SigmaTron International Inc. Annual Report 2017

FY2017 Annual Report · SigmaTron International Inc.

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SIGMATRON INTERNATIONAL, INC. ANNUAL REPORT 2017

EMS EXCELLENCE... INNOVATIVE. FLEXIBLE. GLOBAL. TRUSTED. EMS EXCELLENCE... TRUSTED. EMS EXCELLENCE... INNOVATIVE. FLEXIBLE. GLOBAL. . . . . . . . . . . ▼ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(NASDAQ: SGMA) is an electronic manufacturing services (EMS)
SIGMATRON
provider of printed circuit board assemblies and completely assembled
electronic products to customers in eight diverse end user markets through
a global network of seven facilities located in four countries, United States,
Mexico, China and Vietnam.

Focused on service excellence, our scale allows us to embrace the most
complex projects, yet our agility and technical versatility ensure we
partner closely with customers to provide personalized program support
from beginning to end. We offer superior EMS value, from design and
engineering, and integrated real-time information and process systems,
to manufacturing and test.

Our high-value, Supply Chain team provides component sourcing at
internationally-competitive pricing with expertise in green, regulatory
compliance and documentation services.

ABOUT THE COVER

For decades, and rare for a company our size, SigmaTron’s (SII’s) hallmarks: EMS Excellence: “Innovative.
Flexible. Global. Trusted.” have constituted a “force multiplier” for our valued customers. SII’s strengths
are helping win business, apparent in three technologically demanding programs profiled in this report.
Specifically, when industrial, fitness and gaming market leaders sought to launch their latest patented
technologies, SII was chosen as their EMS provider.

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TO OUR STOCKHOLDERS

For SigmaTron International, Inc. (“SigmaTron” or “SII”),

Fiscal Year (FY) 2017 ended on an uptick. With our

third quarter reflecting global economic volatility and

pre-election uncertainty in the U.S., our fourth quarter

(4Q) rebound links with favorable customer trends.

Specifically, 4Q revenues increased to $65.6 million

compared to $60.8 million for the same quarter in the

prior fiscal year. Overall, since listing in 1994 as a public

company on NASDAQ, SigmaTron’s revenues have

grown from $36.6 million to $252.2 million in FY17.

However, in FY17, revenues decreased to $252.2 million
from $253.9 million in FY16. Net income decreased to
$1,390,206 in FY17 compared to $2,082,659 in FY16.

We have been managing through delays and volume
decline from select customers, and the revenue volatility
(not due to lost programs) impacted our organization
as a whole. SII took proactive steps throughout the year
to realign our customer strategy and to jumpstart
programs slow to emerge from the pipeline. Facing

FY17 growth challenges head-on, our stable year-end
financial results reflect the steady hand of SII’s
experienced management team, supported by
a committed workforce.

FY17 RESULTS AND FY18 MARKET OUTLOOK
By SII’s fiscal year-end in April, long-lagging U.S.
manufacturing output saw its strongest gain since early
2014, and the International Business Indicator’s metric
on global business was the highest it has been in four
years. When polled in 2017, U.S. companies expressed
optimism about international business and emerging
market opportunities in the year ahead. Given our
strengths for an EMS company our size and numerous
committed customers such as the three profiled in this
report, SII remains encouraged about where we stand
today, and our prospects for FY18.

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SIGMATRON GROWTH IN REVENUES
DOLLARS IN MILLIONS (USD).

1997

2008

2017

$87 $168 $252

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“The U.S. industrial sector was widely reported to be on a growth path,
with the U.S. industrial production rising in April (2017) at the fastest
pace in more than three years, and long-lagging manufacturing output’s
strongest gain since early 2014.” | The Wall Street Journal

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20 17 SIGMATRON INTERNATIONAL 1

EMS EXCELLENCE:
INNOVATIVE. FLEXIBLE. GLOBAL. TRUSTED.

Since our founding, SII has emphasized EMS

EXCELLENCE as we built a sustainable, competitively

advantaged business and met the needs of a diverse

and demanding customer base. For decades, and rare

for a company our size, SigmaTron’s hallmarks:

EMS Excellence: “Innovative. Flexible. Global. Trusted.”

have constituted a “force multiplier” for our valued

customers in FY17. And, SII’s strengths are helping

win business — apparent in the three technologically

demanding programs profiled in this report. Specifically,

when industrial, fitness and gaming market leaders

sought to launch their latest patented technologies,

SII was chosen as their EMS provider.

INNOVATIVE.
▲
Informed by over 20 years of market insight
and experience, SII adds design, prototyping and
manufacturing synergy to the engineering talent already
present in our customers’ local and global teams. Since
acquiring Spitfire Controls Design and Engineering
Center (FY13) and with our Union City, California
operation based in the cradle of American technological
innovation, we leverage some of the latest technologies
that align with our customers’ market-critical needs.
Branded into SII’s culture are personalized program
teams that ensure that customers benefit by all we have
to offer. Throughout FY17, our program innovations
often connected us to expanded business and added
a barrier to entry for others amidst an increasingly
competitive EMS marketplace.

FLEXIBLE.
▲
A differentiating strength of our business model is
SII’s flexibility in our human capital, supply chain and
manufacturing service network across geographies
and markets. For the eight markets we serve, SII’s IT
and Supply Chain platform, in particular, allow SII to
flexibly respond to changes (scale and specifications)
for complex EMS programs, with integrated real-time
information and process system updates. Our agility
helps drive success at each production stage: engineering
and design, prototyping, manufacturing and test.

GLOBAL.
▲
In FY17 SII merited customer service awards in three
different countries in which we manufacture. For
decades, SII has offered customers a global program
team and network through our seven facilities in the
United States, Mexico, China and Vietnam. In FY17,
two of these, Mexico and China, were among the three
countries ranked highest for driving optimism in U.S.
business development. Net/net, from local contact
points, SII’s global support service network integrates
and differentiates SigmaTron across markets and
customer segments.

TRUSTED.
▲
Our founding philosophy — “If we excel at taking
care of our customers, we will win in the markets we
serve” — is manifest throughout FY17 as we experienced
customer trust and loyalty levels reflected in our long-
term relationships. Evidenced by the customers featured
in this report, our technical and service commitments
net personalized program support from beginning to
end. In FY17, we also enhanced inventory controls,
Manufacturing Execution System (MES) and expanded
benefits to Score® including cross-divisional component
tracing. SII helped mitigate the industry’s actual (or risk
of) lead time increases for sourced components required
for our customer products.

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2 SIGMATRON INTERNATIONAL 2017

“SigmaTron’s support and manufacturing footprint provide flexibility for
Life Fitness to advance our production schedules to meet the needs of our
customers. In an industry predicated on meeting custom requirements,
partnering with SII is a true asset.”

Jason M. Adams | Director, Strategic Sourcing & Procurement | Life Fitness

EMS SYNERGY, FOR OVER THREE DECADES

LIFE FITNESS – A Brunswick Company, Life Fitness
(LF) is an American fitness equipment company with
12 manufacturing facilities and distribution in over
120 countries. It is known globally as the innovator of
the first electronic exercise equipment, the Lifecycle
exercise bike. With our “One Source. Global Options.®”
positioning and operations in countries where Life
Fitness does business, SigmaTron International (SII)
has served as an EMS provider to LF for over 30 of its
45-year history. The synergy of our organizations
drives the highest standards of design, manufacturing
and testing for existing and new products, each
paced to remain ahead of the latest technology.

Featured here, SII worked closely with LF Purchasing
team in each stage of the company’s Elevation
Series, just one such collaboration in LF’s luxury
cardio equipment line. Production launch began in
FY15, and after meeting rigorous standards of Design
for Manufacturability (DFM) and Design for Test (DFT),
progressed to finished goods. Preceding launch, dual
facilities at SII aligned with LF to support in-house
fixturing for precision assembly of the user interface
control console, ultimately passing LF-engineered
custom test standards. Currently rated a “Top Pick”
in commercial treadmills, the product’s “Explore”
console pairs FlexDeck technology with its Quick
NavDial’s sleek design, Internet (wireless or wired)
and Bluetooth® functionality.

▼

...........................................................▲.......................................................................EMS EXCELLENCE. IN EACH GLOBAL LOCATION, SII provides highest-quality assemblies with state-of-the-art EMS, testing and quality
control systems, and expanded industry-specific certifications. SII delivers service excellence worldwide through
a central point of contact, a global IT and supply chain infrastructure, and systems for real-time process visibility and
reporting. From Spitfire Controls, our design and engineering services deliver systems integration, with electronic
controls that match performance specifications to other key components of a customer’s product.

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UNITED STATES

Manufacturing/Design
SigmaTron International, Inc.
Corporate Headquarters
Midwest Operations
Elk Grove Village, Illinois

West Coast Operations
Union City, California

Spitfire Controls Division
Elgin, Illinois

Warehouses
Del Rio, Texas
El Paso, Texas
San Diego, California

MEXICO
Manufacturing
SigmaTron International, Inc.
Mexico Operations
Acuña Operations
Chihuahua Operations
Tijuana Operations

ASIA
Manufacturing
SigmaTron International, Inc.
China Operations
Suzhou, China

SigmaTron International, Inc.
Vietnam Operations
Ho Chi Minh City, Vietnam

International
Procurement Office
SigmaTron International, Inc.
Taiwan Procurement Office
Taipei City, Taiwan

DIVISIONAL PROGRESS: UNITED STATES
Elk Grove Village, Illinois. As company headquarters and a key manufacturing site,
Elk Grove Village (EGV) helps position SigmaTron as a total solutions EMS provider
by delivering front-end design and engineering services through commercial-ready
(packaged) product. As in prior years, EGV capabilities were key to low-to-mid
volume, high-mix and high-flexibility orders. The scope and mix of programs that
emerged from the pipeline in FY17, and continuing into FY18, are the highest ever
reported. In response to demand, EGV expanded plant space with a dedicated
box-build area reflecting the increased demand for electromechanical subassemblies
and complete products. EGV also added state-of-the-art equipment to advance
standards of automation, productivity and quality.

Spitfire Controls Design and Engineering Center, Elgin, Illinois. In FY17, the
Spitfire Controls Design and Engineering Center (SF) continued to infuse design
engineering, project management and test-engineering expertise into the highest
number of sister division programs since its acquisition by SII in FY13. SF’s
contribution led to program expansion for a number of new and existing category
leaders in the industrial and industrial-appliance markets. The division continues
to offer more than a decade of expertise in design for manufacturability (DFM)
analysis and has a track record of addressing complex design challenges with
cost-competitive solutions. SF’s focus, to drive new intellectual property, will
continue in FY18 for customers who value high quality and field reliability in their
new product development.

Union City, California. Again in FY17, our Union City (UC) operation served high-
complexity programs with leading edge, assembly technologies. UC also expanded
its Surface Mount Technology (SMT) lines amidst the highest number of programs
served in seven years. For a third consecutive year, the division merited a “Platinum
Supplier” award from St. Jude Medical Center. With its track record in medical
programs, UC in FY17 started the lengthy process to achieve FDA registration.
Once realized, it will help the division meet a long-term goal to diversify accounts in
medical markets. UC is at-the-ready for account expansion in FY18, especially in the
gaming and industrial sectors. The division continued support to regional customers
who benefit from California’s geographic proximity to our operations in Mexico.

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4 SIGMATRON INTERNATIONAL 2017

“Reflecting on our two-year partnership, IGT benefits from SII’s expansive
capabilities and geographic coverage and fully utilizes of the company’s
engineering capabilities – with prototypes driven to full production. A mutual
focus on communication, flexibility, cost and quality characterizes success.”

Nancy Sarmento, CPM, CSCP, CPSM | Commodity Specialist IV | IGT Global Procurement~Commodity Management

▼

EMS INNOVATION, THE GLOBAL LEADER IN GAMING

INTERNATIONAL GAME TECHNOLOGY PLC – IGT is a world
leader in end-to-end gaming that delivers top-performing
products and services to legal, regulated gaming
operators in over 100 countries across six continents.

SigmaTron first collaborated with IGT in FY14
supporting its launch of 3D gaming technology. For IGT,
recent EMS programs resulted in the on-time launch
of the company’s groundbreaking CrystalCurve
TRUE 4D™ gaming technology in FY17. IGT’s TRUE 4D™
technology allows players to interact with gaming
platforms suffused with 4D: mid-air haptics that
produce physical sensations in the player’s hands.

SII’s comprehensive services flowed initially from a
single location but quickly expanded to include an arc
of global facilities, each aligned to critically support
IGT’s technically sophisticated designs. For SII, our
“One Source. Global Options®” in China, Mexico and
California provides seamless programs that help IGT
continue pushing the boundaries in gaming. For TRUE
4D, SII’s manufacturing, engineering and prototyping,
joined by custom manufacturing and test services,
netted a series of highly complex PCBAs through
finished goods. And, SII’s International Procurement
Office (Taiwan) augmented IGT’s own supply chain,
effectively aligning regulatory-compliant, critical
and fast-changing component sourcing needs.

Looking ahead, we commit to delivering IGT-cited success
factors: quality, cost effectiveness, clear and concise
communications, and a sense of execution urgency.

EMS EXCELLENCE. EMS EXCELLENCE. DIVISIONAL PROGRESS: MEXICO

DIVISIONAL PROGRESS: ASIA

Acuña. The Acuña operation links the U.S. to one of
Mexico’s lower-cost regions and offers access and a
desirable cost-structure for customers that appreciate
the North American connection. One of SII’s largest
facilities, Acuña offers a balance of high-volume
manufacturing and, as of this year, a total of 13 high-
tech Surface Mount Technology (SMT) lines. While
regional labor in all of Mexico is widely publicized as
a tight commodity, experienced management remains
vigilant and prepared to act to minimize the effect
when possible.

Chihuahua. In FY17, Chihuahua’s flexibility
and customer commitment helped it to double
manufacturing output for select customers and
enhanced efficiency with improvements to major
equipment utilization for final assembly. For a second
consecutive year, the division expanded its SMT lines
following business expansion in the industrial sector.
Chihuahua enhanced its manufacturing and test
(software and equipment) platforms to include new
Automated Optical Inspection (AOI) and In-Circuit
Test (ICT) equipment as it continued to grow.

Tijuana. In direct response to customer demand for
high-volume production, especially for automotive and
industrial, Tijuana (TJ) implemented new technologies
with expanded SMT and other equipment and enhanced
manufacturing proficiencies. In FY17, TJ achieved ISO
TS 16949 certification (automotive). With its capabilities
and quality expansion, TJ added noteworthy customers
in the automotive, gaming and industrial markets. For
programs with medium- to high-run rates, TJ integrated
a streamlined production configuration managed by its
“Customer Focus Teams” aimed at extending quality
and efficiency levels in FY18 and beyond.

Suzhou, China. In FY17, from its modern, 200,000
square-foot facility, the Suzhou operation reported a
standout year of accomplishments with at least seven
new programs added to its base programs. These
programs include complex box builds for the desirable
automotive, industrial (including agricultural) and
gaming markets. Suzhou’s results include “Supplier
Excellence” awards from several customers.

Suzhou expanded its box-build assembly line, added
new and renovated plant floor spaces, and added new
automatic test equipment. We enhanced “Customer
Focus Teams” and Manufacturing Execution System
(MES) software in order to support flexibility in the
domestic market. Suzhou increased manufacturing
flexibility (“any mix, any volume”) with award-winning
Next Production Modular (NPM) plant technology,
maximizing the return on equipment investment.

In FY17, the division earned MFi Certification, the
special licensing required to build Apple Computer
products, and also applied for ISO 16949 (automotive)
certification. Meeting a FY16 goal, the division also
grew its domestic business for customers desiring
an assembly provider to support the Chinese market
directly. In Suzhou for FY18, many customer programs,
some including breakthrough technologies, are expected
to emerge from the late prototype stages and show
promise of achieving volume production.

Taipei, Taiwan – International Procurement Office (IPO).
In FY17, SII’s International Procurement Office (IPO)
in Taipei continued to manage companywide needs for
sourcing and procurement, and ensure supplier quality,
thereby remaining a highly valued differentiating strength
for SigmaTron. Our IPO comprehensively connects a
network of mid-sized technology firms with high quality
and cost effective partners in Southeast Asia. Our IPO
delivers value for customers (often across multiple
factories) who require sources and procurement for

6 SIGMATRON INTERNATIONAL 201 7

“SigmaTron is integral to our global supplier network. SII’s New Product
Introduction (NPI) expertise is key to achievement of our strategic goals
and we look forward to continuing a successful, cross-functional
relationship in FY18.”

Tony Rakoczy | Midtronics Director of Global Supply Chain

▼

“2017 SUPPLIER OF THE YEAR” TO THE GLOBAL
LEADER IN BATTERY MANAGEMENT SYSTEMS

MIDTRONICS, INC. – Midtronics is the global leader
in vehicle battery management with a reputation for
innovation evident in nearly 200 U.S. patents and
recognition as Crain’s Chicago Business Most Innovative
Company. Midtronics selected SigmaTron as its EMS
partner more than a decade ago, and, in 2017, the
company recognized SII as its Supplier of the Year.

SII’s most recent collaboration with Midtronics was
key in launching the DSS-5000 Battery Diagnostic
Service System. This new product features patented
Conductance Profiling™ technology to provide
more detailed information about battery State of
Charge and State of Health. The DSS-5000 supports
conventional lead acid batteries, plus new Absorbed
Glass Mat and Enhanced Flooded Battery models
and advanced vehicle systems, including start-stop.

For the DSS-5000, manufacturing and custom test
services flowed from our Elk Grove Village operation
along with support engineering services from
our Elgin facility. The result was a technologically
sophisticated array of PCBAs and box builds
customized to net unique product features: color
touchscreen display with preprogrammed battery
service apps; Vehicle Identification Number scanning
to auto-identify vehicle and battery system
information and create service records; and Wi-Fi
and Bluetooth capabilities to support test data
management and automated software updates
via Midtronics Battery Management Information
System program maintenance.

EMS EXCELLENCE. EMS EXCELLENCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▼ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

MEASURED OPTIMISM, RENEWED STRATEGY
FOR LONG-TERM SUCCESS
The SigmaTron of today is more expansive and
diversified as a world-class provider of EMS and
is serving the largest number of technologically
sophisticated customers than at any other time in
SigmaTron’s history. With our rebounded financial
results in 4Q, we are pleased by the progress each of
our divisions has made and do not recall a time when
our relative strength and industry position has been this
strong. Financial reports point to a more bullish mood
in the economy, positive growth trends are reported in
each of the markets we serve, and new customer projects
are emerging from the pipeline in every division of the
company. I am pleased to report that during 4Q we
entered into a new relationship with U.S. Bank N.A. as
our primary bank, which provides access to significant
additional working capital that will support our
anticipated growth. Yet with a number of unknowns about
the U.S. Administration’s pro-growth policy outcomes,
we plan to remain fiscally conservative and vigilant.

As always, I thank our employees, our Board of Directors
and our professional firms for helping us navigate an
economy in transition. We appreciate our customers
and value their partnerships, whether they are new or
long-standing. And, as we work with members of our
supply chain on programs that allow us to be more
productive, we thank them for helping us meet our
mutual goals.

Sincerely,

Gary R. Fairhead
President and Chief Executive Officer
SigmaTron International, Inc.
August 11, 2017

initial parts and materials, and also for subsequent,
scaled-up runs. Our procurement communications
serve SII systemwide, driving success to even the most
complex, business transactions.

In many cases, supply chain industry challenges are
the result of consolidation of manufacturers, the rapid
growth of automotive electronics and resumption
in overall growth of EMS. This year, with decades of
experience, our Taiwan IPO supported global customers
by expertly helping to mitigate the well-publicized
industrywide shortages and component lead-time
increases publicized throughout FY17.

Ho Chi Minh City, Vietnam. SII’s Vietnam operation
continues to augment our China operation to serve
customers’ EMS needs in Asia, and offers highly
experienced management and program teams. Ho Chi
Minh City’s long history of EMS, prior to and following
SII’s FY12 acquisition, allows customers to capitalize on
strategically located, reduced-cost manufacturing with
valued insights into the region’s strengths.

In FY17, the division reported noteworthy strides toward
long-term, continuous-improvement initiatives and
invested in new production and process efficiencies. For
one, the Ho Chi Minh City operation expanded Tango™
information software to further standardize and integrate
systems such as component traceability, while reducing
production waste and inefficiency.

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8 SIGMATRON INTERNATIONAL 2017

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

X Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal year ended April 30, 2017.

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 0-23248

SIGMATRON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization)

2201 Landmeier Rd., Elk Grove Village, IL
(Address of principal executive offices)

Registrant’s telephone number, including area code: 847-956-8000
Securities registered pursuant to Section 12(b) of the Act:

36-3918470
(I.R.S. Employer
Identification Number)

60007
(Zip Code)

Title of each class
Common Stock $0.01 par value per share

Name of each exchange on which registered
The NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. (cid:134)Yes (cid:58) No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. (cid:134)Yes (cid:58) No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
(cid:58) Yes (cid:134) No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). (cid:58) Yes (cid:134) No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:58)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.

Large accelerated filer (cid:134) Accelerated filer (cid:134) Non-accelerated filer (cid:134) Smaller reporting company (cid:58)
Emerging growth company (cid:134)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act. (cid:134)

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act.) (cid:134)Yes (cid:58) No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as
of October 31, 2016 (the last business day of the registrant’s most recently completed second fiscal quarter) was
$19,568,957 based on the closing sale price of $5.26 per share as reported by Nasdaq Capital Market as of such
date.

The number of outstanding shares of the registrant’s Common Stock, $0.01 par value, as of July 20, 2017 was
4,195,813.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections or portions of the definitive proxy statement of SigmaTron International, Inc., for use in
connection with its 2017 annual meeting of stockholders, which the Company intends to file within 120 days of the
fiscal year ended April 30, 2017, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

BUSINESS

ITEM 1.
ITEM 1A. RISK FACTORS
ITEM IB. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURES

PROPERTIES
LEGAL PROCEEDINGS

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
SELECTED FINANCIAL DATA

ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

ITEM 8.
ITEM 9.

MARKET RISKS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND

ITEM 14.

DIRECTOR INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART I

PART II

PART III

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16.

10-K SUMMARY

SIGNATURES

4
10
17
18
19
19

21
21

31
31

31
32

32
32

33
33
38

PART I

ITEM 1. BUSINESS

CAUTIONARY NOTE:

In addition to historical financial information, this discussion of the business of SigmaTron International, Inc.
(“SigmaTron”), its wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex, S.A. de C.V.,
Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., Spitfire Controls
(Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and SigmaTron
Electronic Technology Co., Ltd. (collectively, “SigmaTron China”) and international procurement office
SigmaTron Taiwan branch (collectively, the “Company”) and other Items in this Annual Report on Form 10-K
contain forward-looking statements concerning the Company’s business or results of operations. Words such as
“continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking
statements. These forward-looking statements are based on the current expectations of the Company. Because
these forward-looking statements involve risks and uncertainties, the Company’s plans, actions and actual
results could differ materially. Such statements should be evaluated in the context of the risks and uncertainties
inherent in the Company’s business including, but not necessarily limited to, the Company’s continued
dependence on certain significant customers; the continued market acceptance of products and services offered
by the Company and its customers; pricing pressures from the Company’s customers, suppliers and the market;
the activities of competitors, some of which may have greater financial or other resources than the Company;
the variability of our operating results; the results of long-lived assets and goodwill impairment testing; the
variability of our customers’ requirements; the availability and cost of necessary components and materials; the
ability of the Company and our customers to keep current with technological changes within our industries;
regulatory compliance, including conflict minerals; the continued availability and sufficiency of our credit
arrangements; changes in U.S., Mexican, Chinese, Vietnamese or Taiwanese regulations affecting the
Company’s business; the turmoil in the global economy and financial markets; the stability of the U.S.,
Mexican, Chinese, Vietnamese and Taiwanese economic, labor and political systems and conditions; currency
exchange fluctuations; and the ability of the Company to manage its growth. These and other factors which
may affect the Company’s future business and results of operations are identified throughout the Company’s
Annual Report on Form 10-K, and as risk factors, may be detailed from time to time in the Company’s filings
with the Securities and Exchange Commission. These statements speak as of the date of such filings, and the
Company undertakes no obligation to update such statements in light of future events or otherwise unless
otherwise required by law.

Overview

SigmaTron is a Delaware corporation, which was organized on November 16, 1993, and commenced operations
when it became the successor to all of the assets and liabilities of SigmaTron L.P., an Illinois limited
partnership, through a reorganization on February 8, 1994.

The Company operates in one business segment as an independent provider of electronic manufacturing
services (“EMS”), which includes printed circuit board assemblies and completely assembled (box-build)
electronic products. In connection with the production of assembled products, the Company also provides
services to its customers, including (1) automatic and manual assembly and testing of products; (2) material
sourcing and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousing
and distribution services; and (6) assistance in obtaining product approval from governmental and other
regulatory bodies. The Company provides these manufacturing services through an international network of
facilities located in the United States, Mexico, China, Vietnam and Taiwan.

The Company provides manufacturing and assembly services ranging from the assembly of individual
components to the assembly and testing of box-build electronic products. The Company has the ability to
produce assemblies requiring mechanical as well as electronic capabilities. The products assembled by the

Company are then incorporated into finished products sold in various industries, particularly appliance,
consumer electronics, gaming, fitness, industrial electronics, medical/life sciences, semiconductor and
telecommunications. In some instances the Company manufactures the completed finished product for its
customers.

The Company operates manufacturing facilities in Elk Grove Village, Illinois United States of America
(“U.S.”); Union City, California U.S.; Acuna, Chihuahua and Tijuana, Mexico; Suzhou, China; and Ho Chi
Minh City, Vietnam. In addition, the Company maintains an International Procurement Office (IPO) in Taipei,
Taiwan. The Company also provides design services in Elgin, Illinois.

The Company’s international footprint provides our customers with flexibility within the Company to
manufacture in China, Mexico, Vietnam or the U.S. We believe this strategy will continue to serve the
Company well as its customers continuously evaluate their supply chain strategies.

Products and Services

The Company provides a broad range of electronic and electromechanical manufacturing related outsourcing
solutions for its customers. These solutions incorporate the Company’s knowledge and expertise in the EMS
industry to provide its customers with an international network of manufacturing facilities, advanced
manufacturing technologies, complete supply chain management, responsive and flexible customer service, as
well as product design, test and engineering support. The Company’s EMS solutions are available from
inception of product concept through the ultimate delivery of a finished product. Such technologies and
services include the following:

Manufacturing and Testing Services: The Company’s core business is the assembly and testing of all

types of electronic printed circuit board assemblies (“PCBA”) and often incorporating these PCBAs into
electronic modules used in all types of devices and products that depend on electronics for their operation. This
assembly work utilizes state of the art manufacturing and test equipment to deliver highly reliable products to
the Company’s customers. The Company supports new product introduction (“NPI”), low volume / high mix as
well as high volume/ low mix assembly work at all levels of complexity. Assembly services include pin-
through-hole (“PTH”) components, surface mount (“SMT”) components, including ball grid array (“BGA”),
part-on-part components, conformal coating, parylene coating and others. Test services include and are not
limited to, in-circuit, automated optical inspection (“AOI”), functional, burn-in, hi-pot and boundary scan.
From simple component assembly through the most complicated industry testing, the Company offers most of
the services required to build electronic devices commercially available in the market today.

Design Services: To compliment the manufacturing services it offers its customers, the Company also

offers DFM, design for manufacturing and DFT, design for test review services to help customers ensure that
the products they have designed are optimized for production and testing. In addition, through its Spitfire
Control division, the Company offers complete product design services for a variety of industries and
applications, including appliance controls.

Supply Chain Management: The Company provides complete supply chain management for the

procurement of components needed to build customers’ products. This includes the procurement and
management of all types of electronic components and related mechanical parts such as plastics and metals.
The Company’s resources supporting this activity are provided both on a plant specific basis as well as globally
through its IPO in Taipei, Taiwan. Each of its sites is linked together using the same Enterprise Resource
Planning (“ERP”) system and custom IScore software tools with real-time on-line visibility for customer access.
The Company procures material from major manufacturers and distributors of electronic parts all over the
world.

The Company relies on numerous third-party suppliers for components used in the Company’s
production process. Certain of these components are available only from single-sources or a limited number of
suppliers. In addition, a customer’s specifications may require the Company to obtain components from a
single-source or a small number of suppliers. The loss of any such suppliers could have a material impact on
the Company’s results of operations. Further, the Company could operate at a cost disadvantage compared to
competitors who have greater direct buying power from suppliers. The Company does not enter into long-term

purchase agreements with major or single-source suppliers. The Company believes that short-term purchase
orders with its suppliers provides flexibility, given that the Company’s orders are based on the changing needs
of its customers.

Warehousing and Distribution: The Company provides both in-house and third party warehousing,

shipping, and customs brokerage for border crossings as part of its service offering. This includes international
shipping, drop shipments to the end customer, as well as, support of inventory optimization activities such as
kanban and consignment.

Green, Sustainability, and Social Responsible Initiatives: The Company supports initiatives that

promote sustainability, green environment and social responsibility. The Company requires its supply chain to
meet all government imposed requirements in these areas and helps its customers in achieving effective
compliance. Those include, but are not limited to, Restrictions of Hazardous Substances (“RoHS”), Restriction
of Chemicals (“REACH”) and Conflict Minerals regulations.

Manufacturing Location and Certifications: The Company’s manufacturing and warehousing

locations are strategically located to support our customers with locations in Elk Grove Village, Illinois U.S.;
Union City, California U.S.; Acuna, Chihuahua and Tijuana, Mexico; Suzhou, China and Ho Chi Minh City,
Vietnam. The Company’s ability to transition manufacturing to lower cost regions without jeopardizing
flexibility and service, differentiates it from many competitors. Manufacturing certifications and registrations
are location specific, and include ISO 9001:2008, ISO 14001:2004, Medical ISO 13485:2003, Aerospace
AS9100C and International Traffic in Arms Regulations (“ITAR”) certifications.

Markets and Customers

The Company’s customers are in the appliance, industrial electronics, consumer electronics, fitness, medical/life
sciences, gaming, telecommunications and semiconductor equipment industries. As of April 30, 2017, the
Company had approximately 175 active customers ranging from Fortune 500 companies to small, privately held
enterprises.

The following table shows, for the periods indicated, the percentage of net sales to the principal end-user
markets it serves.

Percent of Net Sales

Markets

Typical OEM Application

Appliances

Industrial Electronics

Consumer Electronics

Fitness

Household appliance controls
Motor controls, power supplies, lighting products, scales,
joysticks
Personal grooming, computers

Treadmills, exercise bikes, cross trainers

Medical/Life Sciences

Clinical diagnostic systems and instruments

Gaming

Telecommunications

Semiconductor Equipment

Total

Slot machines, lighting displays

Routers, communication
Process control and yield management equipment for
semiconductor productions

Fiscal
2017
%

Fiscal
2016
%

43.3

50.1

31.2

30.1

8.5

6.8

4.5

3.6

1.1

1.0

4.2

7.3

4.5

0.8

1.0

2.0

100% 100%

For the fiscal year ended April 30, 2017, the Company’s largest two customers, Electrolux and Whirlpool Inc.,
accounted for 26.7% and 12.6%, respectively, of the Company’s net sales. For the fiscal year ended April 30,
2016, Electrolux and Whirlpool Inc., accounted for 35.2% and 10.6%, respectively, of the Company’s net sales.

The Company believes that Electrolux and Whirlpool will continue to account for a significant percentage of
the Company’s net sales, although the percentage of net sales may vary from period to period.

Sales and Marketing

The Company markets its services through 9 independent manufacturers’ representative organizations that
together currently employ 26 sales personnel in the United States and Canada. Independent manufacturers’
representatives organizations receive variable commissions based on orders received by the Company and are
assigned specific accounts, not territories. Many of the members of the Company’s senior management are
actively involved in sales and marketing efforts, and the Company has 4 direct sales employees. In addition, the
Company markets itself through its website and tradeshows.

Mexico, Vietnam and China Operations

The Company’s wholly-owned subsidiary, Standard Components de Mexico, S.A, a Mexican corporation, is
located in Acuna, Coahuila Mexico, a border town across the Rio Grande River from Del Rio, Texas, and is 155
miles west of San Antonio. Standard Components de Mexico, S.A. was incorporated and commenced operation
in 1968 and had 883 employees at April 30, 2017. The Company’s wholly-owned subsidiary, AbleMex S.A. de
C.V., a Mexican corporation, is located in Tijuana, Baja California Mexico, a border town south of San Diego,
California. AbleMex S.A. de C.V. was incorporated and commenced operations in 2000. The operation had
236 employees at April 30, 2017. The Company’s wholly-owned subsidiary, Digital Appliance Controls de
Mexico S.A., a Mexican corporation, operates in Chihuahua, Mexico, located approximately 235 miles from El
Paso, Texas. Digital Appliance Controls de Mexico S.A. was incorporated and commenced operations in 1997.
The operation had 550 employees at April 30, 2017. The Company believes that one of the key benefits to
having operations in Mexico is its access to cost-effective labor resources while having geographic proximity to
the United States.

The Company’s wholly-owned foreign enterprises, Wujiang SigmaTron Electronics Co., Ltd. and SigmaTron
Electronic Technology Co., Ltd., are located in Suzhou, China. The Company has entered into an agreement
with governmental authorities in the economic development zone of Wujiang, Jiangsu Province, Peoples
Republic of China, pursuant to which the Company became the lessee of a parcel of land of approximately 100
Chinese acres. The term of the land lease is 50 years. The Company built a manufacturing plant, office space
and dormitories on this site during 2004. In fiscal 2015, the China facility expanded and added 40,000 square
feet in warehouse and manufacturing. The total square footage of the facility is 202,000 and has 580 employees
as of April 30, 2017. Both SigmaTron China entities operate at this site.

The Company’s wholly-owned subsidiary, Spitfire Controls (Vietnam) Co. Ltd. is located in Amata Industrial
Park, Bien Hoa City, Dong Nai Province, Vietnam, and is 18 miles east of Ho Chi Minh City. Spitfire Controls
(Vietnam) Co. Ltd. was incorporated and commenced operation in 2005 and had 305 employees as of April 30,
2017.

The Company provides funds for salaries, wages, overhead and capital expenditure items as necessary to
operate its wholly-owned Mexican, Vietnamese and Chinese subsidiaries and the Taiwan IPO. The Company
provides funding in U.S. Dollars, which are exchanged for Pesos, Dong, Renminbi, and New Taiwan dollars.
The fluctuation of currencies from time to time, without an equal or greater increase in inflation, could have a
material impact on the financial results of the Company. The impact of currency fluctuations for the fiscal year
ended April 30, 2017 resulted in foreign currency transaction losses of approximately $508,000 compared to a
net foreign currency loss of $59,000 in the prior year. In fiscal year 2017, the Company paid approximately
$45,620,000 to its foreign subsidiaries.

The Company has not recorded U.S. income taxes on the undistributed earnings of the Company’s foreign
subsidiaries. Such earnings are considered to be indefinitely invested in the foreign subsidiaries. If such
earnings were repatriated, additional tax expense may result. The cumulative amount of unremitted earnings for
which U.S. income taxes have not been recorded is $10,672,000 as of April 30, 2017. The amount of U.S.
income taxes on these earnings is impractical to compute due to the complexities of the hypothetical
calculation.

During fiscal year 2017, the Company recorded tax expense of $78,100 related to the inability to realize the tax
benefit recorded in fiscal year 2015 for potential foreign tax credits. The Company’s estimate of cumulative
taxable income during the foreign tax credit carryforward period was insufficient to support that the tax benefit
from the foreign tax credit is more likely than not to be realized.

The consolidated financial statements as of April 30, 2017 include the accounts and transactions of SigmaTron,
its wholly-owned subsidiaries, Standard Components de Mexico, S.A., AbleMex S.A. de C.V., Digital
Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., Spitfire Controls (Cayman)
Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and SigmaTron
Electronic Technology Co., Ltd., and international procurement office, SigmaTron Taiwan Branch. The
functional currency of the Company’s foreign subsidiaries operations is the U.S. Dollar. Intercompany
transactions are eliminated in the consolidated financial statements.

Competition

The EMS industry is highly competitive and subject to rapid change. Furthermore, both large and small
companies compete in the industry, and many have significantly greater financial resources, more extensive
business experience and greater marketing and production capabilities than the Company. The significant
competitive factors in this industry include price, quality, service, timeliness, reliability, the ability to source
raw components, and manufacturing and technological capabilities. The Company believes it can compete on
all of these factors.

Consolidation

As a result of consolidation and other transactions involving competitors and other companies in the Company’s
markets, the Company occasionally reviews potential transactions relating to its business, products and
technologies. Such transactions could include mergers, acquisitions, strategic alliances, joint ventures, licensing
agreements, co-promotion agreements, financing arrangements or other types of transactions. In the future, the
Company may choose to enter into these types of or other transactions at any time depending on available
sources of financing, and such transactions could have a material impact on the Company’s business, financial
condition or operations.

Governmental Regulations

The Company’s operations are subject to certain foreign, federal, state and local regulatory requirements
relating to, among others, environmental, waste management, labor and health and safety matters. Management
believes that the Company’s business is operated in compliance with all such regulations, RoHS and
REACH. RoHS prohibits the use of lead, mercury and certain other specified substances in electronics products
being sold into the European Union. The Company has RoHS-dedicated manufacturing capabilities at all of its
manufacturing operations. REACH is a European Union Regulation enacted as of December 2006. The
regulation imposes information reporting requirements on all listed SVHCs (substances of very high concern).
From time-to-time the Company's customers request REACH required information and certifications on the
assemblies the Company manufactures for them. These requests require the Company to gather information
from component suppliers to verify the presence and level of mass of any SVHCs greater than 0.1% in the
assemblies the Company manufactures based on customer specifications. If any SVHCs are present at more
than 0.1% of the mass of the item, the specific concentration and mass of the SVHC must be reported to proper
authorities by the Company's customer.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) introduced
reporting requirements for verification of whether the Company directly (or indirectly through suppliers of
components) is purchasing the minerals or metals gold, columbite-tantalite, cassiterite, wolframite and their
derivatives (tin, tungsten, and tantalum), that are being provided by sources in the conflict region of the
Democratic Republic of Congo (“DRC”). On May 25, 2017, the Company filed Form SD with the Securities
and Exchange Commission stating the Company’s supply chain remains DRC conflict undeterminable.

The Company’s costs of compliance with environmental laws, including conflict mineral reporting, is estimated
to be a total of approximately $1,100,000 for the three most recently completed fiscal years ending April 30,

2017. Additional or modified requirements may be imposed in the future. If such additional or modified
requirements are imposed, or if conditions requiring remediation are found to exist, the Company may be
required to incur additional expenditures.

Backlog

The Company relies on customers’ forecasted orders and purchase orders (firm orders) from its customers to
estimate backlog. The Company’s backlog of firm orders as of April 30, 2017 and 2016 was approximately
$209,540,000 and $167,290,000, respectively. The Company anticipates a significant portion of the backlog at
April 30, 2017 will ship in fiscal year 2018. Because customers may cancel or reschedule deliveries, backlog
may not be a meaningful indicator of future revenue. Variations in the magnitude and duration of contracts,
forecasts and purchase orders received by the Company and delivery requirements generally may result in
substantial fluctuations in backlog from period to period.

Employees

The Company employed approximately 3,053 full-time employees as of April 30, 2017, including 219 engaged
in engineering or engineering-related services, 2,414 in manufacturing and 420 in administrative and marketing
functions.

The Company has a labor contract with Chemical & Production Workers Union Local No. 30, AFL-CIO,
covering the Company’s workers in Elk Grove Village, Illinois which expires on November 30, 2018. The
Company’s Mexican subsidiary, Standard Components de Mexico S.A., has a labor contract with Sindicato De
Trabajadores de la Industra Electronica, Similares y Conexos del Estado de Coahuila, C.T.M. covering the
Company’s workers in Acuna, Mexico which expires on February 1, 2018. The Company’s subsidiary located
in Tijuana Mexico has a labor contract with Sindicato Mexico Moderno De Trabajadores De La, Baja
California, C.R.O.C. The contract does not have an expiration date. The Company’s subsidiary located in Ho
Chi Minh City, Vietnam, has a labor contract with CONG DOAN CO SO CONG TY TNHH Spitfire Controls
Vietnam. The contract expires February 28, 2018.

Since the time the Company commenced operations, it has not experienced any union-related work stoppages.
The Company believes its relations with both unions and its other employees are good.

Executive Officers of the Registrant

Name

Age

Position

Gary R. Fairhead

President and Chief Executive Officer. Gary R. Fairhead has been the

President of the Company since January 1990 and Chairman of the Board of
Directors of the Company since August 2011. Gary R. Fairhead is the
brother of Gregory A. Fairhead.

Linda K. Frauendorfer

Chief Financial Officer, Vice President of Finance, Treasurer and Secretary

since February 1994. Director of the Company since August 2011.

Gregory A. Fairhead

Executive Vice President and Assistant Secretary. Gregory A. Fairhead has

been the Executive Vice President since February 2000 and Assistant
Secretary since 1994. Mr. Fairhead was Vice President - Acuna Operations
for the Company from February 1990 to February 2000. Gregory A.
Fairhead is the brother of Gary R. Fairhead.

John P. Sheehan

Vice President, Director of Supply Chain and Assistant Secretary since

February 1994.

Daniel P. Camp

Vice President, Acuna Operations since 2007. Vice President - China

Operations from 2003 to 2007. General Manager / Vice President of Acuna
Operations from 1994 to 2003.

Rajesh B. Upadhyaya

Executive Vice President, West Coast Operations since 2005. Mr.

Upadhyaya was the Vice President of the Fremont Operations from 2001
until 2005.

Hom-Ming Chang

Vice President, China Operations since 2007. Vice President - Hayward
Materials / Test / IT from 2005 - 2007. Vice President of Engineering
Fremont Operation from 2001 to 2005.

ITEM 1A. RISK FACTORS

The following risk factors should be read carefully in connection with evaluating our business and the forward-
looking information contained in this Annual Report on Form 10-K. Any of the following risks could
materially adversely affect our business, operations, industry or financial position or our future financial
performance. While the Company believes it has identified and discussed below the key risk factors affecting
its business, there may be additional risks and uncertainties that are not presently known or that are not
currently believed to be significant that may adversely affect its business, operations, industry, financial
position and financial performance in the future.

The Company’s ability to secure and maintain sufficient credit arrangements is key to its continued
operations.

Prior to March 31, 2017 the Company had a senior secured credit facility with Wells Fargo, N.A. with a credit
limit up to $30,000,000. The credit facility was collateralized by substantially all of the Company’s
domestically located assets and the Company had pledged 65% of its equity ownership interest in some of its
foreign entities. Prior to its payoff and termination, the Wells Fargo, N.A. senior secured credit facility was due
to expire on October 31, 2018. On March 31, 2017, the Company paid the balance outstanding under the senior
credit facility in the amount of $22,232,914. The remaining deferred financing costs of $68,475 were expensed
in the fourth quarter of fiscal 2017.

On March 31, 2017, the Company entered into a $35,000,000 senior secured credit facility with U.S. Bank,
N.A., which expires on March 31, 2022. The credit facility is collateralized by substantially all of the
Company’s domestically located assets. The facility allows the Company to choose among interest rates at
which it may borrow funds: the bank fixed rate of four percent or LIBOR plus one and one half percent
(effectively 2.65% at April 30, 2017). Interest is due monthly. Under the senior secured credit facility, the
Company may borrow up to the lesser of (i) $35,000,000 or (ii) an amount equal to a percentage of the eligible
receivable borrowing base plus a percentage of the inventory borrowing base. Deferred financing costs of
$207,647 were capitalized in the fourth quarter of fiscal 2017 and will be amortized over the term of the
agreement. As of April 30, 2017, there was $23,178,429 outstanding and $11,821,571 of unused availability
under the U.S. Bank, N.A. facility compared to an outstanding balance of $20,014,069 and $3,630,035 of
unused availability under the Wells Fargo, N.A. senior credit facility at April 30, 2016. At April 30, 2017, the
Company was in compliance with its financial covenant and other restricted covenants under the credit facility.

On August 4, 2015, the Company’s wholly-owned subsidiary, Wujiang SigmaTron Electronics Co., Ltd entered
into a credit facility with China Construction Bank. Under the agreement Wujiang SigmaTron Electronics Co.,
Ltd can borrow up to 5,000,000 Renminbi and the facility is collateralized by Wujiang SigmaTron Electronics
Co., Ltd.’s manufacturing building. Interest is payable monthly and the facility bears a fixed interest rate of
6.67%. The facility was due to expire on August 3, 2017. The credit facility was closed as of March 1, 2017.
There was no outstanding balance under the facility at April 30, 2017 or April 30, 2016.

On March 24, 2017, the Company’s wholly-owned subsidiary, SigmaTron Electronic Technology Co., Ltd
entered into a credit facility with China Construction Bank. Under the agreement SigmaTron Electronic
Technology Co., Ltd can borrow up to 9,000,000 Renminbi and the facility is collateralized by Wujiang
SigmaTron Electronics Co., Ltd.’s manufacturing building. Interest is payable monthly and the facility bears a
fixed interest rate of 6.09%. The term of the facility extends to February 7, 2018. There was no outstanding
balance under the facility at April 30, 2017.

The Company anticipates that its credit facilities, cash flow from operations and leasing resources are adequate
to meet its working capital requirements and capital expenditures for fiscal year 2018. In addition, in the event
the Company desires to expand its operations, its business grows more rapidly than expected, the current
economic climate deteriorates, customers delay payments, or the Company desires to consummate an
acquisition, additional financing resources may be necessary in the current or future fiscal years. There is no
assurance that the Company will be able to obtain equity or debt financing at acceptable terms, or at all, in the
future. There is no assurance that the Company will be able to retain or renew its credit agreements in the
future, or that any retention or renewal will be on the same terms as currently exist.

Adverse changes in the economy or political conditions could negatively impact the Company’s business,
results of operations and financial condition.

The Company’s sales and gross margins depend significantly on market demand for its customers’ products.
The uncertainty in the U.S. and international economic and political environments could result in a decline in
demand for our customers’ products in any industry. Further, any adverse changes in tax rates and laws
affecting our customers could result in decreasing gross margins. Any of these factors could negatively impact
the Company’s business, results of operations and financial condition.

The Company experiences variable operating results.

The Company’s results of operations have varied and may continue to fluctuate significantly from period to
period, including on a quarterly basis. Consequently, results of operations in any period should not be
considered indicative of the results for any future period, and fluctuations in operating results may also result in
fluctuations in the price of the Company’s common stock.

The Company’s quarterly and annual results may vary significantly depending on numerous factors, many of
which are beyond the Company’s control. Some of these factors include:

- changes in sales mix to customers
- changes in availability and rising component costs

- volume of customer orders relative to capacity
- market demand and acceptance of our customers’ products
- price erosion within the EMS marketplace
- capital equipment requirements needed to remain technologically competitive
- volatility in the U.S. and international economic and financial markets

The Company’s customer base is concentrated.

Sales to the Company’s five largest customers accounted for 55.2% and 61.9% of net sales for the fiscal years
ended April 30, 2017 and 2016, respectively. For the year ended April 30, 2017, two customers accounted for
26.7% and 12.6%, respectively, of net sales of the Company, and 8.4% and 4.2%, respectively, of accounts
receivable at April 30, 2017. For the year ended April 30, 2016, two customers accounted for 35.2% and
10.6%, respectively, of net sales of the Company and 6.5% and 2.4%, respectively, of accounts receivable at
April 30, 2016. Significant reductions in sales to any of the Company’s major customers or the loss of a major
customer could have a material impact on the Company’s operations. If the Company cannot replace canceled
or reduced orders, sales will decline, which could have a material impact on the results of operations. There can
be no assurance that the Company will retain any or all of its largest customers. This risk may be further
complicated by pricing pressures and intense competition prevalent in our industry.

If any of the Company’s customers have financial difficulties, the Company could encounter delays or defaults
in the payment of amounts owed for accounts receivable and inventory obligations. This could have a
significant adverse impact on the Company’s results of operations and financial condition.

Most of the Company’s customers do not commit to long-term production schedules, which makes it difficult
to schedule production and achieve maximum efficiency at the Company’s manufacturing facilities and
manage inventory levels.

The volume and timing of sales to the Company’s customers may vary due to:

- customers’ attempts to manage their inventory
- variation in demand for the Company’s customers’ products
- design changes, or
- acquisitions of or consolidation among customers

Many of the Company’s customers do not commit to firm production schedules. The Company’s inability to
forecast the level of customer orders with certainty can make it difficult to schedule production and maximize
utilization of manufacturing capacity and manage inventory levels. The Company could be required to increase
or decrease staffing and more closely manage other expenses in order to meet the anticipated demand of its
customers. Orders from the Company’s customers could be cancelled or delivery schedules could be deferred
as a result of changes in our customers’ demand, thereby adversely affecting the Company’s results of
operations in any given quarter.

The Company and its customers may be unable to keep current with the industry’s technological changes.

The market for the Company’s manufacturing services is characterized by rapidly changing technology and
continuing product development. The future success of the Company’s business will depend in large part upon
our customers’ ability to maintain and enhance their technological capabilities, develop and market
manufacturing services which meet changing customer needs and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely basis.

Our customers have competitive challenges, including rapid technological changes, pricing pressure and
decreasing demand from their customers, which could adversely affect their business and the Company’s.

Factors affecting the industries that utilize our customers’ products could negatively impact our customers and
the Company. These factors include:

- increased competition among our customers and their competitors
- the inability of our customers to develop and market their products

- recessionary periods in our customers’ markets
- the potential that our customers’ products become obsolete
- our customers’ inability to react to rapidly changing technology

Any such factor or a combination of factors could negatively impact our customers’ need for or ability to pay
for our products, which could, in turn, affect the Company’s results of operations.

Adverse market conditions could reduce our future sales and earnings per share.

Uncertainty over the erosion of global consumer confidence amidst concerns about volatile energy costs,
geopolitical issues, the availability and cost of credit, declining asset values, inflation, rising unemployment,
and the stability and solvency of financial institutions, financial markets, businesses, and sovereign nations has
slowed global economic growth and resulted in recessions in many countries, including in the United States,
Europe and certain countries in Asia over the past several years. The economic recovery of recent years is
fragile and recessionary conditions may return. Any of these potential negative economic conditions may
reduce demand for the Company’s customers’ products and adversely affect the Company’s sales.
Consequently, the Company’s past operating results, earnings and cash flows may not be indicative of the
Company’s future operating results, earnings and cash flows.

Customer relationships with start-up companies present more risk.

A small portion of the Company’s current customer base is comprised of start-up companies. Customer
relationships with start-up companies may present heightened risk due to the lack of product history. Slow
market acceptance of their products could result in demand fluctuations causing inventory levels to rise.
Further, the current economic environment could make it difficult for such emerging companies to obtain
additional funding. This may result in additional credit risk including, but not limited to, the collection of trade
account receivables and payment for their inventory. If the Company does not have adequate allowances
recorded, the results of operations may be negatively affected.

The Company faces intense industry competition and downward pricing pressures.

The EMS industry is highly fragmented and characterized by intense competition. Many of the Company’s
competitors have greater experience, as well as greater manufacturing, purchasing, marketing and financial
resources than the Company.

Competition from existing or potential new competitors may have a material adverse impact on the Company’s
business, financial condition or results of operations. The introduction of lower priced competitive products,
significant price reductions by the Company’s competitors or significant pricing pressures from its customers
could adversely affect the Company’s business, financial condition, and results of operations.

The Company has foreign operations that may pose additional risks.

The Company has substantial manufacturing operations in multiple countries. Therefore, the Company’s
foreign businesses and results of operations are dependent upon numerous related factors, including the stability
of the foreign economies, the political climate, relations with the United States, prevailing worker wages, the
legal authority of the Company to operate and expand its business in a foreign country, and the ability to
identify, hire, train and retain qualified personnel and operating management in Mexico, China and Vietnam.

The Company obtains many of its materials and components through its IPO in Taipei, Taiwan. The
Company’s access to these materials and components is dependent on the continued viability of its Asian
suppliers.

Approximately 14.0% and 15.0% of the total non-current consolidated assets of the Company are located in
foreign jurisdictions outside the United States as of April 30, 2017 and 2016, respectively.

Disclosure and internal controls may not detect all errors or fraud.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, believe that
the Company’s disclosure controls and internal controls may not prevent all errors and all fraud. The
Company’s disclosure controls and internal controls can provide only reasonable assurance that the procedures
will meet the control objectives. Controls are limited in their effectiveness by human error, including faulty
judgments in decision-making. Further, controls can be circumvented by collusion of two or more people or by
management override of controls.

Inadequate internal control over financial reporting could result in a reduction in the value of our common
stock.

If the Company identifies and reports a material weakness in its internal control over financial reporting,
shareholders and the Company’s lenders could lose confidence in the reliability of the Company’s financial
statements. This could have a material adverse impact on the value of the Company’s stock and the Company’s
liquidity.

There is a risk of fluctuation of various currencies integral to the Company’s operations.

The Company purchases some of its material components and funds some of its operations in foreign
currencies. From time to time the currencies fluctuate against the U.S. Dollar. Such fluctuations could have a
material impact on the Company’s results of operations and performance. The impact of currency fluctuations
for the year ended April 30, 2017 resulted in foreign currency transaction losses of approximately $508,000
compared to a net foreign currency loss of $59,000 in the prior year. These fluctuations are expected to
continue and could have a negative impact on the Company’s results of operations. The Company did not, and
is not expected to, utilize derivatives or hedge foreign currencies to reduce the risk of such fluctuations.

The availability of raw components or an increase in their price may affect the Company’s operations and
profits.

The Company relies on numerous third-party suppliers for components used in the Company’s production
process. Certain of these components are available only from single-sources or a limited number of suppliers.
In addition, a customer’s specifications may require the Company to obtain components from a single-source or
a small number of suppliers. The loss of any such suppliers could have a material impact on the Company’s
results of operations. Further, the Company could operate at a cost disadvantage compared to competitors who
have greater direct buying power from suppliers. The Company does not enter into long-term purchase
agreements with major or single-source suppliers. The Company believes that short-term purchase orders with
its suppliers provides flexibility, given that the Company’s orders are based on the changing needs of its
customers.

The Company depends on management and skilled personnel.

The Company depends significantly on its President/CEO and other executive officers. The Company’s
employees generally are not bound by employment agreements and the Company cannot assure that it will
retain its executive officers or skilled personnel. The loss of the services of any of these key employees could
have a material impact on the Company’s business and results of operations. In addition, despite significant
competition, continued growth and expansion of the Company’s EMS business will require that the Company
attract, motivate and retain additional skilled and experienced personnel. The inability to satisfy such
requirements could have a negative impact on the Company’s ability to remain competitive in the future.

Favorable labor relations are important to the Company.

The Company currently has labor union contracts with its employees constituting approximately 50% and 45%
of its workforce for fiscal years 2017 and 2016, respectively. Although the Company believes its labor relations
are good, any labor disruptions, whether union-related or otherwise, could significantly impair the Company’s
business, substantially increase the Company’s costs or otherwise have a material impact on the Company’s
results of operations.

Failure to comply with environmental regulations could subject the Company to liability.

The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and
disposal of hazardous chemicals used during its manufacturing process. To date, the cost to the Company of
such compliance has not had a material impact on the Company’s business, financial condition or results of
operations. However, there can be no assurance that violations will not occur in the future as a result of human
error, equipment failure or other causes. Further, the Company cannot predict the nature, scope or effect of
environmental legislation or regulatory requirements that could be imposed or how existing or future laws or
regulations will be administered or interpreted. Compliance with more stringent laws or regulations, as well as
more vigorous enforcement policies of regulatory agencies, could require substantial expenditures by the
Company and could have a material impact on the Company’s business, financial condition and results of
operations. Any failure by the Company to comply with present or future regulations could subject it to future
liabilities or the suspension of production which could have a material negative impact on the Company’s
results of operations.

Conflict minerals regulations may cause the Company to incur additional expenses and could increase the
cost of components contained in its products and adversely affect its inventory supply chain.

The Dodd-Frank Act, and the rules promulgated by the Securities and Exchange Commission (“SEC”)
thereunder, requires the Company to determine and report annually whether any conflict minerals contained in
our products originated from the DRC or an adjoining country. The Dodd-Frank Act and these rules could affect
our ability to source components that contain conflict minerals at acceptable prices and could impact the
availability of conflict minerals, since there may be only a limited number of suppliers of conflict-free conflict
minerals. Our customers may require that our products contain only conflict-free conflict minerals, and our
revenues and margins may be negatively impacted if we are unable to meet this requirement at a reasonable
price or are unable to pass through any increased costs associated with meeting this requirement. Additionally,
the Company may suffer reputational harm with our customers and other stakeholders if our products are not
conflict-free. The Company could incur significant costs in the event we are unable to manufacture products
that contain only conflict-free conflict minerals or to the extent that we are required to make changes to
products, processes, or sources of supply due to the foregoing requirements or pressures.

The price of the Company’s stock is volatile.

The price of the Company’s common stock historically has experienced significant volatility due to fluctuations
in the Company’s revenue and earnings, other factors relating to the Company’s operations, the market’s
changing expectations for the Company’s growth, overall equity market conditions and other factors unrelated
to the Company’s operations. In addition, the limited float of the Company’s common stock and the limited
number of market makers also affect the volatility of the Company’s common stock. Such fluctuations are
expected to continue in the future.

An adverse change in the interest rates for our borrowings could adversely affect our results of operations.

The Company pays interest on outstanding borrowings under its senior secured credit facility and certain other
long-term debt obligations at interest rates that fluctuate. An adverse change in the Company’s interest rates
could have a material adverse effect on its results of operations.

Changes in securities laws and regulations may increase costs.

The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and listing
requirements subsequently adopted by Nasdaq in response to Sarbanes-Oxley, have required changes in
corporate governance practices, internal control policies and securities disclosure and compliance practices of
public companies. More recently the Dodd-Frank Act requires changes to our corporate governance,
compliance practices and securities disclosures. Compliance following the implementation of these rules has
increased our legal, financial and accounting costs. The Company expects increased costs related to these new
regulations to continue, including, but not limited to, legal, financial and accounting costs. These developments
may result in the Company having difficulty in attracting and retaining qualified members of the board or
qualified officers. Further, the costs associated with the compliance with and implementation of procedures
under these laws and related rules could have a material impact on the Company’s results of operations.

Any litigation, even where a claim is without merit, could result in substantial costs and diversion of
resources.

In the past, the Company has been notified of claims relating to various matters including intellectual property
rights, contractual matters, labor issues or other matters arising in the ordinary course of business. In the event
of any such claim, the Company may be required to spend a significant amount of money and resources, even
where the claim is without merit. Accordingly, the resolution of such disputes, even those encountered in the
ordinary course of business, could have a material adverse effect on the Company’s business, consolidated
financial conditions and results of operations.

If the security of the Company’s systems is breached or otherwise subjected to unauthorized access, the
Company’s reputation may be severely harmed and it may be exposed to liability.

The Company’s system stores confidential information which includes its financial information, its customers’
proprietary email distribution lists, product information, supplier information, and other critical data. Any
accidental or willful security breaches or other unauthorized access could expose the Company to liability for
the loss of such information, adverse regulatory action by federal and state governments, time-consuming and
expensive litigation and other possible liabilities as well as negative publicity, which could severely damage the
Company’s reputation. If security measures are breached because of third-party action, employee error,
malfeasance or otherwise, or if design flaws in its software are exposed and exploited, and, as a result, a third
party obtains unauthorized access to any of its customers’ data, its relationships with its customers may be
severely damaged, and the Company could incur significant liability. Because techniques used to obtain
unauthorized access or to sabotage systems change frequently and generally are not recognized until they are
launched against a target, the Company and its third-party hosting facilities may be unable to anticipate these
techniques or to implement adequate preventive measures. In addition, many states have enacted laws requiring
companies to notify customers of data security breaches involving their data. These mandatory disclosures
regarding a security breach often lead to widespread negative publicity, which may cause the Company’s
customers to lose confidence in the effectiveness of its data security measures. Any security breach whether
actual or perceived, could harm the Company’s reputation, could cause it to lose customers and may negatively
impact its ability to acquire new customers.

With the increased use of technologies such as the Internet to conduct business, a company is susceptible to
operational, information security and related risks. In general, cyber incidents can result from deliberate attacks
or unintentional events. Cyberattacks include, but are not limited to, gaining unauthorized access to digital
systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or
sensitive information, corrupting data, or causing operational disruption (e.g., ransomware attacks).
Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as
causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended
users). Cyber incidents affecting the Company or its service providers have the ability to cause disruptions and
impact business operations, potentially resulting in financial losses, interference with the Company’s ability to
conduct business in the ordinary course, violations of applicable privacy and other laws, regulatory fines,
penalties, reputational damage, reimbursement or other compensation costs, additional compliance costs and, in
extreme cases, have caused companies to cease doing business. Cyber events also can affect counterparties or
clients with which the Company does business, governmental and other regulatory authorities, banks, insurance

companies and other financial institutions, among others. In addition, substantial costs may be incurred in order
to prevent any cyber incidents in the future. While the Company has established risk management systems to
prevent such cyber incidents, there are inherent limitations in such systems including the possibility that the
Company has not prepared for certain risks that have not been or are not possible to have been identified.
Further, the Company may be able to influence, but cannot control, the cyber security plans and systems put in
place by its service providers or any other third parties whose operations may affect the Company. The
Company could be negatively impacted as a result.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

At April 30, 2017, the Company, operating in one business segment as an independent EMS provider, had
manufacturing facilities located in Elk Grove Village, Illinois U.S., Union City, California U.S., Acuna,
Chihuahua and Tijuana, Mexico, Ho Chi Minh City, Vietnam and Suzhou, China. In addition, the Company
provides materials procurement services through its Elk Grove Village, Illinois U.S., Union City, California
U.S, and Taipei, Taiwan offices. The Company provides design services in Elgin, Illinois U.S.

Certain information about the Company’s manufacturing, warehouse, purchasing and design facilities
is set forth below:

Location

Square
Feet

Services Offered

Owned/Leased

Suzhou, China

202,000 Electronic and electromechanical manufacturing

solutions

Elk Grove Village, IL 124,300 Corporate headquarters and electronic and
electromechanical manufacturing solutions

*
***

Owned

Union City, CA

117,000 Electronic and electromechanical manufacturing

Leased

solutions

Acuna, Mexico

115,000 Electronic and electromechanical manufacturing

Owned **

solutions

Chihuahua, Mexico

113,000 Electronic and electromechanical manufacturing

Leased

solutions

Tijuana, Mexico

112,100 Electronic and electromechanical manufacturing

Leased

solutions

Ho Chi Minh City,
Vietnam

24,475 Electronic and electromechanical manufacturing

Leased

solutions

Del Rio, TX

44,000 Warehousing and distribution

Taipei, Taiwan

4,685 International procurement office

Elgin, IL

45,000 Design services

San Diego, CA

30,240 Warehousing and distribution

Leased

Owned

Leased

*The Company’s Suzhou, China building is owned by the Company and the land is leased from the Chinese
government for a 50 year term.

**A portion of the facility is leased and the Company has an option to purchase it.

***Total square footage includes 70,000 square feet of dormitories.

The Union City and San Diego, California, Tijuana and Chihuahua, Mexico, Ho Chi Minh City, Vietnam and
Del Rio, Texas properties are occupied pursuant to leases of the premises. The lease agreements for the Del

Rio, Texas properties expire December 2019. The lease agreement for the San Diego, California property
expires August 2019. The lease agreement for the Union City, California property expires March 2021. The
Chihuahua, Mexico lease expires July 2019. The Tijuana, Mexico lease expires November 2018. The lease
agreement for the Ho Chi Minh City, Vietnam property expires July 2020. The Company’s manufacturing
facilities located in Acuna, Mexico, Elgin, Illinois and Elk Grove Village, Illinois are owned by the Company,
except for a portion of the facility in Acuna, Mexico, which is leased. The Company has an option to buy the
leased portion of the facility in Acuna, Mexico. The properties in Elk Grove Village, Illinois and Elgin, Illinois
are financed under separate mortgage loan agreements. The Company leases the IPO office in Taipei, Taiwan
to coordinate Far East purchasing activities. The Company believes its current facilities are adequate to meet its
current needs. In addition, the Company believes it can find alternative facilities to meet its needs in the future,
if required.

ITEM 3. LEGAL PROCEEDINGS

In November 2008, the Company received notice of an Equal Employment Opportunity Commission (“EEOC”)
claim based on allegations of discrimination, sexual harassment, and retaliation filed by Maria Gracia, a former
employee. The EEOC declined to pursue Ms. Gracia’s charges against the Company, but on July 26, 2011, Ms.
Gracia received a right to sue letter from the EEOC. On October 25, 2011, Ms. Gracia filed suit against the
Company in the U.S. District Court for the Northern District of Illinois under Title VII of the Civil Rights Act.
The Complaint alleged claims that Ms. Gracia was subject to discrimination, harassment, and hostile work
environment based on sex and national origin. Further, the Complaint also alleged that the Company retaliated
by terminating Ms. Gracia’s employment after she filed her initial charge of discrimination with the EEOC. Ms.
Gracia sought relief in the form of (a) damages sufficient to compensate her injuries; (b) attorney’s fees; (c)
costs of the action; and (d) equitable remedies.

In December 2014, a jury found for the Company on the claim regarding discrimination, harassment and hostile
work environment but awarded plaintiff damages regarding the retaliation/wrongful discharge claim totaling
$307,000. In post-trial motions, the judge reduced the verdict to $300,000. Subsequently, on September 17,
2015, the court ruled on plaintiff’s Claim for Equitable Relief, awarding the plaintiff an additional $74,478. On
October 16, 2015, the Company appealed the judgment to the Seventh Circuit Court of Appeals. On November
23, 2016, the U.S. District Court ruled that the plaintiff is entitled to an award for costs and attorneys’ fees. On
November 29, 2016, the Seventh Circuit Court of Appeals affirmed the judgment of the U.S. District Court
entered against the Company in December 2014. On January 30, 2017, the Company and Ms. Gracia settled the
suit by entering into a confidential settlement and release agreement. The settlement was paid as of the fiscal
year ended April 30, 2017.

From time to time the Company is involved in legal proceedings, claims or investigations that are incidental to
the conduct of the Company’s business. In future periods, the Company could be subjected to cash cost or non-
cash charges to earnings if any of these matters are resolved on unfavorable terms. However, although the
ultimate outcome of any legal matter cannot be predicted with certainty, based on present information,
including management’s assessment of the merits of any particular claim, the Company does not expect that
these legal proceedings or claims will have any material adverse impact on its future consolidated financial
position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Company’s common stock is traded on the NASDAQ Capital Market System under the symbol SGMA.
The following table sets forth the range of quarterly high and low sales price information for the common stock
for the periods ended April 30, 2017 and 2016.

Common Stock as Reported
by NASDAQ

Period

High

Low

Fiscal 2017
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

Fiscal 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter

$ 5.45
5.50
6.81
6.20

$ 7.80
7.91
7.34
9.12

$ 4.01
4.34
5.25
5.42

$ 5.85
6.10
5.02
6.11

As of July 20, 2017, there were approximately 40 holders of record of the Company’s common stock, which
does not include shareholders whose stock is held through securities position listings. The Company estimates
there to be approximately 2,623 beneficial owners of the Company’s common stock.

The Company has not paid cash dividends on its common stock since completing its February 1994 initial
public offering and does not intend to pay any dividends in the foreseeable future. So long as any indebtedness
remains unpaid under the Company’s revolving loan facility, the Company is prohibited from paying or
declaring any dividends on any of its capital stock, except stock dividends, without the written consent of the
lender under the facility.

On May 1, 2015, the Company sold 74,000 shares of its common stock to three individual investors in a private
offering, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), at $7.00
per share, representing an approximate average of the market price of the Company’s common stock in the
public market during the immediately preceding thirty day period. The transaction resulted in $518,000 of
proceeds from the sale of restricted stock. The stock was unregistered and may be sold only upon registration
or the availability of an exemption from registration under the Securities Act.

Equity Compensation Plan Information

For information concerning securities authorized for issuance under our equity compensation plans, see Part III,
Item 12 of this Annual Report, under the caption “Security Ownership of Certain Beneficial Owners and
Management and Related Stockholders Matters” as well as the Company’s audited financial statements and
notes thereto, including Note N, filed herewith and all such information is incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), the Company is not required to provide the information
required by this item.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Overview

The Company operates in one business segment as an independent provider of EMS, which includes printed
circuit board assemblies and completely assembled (box-build) electronic products. In connection with the
production of assembled products, the Company also provides services to its customers, including (1) automatic
and manual assembly and testing of products; (2) material sourcing and procurement; (3) manufacturing and
test engineering support; (4) design services; (5) warehousing and distribution services; and (6) assistance in
obtaining product approval from governmental and other regulatory bodies. The Company provides these
manufacturing services through an international network of facilities located in the United States, Mexico,
China, Vietnam and Taiwan.

The Company relies on numerous third-party suppliers for components used in the Company’s production
process. Certain of these components are available only from single-sources or a limited number of suppliers.
In addition, a customer’s specifications may require the Company to obtain components from a single-source or
a small number of suppliers. The loss of any such suppliers could have a material impact on the Company’s
results of operations. Further, the Company could operate at a cost disadvantage compared to competitors who
have greater direct buying power from suppliers. The Company does not enter into long-term purchase
agreements with major or single-source suppliers. The Company believes that short-term purchase orders with
its suppliers provides flexibility, given that the Company’s orders are based on the changing needs of its
customers.

Sales can be a misleading indicator of the Company’s financial performance. Sales levels can vary
considerably among customers and products depending on the type of services (turnkey versus consignment)
rendered by the Company and the demand by customers. Consignment orders require the Company to perform
manufacturing services on components and other materials supplied by a customer, and the Company charges
only for its labor, overhead and manufacturing costs, plus a profit. In the case of turnkey orders, the Company
provides, in addition to manufacturing services, the components and other materials used in assembly. Turnkey
contracts, in general, have a higher dollar volume of sales for each given assembly, owing to inclusion of the
cost of components and other materials in net sales and cost of goods sold. Variations in the number of turnkey
orders compared to consignment orders can lead to significant fluctuations in the Company’s revenue and gross
margin levels. Consignment orders accounted for less than 1% of the Company’s revenues for each of the fiscal
years ended April 30, 2017 and 2016.

The Company believes that the U.S. election results continue to drive a more positive attitude regarding the
economy for calendar 2017 and at this time it expects the positive trend to continue. There has been some
short-term volatility with the Company’s customers compared to three months ago. The Company does expect
additional new customers to add to its revenue base in fiscal year 2018. The upturn in the economic outlook has
created some additional challenges. The Company is seeing some shortages in the component marketplace
that could affect its ability to meet our customers’ backlog. In all cases, the customer is working with the
Company to address the issue with the supplier of the component. Margin pressures continue and the Company
believes the additional revenue will assist it in managing those pressures.

Critical Accounting Policies:

Management Estimates and Uncertainties - The preparation of consolidated financial statements in

conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Significant estimates made in
preparing the consolidated financial statements include depreciation and amortization periods, the allowance for
doubtful accounts, reserves for inventory, lower of cost or market adjustment for inventory, contingent
consideration, deferred taxes, uncertain tax positions, valuation allowance for deferred taxes and valuation of
goodwill and long-lived assets. Actual results could materially differ from these estimates.

Revenue Recognition - Revenues from sales of the Company's electronic manufacturing services

business are recognized when the finished good product is shipped to the customer. In general, and except for
consignment inventory, it is the Company's policy to recognize revenue and related costs when the finished
goods have been shipped from its facilities, which is also the same point in time that title passes under the terms
of the purchase order and control passes to the customer. Finished goods inventory for certain customers is
shipped from the Company to an independent warehouse for storage or shipped directly to the customer and
stored in a segregated part of the customer’s own facility. Upon the customer’s request for finished goods
inventory, the inventory is shipped to the customer if the inventory was stored off-site, or transferred from the
segregated part of the customer’s facility for consumption or use by the customer. The Company recognizes

revenue upon such shipment or transfer. The Company does not earn a fee for such arrangements. The
Company from time to time may ship finished goods from its facilities, which is also the same point in time that
title passes under the terms of the purchase order, and invoice the customer at the end of the calendar month.
This is done only in special circumstances to accommodate a specific customer. Further, from time to time
customers request the Company hold finished goods after they have been invoiced to consolidate finished goods
for shipping purposes. The Company generally provides a warranty for workmanship, unless the assembly was
designed by the Company, in which case it warrants assembly/design. The Company does not have any
installation, acceptance or sales incentives (although the Company has negotiated longer warranty terms in
certain instances). The Company assembles and tests assemblies based on customers’ specifications.
Historically, the amount of returns for workmanship issues has been de minimis under the Company’s standard
or extended warranties.

Inventories - Cost is determined by an average cost method and the Company allocates labor and

overhead to work-in-process and finished goods. In the event of an inventory write-down, the Company records
expense to state the inventory at lower of cost or market. The Company establishes inventory reserves for
valuation, shrinkage, and excess and obsolete inventory. The Company records provisions for inventory
shrinkage based on historical experience to account for unmeasured usage or loss. The Company records
provisions for excess and obsolete inventories for the difference between the cost of inventory and its estimated
realizable value based on assumptions about future product demand and market conditions. For convenience,
the Company records these inventory reserves against the inventory cost through a contra asset rather than
through a new cost basis. Upon a subsequent sale or disposal of the impaired inventory, the corresponding
reserve is relieved to ensure the cost basis of the inventory reflects any reductions. Actual results differing from
these estimates could significantly affect the Company’s inventories and cost of products sold as the inventory
is sold or otherwise relieved.

Goodwill - Goodwill represents the purchase price in excess of the fair value of assets acquired in

business combinations. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 350, “Intangibles – Goodwill and Other,” requires the Company to assess goodwill and other
indefinite-lived intangible assets for impairment at least annually in the absence of an indicator of possible
impairment and immediately upon an indicator of possible impairment. The Company is permitted the option
to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it
is more likely than not that the fair value of any reporting unit is less than its corresponding carrying value. If,
after assessing the totality of events and circumstances, the Company concludes that it is not more likely than
not that the fair value of any reporting unit is less than its corresponding carrying value, then the Company is
not required to take further action. However, if the Company concludes otherwise, then it is required to
perform a quantitative impairment test, including computing the fair value of the reporting unit and comparing
that value to its carrying value. If the fair value is less than its carrying value, a second step of the test is
required to determine if recorded goodwill is impaired. The Company also has the option to bypass the
qualitative assessment for goodwill in any period and proceed directly to performing the quantitative
impairment test. The Company will be able to resume performing the qualitative assessment in any subsequent
period. The Company performed its annual goodwill impairment test as of February 1, 2017 and determined no
impairment existed as of that date. The step one analysis was performed using a combination of a market
approach and an income approach based on a discounted cash flow approach.

Intangible Assets - Intangible assets are comprised of finite life intangible assets including patents,
trade names, backlog, non-compete agreements, and customer relationships. Finite life intangible assets are
amortized on a straight line basis over their estimated useful lives of 5 years for patents, 20 years for trade
names, 1 year for backlog and 7 years for non-compete agreements except for customer relationships which are
amortized on an accelerated basis over their estimated useful life of 15 years.

Impairment of Long-Lived Assets - The Company reviews long-lived assets, including amortizable

intangible assets, for impairment. Property, machinery and equipment and finite life intangible assets are
reviewed whenever events or changes in circumstances occur that indicate possible impairment. If events or
changes in circumstances occur that indicate possible impairment, the Company first performs an impairment
review based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived
assets are largely independent of other groups of its assets and liabilities. This analysis requires management
judgment with respect to changes in technology, the continued success of product lines, and future volume,

revenue and expense growth rates. If the carrying value exceeds the undiscounted cash flows, the Company
records an impairment, if any, for the difference between the estimated fair value of the asset group and its
carrying value. The Company further conducts annual reviews for idle and underutilized equipment, and
reviews business plans for possible impairment. As of April 30, 2017, there were no indicators of possible
impairment of long-lived assets.

Income Tax - The Company’s income tax expense, deferred tax assets and liabilities and reserves for
unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. The
Company is subject to income taxes in both the U.S. and several foreign jurisdictions. Significant judgments and
estimates by management are required in determining the consolidated income tax expense assessment.

Deferred income tax assets and liabilities are determined based on differences between financial reporting and
tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse. In evaluating the Company’s ability to recover its
deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive
and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income,
tax planning strategies and recent financial operations. In projecting future taxable income, the Company
begins with historical results and changes in accounting policies, and incorporates assumptions including the
amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and
the implementation of feasible and prudent tax planning strategies. These assumptions require significant
judgment and estimates by management about the forecasts of future taxable income and are consistent with the
plans and estimates the Company uses to manage the underlying businesses. In evaluating the objective
evidence that historical results provide, the Company considers three years of cumulative operating income
and/or loss. Valuation allowances are established when necessary to reduce deferred income tax assets to an
amount more likely than not to be realized.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of
complex tax laws and regulations in a multitude of jurisdictions across its global operations. Changes in tax
laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not
aware of any such changes that would have a material effect on the Company’s results of operations, cash flows
or financial position.

A tax benefit from an uncertain tax position may only be recognized when it is more likely than not that the
position will be sustained upon examination, including resolutions of any related appeals or litigation processes,
based on the technical merits.

The Company adjusts its tax liabilities when its judgment changes as a result of the evaluation of new
information not previously available. Due to the complexity of some of these uncertainties, the ultimate
resolution may result in a payment that is materially different from its current estimate of the tax liabilities.
These differences will be reflected as increases or decreases to income tax expense in the period in which they
are determined.

Reclassifications - Certain reclassifications have been made to the previously reported 2016 financial

statements to conform to the 2017 presentation. There was no change to net income.

New Accounting Standards:

several amendments clarifying various aspects of the ASU, including revenue transactions that involve a third
party, goods or services that are immaterial in the context of the contract and licensing arrangements. ASC 606
may be adopted on either a full retrospective or modified retrospective basis. The Company plans to adopt the
ASU effective the first quarter of fiscal year ending April 30, 2019. As the new standard will supersede all
existing revenue guidance affecting the Company, it could impact the timing and amounts of revenue and costs
recognized from customer contracts. The Company has developed an implementation plan, which is currently in
the assessment phase. The Company has not selected a transition method and is currently evaluating the impact
that adoption of the standard will have on its consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory”. ASU No. 2015-11 requires an entity that determines the cost of inventory by methods other than
last-in, first-out (LIFO) and the retail inventory method (RIM) to measure inventory at the lower of cost and net
realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less
reasonably predictable costs of completion, disposal and transportation. This amendment applies to all
inventory that is measured using the average cost or first-in first-out (FIFO) methods. This supersedes prior
guidance which allowed entities to measure inventory at the lower of cost or market, where market could be
replacement cost, net realizable value or net realizable value less an approximately normal profit margin. ASU
No. 2015-11 is effective for annual reporting periods, and interim periods therein, beginning after December 15,
2016. Prospective application is required. Early application is permitted as of the beginning of the interim or
annual reporting period. The Company plans to adopt ASU No. 2015-11 for the fiscal year ending April 30,
2018 and does not expect the impact of the adoption of this ASU to have a material impact on the Company’s
consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”. The new standard establishes a right-of-use
(ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases
with terms longer than 12 months. Leases will be classified as either finance or operating, with classification
affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years. A modified
retrospective transition approach is required for capital leases and operating leases existing at, or entered into
after, the beginning of the earliest comparative period presented in the financial statements, with certain
practical expedients available. While the Company is still evaluating the impact of its pending adoption of the
new standard on its consolidated financial statements, the Company expects that upon adoption in the fiscal
year ending April 30, 2020, it will recognize ROU assets and lease liabilities and that the amounts could be
material.

In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting”, a new accounting standard update intended to
simplify several aspects of the accounting for share-based payment transactions including: income tax
consequences, classification of awards as either equity or liabilities and classification on the statement of cash
flows. Specifically, the update requires that excess tax benefits and tax deficiencies (the difference between the
deduction for tax purposes and the compensation cost recognized for financial reporting purposes) be
recognized as income tax expense or benefit in the Consolidated Statements of Income, introducing a new
element of volatility to the provision for income taxes. This update is effective for fiscal years beginning after
December 15, 2016. Early adoption is permitted. The Company plans to adopt the ASU for the fiscal year
ending April 30, 2018. Upon adoption of the ASU all share-based awards will continue to be accounted for as
equity awards, excess tax benefits recognized on stock-based compensation expense will be reflected in the
consolidated statements of income as a component of the provision for income taxes on a prospective basis,
excess tax benefits recognized on stock-based compensation expense will be classified as an operating activity
in the consolidated statements of cash flows on a prospective basis and the Company will elect to continue to
estimate expected forfeitures over the course of a vesting period.

models and methods for estimating expected credit losses. For public business entities, ASU 2016-13 is
effective for annual and interim reporting periods beginning after December 15, 2019, and the guidance is to be
applied using the modified-retrospective approach. Earlier adoption is permitted for annual and interim
reporting periods beginning after December 15, 2018. The Company is currently evaluating the new guidance
and has not determined the impact this ASU may have on its consolidated financial statements.

In August 2016, the FASB issued ASU Update No. 2016-15, “Statement of Cash Flows- Classification of
Certain Cash Receipts and Cash Payments,” which is intended to reduce diversity in practice in how certain
transactions are classified in the statements of cash flows. This update will be effective for fiscal years
beginning after December 15, 2017 (the Company’s fiscal year ending April 30, 2019), and interim periods
within those fiscal years. Early adoption is permitted, provided that all of the amendments are adopted in the
same period. The guidance requires application using a retrospective transition method. The Company plans to
adopt the ASU in its fiscal year ending April 30, 2019 using the retrospective transition method. The Company
does not expect the impact of the adoption of this ASU to have a material impact on the Company’s
Consolidated Statements of Cash Flows.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment,” which removes the step 2 requirement to perform a hypothetical
purchase price allocation to measure goodwill impairment. Goodwill impairment will now be the amount by
which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill.
This guidance is effective for public companies for annual or any interim goodwill impairment tests in fiscal
years beginning after December 15, 2019, and early adoption is permitted. The Company does not expect this
guidance to have a significant impact on its financial statements and plans to adopt ASU No. 2017-04 in the
first quarter of its fiscal year ending April 30, 2018.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the
Definition of a Business,” which clarifies the definition of a business when evaluating whether transactions
should be accounted for as acquisitions (or disposals) of assets or businesses. For public companies, this ASU
is effective for annual periods beginning after December 15, 2017, including interim periods within those
periods. The Company plans to adopt this ASU in the first quarter of its fiscal year ending April 30, 2019. The
Company will apply the clarified definition of a business, as applicable, from the period of adoption.

Results of Operations:

FISCAL YEAR ENDED APRIL 30, 2017 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2016

The following table sets forth the percentage relationships of expense items to net sales for the years indicated:

Net sales
Operating expenses:

Cost of products sold
Selling and administrative expenses

Total operating expenses

Operating income

Fiscal Years

2017

100.0%

90.5
8.2
98.7
1.3%

2016

100.0%

90.0
8.3
98.3
1.7%

Net sales decreased 0.7% to $252,235,794 in fiscal year 2017 from $253,904,146 in the prior year. The
Company’s sales decreased in fiscal year 2017 in appliance, fitness and semiconductor equipment marketplaces
as compared to the prior year. The decrease in sales dollars for these marketplaces was partially offset by a
increase in sales dollars in the industrial electronics, consumer electronics, gaming and telecommunications

marketplaces. Revenues started an upward trend during the fourth fiscal quarter of fiscal year 2017. The
Company remains optimistic that revenues in fiscal year 2018 will continue to increase.
The Company’s sales in a particular industry are driven by the fluctuating forecasts and end-market demand of
the customers within that industry. Sales to customers are subject to variations from period to period depending
on customer order cancellations, the life cycle of customer products and product transition. Sales to the
Company’s five largest customers accounted for 55.2% and 61.9% of net sales for fiscal years 2017 and 2016,
respectively.

Gross profit decreased to $24,040,927, or 9.5% of net sales, in fiscal year 2017 compared to $25,518,531 or
10.1% of net sales, in the prior fiscal year. The decrease in gross profit dollars for fiscal year 2017 was the
result of decreased sales and product mix. The decrease in the foregoing gross profit was partially offset by
approximately $780,000 resulting from a change in estimate related to the inventory reserve. Margin pressures
continue from both customers and vendors and will likely continue in fiscal year 2018.

Selling and administrative expenses decreased in fiscal year 2017 to $20,774,729, or 8.2% of net sales
compared to $21,194,211, or 8.3% of net sales, in fiscal year 2016. The decrease in selling and administrative
dollars was attributable to sales salaries, professional fees and bonus expense. The decrease in the foregoing
selling and administrative expenses were partially offset by an increase in purchasing salaries, accounting
professional fees and commissions. Selling and administrative expenses decreased as a percent of net sales due
to a decrease in total selling and administrative dollars in fiscal year 2017 compared to the prior year.

Other income increased in fiscal year 2017 to $376,338 compared to $165,864 in the prior fiscal year. During
fiscal year 2017 the Company recorded an insurance recovery gain in the amount of $276,967 to other income
related to a claim in excess of book value for replacement machinery and equipment destroyed in a fire at one of
its plants.

Interest expense, net, increased to $1,135,853 in fiscal year 2017 compared to $1,004,988 in fiscal year 2016.
Interest expense increased primarily due to the increased borrowings under the Company’s banking
arrangements and mortgage obligations. Interest expense for fiscal year 2018 may increase if interest rates or
borrowings, or both, increase during fiscal year 2018.

In fiscal year 2017, income tax expense was $1,107,477 compared to income tax expense of $1,402,537 in
fiscal year 2016. The effective rate for the years ended April 30, 2017 and 2016 was 44.3% and 40.2%,
respectively. The decrease in income tax expense is due to a decrease in pre-tax income in the current year. The
increase in the effective rate for the year ended April 30, 2017 is due to an unfavorable 4.0% adjustment for
realized and unrealized currency gains, losses, and the remeasurement of certain items to the Company’s
functional currency, as well as a valuation allowance for foreign tax credits that the Company does not believe
are more likely than not to be used in the carryforward period.

The Company reported net income of $1,390,206 in fiscal year 2017 compared to $2,082,659 for fiscal year
2016. Basic and diluted earnings per share for fiscal year 2017 were $0.33 each, compared to basic and diluted
earnings per share of $0.50 and $0.49, respectively, for the year ended April 30, 2016.

Liquidity and Capital Resources:

Operating Activities.

Cash flow used in operating activities was $53,761 for the fiscal year ended April 30, 2017 compared to cash
flow provided by operating activities of $13,130,447 for the prior fiscal year. Cash flow used in operating
activities was primarily the result of an increase in accounts receivable and inventory. Accounts receivable
increased due to higher revenues in the fourth quarter of fiscal year 2017 compared to fiscal year 2016.
Inventories increased primarily due to additional customer orders and the start up of new programs. The
increase in accounts payable was the result of timing of payment to vendors. Net cash used in operations was
partially offset by a decrease in income taxes receivable. Net cash used in operating activities was partially
offset by net income excluding the non-cash effects of depreciation and amortization.

Cash flow provided by operating activities was $13,130,447 for the fiscal year ended April 30, 2016. Cash flow
provided by operating activities was primarily the result of net income excluding the non-cash effects of
depreciation and amortization, a decrease in accounts receivable and inventory and an increase in accounts
payable and accrued expenses. Net cash provided by operations was partially offset by an increase in income
taxes receivable.

Investing Activities.

In fiscal year 2017, the Company purchased in cash $3,505,486 in machinery and equipment to be used in the
ordinary course of business. The Company anticipates it may purchase up to $5,000,000, although there is no
guaranty the Company will not exceed such amount, in machinery and equipment in fiscal year 2018, which the
Company plans to fund by lease or loan transactions. There is no assurance that the Company will be able to
obtain debt financing at acceptable terms, or at all, in the future.

In fiscal year 2016, the Company purchased in cash $3,049,943 in machinery and equipment to be used in the
ordinary course of business. The Company purchases were funded by its’ bank line of credit.

Financing Activities.

Cash provided by financing activities was $2,727,303 for the fiscal year ended April 30, 2017 compared to cash
used in financing activities of $8,789,867 in fiscal year 2016. Cash provided by financing activities in fiscal
year 2017 was primarily the result of increased net borrowings of approximately $4,875,000 under the credit
facility, equipment notes and sale leaseback agreements. The additional borrowings were primarily to support
the increase in customer orders.

Cash used in financing activities was $8,789,867 for the fiscal year ended April 30, 2016. Cash used in
financing activities in fiscal year 2016 was primarily the result of net repayments under the line of credit of
approximately $7,400,000 under the credit facility and payments under capital lease agreements.

Financing Summary.

Notes Payable - Banks

Co., Ltd.’s manufacturing building. Interest is payable monthly and the facility bears a fixed interest rate of
6.67%. The facility was due to expire on August 3, 2017. The credit facility was closed as of March 1, 2017.
There was no outstanding balance under the facility at April 30, 2017 or April 30, 2016.

On March 24, 2017, the Company’s wholly-owned subsidiary, SigmaTron Electronic Technology Co., Ltd
entered into a credit facility with China Construction Bank. Under the agreement SigmaTron Electronic
Technology Co., Ltd can borrow up to 9,000,000 Renminbi and the facility is collateralized by Wujiang
SigmaTron Electronics Co., Ltd.’s manufacturing building. Interest is payable monthly and the facility bears a
fixed interest rate of 6.09%. The term on the facility extends to February 7, 2018. There was no outstanding
balance under the facility at April 30, 2017.

Notes Payable - Buildings

The Company entered into a mortgage agreement on January 8, 2010, in the amount of $2,500,000, with Wells
Fargo, N.A. to refinance the property that serves as the Company’s corporate headquarters and its Illinois
manufacturing facility. On November 24, 2014, the Company refinanced the mortgage agreement with Wells
Fargo, N.A. The note requires the Company to pay monthly principal payments in the amount of $9,500, bears
an interest rate of LIBOR plus two and one-quarter percent (effectively 3.25% at April 30, 2017) and is payable
over a sixty - month period. Final payment of approximately $2,289,500 is due on or before November 8, 2019.
The outstanding balance was $2,574,500 and $2,688,500 at April 30, 2017 and April 30, 2016, respectively.

The Company entered into a mortgage agreement on October 24, 2013, in the amount of $1,275,000, with Wells
Fargo, N.A. to finance the property that serves as the Company’s engineering and design center in Elgin,
Illinois. The Wells Fargo, N.A. note requires the Company to pay monthly principal payments in the amount of
$4,250, bears interest at a fixed rate of 4.5% per year and is payable over a sixty - month period. A final
payment of approximately $1,030,000 is due on or before October 24, 2018. The outstanding balance was
$1,096,500 and $1,147,500 at April 30, 2017 and April 30, 2016, respectively.

Notes Payable - Equipment

On November 1, 2016, the Company entered into a secured note agreement with Engencap Fin S.A. DE C.V. to
finance the purchase of equipment in the amount of $596,987. The term of the agreement extends to November
1, 2021 with average quarterly payments of $35,060 beginning on February 1, 2017 and a fixed interest rate of
6.65%. The balance outstanding under this note agreement was $567,138 at April 30, 2017.

On February 1, 2017, the Company entered into a secured note agreement with Engencap Fin S.A. DE C.V. to
finance the purchase of equipment in the amount of $335,825. The term of the agreement extends to February 1,
2022 with average quarterly payments of $20,031 beginning on May 1, 2017 and a fixed interest rate of 7.35%.
The balance outstanding under this note agreement was $335,825 at April 30, 2017.

Capital Lease and Sale Leaseback Obligations

During 2010, the Company entered into various capital lease agreements with Wells Fargo Equipment Finance
to purchase equipment totaling $1,376,799. The terms of the lease agreements extend to July 2016 through
October 2016 with monthly installment payments ranging from $3,627 to $13,207 and a fixed interest rate
ranging from 4.41% to 4.99%. At April 30, 2017, the balance outstanding under these capital lease agreements
was $0 compared to $106,767 in fiscal year 2016. The net book value of the equipment under these leases at
April 30, 2017 was $589,524 compared to $703,424 at April 30, 2016.

From October 2013 through April 2017, the Company entered into various capital lease and sale leaseback
agreements with Associated Bank, National Association to purchase equipment totaling $6,240,562. The terms
of the lease and sale leaseback agreements extend to September 2018 through March 2022 with monthly
installment payments ranging from $1,455 to $40,173 and a fixed interest rate ranging from 3.75% to 4.95%.
The balance outstanding under these capital lease and sale leaseback agreements was $3,627,760 and
$2,599,820 at April 30, 2017 and April 30, 2016, respectively. The net book value of the equipment under
these leases and sale leaseback agreements at April 30, 2017 was $4,713,044 compared to $3,224,661 at April
30, 2016.

From April 2014 through July 2015, the Company entered into various capital lease agreements with CIT
Finance LLC to purchase equipment totaling $2,512,051. The terms of the lease agreements extend to March
2019 through July 2020 with monthly installment payments ranging from $1,931 to $12,764 and a fixed interest
rate ranging from 5.65% through 6.50%. At April 30, 2017, the balance outstanding under these capital lease
agreements was $1,448,269 compared to $1,886,069 in fiscal year 2016. The net book value of the equipment
under these leases at April 30, 2017 was $1,946,026 compared to $2,155,363 at April 30, 2016.

Operating Leases

In September 2010, the Company entered into a real estate lease agreement in Union City, CA, to rent
approximately 117,000 square feet of manufacturing and office space. Under the terms of the lease agreement,
the Company receives incentives over the life of the lease, which extends through March 2021. The amount of
deferred rent income recorded for the fiscal year ended April 30, 2017 was $79,575 compared to $51,509 in
fiscal year 2016. In addition, the landlord provided the Company tenant incentives of $418,000, which are
being amortized over the life of the lease. The balance of deferred rent at April 30, 2017 was $550,672
compared to $630,247 at April 30, 2016.

On May 31, 2012, the Company entered into a lease agreement in Tijuana, Mexico, to rent approximately
112,000 square feet of manufacturing and office space. Under the terms of the lease agreement, the Company
receives incentives over the life of the lease, which extends through November 2018. The amount of deferred
rent income for the fiscal year ended April 30, 2017 was $127,967 compared to $115,837 in fiscal year 2016.
The balance of deferred rent at April 30, 2017 was $224,964 compared to $352,931 at April 30, 2016.

Other

The impact of inflation on the Company’s net sales, revenues and income from operations for the past two fiscal
years has been minimal.

Off-balance Sheet Transactions:

The Company has no off-balance sheet transactions.

Tabular Disclosure of Contractual Obligations:

As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Exchange Act, the
Company is not required to provide the information required by this item.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

As a smaller reporting company, as defined in Rule 10(f)(1) of Regulation S-K under the Exchange Act, the
Company is not required to provide the information required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is included in Item 15(a) of this Report.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls:

The Company’s management, including its President and Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15(e) and 15(d)-
15(e)) as of April 30, 2017. The Company’s disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives and its President and Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the
reasonable assurance level as of April 30, 2017.

Internal Controls:

The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal controls
over financial reporting are designed to provide reasonable assurance regarding the reliability of financial
reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP. Under
the supervision and with the participation of the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control – Integrated Framework (1992) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s
evaluation, management concluded that its internal controls over financial reporting were effective at the
reasonable assurance level as of April 30, 2017.

This annual report does not include an attestation report of the Company’s registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission
that permit the Company to provide only management’s report in this annual report.

There has been no change in the Company’s internal control over financial reporting during the quarter ended
April 30, 2017, that has materially affected or is reasonably likely to materially affect, its internal control over
financial reporting.

On May 14, 2013, COSO issued an updated version of its Internal Control - Integrated Framework (the “2013
Framework”) which officially superseded the 1992 Framework on December 15, 2014. Originally issued in
1992, the framework helps organizations design, implement and evaluate the effectiveness of internal control
concepts and simplify their use and application. Neither COSO, the Securities and Exchange Commission or
any other regulatory body has mandated adoption of the 2013 Framework by a specified date. The Company is
performing an analysis to evaluate what changes to its control environment, if any, would be needed to
successfully implement the 2013 Framework. Until such time as such analysis and any related transition to the
2013 Framework is complete, the Company will continue to use the 1992 Framework in connection with our
assessment of internal control.

ITEM 9B. OTHER INFORMATION

Not Applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the Company’s definitive proxy
statement, to be filed with the Securities and Exchange Commission not later than 120 days after the close of
the Company’s fiscal year ended April 30, 2017.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)
The financial statements are listed in the Index to Financial Statements filed as part of this Annual Report on
Form 10-K beginning on Page F-1.

(a)(2)
Financial statement schedules are omitted because they are not applicable or required.

(a)(3) and (b)
The exhibits required by Item 601 of Regulations S-K are listed in the Index to Exhibits filed as part of this
Annual Report on Form 10-K beginning on Page 34.

ITEM 16. 10-K SUMMARY

None.

Index to Exhibits

Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to
Registration Statement on Form S-1, File No. 33-72100, dated February 9, 1994.

Amended and Restated By-laws of the Company, adopted on September 24, 1999, incorporated
herein by reference to Exhibit 3.2 to the Company’s Form 10-K for the fiscal year ended April
30, 2000.

Form of 1993 Stock Option Plan, incorporated herein by reference to Exhibit 10.4 to the
Company’s Registration Statement on Form S-1, File No. 33-72100.*

Form of Incentive Stock Option Agreement for the Company’s 1993 Stock Option Plan ,
incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on
Form S-1, File No. 33-72100.*

Form of Non-Statutory Stock Option Agreement for the Company’s 1993 Stock Option Plan,
incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on
Form S-1, File No. 33-72100.*

2004 Employee Stock Option Plan, incorporated herein by reference to Appendix B to the
Company’s 2004 Proxy Statement filed on August 16, 2004. *

SigmaTron International, Inc. 2011 Employee Stock Option Plan dated September 16, 2011,
incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on
Form S-8 filed on December 14, 2011.*

Purchase Agreement between SigmaTron International, Inc., and its nominees and Spitfire
Control, Inc., dated as of May 31, 2012, incorporated herein by reference to Exhibit 2.1 to the
Company’s Form 8-K filed on June 4, 2012.

SigmaTron International, Inc. 2013 Employee Stock Purchase Plan dated September 20, 2013,
incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed on
September 25, 2013.*

SigmaTron International, Inc. 2013 Non-Employee Director Restricted Stock Plan dated
September 20, 2013, incorporated herein by reference to Exhibit 10.1 to the Company’s Form
8-K filed on September 25, 2013.*

Mortgage and Assignment of Rents and Leases executed as of October 24, 2013, by SigmaTron
International, Inc., to Wells Fargo Bank, National Association, incorporated herein by
reference to Exhibit 10.18 to the Company’s Form 10-Q filed on December 13, 2013.

Master Lease Agreement # 2170 entered into between Associated Bank, National Association,
a national banking association and SigmaTron International, Inc., dated October 3, 2013,
incorporated herein by reference to Exhibit 10.20 to the Company’s Form 10-Q filed on
December 13, 2013.

SigmaTron International, Inc. Amended and Restated Change in Control Severance Payment
Plan dated March 11, 2014, incorporated herein by reference to Exhibit 10.1 to the Company’s
Form 8-K/A filed on March 14, 2014.*

3.1

3.2

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

Master Lease Number 81344 entered into between CIT Finance LLC and SigmaTron
International, Inc., dated March 6, 2014, incorporated herein by reference to Exhibit 10.17 to
the Company’s Form 10-K filed on July 24, 2014.

Schedule # 1217927 to Master Lease Agreement Number 81344 entered into between CIT
Finance LLC and SigmaTron International, Inc. dated May 7, 2014, incorporated herein by
reference to Exhibit 10.1 to the Company’s Form 10-Q filed on September 11, 2014.

Schedule # 1223197 to Master Lease Agreement Number 81344 entered into by and between
CIT Finance LLC and SigmaTron International, Inc. dated August 1, 2014, incorporated herein
by reference to Exhibit 10.1 to the Company’s Form 10-Q filed on December 12, 2014.

Lease No. 003 is an attachment to Master Lease No. 2170 dated October 17, 2013 by and
between Associated Bank, National Association and SigmaTron International, Inc. dated
September 22, 2014, incorporated herein by reference to Exhibit 10.2 to the Company’s Form
10-Q filed on December 12, 2014.

Lease No. 004 is an attachment to Master Lease No. 2170 dated October 17, 2013 by and
between Associated Bank, National Association and SigmaTron International, Inc. dated
September 22, 2014, incorporated herein by reference to Exhibit 10.3 to the Company’s Form
10-Q filed on December 12, 2014.

Lease No. 005 is an attachment to Master Lease No. 2170 dated October 17, 2013 by and
between Associated Bank, National Association and SigmaTron International, Inc. dated
September 22, 2014, incorporated herein by reference to Exhibit 10.4 to the Company’s Form
10-Q filed on December 12, 2014.

Schedule # 1246045 to Master Lease Agreement Number 81344 entered into by and between
CIT Finance LLC and SigmaTron International, Inc. dated October 27, 2014, incorporated
herein by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on December 12, 2014.

First Amendment to Third Amended and Restated Credit Agreement entered into as of March
7, 2015, by and between SigmaTron International, Inc. and Wells Fargo Bank, National
Association, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed
on March 12, 2015.

Lease No. 006 is an attachment to Master Lease No. 2170 dated October 17, 2013 by and
between Associated Bank, National Association and SigmaTron International, Inc. dated
January 16, 2015, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-
Q filed on March 16, 2015.

Schedule # 1284094 to Master Lease Agreement Number 81344 entered into by and between
CIT Finance LLC and SigmaTron International, Inc. dated June 2, 2015, incorporated herein by
reference to Exhibit 10.29 to the Company’s Form 10-K filed on July 24, 2015.

Lease No. 007 is an attachment to Master Lease No. 2170 dated October 17, 2013 by and
between Association Bank, National Association and SigmaTron International, Inc. dated
December 22, 2015, incorporated herein by reference to Exhibit 10.1 to the Company’s Form
10-Q filed on March 15, 2016.

SigmaTron International, Inc. Employee Bonus Plan for Fiscal Year 2017 dated June 2, 2016,
incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 6,
2016.*

SigmaTron International, Inc. 2013 Employee Stock Purchase Plan disclosed on Form 8-K
dated September 20, 2013, has been terminated effective as of August 15, 2016, incorporated
herein by reference to the Company’s Form 8-K filed on August 15, 2016.*

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

21.0

23.1

24.0

31.1

31.2

32.1

32.2

Lease No. 009, entered into July 15, 2016, is an attachment to Master Lease No. 2170 dated
October 17, 2013 by and between Associated Bank, National Association and SigmaTron
International, Inc., incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-
Q filed on September 13, 2016.

Lease No. 010, entered into August 8, 2016, is an attachment to Master Lease No. 2170 dated
October 17, 2013 by and between Associated Bank, National Association and SigmaTron
International, Inc., incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-
Q filed on December 12, 2016.

Promissory Note, entered into November 1, 2016, by and between ENGENCAP FIN, S.A. DE
C.V., SOFOM, E.N.R. and SigmaTron International, Inc., incorporated herein by reference to
Exhibit 10.1 to the Company’s Form 10-Q filed on March 14, 2017.

SigmaTron International, Inc. Employee Bonus Plan for Fiscal Year 2018 dated April 21, 2017,
incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 25,
2017*

Promissory Note, entered into January 5, 2017, by and between ENGENCAP FIN, S.A. DE
C.V., SOFOM, E.N.R. and SigmaTron International, Inc. **

Lease No. 011, entered into May 8, 2017, is an attachment to Master Lease No. 2170 dated
October 17, 2013 by and between Associated Bank, National Association and SigmaTron
International, Inc.**

Lease No. 012, entered into May 8, 2017, is an attachment to Master Lease No. 2170 dated
October 17, 2013 by and between Associated Bank, National Association and SigmaTron
International, Inc.**

Loan and Security Agreement between SigmaTron International, Inc. and U.S. Bank National
Association dated March 31, 2017.**

Subsidiaries of the Registrant, incorporated herein by reference to Exhibit 21 to the Company’s
Form 10-K for the fiscal year ended April 30, 2014, filed on July 24, 2014.

Consent of BDO USA, LLP.**

Power of Attorney of Directors and Executive Officers (included on the signature page of this
Form 10-K for the fiscal year ended April 30, 2017).**

Certification of Principal Executive Officer of the Company Pursuant to Rule 13a-14(a) under
the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification of Principal Financial Officer of the Company Pursuant to Rule 13a-14(a) under
the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification by the Principal Executive Officer of SigmaTron International, Inc. Pursuant to
Rule 13a-14(b) under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).**

Certification by the Principal Financial Officer of SigmaTron International, Inc. Pursuant to
Rule 13a-14(b) under the Exchange Act and Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).**

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Scheme Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* Indicates management contract or compensatory plan.
** Filed herewith

The Company hereby files as exhibits to this Report the exhibits listed in Item 15(a)(3) above, which are
attached hereto or incorporated herein.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

SIGMATRON INTERNATIONAL, INC.

By: /s/ Gary R. Fairhead

Gary R. Fairhead, President and Chief Executive Officer,
Principal Executive Officer and Director

Dated: July 24, 2017

KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors and officers of SigmaTron
International, Inc., a Delaware corporation, which is filing an Annual Report on Form 10-K with the Securities
and Exchange Commission under the provisions of the Securities Exchange Act of 1934 as amended, hereby
constitute and appoint Gary R. Fairhead and Linda K. Frauendorfer, and each of them, each of their true and
lawful attorneys-in fact and agents, with full power of substitution and resubstitution, for him and in his name,
place and stead, in all capacities, to sign any or all amendments to the report to be filed with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities, and on the dates indicated.

Signature

Title

/s/ Gary R. Fairhead
Gary R. Fairhead

Chairman of the Board of Directors,
President and Chief Executive Officer,
(Principal Executive Officer) and Director

/s/ Linda K. Frauendorfer
Linda K. Frauendorfer

Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer) and Director

/s/ Thomas W. Rieck
Thomas W. Rieck

/s/ Dilip S. Vyas
Dilip S. Vyas

/s/ Paul J. Plante
Paul J. Plante

/s/ Barry R. Horek
Barry R. Horek

/s/ Bruce J. Mantia
Bruce J. Mantia

Director

Date

July 24, 2017

INDEX TO FINANCIAL STATEMENTS

SigmaTron International, Inc. and Subsidiaries

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-2

Page

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-3
F-5

F-6
F-7
F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
SigmaTron International, Inc.
Elk Grove Village, Illinois

We have audited the accompanying consolidated balance sheets of SigmaTron International, Inc. as of April
30, 2017 and 2016 and the related consolidated statements of income, changes in stockholders' equity, and
cash flows for the years then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States) and in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of SigmaTron International, Inc. at April 30, 2017 and 2016, and the results of its
operations and its cash flows for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

BDO USA, LLP
Chicago, Illinois
July 24, 2017

F-2

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
APRIL 30, 2017 and 2016

ASSETS

2017

2016

CURRENT ASSETS

Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$100,000 at April 30, 2017 and 2016,

respectively
Inventories, net
Prepaid expenses and other assets
Refundable income taxes
Note receivable
Other receivables

3,493,324

4,325,268

26,656,871
73,571,238
2,971,087
339,791
887,531
1,112,071

17,844,228
67,649,022
2,128,128
774,847
887,531
481,860

Total current assets

109,031,913

94,090,884

PROPERTY, MACHINERY AND EQUIPMENT, NET

33,008,714

33,080,858

OTHER LONG-TERM ASSETS
Intangible assets, net
Goodwill
Deferred income taxes
Other assets

4,213,235
3,222,899
236,087
1,472,816

4,703,245
3,222,899
233,057
1,418,398

Total other long-term assets

9,145,037

9,577,599

TOTAL ASSETS

151,185,664

136,749,341

The accompanying notes are an integral part of these statements.

F-3

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS – CONTINUED
APRIL 30, 2017 and 2016

LIABILITIES AND STOCKHOLDERS’ EQUITY

2017

2016

CURRENT LIABILITIES
Trade accounts payable
Accrued expenses
Accrued wages
Income taxes payable
Current portion of long-term debt
Current portion of capital lease obligations
Current portion of contingent consideration
Current portion of deferred rent

Total current liabilities

Long-term debt,

less current portion
Capital lease obligations,
less current portion
Contingent consideration,
less current portion
Other long-term liabilities
Deferred rent, less current portion
Deferred income taxes

Total long-term liabilities

Total liabilities

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 500,000 shares

authorized, none issued or outstanding

Common stock, $.01 par value; 12,000,000 shares

authorized, 4,195,813 and 4,183,955 shares issued
and outstanding at April 30, 2017 and 2016, respectively

Capital in excess of par value
Retained earnings

Total stockholders’ equity

TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY

The accompanying notes are an integral part of these statements.

F-4

44,859,344
3,623,106
4,489,602
69,868
351,562
1,711,204
286,240
220,288

37,011,786
2,772,301
4,199,147
-
165,000
1,374,898
275,288
187,889

55,611,214

45,986,309

27,192,246

23,572,152

3,364,825

3,217,758

237,578
991,017
555,348
1,361,291

875,793
870,542
795,289
1,355,620

33,702,305

30,687,154

89,313,519

76,673,463

41,702
22,952,535
38,877,908

41,560
22,546,616
37,487,702

61,872,145

60,075,878

151,185,664

136,749,341

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Years ended April 30, 2017 and 2016

Net sales

Cost of products sold

Gross profit

2017

2016

252,235,794

253,904,146

228,194,867

228,385,615

24,040,927

25,518,531

Selling and administrative expenses

20,774,729

21,194,211

Operating income

3,266,198

4,324,320

Other income, net
Interest expense

(367,338)
1,135,853

(165,864)
1,004,988

Income before income tax expense

2,497,683

3,485,196

Income tax expense

1,107,477

1,402,537

NET INCOME

Earnings per common share
Basic

Diluted

Weighted-average shares of common

stock outstanding

Basic

Diluted

1,390,206

0.33

2,082,659

0.50

0.49

4,186,183

4,164,815

4,213,592

4,224,030

The accompanying notes are an integral part of these statements.

F-5

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Years ended April 30, 2017 and 2016

Capital in
Preferred Common excess of par

Total

Retained

stockholders’

stock

value

earnings

equity

Balance at May 1, 2015

40,703

21,239,641

35,405,043

56,685,387

Recognition of stock-based
compensation

Exercise of stock options

Vesting of restricted
stock

Sale of restricted stock

Employee stock purchases

Tax benefit from contingent
consideration

Excess tax benefits on stock options
and awards

Net income

Balance at April 30, 2016

Recognition of stock-based
compensation

Exercise of stock options

Vesting of restricted
stock

Employee stock purchases

Excess tax expense on stock options
and awards

Net income

740

588,245

7,180

69,400

517,260

52,169

23,972

48,749

588,245

7,200

69,400

518,000

52,266

23,972

48,749

2,082,659

41,560

22,546,616

37,487,702

60,075,878

332,783

4,308

113

60,536

8,330

(38)

332,783

4,320

60,649

8,347

(38)

1,390,206

Balance at April 30, 2017

- $ 41,702 $

22,952,535 $ 38,877,908 $ 61,872,145

The accompanying notes are an integral part of these statements.

F-6

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 30, 2017 and 2016

Cash flows from operating activities

Net income
Adjustments to reconcile net income to net

cash provided by (used in) operating activities

Depreciation and amortization
Stock-based compensation
Restricted stock expense
Increase in inventory obsolescence reserve
Tax benefit from contingent consideration
Deferred income tax expense
Amortization of intangible assets
Amortization of financing fees
Fair value adjustment of contingent consideration
Loss from disposal or sale of machinery and equipment
Gain from involuntary conversion on non-monetary assets due to fire

Changes in assets and liabilities

Accounts receivable
Inventories
Prepaid expenses and other assets
Refundable income taxes
Income taxes payable
Trade accounts payable
Deferred rent
Accrued expenses and wages

Net cash (used in) provided by operating activities

Cash flows from investing activities

Purchases of machinery and equipment
Net cash used in investing activities

Cash flows from financing activities

Proceeds from the exercise of common stock options
Proceeds from the sale of restricted stock
Proceeds from Employee stock purchases
Proceeds under equipment note
Proceeds under sale leaseback agreements
Proceeds from tax benefit on stock options and awards
Tax expense on stock options and awards
Payments of contingent consideration
Payments under capital lease and sale leaseback agreements
Payments under equipment note
Payments under building notes payable
Borrowings under lines of credit
Payments under lines of credit
Payments of financing fees
Tax benefit from contingent consideration

Net cash provided by (used in) financing activities

2017

2016

1,390,206

2,082,659

4,708,876
332,783
60,649
300,000
-
2,641
490,010
111,981
(353,591)
58,456
(276,967)

(8,812,643)
(6,222,216)
(1,092,816)
435,056
69,868
7,847,558
(207,542)
1,103,930
(53,761)

5,119,376
588,245
69,400
-
(23,972)
775,477
470,899
53,497
(5,742)
23,101
-

1,438,964
1,020,687
40,583
(693,801)
(141,297)
1,173,511
(167,345)
1,472,619
13,296,861

(3,505,486)
(3,505,486)

(3,049,943)
(3,049,943)

4,320
-
8,347
932,812
904,027
-
(38)
(273,672)
(1,610,356)
(29,850)
(165,000)
94,123,100
(90,958,740)
(207,647)
-
2,727,303

7,200
518,000
52,266
-
-
48,749
-
(342,162)
(1,363,754)
-
(165,000)
194,424,157
(201,826,881)
(166,414)
23,972
(8,789,867)

Change in cash

(831,944)

1,457,051

F-7

SigmaTron International, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
Years ended April 30, 2017 and 2016

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

4,325,268
3,493,324

2,868,217
4,325,268

Supplementary disclosures of cash flow information

Cash paid for interest
Cash paid for income taxes
Purchase of machinery and equipment financed
under capital leases
Financing of insurance policy
Conversion of accounts receivable into a note receivable

The accompanying notes are an integral part of these statements.

2017

2016

994,583
603,091

964,537
1,634,772

1,189,701
157,805
-

1,308,865
159,616
887,531

F-8

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2017 and 2016

NOTE A - DESCRIPTION OF THE BUSINESS

SigmaTron International, Inc., its subsidiaries, foreign enterprises and international procurement office (collectively,
the “Company”) operates in one business segment as an independent provider of electronic manufacturing services
(“EMS”), which includes printed circuit board assemblies and completely assembled (box-build) electronic products.
In connection with the production of assembled products, the Company also provides services to its customers,
including (1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3)
manufacturing and test engineering support; (4) design services; (5) warehousing and distribution services; and (6)
assistance in obtaining product approval from governmental and other regulatory bodies. As of April 30, 2017, the
Company provided these manufacturing services through an international network of facilities located in the United
States, Mexico, China, Vietnam and Taiwan. Approximately 14.0% and 15.0% of the total non-current consolidated
assets of the Company are located outside of the United States as of April 30, 2017 and 2016, respectively.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements include the accounts and transactions of SigmaTron International, Inc.
(“SigmaTron”), its wholly-owned subsidiaries, Standard Components de Mexico, S.A., AbleMex S.A. de C.V., Digital
Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., Spitfire Controls (Cayman) Co.
Ltd. and SigmaTron International Trading Co., wholly-owned foreign enterprises Suzhou SigmaTron Electronics Co.
Ltd., and SigmaTron Electronic Technology Co., Ltd. (collectively, “SigmaTron China”), and its international
procurement office, SigmaTron Taiwan. The functional currency of the Mexican, Vietnamese and Chinese
subsidiaries and procurement branch is the U.S. Dollar. Intercompany transactions are eliminated in the consolidated
financial statements. The impact of foreign currency fluctuation for the fiscal year ended April 30, 2017 resulted in
foreign currency transaction losses of approximately $508,000 compared to a net foreign currency loss of $59,000 in
the prior year and is included in cost of products sold.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in
the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Significant estimates made in preparing the consolidated financial statements include depreciation and amortization
periods, the allowance for doubtful accounts, reserves for inventory, lower of cost or market adjustment for inventory,
contingent consideration, deferred taxes, uncertain tax positions, valuation allowance for deferred taxes and valuation
of goodwill and long-lived assets. Actual results could materially differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid short-term investments with original maturities within
three months of the purchase date.

F-9

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Accounts Receivable

The majority of the Company’s accounts receivable are due from companies in the consumer electronics, gaming,
fitness, industrial electronics, medical/life sciences, semiconductor, telecommunications and appliance industries.
Credit is extended based on evaluation of a customer’s financial condition, and, generally, collateral is not required.
Accounts receivable are due in accordance with agreed upon terms, and are stated at amounts due from customers net
of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payments terms are
considered past due. The Company writes off accounts receivable when they are determined to be uncollectible.

The Company has arrangements with various financial institutions to sell certain eligible accounts receivable balances
from specific customers. The accounts receivable balances sold are at the election of the Company and the Company
incurred fees for such sales, which were not material for the year ended April 30, 2017 or 2016. The accounts
receivable balances are derecognized at the time of sale, as the Company does not have continuing involvement after
the point of sale. During the years ended April 30, 2017 and 2016, the Company sold without recourse trade
receivables of approximately $95,000,000 and $115,000,000, respectively. Cash proceeds from these agreements are
reflected as operating activities included in the change in accounts receivable in the Company's Consolidated
Statements of Cash Flows.

Allowance for Doubtful Accounts

The Company’s allowance for doubtful accounts relates to receivables not expected to be collected from its customers.
This allowance is based on management’s assessment of specific customer balances, considering the age of receivables
and financial stability of the customer and a five year average of prior uncollectible amounts. If there is an adverse
change in the financial condition of the Company’s customers, or if actual defaults are higher than provided for, an
addition to the allowance may be necessary.

Inventories

Cost is determined by an average cost method and the Company allocates labor and overhead to work-in-process and
finished goods. In the event of an inventory write-down, the Company records expense to state the inventory at lower
of cost or market. The Company establishes inventory reserves for valuation, shrinkage, and excess and obsolete
inventory. The Company records provisions for inventory shrinkage based on historical experience to account for
unmeasured usage or loss. The Company records provisions for excess and obsolete inventories for the difference
between the cost of inventory and its estimated realizable value based on assumptions about future product demand
and market conditions. For convenience, the Company records these inventory reserves against the inventory cost
through a contra asset rather than through a new cost basis. Upon a subsequent sale or disposal of the impaired
inventory, the corresponding reserve is relieved to ensure the cost basis of the inventory reflects any reductions. Actual
results differing from these estimates could significantly affect the Company’s inventories and cost of products sold
as the inventory is sold or otherwise relieved.

F-10

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Property, Machinery and Equipment

Property, machinery and equipment are valued at cost. The Company provides for depreciation and amortization
using the straight-line method over the estimated useful life of the assets:

Buildings
Machinery and equipment
Office equipment and software
Tools and dies
Leasehold improvements

20 years
5-12 years
3-5 years
12 months
lesser of lease term or useful life

Expenses for repairs and maintenance are charged to selling and administrative expenses as incurred.

Deferred Financing Costs

Deferred financing costs consist of costs incurred to obtain the Company’s long-term debt and are amortized using
the effective interest method over the term of the related debt. Deferred financing fees of $208,583 and $112,917 net
of accumulated amortization of $11,916 and $443,763, respectively, as of April 30, 2017 and 2016, respectively, are
deducted from long term debt on the Company’s balance sheet.

Income Taxes

The Company’s income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits
reflect management’s best assessment of estimated future taxes to be paid. The Company is subject to income taxes
in both the U.S. and several foreign jurisdictions. Significant judgments and estimates by management are required
in determining the consolidated income tax expense assessment.

Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax
basis of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect
when the differences are expected to reverse. In evaluating the Company’s ability to recover its deferred tax assets
within the jurisdiction from which they arise, the Company considers all available positive and negative evidence,
including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and
recent financial operations. In projecting future taxable income, the Company begins with historical results and
changes in accounting policies, and incorporates assumptions including the amount of future state, federal and foreign
pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax
planning strategies. These assumptions require significant judgment and estimates by management about the forecasts
of future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying
businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of
cumulative operating income and/or loss. Valuation allowances are established when necessary to reduce deferred
income tax assets to an amount more likely than not to be realized.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax
laws and regulations in a multitude of jurisdictions across its global operations. Changes in tax laws and rates could
also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes
that would have a material effect on the Company’s results of operations, cash flows or financial position.

A tax benefit from an uncertain tax position may only be recognized when it is more likely than not that the position
will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the
technical merits.

F-11

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Income Taxes - Continued

The Company adjusts its tax liabilities when its judgment changes as a result of the evaluation of new information not
previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a
payment that is materially different from its current estimate of the tax liabilities. These differences will be reflected
as increases or decreases to income tax expense in the period in which they are determined.

Earnings per Share

Basic earnings per share are computed by dividing net income (the numerator) by the weighted-average number of
common shares outstanding (the denominator) for the period. The computation of diluted earnings per share is similar
to the computation of basic earnings per share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially dilutive common stock equivalents such
as stock options and restricted stock, had been exercised or vested. There were no anti-dilutive common stock
equivalents at April 30, 2016. There were 285,000, anti-dilutive common stock equivalents at April 30, 2017, which
have been excluded from the calculation of diluted earnings per share.

Twelve Months Ended

April 30,

2017

2016

1,390,206

2,082,659

4,186,183
27,409

4,164,815
59,215

4,213,592

4,224,030

0.33

0.50

0.49

Net income
Weighted-average shares

Basic
Effect of dilutive stock options

Diluted

Basic earnings per share

Diluted earnings per share

Revenue Recognition

Revenues from sales of the Company's electronic manufacturing services business are recognized when the finished
good product is shipped to the customer. In general, and except for consignment inventory, it is the Company's policy
to recognize revenue and related costs when the finished goods have been shipped from its facilities, which is also the
same point in time that title passes under the terms of the purchase order and control passes to the customer. Finished
goods inventory for certain customers is shipped from the Company to an independent warehouse for storage or
shipped directly to the customer and stored in a segregated part of the customer’s own facility. Upon the customer’s
request for finished goods inventory, the inventory is shipped to the customer if the inventory was stored off-site, or
transferred from the segregated part of the customer’s facility for consumption or use by the customer. The Company
recognizes revenue upon such shipment or transfer. The Company does not earn a fee for such arrangements. The
Company from time to time may ship finished goods from its facilities, which is also the same point in time that title
passes under the terms of the purchase order, and invoice the customer at the end of the calendar month. This is done
only in special circumstances to accommodate a specific customer. Further, from time to time customers request the
Company hold finished goods after they have been invoiced to consolidate finished goods for shipping purposes. The
Company generally provides a warranty for workmanship, unless the assembly was designed by the Company, in

F-12

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Revenue Recognition - Continued

which case it warrants assembly/design. The Company does not have any installation, acceptance or sales incentives
(although the Company has negotiated longer warranty terms in certain instances). The Company assembles and tests
assemblies based on customers’ specifications. Historically, the amount of returns for workmanship issues has been
de minimis under the Company’s standard or extended warranties.

Shipping and Handling Costs

The Company records shipping and handling costs as selling and administrative expenses. Customers are typically
invoiced for shipping costs and such amounts are included in net sales. Shipping and handling costs were not material
to the financial statements for fiscal years 2017 or 2016.

Fair Value Measurements

Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The
Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop
its own assumptions.

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, note receivable, other
receivables, accounts payable and accrued expenses which approximate fair value at April 30, 2017 and 2016, due to
their short-term nature. The carrying amounts of the Company’s debt obligations approximate fair value based on
future payments discounted at current interest rates for similar obligations or interest rates which fluctuate with the
market.

The Company measured the contingent consideration included in the fiscal 2013 Spitfire acquisition under the fair
value standard (primarily using level 3 measurement inputs). The contingent consideration continues to be measured
and reported at fair value at each period end. The Company currently does not have any other non-financial assets
and non-financial liabilities that are required to be measured at fair value on a recurring basis.

Goodwill

Goodwill represents the purchase price in excess of the fair value of assets acquired in business combinations.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350, “Intangibles –
Goodwill and Other,” requires the Company to assess goodwill and other indefinite-lived intangible assets for
impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator
of possible impairment. The Company is permitted the option to first assess qualitative factors to determine whether
the existence of events and circumstances indicates that it is more likely than not that the fair value of any reporting
unit is less than its corresponding carrying value. If, after assessing the totality of events and circumstances, the
Company concludes that it is not more likely than not that the fair value of any reporting unit is less than its
corresponding carrying value, then the Company is not required to take further action. However, if the Company
concludes otherwise, then it is required to perform a quantitative impairment test, including computing the fair value
of the reporting unit and comparing that value to its carrying value. If the fair value is less than its carrying value, a
second step of the test is required to determine if recorded goodwill is impaired. The Company also has the option to

F-13

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Goodwill - Continued

bypass the qualitative assessment for goodwill in any period and proceed directly to performing the quantitative
impairment test. The Company will be able to resume performing the qualitative assessment in any subsequent period.
The Company performed its annual goodwill impairment test as of February 1, 2017 and determined no impairment
existed as of that date. The step one analysis was performed using a combination of a market approach and an income
approach based on a discounted cash flow approach.

Intangible Assets

Intangible assets are comprised of finite life intangible assets including patents, trade names, backlog, non-compete
agreements, and customer relationships. Finite life intangible assets are amortized on a straight line basis over their
estimated useful lives of 5 years for patents, 20 years for trade names, 1 year for backlog and 7 years for non-compete
agreements except for customer relationships which are amortized on an accelerated basis over their estimated useful
life of 15 years.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including amortizable intangible assets, for impairment. Property, machinery
and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur that
indicate possible impairment. If events or changes in circumstances occur that indicate possible impairment, the
Company first performs an impairment review based on an undiscounted cash flow analysis at the lowest level at
which cash flows of the long-lived assets are largely independent of other groups of its assets and liabilities. This
analysis requires management judgment with respect to changes in technology, the continued success of product lines,
and future volume, revenue and expense growth rates. If the carrying value exceeds the undiscounted cash flows, the
Company records an impairment, if any, for the difference between the estimated fair value of the asset group and its
carrying value. The Company further conducts annual reviews for idle and underutilized equipment, and reviews
business plans for possible impairment. As of April 30, 2017, there were no indicators of possible impairment of
long-lived assets.

Stock Incentive Plans

Under the Company’s stock option plans, options to acquire shares of common stock have been made available for
grant to certain employees and directors. Each option granted has an exercise price of not less than 100% of the
market value of the common stock on the date of grant. The contractual life of each option is generally 10 years. The
vesting of the grants varies according to the individual options granted. The Company measures the cost of employee
services received in exchange for an equity award based on the grant date fair value and records that cost over the
respective vesting period of the award.

Reclassifications

Certain reclassifications have been made to the previously reported 2016 financial statements to conform to the 2017
presentation. There was no change to net income.

F-14

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

New Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with
Customers" (Topic 606) which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition”.
This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue. In
August 2015, the FASB amended the effective date to be annual reporting periods beginning after December 15, 2017,
including interim periods within that year (effective the first quarter of the Company’s fiscal year ending April 30,
2019), with early adoption permitted for annual reporting periods beginning after December 15, 2016 including the
interim period within that year. The FASB issued several amendments clarifying various aspects of the ASU, including
revenue transactions that involve a third party, goods or services that are immaterial in the context of the contract and
licensing arrangements. ASC 606 may be adopted on either a full retrospective or modified retrospective basis. The
Company plans to adopt the ASU effective the first quarter of fiscal year ending April 30, 2019. As the new standard
will supersede all existing revenue guidance affecting the Company, it could impact the timing and amounts of revenue
and costs recognized from customer contracts. The Company has developed an implementation plan, which is
currently in the assessment phase. The Company has not selected a transition method and is currently evaluating the
impact that adoption of the standard will have on its consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory”. ASU No. 2015-11 requires an entity that determines the cost of inventory by methods other than last-in,
first-out (LIFO) and the retail inventory method (RIM) to measure inventory at the lower of cost and net realizable
value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable
costs of completion, disposal and transportation. This amendment applies to all inventory that is measured using the
average cost or first-in first-out (FIFO) methods. This supersedes prior guidance which allowed entities to measure
inventory at the lower of cost or market, where market could be replacement cost, net realizable value or net realizable
value less an approximately normal profit margin. ASU No. 2015-11 is effective for annual reporting periods, and
interim periods therein, beginning after December 15, 2016. Prospective application is required. Early application is
permitted as of the beginning of the interim or annual reporting period. The Company plans to adopt ASU No. 2015-
11 for the fiscal year ending April 30, 2018 and does not expect the impact of the adoption of this ASU to have a
material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases”. The new standard establishes a right-of-use (ROU)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms
longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern
of expense recognition in the income statement. The new standard is effective for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach
is required for capital leases and operating leases existing at, or entered into after, the beginning of the earliest
comparative period presented in the financial statements, with certain practical expedients available. While the
Company is still evaluating the impact of its pending adoption of the new standard on its consolidated financial
statements, the Company expects that upon adoption in the fiscal year ending April 30, 2020, it will recognize ROU
assets and lease liabilities and that the amounts could be material.

F-15

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

New Accounting Standards - Continued

This update is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The Company
plans to adopt the ASU for the fiscal year ending April 30, 2018. Upon adoption of the ASU all share-based awards
will continue to be accounted for as equity awards, excess tax benefits recognized on stock-based compensation
expense will be reflected in the consolidated statements of income as a component of the provision for income taxes
on a prospective basis, excess tax benefits recognized on stock-based compensation expense will be classified as an
operating activity in the consolidated statements of cash flows on a prospective basis and the Company will elect to
continue to estimate expected forfeitures over the course of a vesting period.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments.” ASU 2016-13 introduces a new forward-looking approach, based on
expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The
estimate of expected credit losses will require entities to incorporate considerations of historical information, current
information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable
users of financial statements to understand the entity’s assumptions, models and methods for estimating expected
credit losses. For public business entities, ASU 2016-13 is effective for annual and interim reporting periods beginning
after December 15, 2019, and the guidance is to be applied using the modified-retrospective approach. Earlier adoption
is permitted for annual and interim reporting periods beginning after December 15, 2018. The Company is currently
evaluating the new guidance and has not determined the impact this ASU may have on its consolidated financial
statements.

In August 2016, the FASB issued ASU Update No. 2016-15, “Statement of Cash Flows- Classification of Certain
Cash Receipts and Cash Payments,” which is intended to reduce diversity in practice in how certain transactions are
classified in the statements of cash flows. This update will be effective for fiscal years beginning after December 15,
2017 (the Company’s fiscal year ending April 30, 2019), and interim periods within those fiscal years. Early adoption
is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application
using a retrospective transition method. The Company plans to adopt the ASU in its fiscal year ending April 30, 2019
using the retrospective transition method. The Company does not expect the impact of the adoption of this ASU to
have a material impact on the Company’s Consolidated Statements of Cash Flows.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment,” which removes the step 2 requirement to perform a hypothetical purchase price
allocation to measure goodwill impairment. Goodwill impairment will now be the amount by which a reporting unit's
carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. This guidance is effective for
public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15,
2019, and early adoption is permitted. The Company does not expect this guidance to have a significant impact on its
financial statements and plans to adopt ASU No. 2017-04 in the first quarter of its fiscal year ending April 30, 2018.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition
of a Business,” which clarifies the definition of a business when evaluating whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. For public companies, this ASU is effective for annual
periods beginning after December 15, 2017, including interim periods within those periods. The Company plans to
adopt this ASU in the first quarter of its fiscal year ending April 30, 2019. The Company will apply the clarified
definition of a business, as applicable, from the period of adoption.

F-16

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE C - ALLOWANCE FOR DOUBTFUL ACCOUNTS

Changes in the Company’s allowance for doubtful accounts are as follows:

Beginning Balance

Bad debt expense

Write-offs

2017

100,000

2016
186,844
-
(86,844)
100,000

NOTE D - INVENTORIES

Inventories consist of the following at April 30:

2017

2016

Finished products
Work-in-process
Raw materials

Less obsolescence reserve

20,291,768
1,795,852
52,748,542
74,836,162
1,264,924
73,571,238

Changes in the Company’s inventory obsolescence reserve are as follows:

Beginning balance
Provision for obsolescence
Write-offs

2017

1,212,532
300,000
(247,608)
1,264,924

23,295,138
3,035,459
42,530,957
68,861,554
1,212,532
67,649,022

2016

1,276,386
-
(63,854)
1,212,532

F-17

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE E - RELATED PARTIES

In March, 2015, two of the Company’s executive officers invested in a start-up customer. The executive officers’
investments constitute less than 2% (individually and in aggregate) of the outstanding beneficial ownership of the
customer, according to information provided by the customer to the executive officers. As of April 30, 2017, the
Company had an outstanding note receivable and account receivable from that customer of approximately $888,000
and $1,271,000, respectively, compared to an outstanding note receivable and account receivable of approximately
$888,000 and $233,000, respectively, at April 30, 2016. As of April 30, 2017, inventory on hand related to this
customer approximated $310,000 compared to $1,600,000 at April 30, 2016. Sales to this customer have not been
material for fiscal year 2017.

On January 29, 2016, the Company entered into a memorandum of understanding with this customer. Under the
subsequent agreement, effective January 29, 2016, the then account receivable of approximately $888,000 was
converted into a short-term promissory note. The promissory note bears interest at the rate of 8% per annum, payable
at the maturity of the promissory note. The promissory note was scheduled to mature at the earlier of October 31,
2016, or within 10 days after the customer obtains certain equity financing, or at the closing of a sale of substantially
all of the customer’s stock or assets. As additional consideration, the Company received warrants under the agreement.
The warrants are ten years in duration and may be exercised at an exercise price of $0.01 per share and for a number
of shares determined pursuant to the warrant, expected to be, at a minimum, approximately 1% of the customer’s then
– outstanding equity securities. The Company believes the warrants have nil value. Further, the Company has been
granted a security interest in the customer’s accounts receivable and authority to access and be a signatory on the
customer’s deposit accounts.

On December 6, 2016 the Company extended the maturity of the promissory note to July 31, 2017. The promissory
note continues to bear interest at the rate of 8% per annum, payable monthly. As consideration, the Company received
additional warrants under the agreement, which the Company currently believes have nil value. Management
continues to assess whether the recorded accounts receivable, notes receivable and inventory are recoverable and
whether reserves are necessary. This assessment includes 1) the customer’s successful efforts to raise capital in the
past; 2) the status of the customer’s current progress in raising capital; and 3) orders that continue to come in from
large big-box and online customers. The Company further improved its priority position as a secured creditor in a
potential sale, liquidation or bankruptcy filing by or against the customer based on an amendment to the security
agreement executed by the Company and the customer. Based on these factors, the Company believes the accounts
receivable, notes receivable and inventory are recoverable as of April 30, 2017. However, in the event the customer
fails to raise additional capital in the short term, the Company may not receive payment in full of the obligations owed
by the customer or payments by the customer to the Company may be further delayed. The Company will continue to
monitor and assess any need to record a reserve against this obligation.

F-18

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE F - PROPERTY, MACHINERY AND EQUIPMENT, NET

Property, machinery and equipment consist of the following at April 30:

Land and buildings
Machinery and equipment
Office equipment and software
Leasehold improvements
Equipment under capital leases

Less accumulated depreciation
and amortization, including
amortization of assets under
capital leases of $2,940,833
and $1,972,085 at April 30,
2017 and 2016, respectively

Property, machinery and

equipment, net

2017

2016

16,969,769 $ 16,220,619
58,428,733
57,604,080
9,601,149
9,134,187
2,622,870
2,566,250
10,119,412
8,055,533

97,741,933

93,580,669

64,733,219

60,499,811

33,008,714 $ 33,080,858

Depreciation and amortization expense of property, machinery and equipment was $4,708,876 and $5,119,376 for
the years ended April 30, 2017 and 2016, respectively.

F-19

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE G - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

There were no changes in carrying amount of tax deductible goodwill in the amount of $3,222,899 for the fiscal years
ended April 30, 2017 and 2016.

Other Intangible Assets

Intangible assets subject to amortization are summarized as of April 30, 2017 as follows:

Weighted Average

Remaining

Amortization

Period (Years)

Gross

Carrying

Amount

Accumulated

Amortization

Other intangible assets – Able
Customer relationships – Able
Spitfire:

Non-contractual customer relationships
Backlog
Trade names
Non-compete agreements
Patents

Total

-
-

375,000 $

2,395,000

10.08
-
15.08
2.08
0.08

4,690,000
22,000
980,000
50,000
400,000
8,912,000 $

375,000
2,395,000

1,237,410
22,000
240,897
35,105
393,353
4,698,765

Intangible assets subject to amortization are summarized as of April 30, 2016 as follows:

Weighted Average

Remaining

Amortization

Period (Years)

Gross

Carrying

Amount

Accumulated

Amortization

Other intangible assets – Able
Customer relationships – Able
Spitfire:

Non-contractual customer relationships
Backlog
Trade names
Non-compete agreements
Patents

Total

-
-

375,000 $

2,395,000

11.08
-
16.08
3.08
1.08

4,690,000
22,000
980,000
50,000
400,000
8,912,000 $

375,000
2,395,000

883,540
22,000
191,901
27,965
313,349
4,208,755

F-20

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE G - GOODWILL AND OTHER INTANGIBLE ASSETS - Continued

Estimated aggregate amortization expense for the Company’s intangible assets, which become fully amortized in
2032, for the remaining fiscal years is as follows:

For the fiscal year ending April 30:
(cid:3)

(cid:3)

(cid:3)
2018
2019
2020
2021
2022
Thereafter

(cid:3)

(cid:3)
$

435,043
423,721
411,406
403,199
395,578
2,144,288
4,213,235

Amortization expense was $490,010 and $470,899 for the years ended April 30, 2017 and 2016, respectively.

In conjunction with the May 2012 acquisition of Spitfire, an estimate of the fair value of the contingent consideration,
$2,320,000, was recorded based on expected operating results through fiscal 2019 and the specific terms of when such
consideration would be earned. Those terms provide for additional consideration to be paid based on a percentage of
sales and pre-tax profits over those years in excess of certain minimums. Payments are made quarterly each year and
adjusted after each year-end audit. The Company made payments totaling $342,162 during fiscal year 2016. The
Company made payments totaling $273,672 during fiscal year 2017. During fiscal year 2017 the Company decreased
the estimated remaining payments expected to be paid under the agreement, which resulted in a decrease of $353,591
to the contingent consideration liability. Any change in the Company’s estimate is reflected as a change in the
contingent consideration liability and as additional charges or credits to selling and administrative expenses. As of
April 30, 2017, the contingent consideration liability was $523,818 compared to $1,151,081 at April 30, 2016.

F-21

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE H - LONG-TERM DEBT

Note Payable - Bank

Prior to March 31, 2017 the Company had a senior secured credit facility with Wells Fargo, N.A. with a credit limit
up to $30,000,000. The credit facility was collateralized by substantially all of the Company’s domestically located
assets and the Company had pledged 65% of its equity ownership interest in some of its foreign entities. Prior to its
payoff and termination, the Wells Fargo, N.A. senior secured credit facility was due to expire on October 31, 2018.
On March 31, 2017, the Company paid the balance outstanding under the senior credit facility in the amount of
$22,232,914. The remaining deferred financing costs of $68,475 were expensed in the fourth quarter of fiscal 2017.

On March 31, 2017, the Company entered into a $35,000,000 senior secured credit facility with U.S. Bank, N.A.,
which expires on March 31, 2022. The credit facility is collateralized by substantially all of the Company’s
domestically located assets. The facility allows the Company to choose among interest rates at which it may borrow
funds: the bank fixed rate of four percent or LIBOR plus one and one half percent (effectively 2.65% at April 30,
2017). Interest is due monthly. Under the senior secured credit facility, the Company may borrow up to the lesser of
(i) $35,000,000 or (ii) an amount equal to a percentage of the eligible receivable borrowing base plus a percentage of
the inventory borrowing base. Deferred financing costs of $207,647 were capitalized in the fourth quarter of fiscal
2017 and will be amortized over the term of the agreement. As of April 30, 2017, there was $23,178,429 outstanding
and $11,821,571 of unused availability under the U.S. Bank, N.A. facility compared to an outstanding balance of
$20,014,069 and $3,630,035 of unused availability under the Wells Fargo, N.A. senior credit facility at April 30, 2016.
At April 30, 2017, the Company was in compliance with its financial covenant and other restricted covenants under
the credit facility.

On August 4, 2015, the Company’s wholly-owned subsidiary, Wujiang SigmaTron Electronics Co., Ltd entered into
a credit facility with China Construction Bank. Under the agreement Wujiang SigmaTron Electronics Co., Ltd can
borrow up to 5,000,000 Renminbi and the facility is collateralized by Wujiang SigmaTron Electronics Co., Ltd.’s
manufacturing building. Interest is payable monthly and the facility bears a fixed interest rate of 6.67%. The facility
is due to expire on August 3, 2017. The credit facility was closed as of March 1, 2017. There was no outstanding
balance under the facility at April 30, 2017 or April 30, 2016.

On March 24, 2017, the Company’s wholly-owned subsidiary, SigmaTron Electronic Technology Co., Ltd entered
into a credit facility with China Construction Bank. Under the agreement SigmaTron Electronic Technology Co., Ltd
can borrow up to 9,000,000 Renminbi and the facility is collateralized by Wujiang SigmaTron Electronics Co., Ltd.’s
manufacturing building. Interest is payable monthly and the facility bears a fixed interest rate of 6.09%. The term of
the facility extends to February 7, 2018. There was no outstanding balance under the facility at April 30, 2017.

F-22

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE H - LONG-TERM DEBT - Continued

Notes Payable - Buildings

The Company entered into a mortgage agreement on January 8, 2010, in the amount of $2,500,000, with Wells Fargo,
N.A. to refinance the property that serves as the Company’s corporate headquarters and its Illinois manufacturing
facility. On November 24, 2014, the Company refinanced the mortgage agreement with Wells Fargo, N.A. The note
requires the Company to pay monthly principal payments in the amount of $9,500, bears an interest rate of LIBOR
plus two and one-quarter percent (effectively 3.25% at April 30, 2017) and is payable over a sixty - month period.
Final payment of approximately $2,289,500 is due on or before November 8, 2019. The outstanding balance was
$2,574,500 and $2,688,500 at April 30, 2017 and April 30, 2016, respectively.

The Company entered into a mortgage agreement on October 24, 2013, in the amount of $1,275,000, with Wells
Fargo, N.A. to finance the property that serves as the Company’s engineering and design center in Elgin, Illinois. The
Wells Fargo, N.A. note requires the Company to pay monthly principal payments in the amount of $4,250, bears
interest at a fixed rate of 4.5% per year and is payable over a sixty - month period. A final payment of approximately
$1,030,000 is due on or before October 24, 2018. The outstanding balance was $1,096,500 and $1,147,500 at April
30, 2017 and April 30, 2016, respectively.

Notes Payable - Equipment

On November 1, 2016, the Company entered into a secured note agreement with Engencap Fin S.A. DE C.V. to
finance the purchase of equipment in the amount of $596,987. The term of the agreement extends to November 1,
2021 with average quarterly payments of $35,060 beginning on February 1, 2017 and a fixed interest rate of 6.65%.
The balance outstanding under this note agreement was $567,138 at April 30, 2017.

On February 1, 2017, the Company entered into a secured note agreement with Engencap Fin S.A. DE C.V. to finance
the purchase of equipment in the amount of $335,825. The term of the agreement extends to February 1, 2022 with
average quarterly payments of $20,031 beginning on May 1, 2017 and a fixed interest rate of 7.35%. The balance
outstanding under this note agreement was $335,825 at April 30, 2017.

Capital Lease and Sale Leaseback Obligations

During 2010, the Company entered into various capital lease agreements with Wells Fargo Equipment Finance to
purchase equipment totaling $1,376,799. The terms of the lease agreements extend to July 2016 through October
2016 with monthly installment payments ranging from $3,627 to $13,207 and a fixed interest rate ranging from 4.41%
to 4.99%. At April 30, 2017, the balance outstanding under these capital lease agreements was $0 compared to
$106,767 in fiscal year 2016. The net book value of the equipment under these leases at April 30, 2017 was $589,524
compared to $703,424 at April 30, 2016.

From October 2013 through April 2017, the Company entered into various capital lease and sale leaseback agreements
with Associated Bank, National Association to purchase equipment totaling $6,240,562. The terms of the lease and
sale leaseback agreements extend to September 2018 through March 2022 with monthly installment payments ranging
from $1,455 to $40,173 and a fixed interest rate ranging from 3.75% to 4.95%. The balance outstanding under these
capital lease and sale leaseback agreements was $3,627,760 and $2,599,820 at April 30, 2017 and April 30, 2016,
respectively. The net book value of the equipment under these leases and sale leaseback agreements at April 30, 2017
was $4,713,044 compared to $3,224,661 at April 30, 2016.

From April 2014 through July 2015, the Company entered into various capital lease agreements with CIT Finance
LLC to purchase equipment totaling $2,512,051. The terms of the lease agreements extend to March 2019 through
July 2020 with monthly installment payments ranging from $1,931 to $12,764 and a fixed interest rate ranging from
5.65% through 6.50%. At April 30, 2017, the balance outstanding under these capital lease agreements was

F-23

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE H - LONG-TERM DEBT - Continued

Capital Lease Obligations - Continued

$1,448,269 compared to $1,886,069 in fiscal year 2016. The net book value of the equipment under these leases at
April 30, 2017 was $1,946,026 compared to $2,155,363 at April 30, 2016.

The aggregate amount of debt, net of deferred financing fees, maturing in each of the following fiscal years and
thereafter is as follows:

Fiscal Year

Total

2018
2019
2020
2021
(cid:3)
(cid:3)

$
(cid:3)

(cid:3)

(cid:3)
(cid:3)
351,562 (cid:3)
1,346,062 (cid:3)
2,533,062 (cid:3)
23,313,122 (cid:3)
27,543,808 (cid:3)
(cid:3)

(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)

See Note M - Leases, Page F-30 for future maturities under capital lease obligations.

Other Long-Term Liabilities

As of April 30, 2017 and 2016, the Company had recorded $991,017 and $870,542, respectively, for seniority
premiums and retirement accounts related to benefits for employees, $913,827 and $800,067 of which, respectively,
are for the Company’s foreign subsidiaries.

