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

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, 2025 ("Fiscal 2025").

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 has traditionally been a provider of reliability test equipment and services to the semiconductor and other industries. Our customers rely on us to verify that their semiconductor components meet or exceed the rigorous reliability standards demanded for automotive electronics, industrial electronics, computing and data storage, consumer electronics, and communication markets. We act as a global one-stop solution for our customers by designing and building reliability test solutions and offering comprehensive testing services. The Company also develops and manufactures an extensive range of equipment used in the manufacturing processes of semiconductors and various other industries.

The types of products and services provided by each segment are summarized below:

Semiconductor Back-end Solutions

The SBS segment of the Company designs and manufactures an extensive range of burn-in and reliability test equipment used in the "back-end" manufacturing processes of semiconductors. Our equipment includes burn-in systems, burn-in boards and related equipment that is used in the testing of structural integrity of integrated circuits. We also act as an extended development team of Integrated Device Manufacturers ("IDMs") and Fabless semiconductor companies in the testing process with our expert technical skills, especially in the New Product Introduction ("NPI") process.

The Company also provides comprehensive electrical, environmental, and burn-in testing services to semiconductor manufacturers in our testing laboratories in Asia. Our customers include both manufacturers and end users of semiconductor and electronic components who look to us when they decide to outsource their testing process. We also support the asset-light strategy of our customers by setting up test facilities and providing component level, package level and system level testing services with expert technology that improves the productivity of our customers. The independent tests are performed to industry and customer specific standards.

Industrial Electronics

The IE segment of the Company engages in the design, manufacture and distribution of an extensive range of test, process and other equipment used in the manufacturing processes of customers in various industries in the consumer and industrial markets. Our IE segment's product offerings include environmental chambers, leak detectors, autoclaves, centrifuges, dynamic testers, HAST testers, temperature-controlled chucks, and more. In addition to its equipment offerings, the segment also provides preventive maintenance, calibration services, repair services and upgrading and refurbishment services for temperature, humidity and pressurization equipment.

The IE segment markets both proprietary products and distribute mechanical, electrical and electronic products made by manufacturers around the world. These products include environmental chambers, mechanical shock and vibration testers, specialized equipment for the semiconductor and automotive industries, as well as a wide range of components such as connectors, sockets, cables, LCD displays and touch screen panels. The segment also serves the aviation industry with a comprehensive suite of aircraft spares and components, ground support equipment, and specialized maintenance tooling. We act as value-added solutions provider by enhancing the value of the distributed products by customizing each to the needs of our customers through our expert engineering and integration services. In addition, we also support customers as their extended research and development arm in product design, leveraging the expert skills of our component and design engineers.

Critical Accounting Estimates & Policies

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the U.S. 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.

There have been no material changes in our critical accounting estimates and policies since our Annual Report on Form 10-K for Fiscal 2025. 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 Fiscal 2025 for a complete description of our critical accounting policies and estimates.

Second Quarter Fiscal Year 2026 Highlights

●	Total revenue increased by $7,030, or 81.6%, to $15,649 in the second quarter of Fiscal 2026, compared to $8,619 for the same period in Fiscal 2025.
●	SBS segment revenue increased by $6,548, or 112.7% to $12,357 for the second quarter of Fiscal 2026, compared to $5,809 for the same period in Fiscal 2025.
●	IE segment revenue increased by $483, or 17.2%, to $3,284 for the second quarter of Fiscal 2026, compared to $2,801 for the same period in Fiscal 2025.
●	The overall gross profit margin decreased by 9.7% to 16.0% for the second quarter of Fiscal 2026, from 25.7% for the same period in Fiscal 2025.

●	General and administrative expense increased by $232, or 11.8%, to $2,197 for the second quarter of Fiscal 2026, from $1,965 for the same period in Fiscal 2025.
●	Selling expense decreased by $77, or 43.8%, to $99 for the second quarter of Fiscal 2026, from $176 for the same period in Fiscal 2025.
●	Income from operations was $97 for the second quarter of Fiscal 2026, reflecting a decline of $100 as compared to loss from operations of $3 for the same period in Fiscal 2025.
●	Otherincome was $237 for the second quarter of Fiscal 2026, a decrease of $449 as compared to other income of $686 for the same period in Fiscal 2025.
●	Income tax expense was $77 in the second quarter of Fiscal 2026, a decrease of $62 as compared to $139 for the same period in Fiscal 2025.
●	During the second quarter of Fiscal 2026, income from continuing operations before non-controlling interest, net of tax was $235, as compared to income from continuing operations before non-controlling interest of $536 for the same period in Fiscal 2025.
●	Net income attributable to non-controlling interest for the second quarter of Fiscal 2026 was $165, an increase of $143 as compared to net income of $22 for the same period in Fiscal 2025.
●	Basic earnings per share for the second quarter of Fiscal 2026 was $0.01, as compared to earnings per share of $0.06 for the same period in Fiscal 2025.
●	Diluted earnings per share for the second quarter of Fiscal 2026 was $0.01, as compared to earnings per share of $0.06 for the same period in Fiscal 2025.
●	Total assets increased by $4,661 to $45,729 as of December 31, 2025, compared to $41,068 as of June 30, 2025.
●	Total liabilities increased by $6,916 to $13,993 as of December 31, 2025, compared to $7,077 as of June 30, 2025.

Results of Operations and Business Outlook

The following table sets forth our revenue components for both three and six months ended December 31, 2025 and 2024.

Revenue Components		Three Months Ended								Six Months Ended
		December 31,				December 31,				December 31,				December 31,
		2025				2024				2025				2024
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Semiconductor Back-end Solutions (SBS)			78.9	%			67.4	%			76.4	%			68.9	%
Industrial Electronics (IE)			21.0	%			32.5	%			23.5	%			31.0	%
Others			0.1	%			0.1	%			0.1	%			0.1	%
Total			100.0	%			100.0	%			100.0	%			100.0	%

Revenue for the three and six months ended December 31, 2025 was $15,649 and $31,163, respectively, representing an increase of $7,030 and $12,745 when compared to revenue of $8,619 and $18,418 for the same period of Fiscal 2025. As a percentage, revenue increased by 81.6% and 69.2% for the three and six months ended December 31, 2025, when compared to revenue for the same period of Fiscal 2025.

Revenue within our two current segments for the three and six months ended December 31, 2025, is discussed below.

Semiconductor Back-end Solutions (SBS)

Revenue in the SBS segment as a percentage of total revenue was 78.9% and 76.4% for the three and six months ended December 31, 2025, an increase of 11.5% and 7.5% of total revenue when compared to 67.4% and 68.9% in the same period of Fiscal 2025. Total SBS revenue increased by $6,548 to $12,357 from $5,809 and increased by $11,121 to $23,809 from $12,688 for the three and six months ended December 31, 2025.

SBS segment recorded strong revenue growth for three-month period ended December 31, 2025, primarily driven by the commencement of final test services for AI chips in the final month of the first quarter of Fiscal 2026, as a result of a customer shifting testing activities to alternative geographies. Testing services demand in markets outside China are showing signs of recovery and this has further supported the segment's revenue momentum, partially offset by a decline in revenue from China of approximately 44.3% for the three months ended December 31, 2025 compared to the same period in fiscal year 2025, and a decrease of approximately 47.1% for the six months ended December 31, 2025.

However, revenue from equipment sales within the SBS segment continues to be adversely affected by broader market headwinds, as customers remain cautious with capital expenditure decisions amid ongoing economic uncertainty. Notwithstanding these conditions, burn-in board sales increased by approximately 53.3% for the six months ended December 31, 2025 compared to the same period in fiscal year 2025.

The SBS segment reported overall revenue growth, supported by stronger results in key markets. However, the market remains highly sensitive to global economic shifts and changes in consumer demand, leading to fluctuations in performance. While these developments suggest a gradual recovery from the industry's cyclical downturn, we continue to adopt a prudent and balanced approach toward growth and risk management.

Industrial Electronics (IE)

Revenue in the IE segment as a percentage of total revenue was 21.0% and 23.5% for the three and six months ended December 31, 2025, representing a decrease of 11.5% and 7.5% when compared to 32.5% and 31.0% in the same period of Fiscal 2025. Total IE revenue increased by $483 from $2,801 to $3,284 and increased by $1,621 from $5,715 to $7,336 for the three and six months ended December 31, 2025 as compared to the same period of Fiscal 2025.

Theincrease in IE revenue was primarily attributable to higher sales of aerospace-related products together with increased equipment sales. Since Fiscal 2025, the Company mitigated revenue volatility through service portfolio diversification and expansion into the aerospace business, offsetting softer demand in existing markets. Our ability to deliver customized, value-added solutions has enabled us to capitalize on new partnership opportunities while strengthening market penetration for our proprietary product lines, including Highly Accelerated Stress Test (HAST) systems, bubble testers, centrifuges, and Artic systems. These strategic initiatives underscore our commitment to long-term growth and adaptability amid evolving market conditions.

The equipment and electronic components market is highly competitive, with commoditized products widely available. Our differentiation lies in our value-added distribution model, with enhancement of standard products through customized design, engineering, integration, and sub-assembly services tailored to customer specifications, securing a competitive advantage for the long term.

Uncertainties and Remedies

There are several influencing factors which create uncertainties when forecasting performance, such as the changing nature of technology, specific customer requirements, decline in demand for certain types of burn-in devices or equipment, decline in demand for testing services and fabrication services, and other factors. One factor that influences uncertainty is the highly competitive nature of the semiconductor industry. Additionally, certain customers are unable to provide a forecast of the products required in the upcoming weeks, rendering it difficult to plan adequate resources needed to meet these customers' requirements because of short lead time and last-minute order confirmation. This will normally result in a lower margin for these products as it is often 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, 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 U.S. 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, recently observed as a result of current U.S. economic and trade policies, 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.

We may experience supply shortages as well as inflationary cost pressures in at least the near term. Risks and uncertainties related to supply chain challenges, and inflationary pressures may continue to negatively impact our revenue and gross margin. We continue to monitor and evaluate the business impact to react proactively.

On August 9, 2022, the CHIPS and Science Act of 2022 ("CHIPS Act") was enacted in the U.S. The CHIPS Act will provide financial incentives to the semiconductor industry which are primarily directed at manufacturing activities within the U.S. We continue to evaluate the business impact and potential opportunities related to the CHIPS Act. To date, we do not see any direct effect of the CHIPS Act on the Company in the foreseeable future. Meanwhile, the One Big Beautiful Bill Act enacted in July 2025 extended key business provisions of the Tax Cuts and Jobs Act, which are expected to benefit the Company by allowing immediate expensing of qualified capital investments, thereby reducing taxable income, tax expense and improved operating cash flow to support ongoing growth.

The recent U.S. tariff regime announced in April 2025 could potentially influence downstream demand variability among our customers. While we have no direct significant exposure to these tariffs, secondary effects may arise if customers adjust their procurement strategies in response to trade policy changes. However, the tariff environment remains fluid, with ongoing policy adjustments continuing to reshape regional trade dynamics. Based on our preliminary observations, demand appears to shift from China to other countries in the region. However, potential effects on macro demand in the future are far from clear, although we recognize the risk of revenue volatility should global demand continue to weaken due to the continued trade tensions between China and the U.S. and the potential that such continued trade tensions result in declining economic conditions. We continue to evaluate capacity adjustments in alignment with observable demand signals while maintaining operational flexibility to adapt to changing market conditions.

As of December 31, 2025, although we have seen improvements in both our operations and those of our suppliers, we may continue to experience supply shortages as well as inflationary cost pressures in at least the near term. Risks and uncertainties related to supply chain challenges, uncertainty regarding tariffs, and inflationary pressures may continue to negatively impact our revenue and gross margin. We continue to monitor and evaluate the business impact to react proactively.

Comparison of the Three Months Ended December 31, 2025, and December 31, 2024

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the three months ended December 31, 2025 and 2024 respectively:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Revenue			100.0	%			100.0	%
Cost of sales			84.0	%			74.3	%
Gross Margin			16.0	%			25.7	%
Operating expense
General and administrative			14.0	%			22.8	%
Selling			0.6	%			2.0	%
Research and development			0.7	%			1.3	%
Gain on disposal of property, plant and equipment			0.0	%			(0.4	)%
Total operating expense			15.3	%			25.8	%
Income from Operations			0.7	%			(0.1	)%

Overall Gross Margin

Overall gross margin as a percentage of revenue decreased by 9.7% to 16.0% for the three months ended December 31, 2025, from 25.7% for the same period of Fiscal 2025. Gross profits increased by $281 to $2,499 for the three months ended December 31, 2025, from $2,218 for the same period in Fiscal 2025.

Gross profit margin as a percentage of revenue in the SBS segment decreased by 15.6% to 14.4% for the three months ended December 31, 2025, as compared to 30.0% for the same period in Fiscal 2025. In absolute dollar amounts, gross profit in the SBS segment for the three months ended December 31, 2025, was $1,777, an increase of $35, compared to $1,742 in the same period in Fiscal 2025.

During the three-month period ended December 31, 2025, the SBS segment experienced a notable decline in gross profit margins attributable to its China operations, primarily due to reduced revenue contributions compared to the same period in Fiscal 2025. While revenue from markets outside China showed an upward trend, the associated margins remained relatively compressed. The incremental revenue relating to final testing services that commenced in the final month of the first quarter was attributable to new service streams that required no capital investment, resulting in lower margin profiles that reflect the reduced risk exposure. As the revenue mix increasingly shifts toward final testing services, gross profit margins are expected to trend below historical levels for the SBS segment. Nevertheless, the additional revenue is anticipated to enhance overall profitability in absolute dollar terms.

Gross profit margin as a percentage of revenue in the IE segment increased by 5.0% to 22.3% for the three months ended December 31, 2025, from 17.3% for the same period in Fiscal 2025. In absolute dollar amounts, gross profit in the IE segment for the three months ended December 31, 2025, was $731, indicating an increase of $246, compared to $485 in the same period in Fiscal 2025. The gross profit margin improvement in the IE segment reflects a more favorable product mix of equipment sales this quarter, with higher-margin products accounting for a significantly larger proportion of total sales compared to previous periods. This shift in mix dynamics where higher-value products drive more revenue has lifted overall profitability. This is in contrast with same quarter in last Fiscal 2024 when margins were diluted by greater volume of lower-margin sales.

Operating Expense

Operating expense for the three months ended December 31, 2025 and 2024 was as follows:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
General and administrative		$	2,197			$	1,965
Selling			99				176
Research and development			106				114
Gain on disposal of property, plant and equipment			-				(34	)
Total		$	2,402			$	2,221

General and administrative expense increased by $232, or 11.8%, from $1,965 to $2,197 for the three months ended December 31, 2025, compared to the same period in Fiscal 2025. The increase in general and administrative expenses was primarily driven by higher personnel-related costs and headcount growth within the Singapore operations of the SBS and IE segment. For the IE segment, the increase was largely attributable to expansion into new markets and related business development activities. In addition, the IE segment recognized approximately $134 in expected credit losses. Separately, the Company incurred higher costs related to corporate activities.

Selling expense decreasedby $77, or 43.8%, from $176to $99for the three months ended December 31, 2025, compared to the same period in Fiscal 2025. The decrease in selling expense was primarily attributable to a decrease in commissionable sales in both the SBS and IE segments.

Income from Operations

Income from operations was $97 for the three months ended December 31, 2025, an improvement of $100, as compared to a loss of $3 from operations for the same period in Fiscal 2025. As discussed above, higher revenues in the SBS and IE segments drove the improvement; however, the impact was tempered by compressed gross profit margins reflecting the lower-risk nature of these sales. Notwithstanding the margin compression, the increase in overall revenue contributed to improved income from operations during the period.

Interest Expense

Interest expense for the three months ended December 31, 2025 and 2024 was as follows:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Interest expense		$	22			$	13

Interest expense was $22 for the three months ended December 31, 2025, an increase of $9, or 69.2%, compared to $13 for the same period of Fiscal 2025 due to utilization of credit facilities in Singapore operation. As of December 31, 2025, the Company had an unused line of credit of $5,603 as compared to$5,719 as at December 31, 2024.

Other Income

Other Income for the three months ended December 31, 2025 and 2024 was as follows:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Interest income		$	76			$	82
Other rental income			30				42
Exchange (loss) / gain			(67	)			550
Dividend income			194				-
Other miscellaneous income			4				12
Total		$	237			$	686

There was a decrease of $449 in other income to $237 for the three months ended December 31, 2025 as compared to other income of $686 for the same period in Fiscal 2025. The decrease was primarily due to a reduction in unrealized foreign exchange gains, with an unrealized exchange gain of approximately $11 recorded for the three months ended December 31, 2025, compared with an unrealized exchange gain of $561 during the same period in fiscal 2025. The decrease was partially offset by dividend income received from investments in unquoted shares.

Our net income is exposed to foreign exchange fluctuations as our subsidiaries' functional currencies differ from the U.S. dollar. For the three months ended December 31, 2025, the strengthening of the Singapore dollar against the U.S. dollar resulted in an unrealized foreign exchange loss, primarily from the remeasurement of U.S. dollar denominated monetary assets and liabilities. The impact of such fluctuations was partially mitigated by the change in functional currency of Universal Far East, which reduced the overall exposure to U.S. dollar movements.

Government Grant

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Government Grant		$	-			$	5

In the three months ended December 31, 2025, the Company did not receive any government grants. In comparison, during the same period in Fiscal 2025, the Company received government grants amounting to $5,which were related to a capital expenditure subsidy received from the government in China.

Income Tax Expense

The Company's income tax expense was $77 and $139 for the three months ended December 31, 2025, and 2024, respectively. Income tax expense decreased in line with lower taxable income.

Non-controlling Interest

As of December 31, 2025, we held a 55% interest in SHI International Pte. Ltd. and 76% interest in Prestal Enterprise Sdn. Bhd. The share of non-controlling interest in the net income from the subsidiaries for the three months ended December 31, 2025 was $165 compared to the share of income from the non-controlling interest of $22 for the same period in Fiscal 2025. The increase in net income shared by non-controlling interest in the subsidiaries was attributable to the increase in net income generated by the Company.

The Company received the required approval from the Ministry of Investment, Trade and Industry in Malaysia, and the acquisition of the remaining shares in Trio-Tech Malaysia ("TTM") was consummated on December 3, 2025. The purchase price for the acquisition was RM14,200, payable in cash, or approximately $3,503. Upon consummation of the transaction, the Company, through Trio-Tech Singapore, acquired the remaining equity interest and now owns 100% of the issued and outstanding share capital of TTM. Accordingly, the Company recognized the non-controlling interest's share of profits through the acquisition date, and no non-controlling interest will be recognized in subsequent periods.

PT SHI Indonesia, a dormant subsidiary of SHI International Pte. Ltd., was dissolved during the second quarter of fiscal 2026. The dissolution resulted in a gain arising from the write-off of trade payables and did not have a material impact on the Company's consolidated financial statements.

Net Income Attributable to Trio-Tech International Common Shareholders

Net income attributable to Company's common shareholders was $126 for the three months ended December 31, 2025, compared to a net income of $507 for the same period in Fiscal 2025.

Earnings per Share

Basic earnings per share from continuing operations were $0.01 for three months ended December 31, 2025 as compared to basic earnings per share of $0.06 for the same period in Fiscal 2025. Basic earnings per share from discontinued operations were$nil forthree months ended December 31, 2025 and December 31, 2024 respectively.

Diluted earnings per share from continuing operations were $0.01 for three months ended December 31, 2025 as compared to diluted earnings per share of $0.06 for the same period in Fiscal 2025. Diluted earnings per share from discontinued operations were $nil for three months ended December 31, 2025 and December 31, 2024.

Segment Information

The revenue, gross margin, and income from operations for each segment during the second quarter of Fiscal 2026 and Fiscal 2025 are presented below. As the revenue and gross margin for each segment were discussed in the previous section, only the comparison of income from operations is discussed below.

Semiconductor Back-end Solutions (SBS)

The revenue, gross margin and income fromoperations for the SBS segment for the three months ended December 31, 2025 and 2024 were as follows:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Revenue		$	12,357			$	5,809
Gross margin			14.4	%			30.0	%
Income from operations		$	168			$	97

Income from operations from the SBS segment was $168 compared to income from operations of $97 in the same period in Fiscal 2025. The increase was primarily attributable to the commencement of final test services for AI chips late in the first quarter of Fiscal 2026 as discussed earlier. While this resulted in higher revenue during the period, income from operations increased less proportionately due to the lower risk profile of these sales, which resulted in compressed gross profit margins. Operating expense decreased from $1,645 for the three months ended December 31, 2024 to $1,609 for the three months ended December 31, 2025.

Industrial Electronics (IE)

The revenue, gross margin, and income / (loss) from operations for the IE segment for the three months ended December 31, 2025 and 2024 were as follows:

		Three Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Revenue		$	3,284			$	2,801
Gross margin			22.3	%			17.3	%
Income / (Loss) from operations		$	18			$	(23	)

Income for operations from IE segment for the three months ended December 31, 2025 was $18, an increase of $41 from a loss from operations of $23 in the same period in Fiscal 2025. Theincreased income from operationswas mainly attributable to an increase in revenue and gross profit in absolute dollar amounts. Operating expense increased from $508 for the three months ended December 31, 2024 to $713 for the three months ended December 31, 2025. The increase in gross profit offset higher operating expense, including a expected credit loss recognized during the current quarter, resulting in the slight improvement in operating income.

Comparison of the Six Months Ended December 31, 2025, and December 31, 2024

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the six months ended December 31, 2025 and 2024 respectively:

		Six Months Ended
		December 31,				December 31,
		2025				2024
Revenue			100.0	%			100.0	%
Cost of sales			83.7	%			75.4	%
Gross Margin			16.3	%			24.6	%
Operating expense:
General and administrative			14.0	%			21.3	%
Selling			1.2	%			1.8	%
Research and development			0.6	%			1.1	%
Gain on disposal of property, plant and equipment			0.0	%			(0.3	)%
Total operating expense			15.8	%			23.9	%
Income from Operations			0.5	%			0.7	%

Overall Gross Margin

Overall gross margin as a percentage of revenue decreased by 8.3% to 16.3% for the six months ended December 31, 2025, from 24.6% for the same period of Fiscal 2025. Gross profits increased by $544 to $5,084 for the six months ended December 31, 2025, from $4,540 for the same period in Fiscal 2025.

Gross profit margin as a percentage of revenue in the SBS segment decreased by 13.3% to 14.6% for the six months ended December 31, 2025, as compared to 27.9% for the same period in Fiscal 2025. In absolute dollar amounts, gross profit in the SBS segment for the six months ended December 31, 2025, was $3,487, a decrease of $49, compared to $3,536 in the same period in Fiscal 2025.

During the six-month period ended December 31, 2025, the SBS segment experienced a notable decline in gross profit margins attributable to its China operations, primarily due to reduced revenue contributions compared to the same period in Fiscal 2025. Gross profit from China declined by approximately 81.9% for the six months ended December 31, 2025 compared to the same period in the prior year.

