Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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, 2026 ("Fiscal 2026").

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 2026. 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 2026 for a complete description of our critical accounting policies and estimates.

First Quarter Fiscal Year 2027 Highlights

●	Total revenue increased by $4,435, or 28.6%, to $19,949 in the first quarter of Fiscal 2027, compared to $15,514 for the same period in Fiscal 2026.
●	SBS segment revenue increased by $4,442, or 38.8% to $15,894 for the first quarter of Fiscal 2027, compared to $11,452 for the same period in Fiscal 2026.
●	IE segment revenue decreased by $7, or 0.2%, to $4,045 for the first quarter of Fiscal 2027, compared to $4,052 for the same period in Fiscal 2026.
●	The overall gross profit margin increased by 4.0% to 20.6% for the first quarter of Fiscal 2027, from 16.7% for the same period in Fiscal 2026.

●	General and administrative expense increased by $315, or 14.5%, to $2,489 for the first quarter of Fiscal 2027, from $2,174 for the same period in Fiscal 2026.
●	Selling expense increased by $3, or 1.1%, to $274 for the first quarter of Fiscal 2027, from $271 for the same period in Fiscal 2026.
●	Income from operations was $1,254 for the first quarter of Fiscal 2027, reflecting an increase of $1,208 as compared to income from operations of $46 for the same period in Fiscal 2026.
●	Other expense was $54 for the first quarter of Fiscal 2027, a decrease of $239 as compared to other income of $185 for the same period in Fiscal 2026.
●	Income tax expense was $350 in the first quarter of Fiscal 2027, an increase of $286 as compared to $64 for the same period in Fiscal 2026.
●	During the first quarter of Fiscal 2027, income from continuing operations before non-controlling interest, net of tax was $846, as compared to income from continuing operations before non-controlling interest of $163 for the same period in Fiscal 2026.
●	Net income attributable to non-controlling interest for the first quarter of Fiscal 2027 was $nil, as compared to net income of $88 for the same period in Fiscal 2026.
●	Earnings per share for the first quarter of Fiscal 2027 was $0.08, as compared to earnings per share of $0.01 for the same period in Fiscal 2026.
●	Total assets increased by $7,326 to $68,013 as of September 30, 2026, compared to $60,687 as of June 30, 2026.
●	Total liabilities increased by $5,892 to $23,564 as of September 30, 2026, compared to $17,672 as of June 30, 2026.

Results of Operations and Business Outlook

The following table sets forth our revenue components for both three months ended September 30, 2026 and 2025.

Revenue Components		Three Months Ended
		September 30,				September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Semiconductor Back-end Solutions (SBS)			79.6	%			73.8	%
Industrial Electronics (IE)			20.3	%			26.1	%
Others			0.1	%			0.1	%
Total			100.0	%			100.0	%

Revenue for the three months ended September 30, 2026 was $19,949, representing an increase of $4,435 when compared to revenue of $15,514 for the same period of Fiscal 2026. As a percentage, revenue increased by 28.6% for the three months ended September 30, 2026, when compared to revenue for the same period of Fiscal 2026.

Revenue within our two current segments for the three months ended September 30, 2026, is discussed below.

Semiconductor Back-end Solutions (SBS)

Revenue in the SBS segment as a percentage of total revenue was 79.6% for the three months ended September 30, 2026, an increase of 5.8% of total revenue when compared to 73.8% in the same period of Fiscal 2026. Total SBS revenue increased by $4,442 to $15,894 from $11,452 for the three months ended September 30, 2025.

SBS segment recorded strong revenue growth for three-month period ended September 30, 2026, primarily driven by strong product sales in the Company's Singapore operation. Overall product sales increased by 107%, mainly due to an increase in burn-in board sales of approximately $4,713 or 227%, reflecting continued strong demand from customers supporting an artificial intelligence AI graphics processing unit ("GPU") platform.

Meanwhile, SBS testing sales increased by approximately 18% as compared to same period of Fiscal 2026. The growth was largely contributed by the Company's Malaysia operations, reflecting higher customer testing volumes for EV-related semiconductor devices and continued strength in demand from data center and AI-related applications.

The SBS segment reported overall revenue growth, supported by stronger results in key markets. The market remains highly sensitive to global economic shifts and changes in consumer demand, leading to fluctuations in performance. While these developments reflect improving market dynamics, we remain committed to a prudent strategy that balances growth ambitions with effective risk management.

Industrial Electronics (IE)

Revenue in the IE segment as a percentage of total revenue was 20.3% for the three months ended September 30, 2026, representing a decrease of 5.8% when compared to 26.1% in the same period of Fiscal 2026. Total IE revenue decreased by $7 from $4,052 to $4,045 for the three months ended September 30, 2026 as compared to the same period of Fiscal 2026.

Distribution sales decreased by 10%, primarily due to a component shortage that extended supplier lead times and prolonged the order fulfillment period. The Company currently anticipates that supply will remain constrained until latter part of the second quarter of Fiscal 2027. The decrease was partially offset by an increase in sales of aerospace-related products of $614 or 63%.

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.

The Company maintains monetary assets and liabilities denominated in currencies other than its functional currency. At each reporting date, these items are remeasured into the functional currency at the period-end spot rate. Resulting unrealized foreign currency gains or losses are included in net income and reported as reconciling items in the statement of cash flows under the indirect method. Our operations in Singapore and Malaysia hold certain monetary assets, including U.S. Dollar-denominated accounts receivable and cash balances. The weakening of the U.S. Dollar against the Singapore Dollar and Malaysian Ringgit could result in an unrealized foreign currency loss upon remeasurement of these U.S. Dollar balances into the functional currency of respective subsidiaries. While such impacts affect reported earnings in the period, they are unrealized in nature and may reverse in future periods depending on exchange rate movements and the timing of settlement of these balances.

The U.S. tariff regime announced in April 2025 could influence downstream demand variability among our customers. Trade and tariff policy affecting the semiconductor industry has continued to evolve. In January 2026, the U.S. government imposed a Section 232 tariff on certain advanced semiconductor articles, and additional tariffs or trade restrictions affecting semiconductors, semiconductor manufacturing equipment, and related products remain under active consideration by U.S. trade authorities. While we do not have significant direct exposure to these tariffs, secondary effects may arise if our customers adjust their procurement, manufacturing, or sourcing strategies in response to trade policy developments. Based on our observations, certain customers have continued to shift testing activities away from China to alternative geographies, as discussed above in connection with our SBS segment results. The ultimate scope, duration, and impact of these trade measures on macroeconomic and industry-specific demand remain uncertain, and continued trade tensions between the U.S. and China could result in further revenue volatility or declining economic conditions affecting our business. We continue to evaluate capacity adjustments in alignment with observable demand signals while maintaining operational flexibility to adapt to changing market conditions.

The semiconductor industry is currently experiencing a global shortage of memory components, driven by a structural reallocation of manufacturing capacity toward high-bandwidth memory used in artificial intelligence infrastructure. While this shortage has primarily affected semiconductor device manufacturers reliant on memory inputs, it has contributed to extended lead times and increased costs for certain electronic components used in the manufacture and servicing of our testing equipment. At the same time, sustained demand for testing services related to AI-related semiconductor devices has continued to support revenue growth in our SBS segment, as discussed above. The extent and duration of the memory shortage, and its effect on our supply chain, equipment costs, and customer demand, remain uncertain, and we continue to monitor developments in the memory and broader semiconductor markets and to adjust our procurement and inventory practices accordingly.

Earlier in 2026, an armed conflict in the Middle East involving Israel, Iran, and other parties resulted in significant disruption to global oil and natural gas markets, including a period of substantial disruption to shipping through the Strait of Hormuz and damage to regional energy infrastructure. These events led to significant volatility in global energy prices and contributed to broader inflationary pressures across global supply chains during the period. A ceasefire was subsequently reached, though tensions in the region have continued to evolve, including a breakdown of the ceasefire and renewed price volatility after our fiscal year-end. Based on our assessment, the Company has experienced minimal direct impact on its supply chain to date, due to its indirect exposure to the affected region and the geographic diversification of its suppliers and customers. The Company's approach has been to absorb incremental costs where necessary to remain competitive, while passing through a portion of such cost increases to customers, mitigating the impact on our operating results. However, continued or renewed disruption in the region could result in further volatility in energy prices and broader inflationary pressures that may adversely affect our operating costs and those of our customers and suppliers.

Risks and uncertainties related to supply chain challenges, uncertainty regarding tariffs, and inflationary pressures may continue to negatively impact our gross margin and operating results. We continue to closely monitor these developments and their broader impacts, as well as evaluate appropriate actions to mitigate potential business impacts.

