UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2004

OR

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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

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

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

Number of shares of common stock outstanding as of November 5, 2004 is 2,964,542.

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

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT NUMBER OF SHARES)

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED,
IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE)

See notes to condensed consolidated financial statements.

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TRIO-TECH INTERNATIONAL AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)

See 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 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 and Europe. The Company also designs, develops, manufactures and markets a broad range of equipment and systems used in the manufacture and testing of semiconductor devices and electronic components. TTI conducts business in three industry segments: Testing Services, Manufacturing and Distribution. TTI has subsidiaries in the U.S., Singapore, Malaysia, Thailand, China and Ireland as follows:

		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. Accordingly, 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 three months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2005. 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, 2004, as amended by Form 10-KA filed October 29, 2004.
		Effective July 1, 2004, the Company changed its fiscal report period to end on the last day of the fiscal quarter. The quarter end dates for periods ending September 30, 2004 and September 30, 2003 were September 30, 2004 and September 26, 2003 respectively.

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2.		INVENTORIES
		Inventories consist of the following:

3.		STOCK OPTIONS
		The Company has adopted the intrinsic value method of accounting for employee stock options as permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-based Compensation” (SFAS No. 123) and discloses the pro forma effect on net loss and loss per share as if the fair value based method had been applied. For equity instruments, including stock options, issued to non-employees, the fair value of the equity instruments or the fair value of the consideration received, whichever is more readily determinable is used to determine the value of services or goods received and the corresponding charge to operations.
		The following table illustrates the effect on net income (loss) and earnings (loss) per share as if the Company had applied the fair value recognition provision of SFAS No. 123 to stock-based employee compensation.

		As required by SFAS 123, the Company provides the following disclosure of estimated values for these awards. The weighted-average grant-date fair value of options granted during 2005 and 2004 was estimated to be $4.40 and $2.66 respectively.
		The fair value of each option grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for 2005 and 2004, respectively; risk free interest rates of 2.53%

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and 1.71% to 2.93%, expected lives of 2 years for 2005 and 2004; volatility of 47.40% and 44.67% and no assumed dividends.

4.		EARNINGS PER SHARE
		The Company adopted SFAS No. 128, Earnings per Share (“EPS”). Basic Earnings per Share is 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 exercise of stock options and warrants.
		Stock options to purchase 391,000 shares at prices ranging from $2.25 to $6.00 per share were outstanding during the three months ending September 30, 2004. The following 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:

		Stock options to purchase 440,500 shares at prices ranging from $2.25 to $6.69 per share were outstanding during the three months ended September 30, 2003 and were excluded from the computation of diluted EPS because their effect would have been anti-dilutive.
		The following table is a reconciliation of the weighted-average shares used in the computation of basic and diluted EPS for the years presented herein:

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 condition 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 as of September 30, 2004 is adequate. However, actual write-offs might exceed the recorded allowance.

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6.

WARRANTY ACCRUAL

7.		ACQUISITION OF A BUSINESS
		On July 1, 2004, the Company acquired certain assets from TS Matrix Bhd. (“the Seller’) utilized by the burn-in testing division of Seller, whom is also one of our competitors, for an aggregate cash purchase price of approximately $1,218. The company paid approximately $823 of the purchase price in cash at the beginning of fiscal 2005, and the balance of approximately $395 is payable in the form of a bank-guaranteed note, which matures at December 31, 2004. Our objectives to acquire the burn-in testing division are to service a large electronic device manufacturer with whom we had been pursuing a business relationship for some time and increase our market share in testing services. Upon completion of the acquisition, the customer signed a five-year agreement with the Company to provide testing services. The value of obtaining this customer relationship intangible is included in other intangible assets in the amount of $482. Results of the operations for the burn-in testing business are included in the Company’s income statement effective July 1, 2004.
		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 intangible assets acquired based on their estimated fair values. The fair value assigned to intangible assets acquired was based on estimates and assumptions determined by the management. Purchase intangibles with finite lives are amortized on a straight-line basis over their respective useful lives. The total purchase price was allocated as follows (in thousands):

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		The excess purchase price over the fair value of tangible assets acquired was attributed to the customer relationship obtained from the above business acquisition and recorded as other intangible assets. No goodwill is recognized in this context. The customer relationship intangible will be amortized over its economic life based on the contract term as stated in the sales agreement with the customer on a straight-line method over five years.
		As previously reported in the Form 10-K, the customer relationship intangible is $493. The difference of $11 ($493 versus the above $482) was related to equipment given by the Seller subsequent to the completion date on July 1, 2004.
		Pro Forma Financial Information
		The unaudited financial information in the table below summarizes the combined results of the operations of the Company and the new burn-in testing division in Malaysia for the three months ended September 30, 2003 as if the acquisition had occurred on July 1, 2003. The results from operations for the three months ended September 30, 2004 included the business acquisition that was completed at the beginning of the first quarter of fiscal 2005.
		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 at the beginning of the three months ended September 30, 2003. The unaudited pro forma combined statement of operations for the three months ended September 30, 2003 combines the historical results for the Company for three months ended September 2003 and the historical results for the new burn-in testing division for the period preceding the merger on July 1, 2004. The following amounts are in thousands, except per share amounts.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003

(a)

Net loss was adjusted for pro forma purposes to recognize the effect of the amortization of the other intangible assets over its economic life of five years on a straight-line method, assuming that the acquisition took place from July 1, 2003.

8.		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 are sales from the Manufacturing Segment to the Testing and Distribution Segment. Total inter-segment sales were $29 and $25 for the three months ended September 30, 2004 and 2003 respectively. Corporate

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assets mainly consist of cash and prepaid expenses. Corporate expenses mainly consist of salaries, insurance, professional expenses and directors’ fees.

The following segment information is unaudited and is in thousands:

Business Segment Information: