SigmaTron International, Inc. - 2006 Annual Report

To Our Stockholders,

Fiscal 2006 was a year in which SigmaTron accomplished several noteworthy objectives that will be important to our long-term results. Although we remained profitable for the year, unfortunately our profits declined when compared with 'our prior three years' results.

One of the factors that negatively impacted fiscal 2006 profits was our July 1, 2005, acquisition of Able Electronics Corporation (Able). While Able's effect on our profits was disappointing, the acquisition did accomplish the following objectives for SigmaTron:

The acquisition helped us to continue to diversify our customer base and the markets we serve, which was and continues to be one of our top priorities.
With Able, we acquired a strong group of customers that stayed on and are looking to grow their business with us, in part due to our international footprint.
We strengthened our international footprint via the acquisition—the addition of Able's operation in Tijuana represents our second location in Mexico.
We acquired Able's operation in Hayward, California into which we consolidated our Fremont, California, operation.

It remains our belief that the Able acquisition has strengthened our Company's position for long-term viability and success. As we grow our Tijuana facility to take advantage of production efficiencies in our West Coast operations, we believe we will attain the profitablity in those operations that we initially anticipated. During fiscal 2006, we sold our Las Vegas operation to Grand Products, Inc., the proceeds of which were used to assist in the Able acquisition.

During fiscal 2006, each of our operations was certified to produce assemblies compliant with RoHS, the restriction on hazardous substances policay that became effective July 2006 in the European Union. Each operation currently is producing RoHS-compliant assemblies for those customers that require them. This is an important achievement as failure to reach this milestone could have resulted in a loss of business or customers. Instead we attracted several new customers by becoming RoHS-certified well ahead of the deadline.

The following is an update on our operations and plans:

Elk Grove Village, Illinois: We continued to make financial progress at our Elk Grove Village location in fiscal 2006. Our customer base is slowly becoming more diverse and revenue is growing. Our short term plans include investing to improve our capacity and technology level at this location.

Acuña, Mexico, and Del Rio, Texas: Acuña remains our largest operation in terms of employees and revenue and continues to perform well. We have added new customers there and revenues are increasing. We will be studying the possibility of increasing the size of our Acuña plant in 2007.

Suzhou-Wujiang, China: Our Wujiang operation delivered excellent results in fiscal 2006, its second year of operations. Challenges going forward for this location include attracting and retaining a solid management team, and growing and diversifying its customer base. We continue to believe that China will be a key location in our industry for years to come, which makes our Wujiang location very important to our growth plans.

Hayward, California: After the acquisition of Able, one of our first steps was to consolidate our Fremont operation with Hayward, where Able was headquartered and located. That was accomplished March 31, 2006 and should lead to economies of scale for both operations in 2007. Fremont had an excellent year, but Hayward did not. We expect that transitioning certain Hayward customers to Tijuana plus the consolidation of Fremont with Hayward will lead to positive financial results for those locations in 2007.

Tijuana, Mexico: Tijuana lost money in fiscal 2006. To grow volume and improve profits, we have added to the staff, increased its space and are in the process of transitioning several customers from Hayward to Tijuana. We fully expect that this will contribute to positive results for Tijuana in 2007.

Taipei, Taiwan: Our international purchasing office in Taipei continued to serve us well. Raw material costs continue to be critical to our performance and we believe our branch continues to provide us leverage and a competitive advantage compared to our domestic competitors. We have started to increase our staff in Taipei, which now totals 15.

Our industry is facing continuing margin pressures. Recently we have seen the demand for commodities such as oil (for plastics), copper (for raw printed circuit boards and transformers) and precious metals (for integrated circuits and chips) increase dramatically as well as increasing lead times. Both factors will represent short-term challenges for our customers and us and could negatively impact our results in the near term.

On a positive note, we continue to see increased interest in our international footprint. The addition of our second Mexican operation was timely—we have found that our customers increasingly view Mexico as a desireable supply chain location. Absent an economic downturn, we believe our footprint is an attribute that positions us well to grow revenues in fiscal 2007.

We thank you for your confidence in SigmaTron. As always, we will continue to work to justify that confidence.

Sincerely,

Gary R. Fairhead

President and Chief Executive Officer

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, 2006.

[ ] 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 36-3918470
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)

2201 Landmeier Rd., Elk Grove Village, IL 60007
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 847-956-8000

Securities registered pursuant to Section 12(g) of the Act:

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] 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. [ ] Yes [X] 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. [X] Yes [ ] 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. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Securities Exchange
Act of 1934.

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]

Indicate by check mark whether registrant is a shell company (as defined in Rule
12b-2 of the Act. [ ] Yes [X] No

The aggregate market value of the voting common equity held by non-affiliates of
the registrant as of October 31, 2005 (the last business day of the registrant's
most recently completed second fiscal quarter) was $27,226,795 based on the
closing sale price of $7.25 per share as reported by Nasdaq Capital Market as of
such date.

The number of outstanding shares of the registrant's Common Stock, as of
July 14, 2006, was 3,786,956.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the definitive proxy statement of SigmaTron
International, Inc., for use in connection with its 2006 annual meeting of
stockholders, which will be filed within 120 days of the fiscal year ended
April 30, 2006, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS ...................................................... 4
ITEM 1A. RISK FACTORS .................................................. 10
ITEM 1B. UNRESOLVED STAFF COMMENTS ..................................... 14
ITEM 2. PROPERTIES .................................................... 14
ITEM 3. LEGAL PROCEEDINGS ............................................. 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ........... 16

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ........... 16
ITEM 6. SELECTED FINANCIAL DATA ....................................... 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .................................. 17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .... 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................... 25
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ....................................... 25
ITEM 9A. CONTROLS AND PROCEDURES ....................................... 25
ITEM 9B. OTHER INFORMATION ............................................. 26

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ............ 26
ITEM 11. EXECUTIVE COMPENSATION ........................................ 26
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS ............................ 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ................ 26
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ........................ 26

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .................... 27

SIGNATURES ................................................................ 30

PART 1

ITEM 1. BUSINESS

CAUTIONARY NOTE:

In addition to historical financial information, this discussion of the business
of SigmaTron International, Inc., its wholly owned subsidiaries Standard
Components de Mexico S.A., and AbleMex S.A. de C.V., its wholly owned foreign
enterprise Wujiang SigmaTron Electronics Co., Ltd. ("SigmaTron China"), and its
procurement branch SigmaTron Taiwan 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,"
"will," "expects," "believe," "plans," and similar expressions identify
forward-looking statements. These forward-looking statements are based on the
current expectations of management 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 our continued dependence on certain significant customers; the
continued market acceptance of products and services offered by the Company and
its customers; pricing pressures from our 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
variability of our customers' requirements; the availability and cost of
necessary components and materials; the Company's ability to continue to produce
products that are in compliance with the European Standard of "Restriction of Use
of Hazardous Substance ("RoHS") by mid-2006; the ability of the Company and our
customers to keep current with technological changes within our industries;
regulatory compliance; the continued availability and sufficiency of our credit
arrangements; changes in U.S., Mexican, Chinese or Taiwanese regulations
affecting the Company's business; the continue stability of the U.S., Mexican,
Chinese and Taiwanese economic systems, labor and political conditions; and the
ability of the Company to manage its growth, including its expansion into China
and its integration of the Able Electronics Corporation ("Able") operation
acquired in July 2005. 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 risk factors contained herein and 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 this report and
the Company undertakes no obligation to update such statements in light of
future events or otherwise.

OVERVIEW

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) design,
manufacturing and test engineering support; (4) warehousing and shipment
services; and (5) 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 North America, China
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, life sciences, semiconductor, telecommunications and automotive

During August and September 2004 the Company acquired all the interests of the
outside investors in its affiliate, SMT Unlimited L.P. ("SMTU"), and the general
partner of SMTU, SMT Unlimited, Inc. On October 1, 2004, SMT Unlimited, Inc. was
merged into the Company, and SMTU was liquidated, thereby

becoming an operating division of the Company. Prior to the acquisition by the
Company, SMTU was consolidated under FASB Interpretation No. 46 ("FIN46R")
Consolidation of Variable Interest Entities.

In July 2005 the Company closed on the purchase of all of the outstanding stock
of Able, a company headquartered in Hayward California and its wholly owned
subsidiary, AbleMex S.A. de C.V., located in Tijuana, Mexico. Able is an ISO
9001:2000 certified EMS company serving Original Equipment Manufacturers in the
life sciences, telecommunications and industrial electronics industries. The
acquisition of Able has allowed the Company to make strides towards achieving
four objectives: (1) to further diversify its markets, capabilities and customer
base, (2) adding a third low-cost manufacturing facility in Tijuana, Mexico,
(3) creating an opportunity to consolidate the California operations into one
facility, and (4) to generate incremental revenue from Able's customers as they
become familiar with the Company's broader array of services. The effective date
of the transaction was July 1, 2005. Able was merged into the Company beginning
in November 2005 and operates as a division of the Company. The purchase price
was approximately $16,800,000 and was recorded as a stock purchase transaction
in the first quarter of fiscal year 2006. The transaction was financed by the
Company's amended credit facility and resulted in an increase of approximately
$8,500,000 in goodwill.

In June 2005 the Company closed on the sale of its Las Vegas, Nevada operation.
The Las Vegas facility operated as a complete EMS center specializing in the
assembly of electronic products and cables for a broad range of customers
primarily in the gaming industry. The effective date of the transaction was
May 30, 2005. The transaction was structured as an asset purchase, and included
a $2,000,000 cash payment to the Company for the buyer's purchase of the
machinery, equipment and other assets of the Las Vegas operation. The
transaction was recorded by the Company in the first quarter of fiscal year 2006
and included a gain on the transaction of approximately $311,000. The gain was
offset by a loss of approximately $383,000 from discontinued operations for the
Las Vegas operation for the period ended April 30, 2006.

The Company operates manufacturing facilities in Elk Grove Village, Illinois;
Hayward, California; Acuna and Tijuana, Mexico; and Wujiang, China. The Company
maintains materials sourcing offices in Elk Grove Village, Illinois; Hayward,
California; and Taipei, Taiwan. The Company provides warehousing services in
Del Rio, Texas and Huntsville, Alabama.

The Company 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.

PRODUCTS AND SERVICES

The Company provides a broad range of manufacturing related outsourcing
solutions for its customers on both a turnkey basis (material purchased by the
Company) and consignment basis (material provided by the customer). These
solutions incorporate the Company's knowledge and expertise in the EMS industry
to provide its customers with advanced manufacturing technologies and high
quality, responsive and flexible manufacturing services. The Company's EMS
solutions provide services from product inception through the ultimate delivery
of a finished good. Such technologies and services include the following:

Supply Chain Management. The Company is primarily a turnkey manufacturer and
directly sources all, or a substantial portion, of the components necessary for
its product assemblies, rather than receiving the raw materials from its
customers on consignment. Turnkey services involve a greater investment in
resources and an increased inventory risk compared to consignment services.
Supply chain management includes the purchasing, management, storage and
delivery of raw components required for the manufacture or assembly of a
customer's product based upon the customer's orders. The Company procures
components from a select group of vendors which meet its standards for timely
delivery, high quality and cost effectiveness, or as directed by its customers.
Raw materials used in the assembly and manufacture of printed circuit boards
and electronic assemblies are generally available from several suppliers,
unless restricted by the customer. The Company does not enter into purchase
agreements with the majority of its major or single-source suppliers. The
Company believes ad-hoc negotiations with its suppliers provides the
flexibility needed to source inventory based on the needs of its customers.

The Company believes that its ability to source and procure competitively
priced, quality components is critical to its ability to effectively compete.
In addition to obtaining materials in North America, the Company uses its
Taiwanese procurement office and agents to source materials from the Far East.
The Company believes this office allows it to more effectively manage its
relationships with key suppliers in the Far East by permitting it to respond
more quickly to changes in market dynamics, including fluctuations in price,
availability and quality.

Assembly and Manufacturing. The Company's core business is the assembly of
printed circuit boards through the automated and manual insertion of components
on to raw printed circuit boards. The Company offers its assembly services using
both pin-through-hole ("PTH") and surface mount ("SMT") interconnect
technologies at all of its manufacturing locations. SMT is an assembly process
which allows the placement of a higher density of components directly on both
sides of a printed circuit board. The SMT process is an advancement over the
mature PTH technology, which normally permits electronic components to be
attached to only one side of a printed circuit board by inserting the component
into holes drilled through the board. The SMT process allows original equipment
manufacturers ("OEMs") to use advanced circuitry, while at the same time
permitting the placement of a greater number of components on a printed circuit
board without having to increase the size of the board. By allowing increasingly
complex circuits to be packaged with the components in closer proximity to each
other, SMT greatly enhances circuit processing speed, and thus, board and system
performance.

The Company performs PTH assembly both manually and with automated component
insertion and soldering equipment. Although SMT is a more sophisticated
interconnect technology, the Company intends to continue providing PTH assembly
services for its customers as the Company's customers continue to require both
PTH and SMT capabilities. The Company is also capable of assembling fine pitch
and ball grid array ("BGA") components. BGA is used for more complex circuit
boards required to perform at higher speeds.

Manufacturing and Related Services. The Company offers The Restriction of Use of
Hazardous Substances ("RoHS") compliant assembly services in order to comply
with the European Union environmental mandate that became effective Mid-2006 and
is currently performing RoHS compliant assembly services at each of its
manufacturing locations. The Company also provides quick turnaround, turnkey
prototype services at all of its locations. In Elk Grove Village, the Company
offers touch screen / LCD assembly services in a clean room environment. In
Acuna, Mexico, the Company offers parylene coating services. In Tijuana, Mexico,
the Company offers diagnostic, repair and rework services for power supplies. In
all locations, the Company offers box-build services, which integrate its
printed circuit board and other manufacturing and assembly technologies into
higher level sub-assemblies and end products. Finally, the Company designs and
manufactures DC to AC inverters.

Product Testing. The Company has the ability to perform both in-circuit and
functional testing of its assemblies and finished products. In-circuit testing
verifies that the correct components have been properly inserted and that the
electrical circuits are complete. Functional testing determines if a board or
system assembly is performing to customer specifications. The Company seeks to
provide customers with highly sophisticated testing services that are at the
forefront of current test technology.

Warehousing and Distribution. In response to the needs of select customers, the
Company has the ability to provide in-house warehousing, shipping and receiving
and customer brokerage services in Del Rio, Texas for goods manufactured or
assembled in Acuna, Mexico. The Company also has the ability to provide custom-
tailored delivery schedules and services to fulfill the just-in-time inventory
needs of its customers.

MARKETS AND CUSTOMERS

The Company's customers are in the appliance, gaming, industrial electronics,
fitness, life sciences, semiconductor, telecommunications, consumer electronics
and automotive industries. As of April 30, 2006, the Company had approximately
160 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
------------------------
TYPICAL FISCAL FISCAL FISCAL
MARKETS OEM APPLICATION 2004 2005 2006
------- --------------- ------ ------ ------
Appliances Household appliance controls 36.4% 37.1% 37.6%

Fitness Treadmills, exercise bikes 13.4 18.5 20.0

Industrial Electronics Motor controls, power supplies 13.8 15.6 18.8

Telecommunications Routers 10.9 10.0 11.1

Life Sciences Clinical diagnostic systems and
instruments -- -- 5.0

Semiconductor Equipment Process control and yield management
solutions for semiconductor productions -- -- 3.9

Gaming Slot machines, lighting displays 17.9 11.6 2.3

Consumer Electronics Carbon monoxide alarms, sprinkler systems,
battery backup sump pumps 7.1 6.4 1.1

Automotive Automobile interior lighting 0.5 0.8 0.2
---- ---- ----
Total 100% 100% 100%
==== ==== ====

For the fiscal year ended April 30, 2006, Spitfire Controls, Inc. and Life
Fitness accounted for 30.1% and 19.7%, respectively, of the Company's net sales.
For the fiscal year ended April 30, 2005, Spitfire Controls, Inc. and Life
Fitness accounted for 31.5% and 17.5%, respectively, of the Company's net sales.
For the fiscal year ended April 30, 2004, Spitfire Controls, Inc. and Life
Fitness accounted for 35.7% and 13.0%, respectively, of the Company's net sales.
Although the Company does not have long term contracts with these two customers,
the Company expects that as a group these customers will continue to account for
a significant percentage of the Company's net sales, although the individual
percentages may vary from period to period.

SALES AND MARKETING

The Company markets its services through 11 independent manufacturers'
representative organizations that together currently employ approximately 36
sales personnel in the United States and Canada. Independent manufacturers'
representative organizations receive variable commissions based on orders
received by the Company and are assigned specific accounts, not territories. The
members of the Company's senior management are actively involved in sales and
marketing efforts and the Company has 5 direct sales employees.

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 (consignment and turnkey) 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 levels. However, the Company does not believe that such
variations are a meaningful indicator of the Company's gross margins.
Consignment orders accounted for less than 5% of the Company's revenues for the
fiscal year ended April 30, 2006.

In the past, the timing and rescheduling of orders has caused the Company to
experience significant quarterly fluctuations in its revenue and earnings; such
fluctuations may continue.

MEXICO 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. 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 across
south of San Diego, California. AbleMex S.A. de C.V. was incorporated and
commenced operations in 2000. 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 provides funds for salaries, wages, overhead and capital expenditure
items as necessary to operate its wholly-owned Mexican and Chinese subsidiaries.
The Company provides funding to its Mexican and Chinese subsidiaries in U.S.
dollars, which are exchanged for pesos and RMB as needed. The fluctuation of
currencies from time to time, without an equal or greater increase in inflation,
has not had a material impact on the financial results of the Company. In fiscal
year 2006 the Company paid approximately $12,040,000 to its subsidiaries for
services provided.

In May 2002 the Company acquired a plant in Acuna, Mexico through seller
financing. The loan of $1,950,000 is payable in equal monthly installments of
approximately $31,000 over six and a half years at a rate of 7% interest per
annum. Prior to acquiring that plant, the Company rented the facility. At April
30, 2006, approximately $856,000 was outstanding in connection with the
financing of that facility.

The Company's wholly owned foreign enterprise SigmaTron China is located in
Wujiang, China. Wujiang is located approximately 15 miles south of Suzhou,
China and 60 miles west of Shanghai, 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
(Footnote K, contingencies). The Company built a manufacturing plant office
space and dormitories on this site during 2004. The manufacturing plant and
office space is approximately 80,000 square feet, which can be expanded if
conditions require. SigmaTron China operates at this site as the Company's
wholly owned foreign enterprise. At April 30, 2006, this operation had 192
employees.

SigmaTron China entered into a loan agreement in April 2005, which provides for
a line of credit from the China Construction Bank. The interest rate under the
agreement is 5.76% and at April 30, 2006, SigmaTron China had $1,237,753
outstanding under the line of credit. The line of credit is collateralized by
the Company's building in Suzhou-Wujiang China and 60 of the 100 Chinese acres
leased at the property (Footnote K, contingencies). The loan was paid in full in
July 2006.

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
competitively provide all of these services.

In addition, the Company may be operating at a cost disadvantage compared to
manufacturers who have greater direct buying power with component suppliers or
who have lower cost structures. Current and prospective customers continually
evaluate the merits of manufacturing products internally and will from time to
time offer manufacturing services to third parties in order to utilize excess
capacity. During downturns in the electronics industry, OEMs may become more
price sensitive.

There can be no assurance that competition from existing or potential
competitors will not 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, as would the
introduction of new technologies which render the Company's manufacturing
process technology less competitive or obsolete.

CONSOLIDATION

The consolidated financial statements include the accounts and transactions of
the Company, its wholly-owned subsidiaries, Standard Components de Mexico, S.A.
and AbleMex S.A. de C.V., its wholly owned foreign enterprise Wujiang SigmaTron
Electronics Co., LTD. and its procurement branch, SigmaTron Taiwan. The
functional currency of the Mexican subsidiaries, Chinese foreign enterprise and
Taiwanese procurement branch, is the U.S. dollar.

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. The Company completed one such transaction in
July 2005 with the acquisition of Able. In the future, the Company may choose to
enter into other transactions at any time depending on available sources of
financing, and such transactions could have a material impact on the Company,
its business or operations. Recent transactions are disclosed in Footnote L of
the financial statements included with this Annual Report on Form 10-K.

GOVERNMENTAL REGULATIONS

The Company's operations are subject to certain foreign, federal, state and
local regulatory requirements relating to environmental, waste management, labor
and health and safety matters. Management believes that the Company's business
is operated in material compliance with all such regulations. 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. In addition, effective mid-2006 the Company's customers must be in
compliance with the European Standard: the "Restriction of Use of Hazardous
Substance" directive for all of their products that ship to the European
marketplace. The Company has RoHS dedicated manufacturing capabilities at all of
its manufacturing operations.

BACKLOG

The Company's backlog as of April 30, 2006, was approximately $52,875,000. The
Company currently expects to ship substantially all of the remaining April 30,
2006, backlog by the end of the 2007 fiscal year. Backlog as of April 30, 2005,
totaled approximately $44,000,000. Variations in the magnitude and duration of
contracts and purchase orders received by the Company and delivery requirements
generally may result in substantial fluctuations in backlog from period to
period. Because customers may cancel or reschedule deliveries, backlog may not
be a meaningful indicator of future revenue.

EMPLOYEES

The Company employed approximately 2,140 people as of April 30, 2006, including
106 engaged in engineering or engineering related services, 1,805 in
manufacturing and 229 in administrative and marketing functions.

The Company has a labor contract with Production Workers Union Local No. 10,
AFL-CIO, covering the Company's workers in Elk Grove Village, Illinois which
expires on November 30, 2006. 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 January 15,
2007.

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 REGISTRANTS

NAME AGE POSITION
---- --- --------
Gary R. Fairhead 54 President and Chief Executive Officer. Gary R.
Fairhead has been the President of the Company since
January 1990. Gary R. Fairhead is the brother of
Gregory A. Fairhead.

Linda K. Blake 45 Chief Financial Officer, Vice President - Finance,
Treasurer and Secretary since February 1994.

Gregory A. Fairhead 50 Executive Vice President - Operations and Assistant
Secretary. Gregory A. Fairhead has been Executive
Vice President since February 2000 and Assistant
Secretary since 1994. Mr. Fairhead was Vice
President - Mexican Operations for the Company from
February 1990 to February 2000. Gregory A. Fairhead
is the brother of Gary R. Fairhead.

John P. Sheehan 45 Vice President - Director of Materials and Assistant
Secretary since February 1994.

Daniel P. Camp 57 Vice President - China Operation since 2003, and
General Manager/Vice President of Mexican Operations
from 1994 to 2003.

Raj B. Upadhyaya 51 Executive Vice President - Hayward / Tijuana since
2005. Mr. Upadhyaya was the Executive President of
the California operation from 2001 until 2005.

ITEM 1 A. 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.

Security Agreement also provides a four year term loan in the amount of
$3,000,000. Interest on the term loan accrues at 5.75% and interest only is due
each quarter through June 30, 2006. Quarterly principal payments of $250,000 are
due beginning June 30, 2006.

In September 2005 the Company further amended the above described credit
facility to increase the revolving credit facility from $17,000,000 to
$22,000,000. The amended revolving credit facility is limited to the lesser of:
(i) $22,000,000 or (ii) an amount equal to the sum of 85% of the receivable
borrowing base and the lesser of $11,000,000 or varying percentages of the
inventory base.

At April 30, 2006, the Company was in compliance with its financial covenants
and had borrowings of $17,924,000 outstanding under this line of credit and a
term note of $3,000,000 outstanding.

SigmaTron China entered into a loan agreement in April 2005, which provides for
a line of credit from the China Construction Bank. The interest rate under the
agreement is 5.76% and at April 30, 2006, SigmaTron China had $1,237,500
outstanding under the line of credit. The line of credit is collateralized by
the Company's building in Suzhou-Wujiang China and 60 of the 100 Chinese acres
leased at the property (Footnote K, contingencies).

The Company anticipates credit facilities, cash flow from operations and leasing
resources will be adequate to meet its working capital requirements in fiscal
year 2007. In the event the business grows rapidly or the Company considers an
acquisition, additional financing resources could 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 in the future.

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. These factors
include:

- Changes in sales mix to customers

- Changes in availability and cost of components

- 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

THE COMPANY'S CUSTOMER BASE IS CONCENTRATED.

Sales to the Company's five largest customers accounted for 64%, 63% and 68% of
net sales for the fiscal years ended April 30, 2006, 2005 and 2004,
respectively. Further, the Company's two largest customers accounted for 30.1%
and 19.7% of net sales, respectively, for the fiscal year ended April 30, 2006.
Significant reduction 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.
Although the Company believes its relationships with its large customers are
good, the Company generally does not enter into long-term contracts in
connection with the sale of its goods and services. There can be no assurance
that the Company will retain any or all of its large customers. This risk may be
further complicated by pricing pressures and intense competition prevalent in
our industry.

THERE IS VARIABILITY IN THE REQUIREMENTS OF THE COMPANY'S CUSTOMERS.

The Company does not generally obtain long-term purchase contracts. The timing
of purchase orders placed by the Company's customers is affected by a number of
factors, including variation in demand for the customers' products, regulatory
changes affecting customer industries, customer attempts to manage inventory,
changes in the customers' manufacturing strategies and customers' technical
problems or issues. Many of these factors are outside the control of the Company.

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 its 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.

Effective mid-2006 the Company's customers must be in compliance with the
European Standard; RoHS for all products shipped to the European marketplace.
The purpose of the directive is to restrict the use of hazardous substances in
electrical and electronic equipment and to contribute to the environmentally
sound recovery and disposal of electrical and electronic equipment waste. In
addition, electronic component manufacturers must produce electronic components
which are lead-free. The Company relies on numerous third-party suppliers for
components used in the Company's production process. Customers' specifications
may require the Company to obtain components from a single source or a small
number of suppliers. There is no assurance these suppliers will comply with
RoHS. The inability to utilize any such suppliers could have a material impact
on the Company's results of operations.

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 substantially greater experience, as well
as greater manufacturing, purchasing, marketing and financial resources than the
Company.

THE COMPANY HAS FOREIGN OPERATIONS THAT MAY POSE ADDITIONAL RISKS.

A substantial part of the Company's manufacturing operations is based in Mexico.
Therefore, the Company's business and results of operations are dependent upon
numerous related factors, including the stability of the Mexican economy, the
political climate in Mexico and Mexico's relations with the United States,
prevailing worker wages, the legal authority of the Company to own and operate
its business in Mexico and the ability to identify, hire, train and retain
qualified personnel and operating management in Mexico.

The Company has opened an operation in China in order to better support and grow
its customer base. It is uncertain whether the China operation will have a
material impact, either positive or negative, on the Company's business,
financial condition and results of operations. The success of the operation is
dependent on the Company's ability to obtain new business; to hire and train
qualified personnel; and to implement an efficient manufacturing environment.
Other factors could have a material impact on the business, including the
Chinese political climate and its relations with the United States, stability of
the Chinese economy and the need for additional capital to expand operations in
China.

The Company obtains many of its materials and components through its office in
Taipei, Taiwan and, therefore, the Company's access to these materials and
components is dependent on the continued success of its Asian suppliers.

INABILITY TO MANAGE GROWTH.

The Company may not effectively manage its growth and successfully integrate the
management and operations of its recent Able acquisition. Acquisitions involve
significant financial and operating risks that could have a material adverse
effect on the Company's results of operations.

DISCLOSURE AND INTERNAL CONTROLS.

The Company's management, including the CEO and CFO, do not believe that its
disclosure controls and internal controls will prevent all errors and all fraud.
Controls can provide only reasonable assurance that the procedures will meet the
control objectives. The limitations include errors and mistakes can be made,
including faulty judgments in decision-making. Further, controls can be
circumvented by collusion of two or more people or by management override of
controls. Because of the limitations of a cost effective control system, error
and fraud may occur and not be detected.

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 measurable impact on the
Company's operations and performance. These fluctuations are expected to
continue. The Company does not utilize derivatives or hedge foreign currencies
to reduce the risk of such fluctuations.

THE AVAILABILITY OF RAW COMPONENTS MAY AFFECT THE COMPANY'S OPERATIONS.

THE COMPANY IS DEPENDENT ON KEY PERSONNEL.

The Company depends significantly on its President and Chief Executive Officer,
Gary R. Fairhead, and on other executive officers. 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 it 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 70% of its workforce. 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. 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.

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.

BEING A PUBLIC COMPANY INCREASES THE COMPANY'S ADMINISTRATIVE COSTS.

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), as well as rules subsequently
implemented by the Securities and Exchange Commission and listing requirements
subsequently adopted by Nasdaq in response to Sarbanes-Oxley, have required
changes in corporate governance practices, internal control policies and audit
committee practices of public companies. These new rules, regulations, and
requirements have increased the company's legal, financial compliance and
administrative costs, and made many other activities more time consuming and
costly. Specifically, the Company's ability to become compliant with
Sarbanes-Oxley Section 404, Internal Control Over Financial Reporting, may be
very costly. These new rules and regulations have also made it more difficult
for the Company to obtain director and officer liability insurance. These new
rules and regulations could also make it more difficult for us to attract and
retain qualified members of our board of directors, particularly to serve on its
audit committee.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

At April 30, 2006, the Company had manufacturing facilities located in Elk Grove
Village, Illinois; Hayward, California and Acuna and Tijuana, Mexico and
Wujiang, China. In addition, the Company provides inventory management services
through its Del Rio, Texas, warehouse facilities and materials procurement
services through its Elk Grove Village, Illinois; Acuna, Mexico; Hayward,
California; and Taipei, Taiwan offices and a warehouse facility in Huntsville,
Alabama.

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

SQUARE OWNED/
LOCATION FEET SERVICES OFFERED LEASED
-------- ------- ------------------------------------------------------------ ------
Suzhou-Wujiang, China 147,500 High volume assembly, and testing of PTH and SMT, box-build *

Hayward, CA 126,000 Assembly and testing of PTH, SMT and BGA, box-build, Leased
prototyping, warehousing

Elk Grove Village, IL 118,000 Corporate headquarters, assembly and testing of PTH, SMT and Owned
BGA, box-build, prototyping, warehousing

Acuna, Mexico 115,000 High volume assembly, and testing of PTH and SMT, box-build, Owned
transformers **

Las Vegas, NV 38,250 N/A Leased
***

Del Rio, TX 36,000 Warehouse, portion of which is bonded Leased

Tijuana, Mexico 26,500 High volume assembly, and testing of PTH and SMT, box-build Leased

Fremont, CA 24,500 N/A Leased
****

Taipei, Taiwan 2,900 Materials procurement, alternative sourcing assistance and Leased
quality control

Huntsville, AL ** Just-in-time inventory management and delivery *****

* The Company's Wujiang, China building is owned by the Company and the land is
leased from the Chinese government for a 50 year term (Footnote K,
contingencies).

** A portion of the facility is leased.

*** During fiscal year 2006 the Las Vegas operation was sold. The Company
continues to be obligated under the primary lease agreement for the facility and
sublets the property to other occupants.

**** In fiscal year 2006 the Fremont operation was consolidated into the Hayward
operation. The Company continues to be obligated under the primary lease until
December 31, 2006.

***** There is no lease for this facility. The Company has entered into a
service agreement whereby contracted warehouse personnel provide services for
the Company and its customer.

The Hayward, California and Tijuana, Mexico properties and a portion of the Del
Rio, Texas property are occupied pursuant to leases of the premises. The lease
agreements for the Nevada, Texas and California properties expire October 2009,
December 2015 and September 2010, respectively. The Alabama space is provided
under a service agreement. The Company's manufacturing facilities located in
Acuna, Mexico and Elk Grove Village, Illinois are owned by the Company, except
for a portion of the facility in Mexico, which is leased. The properties in
Acuna, Mexico and Illinois are financed under separate mortgage agreements,
which mature in November 2008. The Company, through an agent, leases the
purchasing and engineering office in Taipei, Taiwan to coordinate Far East
purchasing and design activities.

The Company is considering expanding its Tijuana and Acuna manufacturing
operations during fiscal 2007. All facilities are adequately insured.

ITEM 3. LEGAL PROCEEDINGS

On May 25, 2001, Nancy Messina, a former employee of the Company, filed a
lawsuit against the Company in the United States District Court for the Northern
District of Illinois, Eastern Division, asserting claims of sexual harassment
and gender discrimination under Title VII of the Civil Rights Act of 1964 and

claims of violation of the Federal Equal Pay Act. In November 2005 the Company
and the plaintiff settled the lawsuit upon the Company's payment of a nominal
amount to be applied to the plaintiff's legal expenses.

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 is resolved on unfavorable terms. However,
although the ultimate outcome of any legal matter cannot be predicted with
certainty, based on present information, including our assessment of the merits
of the 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders in the fourth quarter of
fiscal year 2006.

PART II

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

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 bid information for the common stock for the periods ended April 30, 2006,
and 2005.

Common Stock as Reported by Nasdaq

Period High Low
------ ------ ------
Fiscal 2006:
Fourth Quarter $12.03 $ 8.60
Third Quarter 12.34 6.61
Second Quarter 11.17 6.15
First Quarter 11.96 9.75

Fiscal 2005:
Fourth Quarter $12.93 $10.70
Third Quarter 14.73 10.83
Second Quarter 11.74 8.52
First Quarter 14.60 8.75

As of July 14, 2006, there were approximately 65 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 2,550 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 (Footnote G), 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.

ITEM 6. SELECTED FINANCIAL DATA

Years Ended April 30
(In thousands except per share data)
------------------------------------------------
2002 2003 2004 2005 *2006
------- ------- ------- ------- --------
Net Sales $84,798 $84,342 $84,178 $94,312 $124,786
Income before income tax
expense (benefit), minority
interest and discontinued operations 745 6,432 8,446 8,150 2,862

Net Income from continuing
operations 315 4,063 4,934 4,840 1,926

Net Income (loss) from discontinued
operation 1,227 1,651 467 (141) (44)

Net Income 1,542 5,714 5,406 4,699 1,882

Earnings (loss) per share-basic
Continuing operations 0.11 1.41 1.44 1.29 0.51
Discontinued operations 0.43 0.57 0.14 (0.04) (0.01)
------- ------- ------- ------- --------
Total 0.54 1.98 1.58 1.25 0.50
======= ======= ======= ======= ========
Earnings (loss) per share-diluted
Continuing operations 0.11 1.21 1.39 1.27 0.49
Discontinued operations 0.41 0.49 0.14 (0.04) (0.01)
------- ------- ------- ------- --------
Total 0.52 1.70 1.53 1.23 0.48
======= ======= ======= ======= ========

Total assets 51,809 53,400 62,998 66,543 98,940

Long-term debt and capital lease
obligations (including current
maturities 17,514 9,911 7,025 7,194 30,396

* The financial data for 2006 includes the Hayward and Tijuana operation, which
were acquired in July 2005.

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

In addition to historical financial information, this discussion of the business
of 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," "will," "expects," "believe," "plans," and
similar expressions identify forward-looking statements. These forward-looking
statements are based on the current expectations of management 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 our continued dependence on certain
significant customers; the continued market acceptance of products and services
offered by the Company and its customers; pricing pressures from our 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 variability of our customers' requirements; the
availability and cost of necessary components and materials; the Company's
ability to continue to produce products that are in compliance with the European
Standard of "Restriction of Use of Hazardous Substance ("RoHS") by mid-2006; the
ability of the Company and our customers to keep current with technological
changes within our industries; regulatory compliance; the continued availability
and sufficiency of our credit arrangements; changes in U.S., Mexican, Chinese or
Taiwanese regulations affecting the Company's business; the continue stability
of the U.S., Mexican, Chinese and Taiwanese economic systems, labor and
political conditions; and the ability of

the Company to manage its growth, including its expansion into China and its
integration of the Able Electronic Corporation ("Able") operation acquired in
July 2005. 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 risk factors contained herein and 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 this report and
the Company undertakes no obligation to update such statements in light of
future events or otherwise.

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) design, manufacturing and test engineering support; (4)
warehousing and shipment services; and (5) 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 North America, China and Taiwan.

As the demand for electronic products has continued to increase over the past
several months, the lead-time for many components has increased. Pricing for
some components and related commodities has escalated due to the increased
demand and the transition to RoHS components and may continue to increase in the
future periods. The impact of these price increases could have a negative effect
on the Company's gross margins and operating results.

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, and the Company may be
required to operate at a cost disadvantage compared to competitors who have
greater direct buying power from suppliers. The Company does not enter into
purchase agreements with major or single-source suppliers. The Company believes
that ad-hoc negotiations with its suppliers provides flexibility, given that the
Company's orders are based on the needs of its customers, which constantly
change.

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), as well as new rules
subsequently implemented by the Securities and Exchange Commission and new
listing requirements subsequently adopted by Nasdaq in response to
Sarbanes-Oxley, have required changes in corporate governance practices,
internal control policies and audit committee practices of public companies.
These new rules, regulations, and requirements have increased the company's
legal expenses, financial compliance and administrative costs, made many other
activities more time consuming and costly and diverted the attention of senior
management. These new rules and regulations have also made it more difficult for
the Company to obtain director and officer liability insurance. These new rules
and regulations could also make it more difficult for us to attract and retain
qualified members for our board of directors, particularly to serve on our audit
committee. In addition, if the Company receives a qualified opinion on the
adequacy of its internal control over financial reporting, shareholders could
lose confidence in the reliability of the Company's financial statements, which
could have a material adverse impact on the value of the Company's stock.

margins. Consignment orders accounted for less than 5% of the Company's revenues
for the year ended April 30, 2006.

In the past, the timing and rescheduling of orders have caused the Company to
experience significant quarterly fluctuations in its revenues and earnings, and
the Company expects such fluctuations to continue.

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 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 and reserves for inventory and valuation of
goodwill. Actual results could materially differ from these estimates.

Revenue Recognition - Revenues from sales of product including the Company's
electronic manufacturing service business are recognized when the product is
shipped to the customer. In general it is the Company's policy to recognize
revenue and related costs when the order has been shipped from our facilities,
which is also the same point that title passes under the terms of the purchase
order except for consignment inventory. Consignment inventory 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 inventory, the consignment inventory is shipped to the
customer if the inventory was stored offsite or transferred from the segregated
part of the customer's facility for consumption, or use, by the customer. The
Company recognizes revenue upon such transfer. The Company does not earn a fee for
storing the consignment inventory. The Company provides a ninety (90) day warranty
for workmanship only and does not have any installation, acceptance or sales
incentives, although the Company has negotiated extended 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 minimus under the Company's standard or extended warranties. Any returns for
workmanship issues received after each period end are accrued in the respective
financial statements.

Inventories - Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method. 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. Actual results differing from these
estimates could significantly affect the Company's inventories and cost of
products sold. 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.
Actual product demand or market conditions could be different than that projected
by management.

Impairment of Long-Lived Assets - The Company reviews long-lived assets for

impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An asset is considered impaired if its
carrying amount exceeds the future net cash flow the asset is expected to
generate. If such asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset, if
any, exceeds its fair market value. The Company has adopted SFAS No. 144, which
establishes a single accounting model for the impairment or disposal of long-lived
assets, including discontinued operations.

Goodwill and Other Intangibles - The Company adopted on June 1, 2001, SFAS
No. 141 "Business Combinations". Under SFAS No. 141, a purchaser must allocate
the total consideration paid in a business combination to the acquired tangible
and intangible assets based on their fair value. The Company adopted SFAS
No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.
Goodwill represents the purchase price in excess of the fair value of assets
acquired in business combinations. Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets", requires the Company to
assess goodwill for impairment at least annually in the absence of an indicator
of possible impairment and immediately upon an indicator of possible impairment.
During the fourth quarter of 2006 the Company

completed its annual assessment of impairment regarding the goodwill recorded.
That assessment, supported by independent appraisals did not identify any
impairment as of April 30, 2006.

NEW ACCOUNTING STANDARDS

In June 2006 FASB Interpretation 48 "Accounting for Uncertainty in Income Taxes"
was issued which clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. This Interpretation also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.

This Interpretation is effective for fiscal years beginning after December 15,
2006, and earlier application of the provisions of this Interpretation is
encouraged if the enterprise has not yet issued financial statements, including
interim financial statements, in the period this Interpretation is adopted. The
Company has not yet determined the impact of FASB Interpretation 48 on its
financial statements.

On June 1, 2005, the FASB issued Statement No. 154, Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS
154). The statement applies to all voluntary changes in accounting principles,
and changes the requirements for accounting for and reporting of a change in
accounting principles. The Company adopted SFAS 154 at December 31, 2005, there
is no material change to the Company's operating results as a result of this adoption.

In December 2004 the Financial Accounting Standards Board issued SFAS No.
123 (revised 2004), Share-Based Payment ("SFAS 123(R)"). The Company adopted
SFAS 123(R) on May 1, 2006. SFAS 123(R) requires the Company to measure the cost
of employee services received in exchange for an equity award based on the grant
date fair value. The cost will be recognized in financial statements as an
expense over the period during which an employee is required to provide service.
The Company has determined that the adoption SFAS 123(R) will not have a
significant impact on its financial position, results of operations, EPS and
cash flows. However, SFAS 123(R) could have a material impact on the Company's
results of operation if additional options are granted.

On December 21, 2004, FSP FAS 109-2, "Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 ("Act")," was issued. FSP FAS 109-2 provides companies additional time,
beyond the financial reporting period during which the Act took effect, to
evaluate the Act's impact on a company's plan for reinvestment or repatriation
of certain foreign earnings for purposes of applying Statement 109. FSP FAS
109-2 was effective upon issuance. Based on the Company's analysis of the
repatriation provision of the Act, although not yet finalized, it is unlikely
that the Company had any foreign earnings to repatriate, and accordingly, the
financial statements do not reflect any provisions for taxes on unremitted
foreign earnings. The impact on the Company has not been material.

In November 2004 the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of ARB No. 43, Chapter 4." This statement amends the guidance in Accounting
Research Bulletin (ARB) No. 43, Charter 4, "Inventory Pricing," to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material (spoilage) and requires that those items be recognized
as current-period charges regardless of whether they meet the criterion of
"abnormal." The statement also requires that allocation of fixed production
overheads to the cost of conversion be based on the normal capacity of the
production facilities. The provisions of this statement are effective for
inventory costs incurred during fiscal years beginning after June 15, 2005 (as
of May 1, 2006, for the Company) and are to be applied prospectively. The
Company does not believe the impact will be material.

On October 22, 2004, the President signed the American Jobs Creation Act of 2004
("the Act"). The Act provides a deduction from income from qualified domestic
production activities, which will be phased in from 2005 through 2010. In
return, the Act also provides for a two-year phase-out (except for certain pre
-existing binding contracts) of the existing Extraterritorial Income ("ETI")
exclusion tax benefit for foreign sales which the World Trade Organization
("WTO") ruled was an illegal export subsidy. The European Union ("EU") believes
that the Act fails to adequately repeal the illegal export subsidies because of
the transitional

provisions and has asked the WTO to review whether these transitional provisions
are in compliance with their prior ruling. Additionally, the Act creates a
temporary incentive for U.S. corporations to repatriate accumulated income
earned abroad by providing an 85% dividend received deduction for certain
dividends from controlled foreign corporations. The impact on the Company has
not been material.

RESULTS OF OPERATIONS:

FISCAL YEAR ENDED APRIL 30, 2006 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2005

Net sales increased 32.3% to $124,786,476 in fiscal year 2006 from $94,312,573
in the prior year. The Company's sales increased in the industrial electronics,
fitness, life sciences, semiconductor and appliance marketplaces during fiscal
year 2006 as compared to the prior year. The increase in sales volume in the
appliance and fitness industries was partially offset by price reductions to
customers. The Company anticipates pricing pressures from customers will
continue in fiscal year 2007. The increase in the industrial electronics, life
sciences and semiconductor industries is primarily due to sales to new customers
as the results of acquisition of Able. The acquisition of Able has allowed the
Company to make strides towards achieving four objectives:
(1) to further diversify its markets, capabilities and customer base, (2) adding
a third low-cost manufacturing facility in Tijuana, Mexico, (3) creating an
opportunity to consolidate the California operations into one facility, and (4)
to generate incremental revenue from Able's customers as they become familiar
with the Company's broader array of services.

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 terminations, the life cycle of customer products and product transition.
There can be no assurance that sales levels or gross margins will remain stable
in future periods. Sales to the Company's five largest customers accounted for
64% and 63% of net sales for fiscal years 2006 and 2005, respectively.

Gross profit decreased to $14,800,099 or 11.9% of net sales in fiscal year 2006
compared to $17,958,154 or 19.0% of net sales in the prior period. The decrease
in the Company's gross profit is the result of pricing pressures within the EMS
industry, an increase in manufacturing supplies and component pricing and
inefficiencies related to the integration of the Able operation acquired in July
2005. The consolidation of the Fremont and Able Hayward locations was completed
in March 2006. The Company believes operational efficiencies will improve at
both the Hayward and Tijuana manufacturing facilities during fiscal year 2007.
In addition, the Company is currently expanding its Tijuana manufacturing
operation and will transfer specific production from Hayward to Tijuana. The
Company believes this realignment of production will assist in increasing the
operating margins for the Hayward and Tijuana operations.

Selling and administrative expenses increased in fiscal year 2006 to
$10,925,646 or 8.8% of net sales compared to $10,076,082 or 10.6% of net sales
in fiscal year 2005. The increase is primarily due to additional personnel in
the sales department and increased insurance costs incurred in conjunction with
the acquisition of Able. The increase in selling and administrative expenses is
partially offset by a $1,053,000 reduction in bonus expense. The Company
anticipates it will incur additional professional fees related to
Sarbanes-Oxley, specifically Section 404, Internal Control Over Financial
Reporting.

Interest expense increased to $1,421,455 in fiscal year 2006 compared to
$283,137 in fiscal year 2005. The interest expense increased due to significant
increased borrowings under the Company's lines of credit, primarily due to the
Able acquisition, additional capital leases for machinery and equipment and
rising interest rates. Interest expense for fiscal year 2007 is expected to be
comparable to the amount of interest expense recorded in fiscal year 2006 or
possibly higher.

In fiscal year 2006 tax expense from continuing operations was $935,589 which
resulted in an effective rate of 32.7% compared to $3,173,635 in income tax
expense and an effective rate of 38.9% in fiscal year 2005. The effective tax
rate in fiscal year 2006 has decreased compared to prior periods due to income
earned in China. The Company has tax incentives related to its wholly owned
foreign enterprise in China. The Company is currently using an estimate to
calculate the amount of profits for tax purposes generated in China.

In June 2005 the Company closed on the sale of its Las Vegas, Nevada operation.
The Las Vegas facility operated as a complete EMS center specializing in the
assembly of electronic products and cables for a broad range of customers
primarily in the gaming industry. The effective date of the transaction was May
30, 2005. The transaction was structured as an asset sale, and included a
$2,000,000 cash payment to the Company for the buyer's purchase of the
machinery, equipment and other assets of the Las Vegas operation. The
transaction was recorded by the Company in the first quarter of fiscal year 2006
and included a gain on the transaction of approximately $311,000. The gain was
offset by a loss of approximately $383,000 on discontinued operations for the
Las Vegas operation for the period ended April 30, 2006.

The following amounts related to the discontinued operation and have been
segregated from continuing operations and reflected as discontinued operations
in each periods consolidated statement of income (in thousands):

2006 2005 2004
---- ------ ------
Sales 522 11,764 16,316
Income (loss) before tax expense (benefit) (383) (234) 773
Net Income (loss) from discontinued operation 355 (142) 467
Gain on sale of business 311 -- --
Net income (loss) from discontinued operation (44) (142) 467

Net income decreased to $1,882,132 in fiscal year 2006 compared to $4,698,799 in
fiscal year 2005. Diluted earnings per share for the year ended April 30, 2006,
was $0.48 compared to $1.23 in fiscal year 2005. Basic earnings per share was
$0.50 and $1.25 for the year ended April 30 2006, and 2005, respectively.

FISCAL YEAR ENDED APRIL 30, 2005 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2004

Net sales increased 12.0% to $94,312,573 in fiscal year 2005 from $84,178,206 in
the prior year. The Company's sales increased in the fitness, industrial
electronics and appliance marketplaces during fiscal year 2005 as compared to
the prior year. The increase in sales volume in the fitness and appliance
industries was partially offset by price reductions to customers. The Company
anticipates pricing pressures from customers will continue in fiscal year 2006.

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 terminations, the life cycle of customer products and product transition.
There can be no assurance that sales levels or gross margins will remain stable
in future periods. Sales to the Company's five largest customers accounted for
63% and 68% of net sales for fiscal years 2005 and 2004, respectively.

Gross profit decreased to $17,958,154 or 19% of net sales in fiscal year 2005
compared to $17,992,982 or 21.4% of net sales in the prior period. The decrease
is due to an increase in price concessions, manufacturing costs and component
pricing. There can be no assurance gross margins will not decrease in the
future.

Selling and administrative expenses increased in fiscal year 2005 to $10,076,082
or 10.7% of net sales compared to $9,314,600 or 11.1% of net sales in fiscal
year 2004. The increase is due to additional personnel in the sales and
purchasing departments, advertising expenditures and increased legal fees. The
increase in selling and administrative expenses is partially offset by a
reduction in bonus expense. The Company anticipates it will incur additional
professional fees related to Sarbanes-Oxley, specifically Section 404, Internal
Control Over Financial Reporting.

Interest expense increased to $283,137 in fiscal year 2005 compared to $283,137
in fiscal year 2004. The interest expense increased due to increased borrowings
under the Company's lines of credit, additional capital leases for machinery and
equipment, interest for notes payable in connection with the acquisition of SMTU
and notes payable associated with the purchase of the Company's corporate and
manufacturing facility in Elk Grove Village, Illinois.

In fiscal year 2005 tax expense from continuing operations was $3,173,635 which
resulted in an effective rate of 38.9% compared to $3,248,706 in income tax
expense and an effective rate of $38.5% in fiscal year 2004.

Net income decreased to $4,698,799 in fiscal year 2005 compared to $5,405,732 in
fiscal year 2004. Diluted earnings per share for the year ended April 30, 2005,
was $1.23 compared to $1.53 in fiscal year 2004. Basic earnings per share was
$1.25 and $1.58 for the year ended April 30, 2005, and 2004, respectively.

LIQUIDITY AND CAPITAL RESOURCES:

Cash flow provided by operating activities was $1,997,144 for the year ended
April 30, 2006, compared to $1,337,081 for the prior fiscal year. During fiscal
year 2006, cash provided by operations was the result of net income, the
non-cash effect of depreciation and amortization and an increase in trade
accounts payable. Cash provided by operating activities was partially offset by
an increase in inventories of approximately $6,092,000. The increase in
inventories is primarily attributable to an increase in customer required safety
stock and the start up of the Company's China facility.

INVESTING ACTIVITIES.

In June 2005 the Company closed on the sale of its Las Vegas, Nevada operation.
The Las Vegas facility operated as a complete EMS center specializing in the
assembly of electronic products and cables for a broad range of customers
primarily in the gaming industry. The effective date of the transaction was May
30, 2005. The transaction was structured as an asset sale, and included a
$2,000,000 cash payment to the Company for the buyer's purchase of the
machinery, equipment and other assets of the Las Vegas operation. The
transaction was recorded by the Company in the first quarter of fiscal year 2006
and included a gain on the transaction of approximately $311,000. The gain was
offset by a loss of approximately $383,000 on discontinued operations for the
Las Vegas operation for the period ended April 30, 2006

In July 2005 the Company closed on the purchase of all of the outstanding stock
of Able, a company headquartered in Hayward California and its wholly owned
subsidiary, AbleMex S.A. de C.V., located in Tijuana, Mexico. Able is an ISO
9001:2000 certified EMS company serving Original Equipment Manufacturers in the
life sciences, telecommunications and industrial electronics industries. The
acquisition of Able has allowed the Company to make strides towards achieving
four objectives: (1) to further diversify its markets, capabilities and customer
base, (2) adding a third low-cost manufacturing facility in Tijuana, Mexico, (3)
creating an opportunity to consolidate the California operations into one
facility, and (4) to generate incremental revenue from Able's customers as they
become familiar with the Company's broader array of services. The effective date
of the transaction was July 1, 2005. Able was merged into the Company beginning
in November 2005 and operates as a division of the Company. The purchase price
was approximately $16,800,000 and was recorded as a stock purchase transaction
in the first quarter of fiscal year 2006. The transaction was financed by the
Company's amended credit facility and resulted in an increase of approximately
$8,500,000 in goodwill.

In August 2004 the Company acquired the interest of outside investors in its
affiliate SMTU and the general partner of SMTU, SMT Unlimited, Inc., thereby
bringing the Company's interest in its affiliate SMTU to approximately 80%. On
September 2, 2004, the Company acquired the remaining interests in its affiliate
SMTU from its managers. The aggregate price paid for all the interests was
$2,814,699. This aggregate price was paid with $1,330,000 in notes with terms of
up to 2 years and cash in the amount of $1,338,858 and forgiveness of interest
payable. The acquisition was treated as a step acquisition and resulted in
goodwill of $756,959. On October 1, 2004, SMT Unlimited, Inc. was merged into
the Company, and SMTU was liquidated, thereby becoming the Fremont division of
the Company. In March 2006 the Fremont location was consolidated into the
Hayward operation.

In fiscal year 2006 the Company purchased approximately $6,300,000 in machinery
and equipment and it anticipates it will make additional machinery and equipment
purchases during fiscal year 2007. The Company executed three to five year
capital leases to finance several of the purchases in fiscal year 2006.

FINANCING TRANSACTIONS.

The Company entered into an Amended Loan and Security Agreement in July 2005,
which provided for a revolving credit facility. The maximum borrowing limit
under the amended revolving credit facility is limited to the lesser of:
(i) $17,000,000 or (ii) an amount equal to the sum of 85% of the receivable
borrowing base and the lesser of $8,500,000 or varying percentages of the
inventory base. The Amended Loan and Security Agreement expires on June 30, 2008
and includes certain financial covenants. The Amended Loan and Security
Agreement also provides a four year term loan in the amount of $3,000,000.
Interest on the term loan accrued at 5.41% to 6.46% and interest only is due
each quarter through June 30, 2006. Quarterly principal payments of $250,000 are
due beginning June 30, 2006. At April 30, 2006, and 2005, $3,000,000 and $0 was
outstanding under the term loan, respectively.

At April 30, 2006, the Company was in compliance with its financial covenants
and had borrowings of $17,924,000 outstanding under this line of credit and a
term note of $3,000,000 outstanding. The significant increase under the line of
credit and term note was primarily the result of the Able transaction and to
fund working capital requirements.

SigmaTron China entered into a loan agreement in April 2005, which provides for
a line of credit from the China Construction Bank. The interest rate under the
agreement is 5.76% and at April 30, 2006, SigmaTron China had $1,237,500
outstanding under the line of credit. The line of credit is collateralized by
the Company's building in Suzhou-Wujiang China and 60 of the 100 Chinese acres
leased at the property (Footnote K, contingencies). The loan was paid in full in
July 2005.

The impact of inflation for the past three fiscal years has been minimal.

OFF-BALANCE SHEET TRANSACTIONS:

The Company has no off-balance sheet transactions.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS:

The following table summarizes the Company's contractual obligations at April
30, 2006, and the effect such obligations are expected to have on its liquidity
and cash flows in future periods.

Payment Obligations

Less than After 5
Total 1 Year 1-3 Years 3-5 Years Years
---------- --------- ---------- --------- -------
Notes Payable, including
current maturities 4,521,049 724,704 3,796,345 0 0
Capital Leases, including
current maturities 4,745,743 1,681,459 2,955,774 108,510 0
Operating leases 6,370,006 1,673,339 4,230,432 466,235 0
Bank debt 22,597,306 2,235,477 20,361,829 0 0
---------- --------- ---------- ------- ---
Total contractual cash
obligations 38,234,104 6,314,979 31,344,380 574,745 0
========== ========= ========== ======= ===

Maturities for notes payable and bank debt include estimated interest payments
based on prevailing interest rates at April 30, 2006.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risk

The Company's exposure to market risk for changes in interest rates is due
primarily to its short-term investments and borrowings under its credit
agreements. The Company's borrowings are at a variable rate and an increase in
interest rates of 1% would result in interest expense increasing by
approximately $222,000 for the year ended April 30, 2006. As of April 30, 2006,
the Company had no short-term investments and approximately $22,162,000
borrowings under its credit agreements. The Company does not use derivative
financial investments. The Company's cash equivalents, if any, are invested in
overnight commercial paper. The Company does not have any significant cash flow
exposure due to rate changes for its cash equivalents, as these instruments are
short-term.

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

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Our management, including our President and Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of April 30, 2006. Our disclosure controls and
procedures are designed to ensure that information required to be disclosed by
the Company in the reports filed by the Company under the Securities Exchange
Act of 1934 (the "Exchange Act") is recorded, processed, summarized

and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and that such information is accumulated and
communicated to our management, including our President and Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure. Based on this evaluation, our President and Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of April 30, 2006.

There has been no change in our internal control over financial reporting during
the quarter ended April 30, 2006, that has materially affected or is reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 9B OTHER INFORMATION

Not Applicable

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required under this item is incorporated herein by reference to
the Company's definitive proxy statement, filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company's fiscal year
ended April 30, 2006.

ITEM 11. EXECUTIVE COMPENSATION

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) and (a)(2)

The financial statements, including required supporting schedule, are listed in
the index to Financial Statements and Financial Schedule filed as part of this
Annual Report on Form 10-K beginning on Page F-1.

INDEX TO EXHIBITS

(a)(3)

3.1 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.

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

10.1 Form of 1993 Stock Option Plan - filed as Exhibit 10.4 to the Company's
Registration Statement on Form S-1, File No. 33-72100, and hereby
incorporated by reference. *

10.2 Form of Incentive Stock Option Agreement for the Company's 1993 Stock
Option Plan - filed as Exhibit 10.5 to the Company's Registration
Statement on Form S-1, File No. 33-72100, and hereby incorporated by
reference. *

10.3 Form of Non-Statutory Stock Option Agreement for the Company's 1993
stock Option Plan - filed as Exhibit 10.6 to the Company's Registration
Statement on Form S-1, File No. 33-72100, and hereby incorporated by
reference. *

10.4 2000 Outside Directors' Stock Option Plan and hereby incorporated by
reference - filed as Appendix 1 to the Company's 2000 Proxy Statement
filed on August 21, 2000.

10.5 Loan and Security Agreement between SigmaTron International, Inc. and
LaSalle National Bank dated August 25, 1999, filed as Exhibit 10.26 to
the Company's Form 10-Q for the quarter ended October 31, 1999, and
hereby incorporated by reference.

10.6 Lease Agreement # 00-190 between SigmaTron International, Inc. and
International Financial Services dated July 18, 2000, filed as Exhibit
10.27 to the Company's Form 10-Q for the quarter ended October 31, 2000,
and hereby incorporated by reference.

10.7 Lease Agreement # 00-280 between SigmaTron International, Inc. and
International Financial Services dated December 12, 2000, filed as
Exhibit 10.27 to the Company's Form 10-K for the fiscal year ended April
30, 2001, and hereby incorporated by reference.

10.8 Mortgage and Security Agreement between SigmaTron International, Inc.
and LaSalle Bank National Association, dated November 17, 2003, filed as
Exhibit 10.19 to the Company's Form 10-Q for the quarter ended October
31, 2003, and hereby incorporated by reference.

10.9 Mortgage Note between SigmaTron International, Inc. and LaSalle Bank
National Association, dated November 17, 2003, filed as Exhibit 10.20 to
the Company's Form 10-Q for the quarter ended October 31, 2003, and
hereby incorporated by reference.

10.10 2004 Directors' Stock Option Plan and hereby incorporated by reference -
filed as Appendix C to the Company's 2004 Proxy Statement filed on
August 16, 2004. *

10.11 2004 Employee Stock Option Plan and hereby incorporated by reference -
filed as Appendix B to the Company's 2004 Proxy Statement filed on
August 16, 2004. *

10.12 Change in Control Plan dated May 30, 2002, filed as Exhibit 10.15 to the
Company's Form 10-K for the fiscal year ended April 30, 2005, and hereby
incorporated by reference.

10.13 Stock Purchase Agreement, dated the 14th day of July 2005, between
SigmaTron International, Inc. and Able Electronics Corporation, filed as
Exhibit 10.17 to the Company's Form 10-K for the fiscal year ended April
30, 2005, and hereby incorporated by reference.

10.14 Tenth Amendment to Loan and Security Agreement between SigmaTron
International, Inc. and LaSalle Bank National Association, dated July
14, 2005, filed as Exhibit 10.18 to the Company's Form 10-Q for the
quarter ended October 31, 2005, and hereby incorporated by reference.

10.15 Eleventh Amendment to Loan and Security Agreement between SigmaTron
International, Inc. and LaSalle Bank National Association, dated
September 12, 2005, filed as Exhibit 10.19 to the Company's Form 10-Q
for the quarter Ended October 31, 2005, and hereby incorporated by
reference.

10.16 Lease Agreement, Number 12, between SigmaTron International, Inc. and
General Electric Capital Corporation, dated November 22, 2005, filed as
Exhibit 10.20 to the Company's Form 10-Q for the quarter ended January
31, 2006, and hereby incorporated by reference.

16.1 Letter regarding change in certifying accountant dated March 15, 2006,
filed as Exhibit 16.1 to the Company's current report on Form 8-K on
March 15, 2006, and hereby incorporated by reference.

21.1 Subsidiaries of the Registrant.

23.1 Consent of BDO Seidman, LLP.

23.2 Consent of Grant Thornton LLP.

31.1 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.

31.2 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.

32.1 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).

32.2 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).

* Indicates management contract or compensatory plan.

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.

(d) Financial Statements Schedules

The Company hereby files a schedule to this Report the financial schedules in
Item 15, which are attached hereto.

SIGNATURES

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.

SIGMATRON INTERNATIONAL, INC.

By: /s/ Gary R. Fairhead
------------------------------------
Gary R. Fairhead, President
and Chief Executive Officer

Dated: July 27, 2006

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. Blake, 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 Date
--------- ----- ----

/s/ Franklin D. Sove Chairman of the Board of Directors July 27, 2006
---------------------------
Franklin D. Sove

/s/ Gary R. Fairhead President and Chief Executive Officer July 27, 2006
--------------------------- (Principal Executive Officer)
Gary R. Fairhead

/s/ Linda K. Blake Chief Financial Officer, Secretary and Treasurer July 27, 2006
--------------------------- (Principal Financial Officer and Principal
Linda K. Blake Accounting Officer)

/s/ John P. Chen Director July 27, 2006
---------------------------
John P. Chen

/s/ W.L. McClelland Director July 27, 2006
---------------------------
W.L. McClelland

/s/ Thomas W. Rieck Director July 27, 2006
---------------------------
Thomas W. Rieck

/s/ Dilip S. Vyas Director July 27, 2006
---------------------------
Dilip S. Vyas

/s/ Carl Zemenick Director July 27, 2006
---------------------------
Carl Zemenick

INDEX TO FINANCIAL STATEMENTS

PAGE
----
SIGMATRON INTERNATIONAL, INC. AND SUBSIDIARIES

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS............. F-2/F-3

CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
ASSETS.......................................................... F-4
LIABILITIES AND STOCKHOLDERS' EQUITY............................ F-5
CONSOLIDATED STATEMENTS OF INCOME.................................. F-6
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY.......... F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS.............................. F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......................... F-9

Financial statement schedules not listed above are omitted because they are not
applicable or required.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BOARD OF DIRECTORS AND STOCKHOLDERS
SIGMATRON INTERNATIONAL, INC.
ELK GROVE, ILLINOIS

We have audited the accompanying consolidated balance sheet of SigmaTron
International, Inc. as of April 30, 2006 and the related consolidated statements
of income, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Oversight Board (United States). 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 audit 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
presentation of the consolidated financial statements and schedule. We believe
that our audit provides 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, 2006 and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

/s/ BDO Seidman, LLP
Chicago, Illinois
July 7, 2006

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
SigmaTron International, Inc.

We have audited the accompanying consolidated balance sheets of SigmaTron
International, Inc. and subsidiaries (a Delaware corporation) as of April 30,
2005, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the two years in the period ended April 30, 2005.
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). 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 audit 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. and subsidiaries as of April 30, 2005 and 2004, and the
results of its operations and its cash flows for the each of the two years in
the period ended April 30, 2005 in conformity with accounting principles
generally accepted in the United States of America.

GRANT THORNTON LLP

Chicago, Illinois
July 8, 2005, except for Note C, related to "discontinued operations" which is
dated July 19, 2006

F-3

SIGMATRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30,

2006 2005
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,269,925 $ 184,014
Accounts receivable, less allowance for doubtful
accounts of $269,000 and $120,000 at April 30,
2006 and 2005 17,747,414 14,275,308
Inventories, net 31,250,050 21,468,506
Prepaid and other assets 1,329,774 1,168,366
Refundable income taxes 476,000 --
Deferred income taxes 957,069 429,528
Other receivables 332,298 183,666
----------- -----------
Total current assets 55,362,530 37,709,388

MACHINERY AND EQUIPMENT, NET 30,544,307 26,689,940

LONG-TERM ASSETS
Other assets 1,548,240 1,386,770
Intangible assets, net of amortization of $583,650 2,186,350 --
Goodwill 9,298,945 756,959
----------- -----------
Total long-term assets 13,033,535 2,143,729
----------- -----------
TOTAL ASSETS $98,940,372 $66,543,057
=========== ===========

The accompanying notes are an integral part of these statements.

F-4

SIGMATRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
April 30,

2006 2005
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $13,444,928 $ 7,395,111
Accrued expenses 2,163,542 2,269,703
Accrued payroll 1,743,076 1,675,788
Income taxes payable 839,438 407,710
Notes payable - bank 1,000,000 --
Notes payable - buildings 430,000 430,000
Notes payable - other -- 300,000
Capital lease obligations 1,408,485 637,766
----------- -----------
Total current liabilities 21,029,469 13,116,078

NOTES PAYABLE - BANKS 21,161,900 512,958

NOTES PAYABLE - BUILDINGS,
LESS CURRENT PORTION 3,591,088 4,073,828

CAPITAL LEASE OBLIGATIONS,
LESS CURRENT PORTION 2,804,345 1,239,190

DEFERRED INCOME TAXES 2,458,759 1,668,909
----------- -----------
Total liabilities 51,045,561 20,610,963

COMMITMENTS AND CONTINGENCIES: -- --

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 500,000 shares
authorized, none issued and outstanding -- --
Common stock, $.01 par value; 12,000,000 shares
authorized, 3,786,956 and 3,755,420 shares issued and
outstanding at April 30, 2006 and 2005, respectively 37,870 37,554
Capital in excess of par value 19,167,289 19,087,020
Retained earnings 28,689,652 26,807,520
----------- -----------
Total stockholders' equity 47,894,811 45,932,094
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $98,940,372 $66,543,057
=========== ===========

The accompanying notes are an integral part of these statements.

F-5

SIGMATRON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED APRIL 30,

2006 2005 2004
------------ ----------- -----------
Net sales $124,786,476 $94,312,573 $84,178,206
Cost of products sold 109,986,377 76,354,419 66,185,224
------------ ----------- -----------
Gross profit 14,800,099 17,958,154 17,992,982
Selling and administrative expenses 10,925,646 10,076,082 9,314,600
------------ ----------- -----------
Operating income 3,874,453 7,882,072 8,678,382
Other income (408,889) (550,270) --
Interest expense - banks and capital lease obligations 1,421,455 283,137 232,292
------------ ----------- -----------
Income from continuing operations before income tax expense 2,861,887 8,149,205 8,446,090
Income tax expense 935,589 3,173,635 3,248,706
------------ ----------- -----------
Income before minority interest of affiliate 1,926,298 4,975,570 5,197,384
Minority interest in income of affiliate -- 1