 for the same period of Fiscal
2022. The increase of $11 was mainly due to a decrease in operating expense.
Operating expense were $69 and $88 for the three months ended September 30, 2022
and 2021, respectively.
Real Estate Segment
The revenue, gross margin and loss from operations for the real estate segment
for the three months ended September 30, 2022 and 2021 were as follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Revenue $ 8 $ 11
Gross margin (125.0 )% (72.7 )%
Loss from operations $ (14 ) $ (23 )
Loss from operations in the real estate segment for the three months ended
September 30, 2022, was $14 compared to $23 for the same period of Fiscal
2022. Operating expense were $4 and $15 for the three months ended September 30,
2022 and 2021, respectively.
Corporate
The loss from operations for Corporate for the three months ended September 30,
2022, and 2021 was as follows:
Three Months Ended
Sept. 30,
2022 2021
(Unaudited) (Unaudited)
Loss from operations $ 58 $ (97 )
Corporate operating profit was $58 for the three months ended September 30,
2022, compared to loss of $97 in the same period of Fiscal 2022.
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Financial Condition
During the three months ended September 30, 2022 total assets increased by $384
to $43,805 compared to $43,421 as of June 30, 2022. The increase was primarily
due to increase in inventories, and trade receivables and property, plant and
equipment, partially offset by decrease in other receivables, prepaid expenses
and operating right-of-use assets.
Cash and cash equivalents were $9,428 as at September 30, 2022, reflecting an
increase of $1,730 from $7,698 as at June 30, 2022, primarily due to the
maturity of the short-term deposit of Singapore operation for the three months
ended September 30, 2022.
Short-term deposits were $2,829 as at September 30, 2022, reflecting a decrease
of $2,591 from $5,420 as at June 30, 2022. The decrease was primarily due to
maturity of the short-term deposit of Singapore operation for the three months
ended September 30, 2022 and reflected in the cash and cash equivalents.
As at September 30, 2022, the trade accounts receivable balance increased by
$899 to $12,491, from $11,592 as at June 30, 2022, primarily due to an increase
in overall revenue of all entities on a consolidated basis. The number of days'
sales outstanding in accounts receivables for the Group was 79 days and 81 days
at the end of the first quarter of Fiscal 2023 and the end of Fiscal 2022,
respectively.
Other receivable as at September 30, 2022 mainly comprised of advance payments
made to suppliers and refundable services taxes in the Singapore Operation.
Inventories as at September 30, 2022, were $3,548, an increase of $1,290,
compared to $2,258 as at June 30, 2022. The increase in inventories was in line
with the backlog in the manufacturing segment of our Singapore operations.
Prepaid expense were $631 as at September 30, 2022 compared to $1,215 as at June
30, 2022. This was mainly due to the asset capitalization of down payments made
for the purchase of equipment in the China operation.
Investment properties' net in China was $533 as at September 30, 2022 and $585
as at June 30, 2022. The decrease was primarily due to the foreign currency
exchange movement between June 30, 2022 and September 30, 2022.
Property, plant and equipment increased by $206 from $8,481 as at June 30, 2022,
to $8,687 as at September 30, 2022, mainly due to the new acquisition of
property, plant and equipment in the Singapore and China operations. The
increase was partially offset by the depreciation charged for the period and the
foreign currency exchange movement between June 30, 2022 and September 30, 2022.
Restricted term deposits decreased by $46 to $1,632 as at September 30, 2022 as
compared to $1,678 as at June 30, 2022. This was primarily due to the foreign
currency exchange movement between June 30, 2022 and September 30, 2022.
Other assets decreased by $16 to $121 as at September 30, 2022 compared to $137
as at June 30, 2022. This was primarily due to the foreign currency exchange
movement between June 30, 2022 and September 30, 2022.
Lines of credit decreased by $447 to $482 as at September 30, 2022 as compared
to $929 as at June 30, 2022. This was due to lower utilization of the lines of
credit in the Singapore operations.
Accounts payable increased by $1,068 to $3,469 as at September 30, 2022 as
compared to $2,401 as at June 30, 2022 which was in line with the increase of
inventories.
Accrued expense increased by $175 to $6,179 as at September 30, 2022, as
compared to $6,004 as at June 30, 2022. The increase in accrued expense was
mainly due to an increase in the accrued purchases and customers' deposit
received in the Singapore operations.
There was no significant change in bank loans payable as it decreased by $2 to
$1,742 as at September 30, 2022, as compared to $929 as of June 30, 2022. The
loan repayments made by the Malaysia operation during the three months ended
September 30, 2022 was offset by the new loan of $175 that was availed to
finance purchase of equipment.
Finance leases decreased by $42 to $195 as at September 30, 2022, as compared to
$237 as at June 30, 2022. This was due to the repayments made in the Singapore
and Malaysia operations.
Operating lease right-of-use assets and the corresponding lease liability
decreased by $393 to $2,759 as at September 30, 2022, as compared to $3,152 as
at June 30, 2022. This was due to the repayment made and the operating lease
expenses charged for the period.
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Table of Contents
Liquidity Comparison
Net cash provided by operating activities increased by $2,272 to an inflow of
$1,561 for the three months ended September 30, 2022, from an outflow of $711
for the same period of Fiscal 2022. The increase in net cash inflow provided by
operating activities was primarily due to lower payments made to account
payables and accrued expenses by $1,401 and prepaid expense by $1,403. These are
partially offset against higher cash outflow for inventories by $979, payments
for operating lease $234.
Net cash provided by investing activities increased by $1,249 to an inflow of
$1,475 for the three months ended September 30, 2022, from an inflow of $226 for
the same period of Fiscal 2022. The increase in cash inflow was primarily due
to an increase in withdrawal of unrestricted deposit amounting to $1,822. These
increases were partially offset by an increase in additions to property, plant
and equipment of $718.
Net cash outflow from financing activities for the three months ended September
30, 2022, was $414, representing a decrease of $431, as compared to cash inflow
of $17 during the three months ended September 30, 2021. The decrease was mainly
attributable to a higher payment on lines of credit by $637. This decrease was
partially offset by an increase in cash inflow $175 from the proceeds from bank
loan.
The Company filed the Registration Statement, pursuing to which we may raise
capital of US$10,000,000 of any combination of securities (common stock,
warrants, debt securities or units) for expansion of the Company's testing
capacity and working capital purposes if necessary.
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