While revenue from markets outside China showed an upward trend, the associated margins remained relatively compressed. The incremental revenue relating to final testing services that commenced in the final month of the first quarter was derived from new service streams that required no capital investment and carried a lower risk profile, resulting in lower gross profit margins. As final testing services continue to represent a larger portion of SBS segment revenue, gross profit margins are expected to remain below historical levels. Nevertheless, the additional revenue is anticipated to improve overall profitability in absolute dollar terms.

Gross profit margin as a percentage of revenue in the IE segment increased by 4.1% to 22.0% for the six months ended December 31, 2025, from 17.9% for the same period in Fiscal 2025. In absolute dollar amounts, gross profit in the IE segment for the six months ended December 31, 2025, was $1,613, indicating an increase of $589, compared to $1,024 in the same period in Fiscal 2025. Thegross profit margin improvement in the IE segment reflects a more favorable product mix of equipment sales this quarter, with higher-margin products accounting for a significantly larger proportion of total sales compared to previous periods. This shift in mix dynamics where higher-value products drive more revenue has lifted overall profitability. This is in contrast with the same quarter in last Fiscal 2024 when margins were diluted by greater volume of lower-margin sales.

Operating Expense

Operating expense for the six months ended December 31, 2025 and 2024 was as follows:

		Six Months Ended
		December 31,				December 31,
		2025				2024
		(Unaudited)				(Unaudited)
General and administrative		$	4,371			$	3,929
Selling			370				326
Research and development			200				202
Gain on disposal of property, plant and equipment			-				(47	)
Total		$	4,941			$	4,410

General and administrative expense increased by $442, or 11.2%, from $3,929 to $4,371 for the six months ended December 31, 2025, compared to the same period in Fiscal 2025. General and administrative expense for the Company's Singapore operations within the SBS and IE segments increased primarily due to higher personnel-related costs associated with headcount growth. In addition, the increase in general and administrative expenses was mainly attributable to expected credit loss provisions recognized during the period related to the IE segment, together with higher corporate activity-related expense.

Selling expense increased by $44, or 13.5%, from $326 to $370 for the six months ended December 31, 2025, compared to the same period in Fiscal 2025. The increase in selling expense was primarily attributable to an increase in commissionable sales in both the SBS and IE segments.

Income from Operations

Income from operations was $143 for the six months ended December 31, 2025, an increase of $13, as compared to Income of $130 from operations for the same period in Fiscal 2025. As discussed above, revenues in the SBS and IE segments increased during the period; however, the corresponding improvement in income from operations was more modest due to compressed gross profit margins in the SBS segment associated with the lower-risk nature of these sales. In addition, income from operations was further impacted by higher operating expenses in the Company's Singapore operations within both the SBS and IE segments.

Interest Expense

Interest expense for the six months ended December 31, 2025 and 2024 was as follows:

		Six Months Ended
		December 31,				December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Interest expense		$	30			$	26

Interest expense was $30 for the six months ended December 31, 2025, an increase of $4, or 15.4%, compared to $26 for the same period of Fiscal 2025. As of December 31, 2025, The Company had an unused line of credit of $5,603 as compared to$5,719 as at December 31, 2024.

Other Income

Other Income for the six months ended December 31, 2025 and 2024 was as follows:

		Six Months Ended
		December 31,				December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Interest income		$	137			$	183
Other rental income			60				80
Exchange gain			10				44
Dividend income			194				-
Other miscellaneous income			21				14
Total		$	422			$	321

There wasa increase by $101 in other income to $422 for the six months ended December 31, 2025 as compared to other income of $321 for the same period in Fiscal 2025. The increase was mainly due to dividend income received from investments in unquoted shares partially offest by lower interest income recognized by the Company, reflecting reduced fixed deposit placements for operating requirements and lower interest rates.

Government Grant

		Six Months Ended
		December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Government Grant		$	4			$	71

In the six months ended December 31, 2025, the Company received government grants amounting to $4, $2 of which was an incentive from the Singapore government for local resident recruitment, and $2 related to a capital expenditure subsidy received from the government in China.

During the same period in Fiscal 2025, the Company received government grants amounting to $71, $62 of which was an incentive from the Singapore government for local resident recruitment, and $9 related to a capital expenditure subsidy received from the government in China.

Income Tax Expense

The Company's income tax expense was $141 and $190 for the six months ended December 31, 2025, and 2024, respectively. Income tax expensedecreased in line with lower taxable income.

Non-controlling Interest

As of December 31, 2025, we held a 55% interest in SHI International Pte. Ltd.and 76% interest in Prestal Enterprise Sdn. Bhd. The share of non-controlling interest in the net income from the subsidiaries for the six months ended December 31, 2025 was $253 compared to the share of income from the non-controlling interest of $35 for the same period in Fiscal 2025. The increase in net income shared by non-controlling interest in the subsidiaries was attributable to the increase in net income generated by the Company.