F-24

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE I - ACCRUED EXPENSES AND WAGES

Accrued expenses consist of the following at April 30:

Interest
Commissions
Professional fees
Other - Purchases
Other

2017

2016

90,639
143,738
419,801
1,418,120
1,550,808

3,623,106

61,350
80,819
397,375
491,027
1,741,730

2,772,301

Accrued wages consist of the following at April 30:

2017

2016

1,785,078
819,207
1,885,317

4,489,602

1,706,141
920,563
1,572,443

4,199,147

Wages
Bonuses
Foreign wages

(cid:3)

F-25

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE J - INCOME TAX

U.S. and foreign income before income tax expense for the years ended April 30 are as follows:

2017

2016

1,326,266
1,171,417

2,497,683

2,224,802
1,260,394

3,485,196

Domestic
Foreign

Income Tax Provision

The income tax provision for the years ended April 30 consists of the following:

Current
Federal
State
Foreign
Total Current

Deferred
Federal
State
Foreign
Total Deferred

2017

2016

501,226
13,697
589,913
1,104,836

(54,213)
59,884
(3,030)
2,641

279,043
29,217
318,800
627,060

577,149
65,451
132,877
775,477

Provision for income taxes

1,107,477

1,402,537

F-26

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE J - INCOME TAX - Continued

Income Tax Provision - Continued

The difference between the income tax provision and the amounts computed by applying the statutory Federal
income tax rates to income before tax expense for the years ended April 30 are as follows:

U.S Federal Provision:
At statutory rate
State taxes
Change in valuation allowance
Foreign tax differential
Impact of state tax rate change
Foreign valuation allowance
Other
Foreign currency exchange gain/loss
Impact of foreign permanent items
Foreign inflation adjustment

2017

2016

849,215
42,643
78,100
(89,885)
5,920
-
(52,219)
328,239
7,171
(61,707)

1,184,967
117,922
(46,615)
(94,124)
(8,826)
(48,680)
42,850
311,867
(20,056)
(36,768)

Provision for income taxes

1,107,477

1,402,537

F-27

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE J - INCOME TAX - Continued

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the deferred tax assets for federal and state income taxes are as follows:

Deferred Tax Assets
Federal & State NOL carryforwards
Foreign tax credit
Reserves and accruals
Stock based compensation
Inventory
Other intangibles
Deferred rent
Allowance for doubtful accounts
Other DTA
Federal benefit of state
Total Gross Deferred Tax Assets
Less: Valuation allowance

Net Deferred Tax Assets

Deferred Tax Liabilities
Other assets
Property, machinery & equipment
Prepaids
Total Deferred Tax Liabilities

Net Deferred Tax Liability

2017

2016

29,168
78,100
723,313
462,156
1,177,067
206,736
211,509
38,360
13,839
45,589
2,985,837
(78,100)

85,288
-
615,431
244,199
1,074,546
203,789
240,439
38,150
8,902
25,228
2,535,972
-

2,907,737

2,535,972

(318,830)
(3,441,393)
(272,718)
(4,032,941)

(1,125,204)

(113,665)
(3,273,902)
(270,968)
(3,658,535)

(1,122,563)

The Company has state net operating loss carry-forwards totaling approximately $336,000 at April 30, 2017, that will
begin to expire in fiscal year April 30, 2025. The Company recognizes a valuation allowance if, based on the weight
of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized.
The Company determined it is more likely than not that it will realize the deferred tax assets due to the reversal of
deferred tax liabilities. The state deferred tax liabilities exceed the state deferred tax assets and based on the reversing
pattern the Company has concluded that all of the state deferred tax liabilities are expected to reverse within the period
of time available to fully utilize all state deferred tax assets. Therefore, the Company has concluded that a valuation
allowance is not required as of April 30, 2017, related to state net operating loss carryforwards. The Company has
established a valuation allowance of $78,100 related to its foreign tax credit carry-forward. The Company’s estimate
of cumulative taxable income during the foreign tax credit carryforward period is insufficient to support that the tax
benefit from the foreign tax credit is more likely than not to be realized.

F-28

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE J - INCOME TAX - Continued

Deferred Tax Assets and Liabilities - Continued

The Company has not recorded U.S. income taxes on the undistributed earnings of the Company’s foreign subsidiaries.
Such earnings are considered to be indefinitely invested in the foreign subsidiaries. If such earnings were repatriated,
additional tax expense may result. The cumulative amount of unremitted earnings for which U.S. income taxes have
not been recorded is $10,672,000 as of April 30, 2017. The amount of U.S. income taxes on these earnings is
impractical to compute due to the complexities of the hypothetical calculation.

Unrecognized Tax Benefits

The Company has not identified any uncertain tax positions or expects any to be taken in the Company’s tax returns.
For the fiscal year ended April 30, 2017 and 2016, the amount of consolidated worldwide liability for uncertain tax
positions that impacted the Company’s effective tax rate was $0 for each year.

Other

Interest and penalties related to tax positions taken in the Company’s tax returns are recorded in income tax expense
and miscellaneous selling, general and administrative expense, respectively, in the Consolidated Statements of
Income. For the fiscal year ended April 30, 2017 and 2016, the amount included in the Company’s balance sheet for
such liabilities was $0 for each year.

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. With few exceptions, the
Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before fiscal year
2014. The Internal Revenue Service previously concluded an audit of the Company’s fiscal year 2013 tax return, and
a no change letter was issued.

NOTE K - 401(k) RETIREMENT SAVINGS PLAN

The Company sponsors 401(k) retirement savings plans, which are available to all non-union U.S. employees. The
Company may elect to match participant contributions up to $300 per participant annually. The Company contributed
$91,686 and $75,448 to the plans during the fiscal years ended April 30, 2017 and 2016, respectively. The Company
incurred total expenses of $8,000 and $13,460 for the fiscal years ended April 30, 2017 and 2016, respectively, relating
to costs associated with the administration of the plans.

F-29

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE L - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of
uncollateralized accounts receivable. For the year ended April 30, 2017, two customers accounted for 26.7% and
12.6% of net sales of the Company, and 8.4% and 4.2%, respectively, of accounts receivable at April 30, 2017. For
the year ended April 30, 2016, two customers accounted for 35.2% and 10.6% of net sales of the Company and 6.5%
and 2.4%, respectively, of accounts receivable at April 30, 2016. Further, the Company has $2,002,058 in cash in
China as of April 30, 2017. Effective May 1, 2015, China implemented a deposit insurance program to insure up to
approximately $81,000 in deposits, under certain circumstances. Funds above this amount are not insured by a
guaranteed deposit insurance system.

NOTE M - LEASES

The Company leases certain facilities and office space under various operating leases expiring at various dates
through April 2022. The Company also leases various machinery and equipment under capital leases.

Future minimum lease payments under leases with terms of one year or more are as follows:

Years ending April 30,

2018
2019
2020
2021
2022

Capital
Leases

Operating
Leases

1,913,369
1,670,444
1,055,860
632,758
220,221

2,296,427
2,070,622
1,263,854
774,976
100,470

Total future minimum lease payments

5,492,652

6,506,349

Less amounts representing interest

Less Current Portion

Long Term Portion

416,623

5,076,029

1,711,204

3,364,825

F-30

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE M - LEASES - Continued

Rent expense incurred under operating leases was $2,363,778 and $2,258,359 for the years ended April 30, 2017 and
2016, respectively.

In September 2010, the Company entered into a real estate lease agreement in Union City, CA, to rent approximately
117,000 square feet of manufacturing and office space. Under the terms of the lease agreement, the Company receives
incentives over the life of the lease, which extends through March 2021. The amount of deferred rent income recorded
for the fiscal year ended April 30, 2017 was $79,575 compared to $51,509 in fiscal year 2016. In addition, the landlord
provided the Company tenant incentives of $418,000, which are being amortized over the life of the lease. The balance
of deferred rent at April 30, 2017 was $550,672 compared to $630,247 at April 30, 2016.

On May 31, 2012, the Company entered into a lease agreement in Tijuana, Mexico, to rent approximately 112,000
square feet of manufacturing and office space. Under the terms of the lease agreement, the Company receives
incentives over the life of the lease, which extends through November 2018. The amount of deferred rent income for
the fiscal year ended April 30, 2017 was $127,967 compared to $115,837 in fiscal year 2016. The balance of deferred
rent at April 30, 2017 was $224,964 compared to $352,931 at April 30, 2016.

NOTE N - STOCK COMPENSATION AND EQUITY TRANSACTIONS

The Company has stock option plans (“Option Plans”) under which certain employees and non-employee directors
may acquire shares of common stock. All Option Plans have been approved by the Company’s shareholders. At April
30, 2017, the Company has 117,914 shares available for future issuance to employees under the employee plans and
none are available under the non-employee director plans. The Option Plans are interpreted and administered by the
Compensation Committee of the Board of Directors. The maximum term of options granted under the Option Plans
is generally 10 years. Options granted under the Option Plans are either incentive stock options or nonqualified
options. Each option under the Option Plans is exercisable for one share of stock. Options forfeited under the Option
Plans are available for reissuance. Options granted under these plans are granted at an exercise price equal to the fair
market value of a share of the Company’s common stock on the date of grant.

The Company granted 25,000 options to employees in fiscal year 2014. The Company recognized approximately
$3,500 and $18,100 in compensation expense in fiscal year 2017 and 2016, respectively. The balance of unrecognized
compensation expense at April 30, 2017 is $0.

The Company granted 285,000 options to employees in fiscal year 2016. The Company recognized approximately
$325,700 and $556,400 in compensation expense in fiscal year 2017 and 2016, respectively. The balance of
unrecognized compensation expense at April 30, 2017 is approximately $83,700.

On October 1, 2016 and 2015, the Company issued 11,250 and 10,000 shares of restricted stock pursuant to the 2013
Non-Employee Director Restricted Stock Plan, which fully vested on April 1, 2017 and 2016, respectively. The
Company recognized $60,649 and $69,400 in compensation expense in fiscal year 2017 and 2016, respectively. The
balance of unrecognized compensation expense related to the Company’s restricted stock award was $0 and $0 at
April 30, 2017 and 2016, respectively.

F-31

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE N - STOCK COMPENSATION AND EQUITY TRANSACTIONS - Continued

The table below summarizes option activity through April 30, 2017:

Number of
securities to be
issued upon
exercise of
outstanding options
85,954
285,000
(2,000)
(991)
367,963
(1,200)
366,763 $

Weighted-
average
exercise
price

3.81
6.45
3.60
9.17
5.84
3.60
5.85

Number of
options
exercisable
at end
of year

76,954

172,513

269,863

Outstanding at April 30, 2015
Options granted during 2016
Options exercised during 2016
Options expired during 2016
Outstanding at April 30, 2016
Options exercised during 2017
Outstanding at April 30, 2017

Intrinsic value is calculated as the positive difference between the market price of the Company’s common stock and
the exercise price of the underlying options. During the fiscal years ended April 30, 2017 and 2016, the aggregate
intrinsic value of options exercised was $2,172 and $5,100, respectively. As of April 30, 2017 and 2016, the aggregate
intrinsic value of in the money options outstanding was $135,151 and $198,715, respectively.

Information with respect to stock options outstanding at April 30, 2017 follows:

Options outstanding

Number
outstanding at
April 30, 2017

Weighted-average
remaining
contract life

Weighted-
average
exercise price

Range of exercise prices

$3.60-6.45

366,763

7.64 years

366,763

F-32

5.85

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE N - STOCK COMPENSATION AND EQUITY TRANSACTIONS - Continued

Information with respect to stock options outstanding and exercisable at April 30, 2017 follows:
(cid:3)

(cid:3)

Options outstanding and exercisable

Number
outstanding at
April 30, 2017

Weighted-average
remaining
contract life

Weighted-
average
exercise price

Range of exercise prices

$3.60-6.45

269,863

7.41 years

(cid:3)

269,863
(cid:3)

(cid:3)

Information with respect to stock options non-vested at April 30, 2017 follows:

(cid:3)

5.63

(cid:3)

Options non-vested

Number
non-vested at
April 30, 2017

Weighted-average
remaining
contract life

Weighted-
average
exercise price

Range of exercise prices

$6.45

96,900

8.26 years

(cid:3)

96,900
(cid:3)

(cid:3)

6.45

The Company implemented an employee stock purchase plan (“ESPP”), for all eligible employees on February 1,
2014. Under the ESPP, employees may purchase shares of the Company’s common stock at three-month intervals at
85% of the lower of the fair market value of the Company’s common stock on the first day or the last day of the
offering period (calculated in the manner provided in the plan). Employees purchase such stock using payroll
deductions, which may not be less than 1% nor exceed 15% of their total gross compensation. Shares of common
stock are offered under the ESPP through a series of successive offering periods. The plan imposes certain limitations
upon an employee’s right to acquire common stock, including the following: (i) termination of employment for any
reason immediately terminates the employee’s participation in the plan (ii) no employee may be granted rights to
purchase more than $25,000 worth of common stock for each calendar year that such rights are at any time outstanding,
and (iii) the maximum number of shares of common stock purchasable in total by all participants in the ESPP on any
purchase date is limited to 500,000 shares. The number of shares of common stock reserved for issuance under the
plan automatically increases on the first day of the Company’s fiscal years by 25,000 shares. The ESPP was terminated
effective August 15, 2016. Final purchases under the ESPP were completed on August 31, 2016. There were 1,658
and 9,670 shares issued under the ESPP and the Company recorded $3,559 and $13,728 in compensation expense, for
fiscal years ended April 30, 2017 and 2016, respectively.

F-33

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE N - STOCK COMPENSATION AND EQUITY TRANSACTIONS - Continued

On October 1, 2015, the Company granted 2,000 shares to each non-employee director pursuant to the 2013 Non-
Employee Director Restricted Stock Plan. A total of 10,000 restricted shares were granted and the shares vest in six
months from the date of grant. The Company recognized $69,400 in compensation expense in fiscal year 2016. There
was no unrecognized compensation expense related to the 10,000 shares of restricted stock at April 30, 2016.

On May 1, 2015, the Company sold 74,000 shares of its common stock to three individual investors in a private
offering, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), at $7.00 per
share, representing an approximate average of the market price of the Company’s common stock in the public market
during the immediately preceding thirty day period. The transaction resulted in $518,000 of proceeds from the sale
of restricted stock. The stock was unregistered and may be sold only upon registration or the availability of an
exemption from registration under the Securities Act.

F-34

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE O - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly financial data for fiscal year 2017:

2017

Net sales

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$ 58,919,398 $ 65,842,957 $ 61,896,226 $ 65,577,213

Gross profit (1)

5,504,657

5,502,040

5,419,018

7,615,212

Income before income
tax expense (1), (2), (3)

226,858

26,616

89,036

2,155,173

Net income (loss)

146,597

33,295

(47,852)

1,258,166

Earnings per share
Basic

Earnings per share
Diluted

0.03 $

0.01 $

(0.01) $

0.30

0.03 $

0.01 $

(0.01) $

0.30

Weighted average shares- Basic

4,183,955

4,185,752

4,186,813

4,188,279

Weighted average shares- Diluted

4,214,535

4,225,874

4,215,962

4,209,516

1.) Due to a fire at one of the Company’s plants during 2017, the Company recorded expense of approximately
$230,000 in prior quarters in costs of goods sold that was realized as an insurance recovery during the fourth
quarter of 2017 as recovery was considered probable. As part of this settlement, a gain of approximately
$277,000 was also recorded in the fourth quarter of fiscal 2017 due to the insurance claim exceeding the net
book value of the replacement machinery and equipment destroyed.

2.) The Company records inventory reserves for valuation and shrinkage throughout the year based on historical
data. In the fourth quarter of fiscal 2017 physical inventory results were completed and the Company adjusted
the estimate which increased income before income tax expense by approximately $780,000.

3.) As discussed in Note G, during the fourth quarter of fiscal 2017 the Company recorded a change in estimate
related to Contingent Consideration which increased income before income tax expense in the amount of
approximately $247,000.

The aggregate after-tax effect for the above adjustments in the fourth quarter of fiscal 2017 was an increase to basic
earnings per share of $0.21.

F-35

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE O - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued

The following is a summary of unaudited quarterly financial data for fiscal year 2016:

2016

Net sales

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

$ 64,220,946 $ 69,723,493 $ 59,206,344 $ 60,753,363

Gross profit

6,230,274

7,597,013

5,708,096

5,983,148

Income before income
tax expense

962,323

1,857,036

377,599

288,238

Net income

658,806

1,156,298

218,728

48,827

Earnings per share
Basic

Earnings per share
Diluted

0.16 $

0.28 $

0.05 $

0.01

0.16 $

0.27 $

0.05 $

0.01

Weighted average shares- Basic

4,148,285

4,166,758

4,170,193

4,174,251

Weighted average shares- Diluted

4,193,657

4,214,317

4,229,378

4,208,184

NOTE P - LITIGATION

On October 25, 2011, Maria Gracia, a former employee of the Company, filed suit against the Company in the U.S.
District Court for the Northern District of Illinois under Title VII of the Civil Rights Act, alleging among other things
sexual harassment and retaliation.

In December 2014, a jury found for the Company on the sexual harassment claim but found for the plaintiff on her
retaliation claim and awarded her damages totaling $307,000. In post-trial motions, the judge reduced the verdict to
$300,000. Subsequently, on September 17, 2015, the court ruled on plaintiff’s Claim for Equitable Relief, awarding
the plaintiff an additional $74,478. The Company accrued $375,000 in fiscal year 2016 in recognition of the judgment
entered against the Company.

On October 16, 2015, the Company appealed the judgment to the Seventh Circuit Court of Appeals. On November
23, 2016, the U.S. District Court ruled that the plaintiff is entitled to an award for costs and attorneys’ fees. The
expense was accrued in the second fiscal quarter of 2017. On November 29, 2016, the Seventh Circuit Court of
Appeals affirmed the judgment of the U.S. District Court entered against the Company in December 2014. On January
30, 2017, the Company and Ms. Gracia settled the suit by entering into a confidential settlement and release
agreement. In the third fiscal quarter of 2017, the Company accrued an additional amount in connection with the
settlement. The Company accrued and paid $436,124 in fiscal year 2017 in conjunction with the lawsuit.

F-36

SigmaTron International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
April 30, 2017 and 2016

NOTE P - LITIGATION - Continued

As of April 30, 2017, all expenses for the settlement have been fully expensed and paid.

From time to time the Company is involved in legal proceedings, claims, or investigations that are incidental to the
Company’s business. In future periods, the Company could be subjected to cash cost or non-cash charges to earnings
if any of these matters are resolved on unfavorable terms. However, although the ultimate outcome of any legal matter
cannot be predicted with certainty, based on present information, including management’s assessment of the merits
of any particular claim, the Company does not expect these legal proceedings or claims will have any material adverse
impact on its future consolidated financial position or results of operations.

F-37

GROWTH: EMS MARKET WORLDWIDE

201 5

2020

$430B $580B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▲ . . . . . . . . . . . . . . .
Source: New Venture Research Corp., 2017.

GROWTH: FITNESS EQUIPMENT MARKET

201 4

2019

$I48B $206B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▲ . . . . . . . . . . . . . . .
Source: MarketsandMarkets.com™, 2017.

GROWTH: MEDICAL EQUIPMENT MARKET

201 7

2022

$I0B

$14B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▲ . . . . . . . . . . . . . . . .
Source: MarketsandMarkets.com™, 2017.

GROWTH: GLOBAL GAMES MARKET*

201 6

2020

$I0IB

$I29B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▲ . . . . . . . . . . . . . . . .
Source: NewZoo, Q2 2017 Quarterly Update, Global Games Market Report.
* Note: Statistics shown encompass all market categories and delivery systems, including
those outside the lottery and casino gaming markets that SigmaTron serves.

ALL REVENUES IN USD.

Firm: Ackerly Communications, LLC Copywriting/Art Direction: Mary Ackerly Design: Lisa Romanowski Proofreading: Deborah Livingstone Printer: Dreamworks GC, LLC

GROWTH IN MARKETS SERVEDGROWTH IN MARKETS SERVEDCORPORATE OFFICES SigmaTron International, Inc.
2201 Landmeier Road, Elk Grove Village, IL 60007
Tel 847.956.8000
Fax 847.956.9801

INVESTOR RELATIONS 800.700.9095
www.sigmatronintl.com

OFFICERS

Gary R. Fairhead*
Chairman of the Board,
President and
Chief Executive Officer

Linda K. Frauendorfer*
Chief Financial Officer,
Vice President, Finance,
Treasurer and Secretary

Gregory A. Fairhead*
Executive Vice President
and Assistant Secretary

John P. Sheehan*
Vice President,
Director of Supply Chain
and Assistant Secretary

Daniel P. Camp*
Vice President,
Acuña Operations

Rajesh B. Upadhyaya*
Executive Vice President,
West Coast Operations

Hom-Ming Chang*
Vice President,
China Operations

Curtis W. Campbell
Vice President of Sales,
West Coast Operations

James E. Barnes
Vice President of Operations,
Elk Grove Village

Yousef M. Heidari
Vice President,
Engineering

Donald G. Madsen
Vice President,
Customer Service
Union City Operations

Dennis P. McNamara
Vice President,
Engineering

Thomas F. Rovtar
Vice President,
Information Technology

Keith D. Wheaton
Vice President,
Business Development
West Coast Operations

*Executive Officers

BOARD OF DIRECTORS

Gary R. Fairhead
Chairman of the Board,
President and Chief
Executive Officer,
SigmaTron International, Inc.

Linda K. Frauendorfer
Chief Financial Officer,
Vice President, Finance,
Treasurer and Secretary
SigmaTron International, Inc.

Thomas W. Rieck 1,3
Partner,
Rieck and Crotty, P.C.

Dilip S. Vyas 2,3,4
Independent Consultant

Paul J. Plante 1,2
President and Owner
Florida Fresh Vending, LLC

CORPORATE INFORMATION

Bruce J. Mantia2
Retired Partner
Ernst & Young LLP

Barry R. Horek1,3
Retired Partner
Ernst & Young LLP

1 Member of the Audit Committee

2 Member of the
Compensation Committee

3 Member of the

Nominating Committee

4 Lead Director

SEC Counsel
Greenberg Traurig, LLP
77 West Wacker Drive
Chicago, Illinois 60601

Corporate Counsel
Howard & Howard
Attorneys PLLC
200 South Michigan Avenue
Chicago, Illinois 60604

Independent
Public Accountants
BDO USA, LLP
330 North Wabash Avenue
Chicago, Illinois 60611

Form 10-K
If you would like a free copy of
the Form 10-K report filed with
the Securities and Exchange
Commission, please call Linda K.
Frauendorfer at the SigmaTron
corporate office, 1.800.700.9095.

Stock Transfer Agent
and Registrar
American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219

Stock Information
The Company’s common stock
has been trading on the Nasdaq
System under the symbol SGMA
since the Company’s initial public
offering in February 1994.

The Company has 4 million
shares of common stock
outstanding.

The Company has not paid
cash dividends on its common
stock since completing its
February 1994 initial public
offering and does not intend
to pay any dividends in the
foreseeable future.