Comparison of the Three Months Ended September 30, 2026, and September 30, 2025

The following table sets forth certain consolidated statements of income data as a percentage of revenue for the three months ended September 30, 2026 and 2025 respectively:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Revenue			100.0	%			100.0	%
Cost of sales			79.4	%			83.3	%
Gross Margin			20.6	%			16.7	%
Operating expense
General and administrative			12.5	%			14.0	%
Selling			1.4	%			1.7	%
Research and development			0.5	%			0.6	%
Gain on disposal of property, plant and equipment			0.0	%			0.0	%
Total operating expense			14.4	%			16.4	%
Income from Operations			6.2	%			0.3	%

Overall Gross Margin

Overall gross margin as a percentage of revenue increased by 3.9% to 20.6% for the three months ended September 30, 2026, from 16.7% for the same period of Fiscal 2026. Gross profits increased by $1,531 to $4,116 for the three months ended September 30, 2026, from $2,585 for the same period in Fiscal 2026.

Gross profit margin as a percentage of revenue in the SBS segment increased by 6.6% to 21.5% for the three months ended September 30, 2026, as compared to 14.9% for the same period in Fiscal 2026. In absolute dollar amounts, gross profit in the SBS segment for the three months ended September 30, 2026, was $3,419, an increase of $1,709, compared to $1,710 in the same period in Fiscal 2026.

For the three-month period ended September 30, 2026, the increase in gross profit margin of the SBS segment was primarily due to a favorable product mix in product sales. In addition, the Company's Malaysia operations benefited from a ramp-up in customer testing volumes primarily for automotive related semiconductor devices, which was supported with only a modest increase in resources. This improved capacity utilization and contributed to higher margins. The margin improvement was partially offset by a lower gross profit margin from AI-related testing volume and at the Company's China subsidiaries, where lower burn-in service revenue resulted in under-absorption of fixed costs.

Gross profit margin as a percentage of revenue in the IE segment decreased by 4.3% to 17.5% for the three months ended September 30, 2026, from 21.8% for the same period in Fiscal 2026. In absolute dollar amounts, gross profit in the IE segment for the three months ended September 30, 2026, was $706, indicating a decrease of $176, compared to $882 in the same period in Fiscal 2026. Gross profit margin declined due to an unfavorable product mix during the quarter, with lower-margin products accounting for a significantly larger proportion of total sales compared to previous periods.

Operating Expense

Operating expense for the three months ended September 30, 2026 and 2025 was as follows:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
General and administrative		$	2,489			$	2,174
Selling			274				271
Research and development			98				94
Loss on disposal of property, plant and equipment			1				-
Total		$	2,862			$	2,539

General and administrative expense increased by $315, or 14.5%, from $2,174 to $2,489 for the three months ended September 30, 2026, compared to the same period in Fiscal 2026. The increase reflected higher personnel-related costs from increased headcount to support the SBS and IE segments and higher incentive compensation associated with improved performance in Singapore, Malaysia and Thailand. Information technology costs increased as a result of higher market prices for IT equipment and software licenses, reflecting broader inflationary pressures. Professional fee also increased to support the expanded scale of business operations. Higher corporate expenses, including stock-based compensation, also contributed to the increase.

Selling expense slightly increased by $3, or 1.1%, from $271 to $274 for the three months ended September 30, 2026, compared to the same period in Fiscal 2026. Selling expense related to business travel and commissionable sales across both the SBS and IE segments.

Income from Operations

Income from operations was $1,254 for the three months ended September 30, 2026, an improvement of $1,208, as compared to an income of $46 from operations for the same period in Fiscal 2026. As discussed above, higher revenues in the SBS segments together with improved margin contributed to higher income from operations during the period.

Interest Expense

Interest expense for the three months ended September 30, 2026 and 2025 was as follows:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Interest expense		$	9			$	8

Interest expense was $9 for the three months ended September 30, 2026, an increase of $1, or 12.5%, compared to $8 for the same period of Fiscal 2026. As of September 30, 2026, the Company had an unused line of credit of $5,160 as compared to $5,797 as at September 30, 2025.

Other (Expense) / Income

Other (expense) / income for the three months ended September 30, 2026 and 2025 was as follows:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Interest income		$	77			$	61
Other rental income			30				30
Exchange (loss) / gain			(148	)			76
Other miscellaneous (expense) / income			(13	)			18
Total		$	(54	)		$	185

There was an unfavorable change of $239, from other income of $185 for the three months ended September 30, 2025 to other expense of $54 for the three months ended September 30, 2026. The changes was primarily due to increase in foreign exchange losses.

Our net income is exposed to foreign exchange fluctuations, as certain of our subsidiaries hold monetary assets and liabilities denominated in currencies other than their functional currencies, primarily the U.S. dollar. During the three months ended September 30, 2026, we recorded a foreign exchange loss of $148 compared with a gain of $76 for the same period in 2025, primarily due to the strengthening of the Singapore dollar against the U.S. dollar. The loss comprised a realized loss of $88, arising mainly from the settlement of U.S. dollar-denominated receivables and payables by our Singapore operations, and an unrealized loss of $60, resulting mainly from the remeasurement of net U.S. dollar-denominated monetary assets held by those operations as of September 30, 2026.

Government Grant

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Government grant		$	5			$	4

In the three months ended September 30, 2026, the Company received government grants of $5, wholly from the Singapore government for local resident recruitment. In comparison, during the same period in Fiscal 2026, the Company received government grants amounting to $4, $2 consisting of an incentive from the Singapore government for local resident recruitment, and $2 related to capital expenditure subsidy received from the government in China.

Income Tax Expense

The Company's income tax expense was $350 and $64 for the three months ended September 30, 2026, and 2025, respectively. The increase was mainly driven by higher chargeable income and withholding taxes.

Non-controlling Interest

As of September 30, 2026, we held a 55% interest in SHI International Pte. Ltd. and 76% interest in Prestal Enterprise Sdn. Bhd. No net income or loss was attributable to non-controlling interest for the three months ended September 30, 2026, compared to net income attributable to non-controlling interest of $88 for the same period in Fiscal 2026. The non-controlling interests in Fiscal 2026 mainly related to the minority shareholders' interest in Trio-Tech (Malaysia) Sdn. Bhd. ("TTM"). The Company acquired the remaining non-controlling interest in TTM in December 2025, following which TTM became a wholly owned subsidiary.

Net Income Attributable to Trio-Tech International Common Shareholders

Net income attributable to the Company's common shareholders was $846 for the three months ended September 30, 2026, compared to a net income of $77 for the same period in Fiscal 2026.

Earnings per Share

Basic earnings per share from continuing operations were $0.08 for three months ended September 30, 2026 as compared to basic earnings per share of $0.01 for the same period in Fiscal 2026. Basic earnings per share from discontinued operations were $nil for three months ended September 30, 2026 and September 30, 2025 respectively.

Diluted earnings per share from continuing operations were $0.07 for three months ended September 30, 2026 as compared to diluted earnings per share of $0.01 for the same period in Fiscal 2026. Diluted earnings per share from discontinued operations were $nil for three months ended September 30, 2026 and September 30, 2025.

Segment Information

The revenue, gross margin, and income from operations for each segment during the first quarter of Fiscal 2027 and Fiscal 2026 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 / (loss) from operations for the SBS segment for the three months ended September 30, 2026 and 2025 were as follows:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Revenue		$	15,894			$	11,452
Gross margin			21.5	%			14.9	%
Income / (Loss) from operations		$	1,495			$	(80	)

Income from operations from the SBS segment was $1,495 compared to loss from operations of $80 in the same period in Fiscal 2026. The increase was primarily attributable to the higher gross profit generated from increased revenue, primarily driven by factors discussed above. Operating expense increased from $1,790 for the three months ended September 30, 2025 to $1,924 for the three months ended September 30, 2026 mainly attributable to an increase in personnel-related costs from increased headcount to support the operation, and higher incentive compensation associated with improved performance in Singapore, Malaysia and Thailand. Information technology costs also increased as a result of higher market prices for IT equipment and software licenses, reflecting broader inflationary pressures.

Industrial Electronics (IE)

The revenue, gross margin, and income from operations for the IE segment for the three months ended September 30, 2026 and 2025 were as follows:

		Three Months Ended
		September 30,
		2026				2025
		(Unaudited)				(Unaudited)
Revenue		$	4,045			$	4,052
Gross margin			17.5	%			21.8	%
Income from operations		$	41			$	198

Income from operations for IE segment for the three months ended September 30, 2026 was $41, compared to $198 in the same period in Fiscal 2026. The decrease was mainly attributable to lower gross profit margin in the IE segment, as discussed above. Operating expense decreased to $665 for the three months ended September 30, 2026 from $684 for the same period in Fiscal 2026.

Financial Condition

Total assets increased by $7,326 or 12%, to $68,013 as of September 30, 2026 from $60,687 as of June 30, 2026, primarily driven by increase in trade accounts receivable and other receivables, inventories and prepaid expense, partially offset by decreased cash and cash equivalent.

Trade accounts receivable increased by $5,367 or 40% to $18,913 as of September 30, 2026 from $13,546 as of June 30, 2026. The increase was primarily attributable to higher revenue across both business segments, driven mainly by the Company's operations in Singapore and Malaysia. The number of days' sales outstanding in trade receivables for the Company's increased in current quarter to 86 days from 69 days at June 30, 2026.

Other receivables increased by $1,337 or 127% to $2,393 as of September 30, 2026, from $1,056 as of June 30, 2026. The increase was primarily due to higher receivables from rebillable project expenses pending collection from a customer in our Malaysia operations, as well as import tax refunds receivable in our Singapore operations as of the end of the quarter.

Inventories increased by $3,559 or 104% to $6,965 as of September 30, 2026, from $3,406 as of June 30, 2026. The increase was primarily attributable to higher backlog in the Company's Singapore operations, which required the company to purchase additional inventory to support the fulfillment of outstanding customer orders.

Prepaid expenses increased by $176, or 45%, to $571 as of September 30, 2026, from $395 as of June 30, 2026. The increase was primarily attributable to advance payments made during the quarter for the renewal of insurance policies and accounting software subscriptions.

Investment properties' net in China was $279 at September 30, 2026 and $293 at June 30, 2026. The decrease was primarily driven by the depreciation expense for the quarter and the effect of foreign currency translation.

Property, plant and equipment increased from $6,598 at June 30, 2026, to $7,035 at September 30, 2026, mainly due to the acquisition of machinery and equipment by the Company's operations in Malaysia and China, partially offset by depreciation expense for the quarter.

Accounts payable increased by $3,572 to $11,149 at September 30, 2026, compared to $7,577 at June 30, 2026. The increase was consistent with revenue growth in our Malaysia and Singapore operations and reflected higher procurement activity to support expanding business operations.

Contract liabilities increased by $117 to $317 at September 30, 2026 as compared to $200 at June 30, 2026. The increase in contract liabilities was primarily attributable to higher customer deposits received by the Company's Singapore operations.

Bank loans payable decreased by $69 to $376 as of September 30, 2026, as compared to $445 as of June 30, 2026. The decrease was primarily attributable to scheduled repayments of borrowings, partially offset by the effect of foreign currency translation, with no new borrowings drawn during the quarter.

Operating lease right-of-use assets decreased from $5,481 as of June 30, 2026 to $5,250 as of September 30, 2026, while operating lease liabilities decreased from $5,465 to $5,234 over the same period. Both balances decreased by $231, primarily due to depreciation of the ROU assets and lease payments made during the quarter and partially offset by the commencement of new lease arrangements and the renewal of an existing lease in the Company's Singapore operations.

Liquidity Comparison

Net cash used in operating activities was $3,295 for the three months ended September 30, 2026, compared to net cash provided by operating activities of $933 for the same period in Fiscal 2026, a change of $4,228. The change was primarily attributable to an increase in inventory of $3,535 and an increase in other receivables, reflecting higher business activity to support the Company's strong order backlog. The increase in other receivables included rebillable project costs and import tax claims, which the Company anticipates recovering in the coming quarters. These were partially offset by higher net income for the period and higher depreciation of property, plant and equipment, a non-cash expense, resulting from the expansion of capacity for the Company's burn-in services.

Net cash used in investing activities was $453 for the three months ended September 30, 2026, compared to net cash provided by investing activities of $652 for the same period in Fiscal 2026, a change of $1,105. The change was primarily driven by a $804 increase in capital expenditures, as the Company continued to expand capacity to support its order backlog and anticipated growth. The prior-year period also included net withdrawals of unrestricted term deposits of $698 upon maturity, which did not recur in the current period.

Net cash provided by financing activities was $658 for the three months ended September 30, 2026, compared to net cash used in financing activities of $219 during the three months ended September 30, 2025, resulting in a change of $877. The net inflow was mainly attributable to proceeds of $544 from lines of credit and $253 from the exercise of stock options, partially offset by $63 used for repurchase of the Company's common stock.