The Company received the required approval from the Ministry of Investment, Trade and Industry in Malaysia, and the acquisition of the remaining shares in Trio-Tech Malaysia ("TTM") was consummated on December 3, 2025. The purchase price for the acquisition was RM14,200, payable in cash, or approximately $3,503. Upon consummation of the transaction, the Company, through Trio-Tech Singapore, acquired the remaining equity interest and now owns 100% of the issued and outstanding share capital of TTM. Accordingly, the Company recognized the non-controlling interest's share of profits through the acquisition date, and no non-controlling interest will be recognized in subsequent periods.

PT SHI Indonesia, a dormant subsidiary of SHI International Pte. Ltd., was dissolved during the second quarter of fiscal 2026. The dissolution resulted in a gain arising from the write-off of trade payables and did not have a material impact on the Company's consolidated financial statements.

Net Income Attributable to Trio-Tech International Common Shareholders

Net income attributable to Company's common shareholders was $203 for the six months ended December 31, 2025, compared to a net income of $271 for the same period in Fiscal 2025.

Earningsper Share

Basic earnings per share from continuing operations were $0.02 for six months ended December 31, 2025 as compared to basic earnings per share of $0.03 for the same period in Fiscal 2025. Basic earnings per share from discontinued operations were $nil for six months ended December 31, 2025 and December 31, 2024.

Diluted earnings per share from continuing operations were $0.02 for six months ended December 31, 2025 as compared to diluted earnings per share of $0.03 for the same period in Fiscal 2025. Diluted earnings per share from discontinued operations were $nil for six months ended December 31, 2025 and December 31, 2024.

Segment Information

The revenue, gross margin, and income from operations for each segment for the six months ended December 31, 2025 and December 31, 2024 are presented below. As the revenue and gross margin for each segment were discussed in the previous section, only the comparison of income from operations is discussed below.

Semiconductor Back-end Solutions (SBS)

The revenue, gross margin and income fromoperations for the SBS segment for the six months ended December 31, 2025 and 2024 were as follows:

		Six Months Ended
		December 31,				December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Revenue		$	23,809			$	12,688
Gross margin			14.6	%			27.9	%
Income from operations		$	88			$	274

Income from operations from the SBS segment was $88compared to incomefrom operations of $274in the same period in Fiscal 2025. Revenue growth was primarily attributable to incremental revenue from final testing services that commenced in the final month of the first quarter. These revenues were generated from new service streams that required no capital investment and carried a lower risk profile, which resulted in lower gross profit margins. In addition, results in China were adversely impacted by the prevailing macroeconomic environment and were more favorable during the six months ended December 31, 2024 compared to the current six-month period. Collectively, these factors contributed to compressed gross profit margins and a decline in income from operations despite higher revenues.

The decline was further impacted by higher operating expense in the Company's Singapore and Malaysia operations related to the SBS segment. These unfavorable factors were partially offset by cost reductions in the Company's China operations resulting from the implementation of cost-control measures. Operating expense increasedfrom $3,262for the sixmonths ended December 31, 2024to $3,399for the sixmonths ended December 31, 2025. This increaseof $137in operating expense was primarily driven by additional operational, logistics, and personnel-related costs.

Industrial Electronics (IE)

The revenue, gross margin, and income / (loss) from operations for the IE segment for the six months ended December 31, 2025 and 2024 were as follows:

		Six Months Ended
		December 31,				December 31,
		2025				2024
		(Unaudited)				(Unaudited)
Revenue		$	7,336			$	5,715
Gross margin			22.0	%			17.9	%
Income / (Loss) from operations		$	216			$	(30	)

Incomefor operations from IE segment for the sixmonths ended December 31, 2025was $216, an increase of $246from lossfrom operations of $30in the same period in Fiscal 2025. The increase was mainly attributable to an increase in revenue and gross profit in absolute dollar amounts. Operating expense increased from $1,054for the sixmonths ended December 31, 2024to $1,397for the sixmonths ended December 31, 2025. The increase primarily due to higher personnel-related costs associated with headcount growth, as well as expected credit loss provisions recognized during the period. The improvement in gross profit more than offset higher operating expense, resulting in increased operating income compared to sixmonths ended December 31, 2024.

Financial Condition

During the six months ended December 31, 2025 total assets increased by $4,661 to $45,729 compared to $41,068 as of June 30, 2025. The increased was primarily due to an increase in cash and cash equivalents. trade accounts receivable, inventories and other receivables, which was partially offset by a decrease in short-term deposits.

Cash and cash equivalents and short-term deposits were $16,463 at December 31, 2025, reflecting a modest decrease of $244 from $16,707 at June 30, 2025. The decrease was primarily due to payments made to acquire a minority interest in Trio-Tech Malaysia Sdn. Bhd., which more than offset the cash generated from operating activities during the period.

The trade accounts receivable balance as of December 31, 2025 increased by $2,651 to $13,455, from $10,804 at June 30, 2025, primarily reflecting higher overall revenue across both segments between June 30, 2025 and December 31, 2025. The overall increase in trade receivables was primarily attributable to higher sales from the Company's Malaysia operations during the current quarter. The number of days' sales outstanding trade receivables for group decreased in current quarter to 70 days from 106 days at June 30, 2025.

Other receivables at December 31, 2025, were $716, an increase of $108, compared to $608 at June 30, 2025. The increase was mainly due to the advance payments made to our suppliers for goods and services in our Singapore and Malaysia operations.

Inventories at December 31, 2025, were $2,835, an increase of $573, compared to $2,262 at June 30, 2025. The increase in inventories was primarily attributable to higher backlog levels in the Company's Singapore operations to support ongoing order fulfillment.

Prepaid expense was $389 at December 31, 2025 compared to $384 at June 30, 2025. Prepaid expense mainly consists of insurance, rental and software license fees.

Investment properties' net in China was $319 at December 31, 2025 and $345 at June 30, 2025. The decrease was primarily driven by the depreciation charged and foreign currency exchange movement between June 30, 2025 and December 31, 2025.

Property, plant and equipment decreased by $146 from $6,021 at June 30, 2025, to $5,875 at December 31, 2025, mainly due to depreciation charged for the period and foreign currency movements between June 30,2025 to December 31,2025. This was partially offset by the acquisition of additional new plant and equipment in our SBS segment.

Other assets increased by $41 to $272 at December 31, 2025 compared to $231 at June 30, 2025. This was mainly due to down payment made in connection with the purchase of equipment in Bangkok.

Accounts payable increased by $3,631 to $5,527 at December 31, 2025, compared to $1,896 at June 30, 2025. The increase in trade payables during the quarter was aligned with increased revenue in the Company's Malaysia operations and driven by higher supplier purchase to support growing operations.

Accrued expense increased by $1,588 to $4,624 at December 31, 2025, as compared to $3,036 at June 30, 2025. The increase was primarily attributable to payables recognized in connection with the acquisition of the remaining minority interest in Trio-Tech Malaysia.

Contract liabilities decreased by $122 to $128 at December 31, 2025 as compared to $250 at June 30, 2025. The decrease in contract liabilities was primarily attributable to lower customer deposits from our operations in Singapore.

Bank loans payable decreased by $103 to $581 as of December 31, 2025, as compared to $684 as of June 30, 2025. The decrease was primarily attributable to scheduled debt repayments, no new borrowing activity during the period and the impact of foreign currency exchange movements between June 30, 2025and December 31, 2025.

Finance leases decreased by $30 to $13 at December 31, 2025, as compared to $43 at June 30, 2025. This was due to the lease repayments, with no new lease additions during the period between June 30, 2025and December 31, 2025.

Operating lease right-of-use assets and the corresponding lease liability increased by $1,687 to $2,551 at December 31, 2025, as compared to $864at June 30, 2025. The increase was primarily attributable to the commencement of new lease and also a lease renewal during the current quarter in the Company's Singapore operations.

Liquidity Comparison

Net cash provided by operating activities increased by $813 to an inflow of $1,067 for the six months ended December 31, 2025, from an inflow of $254 for the same period in Fiscal 2025. The increase was mainly attributable to higher trade payables of $5,606, driven by increased operational activity, particularly the growth of subsidiary operations in Malaysia. This reflects higher levels of purchase and operating expense incurred to support the expanded revenues. This impact was partially offset by higher trade receivables of $3,544, reflecting strong sales with collections not yet due, and elevated inventory levels of $1,689 maintained to support anticipated order fulfillment in upcoming fiscal quarters, resulting in higher cash inflows during the period.

Net cash provided by investing activities was $1,546 for the six months ended December 31, 2025 an increase of $1,306 compared to net cash provided by investing activities of $240 for the same period in Fiscal 2025. This was primarily due to a higher net withdrawal from unrestricted term deposits upon maturity for the six months ended December 31, 2025, and were held in cash to enhance liquidity for working capital and investment activities.

Net cash used in financing activities for the six months ended December 31, 2025, was $1,386, representing an increase of $1,203, compared to cash outflows of $183 during the six months ended December 31, 2024. The outflow of cash in financing activities was mainly used to acquire the non-controlling interest in a foreign subsidiary. This was partially offset by proceeds from exercising stock options of $284 and proceeds from lines of creditof $856 in the six months period ended December 31,2025.

The Company filed a shelf registration statement with the Securities and Exchange Commission, pursuant to which we may raise capital of up to $50 million in any combination of securities including Common Stock, warrants and units, for certain capital expenditures, to finance possible acquisitions, to increase ownership or purchase the remaining equity in subsidiaries partially owned by the Company, and/or for general corporate purposes, including working capital.