SigmaTron International, Inc. - 2007 Annual Report

To Our Stockholders,

Fiscal Year 2007 was difficult and challenging. Our revenues increased significantly but our net income declined slightly. These results have internal and external causes.

Externally, our industry in general was subjected to pricing pressures from both customers and vendors. As commodity prices for steel, precious metals and oil increased sharply, our raw material costs for various integrated circuits, plastics and stampings increased as well. We were also caught in the middle of increasing costs from vendors and price pressures from customers. Transportation costs also escalated.

Another challenge was the transition to assemblies that are compliant with the European Union's Restriction of Hazardous Substances Directive (RoHS), which became effective July 1,2006 and affected approximately 65% of our customer base (by revenue). The transition to RoHS compliance was logistically cumbersome and inefficient, and it created supply-chain challenges and increased supply costs and capital expenditure requirements.

Internally, our biggest challenge remained integrating Able Electronics into SigmaTron. Although we accomplished that objective late in FY 2007, the process was painful and led to inefficiencies throughout the fiscal year. In conjunction with the challenge of integrating the two companies operationally, we needed to expand the size of our Tijuana operation and expand its employees' skill set. Both challenges had a negative effect on our net income.

Following are updates on our various plants; each includes a report on operations and plans for the future:

Elk Grove Village, Illinois: At Elk Grove, revenue was excellent and operating results were good. Increased revenue, driven in part by the transition to RoHS, came from new and existing customers. We expect that some of the Elk Grove business will eventually migrate to our offshore locations. To grow the Elk Grove operation, we plan to increase our box-build capabilities and expand our employees' skill set.

Acuña, Mexico, and Del Rio, Texas: Acuña had another strong year financially and remains our largest operation in terms of size, employees and revenue. We continue to see a growing demand for Mexico-based assembly services, and we are exploring ways to expand Acuña's size.

Suzhou-Wujiang, China: Wujiang remains tied to Acuña in terms of its customer base, and, like Acuna, had another excellent year. In FY 2007, Wujiang began the slow process of diversifying its customer base. Notably, at the end of the year, Wujiang landed its first intra-China order. During the year, we strengthened our supply-chain relationship with Dimension Molding, a U.S-based plastic injection molder, to the extent that Dimension has opened an operation inside our Wujiang compound. We hope that this new relationship will lead to more box-build and sub-assembly opportunities.

Hayward, California: FY 2007 was not a good year for Hayward, specifically in terms of revenue, which did not meet our expectations; Hayward also experienced operating challenges. Changes have been made, and Hayward is now going forward in the right direction. Hayward continues to be the site of our most sophisticated technology and in FY 2008 has attracted new business from existing customers.

Tijuana, Mexico: Of all our locations, Tijuana remains our greatest challenge. Early in the year, we expanded the size of the Tijuana plant, and increased the size of the staff as well. Although FY 2007 was not a good year overall for Tijuana, we made significant progress in the second half of the year. Tijuana now appears to be moving forward and I firmly expect that it will become a positive contributor to our future results.

Taipei, Taiwan: Our Taiwan facility, which remains important to our ability to compete, continues to do an excellent job. In FY 2007, we grew our international purchasing office in Taiwan; raw materials remain our highest cost.

As I mentioned at the outset, our industry continues to face many challenges. Although we have been disappointed with our recent earnings, we continue to see growing interest in SigmaTron. Our strategic footprint offers our customers-current and potential-many advantages, and we expect our Mexican operations to increase in importance as manufacturing locations. Despite the challenges we face, we remain optimistic about the future.

As always, we thank you for your confidence in SigmaTron.

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, 2007.

[ ] 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, 2006 (the last business day of the registrant's
most recently completed second fiscal quarter) was $36,317,729 based on the
closing sale price of $9.57 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 13, 2007, was 3,794,956.

DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the definitive proxy statement of SigmaTron
International, Inc., for use in connection with its 2007 annual meeting of
stockholders, which will be filed within 120 days of the fiscal year ended
April 30, 2007, 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 ........... 15

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 ................ 27
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ........................ 27

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., acquired in July
2005, and 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,” “anticipate,” “will,”
“expects,” “believe,” “plans,” and similar expressions identify forward-looking
statements. These forward-looking statements are based on the current
expectations of SigmaTron (including its subsidiaries). 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”); 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 continued 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 operation of Able Electronics
Corp. (“Able”) 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 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
the United States, Mexico, 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 liquidated and on November 1, 2004 SMT Unlimited,
Inc. was merged into the Company, resulting in SMTU becoming an operating
division of the Company. Prior to the acquisition by the Company, SMTU was
consolidated under FASB Interpretation No. 46 (“FIN 46R”) 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 (“OEMs”) 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) diversify markets,
capabilities and customer base, (2) adding a third low-cost manufacturing facility
(Tijuana, Mexico), (3) creating an opportunity to consolidate the California
operations into one facility, and (4) generating 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 on November 1, 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 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 RoHS
compliant assembly services in order to comply with the European Union
environmental mandate that became effective 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, 2007, the Company had
approximately 140 active customers ranging from Fortune 500 companies to
small, privately held enterprises.
6

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 2005 2006 2007
------- --------------- ------ ------ ------
Appliances Household appliance controls 37.1% 37.6% 37.6%

Industrial Electronics Motor controls, power supplies 15.6 18.8 23.9

Fitness Treadmills, exercise bikes 18.5 20.0 16.7

Telecommunications Routers 10.0 11.1 6.3

Gaming Slot machines, lighting displays 11.6 2.3 5.7

Life Sciences Clinical diagnostic systems and
instruments -- 5.0 4.2

Semiconductor Equipment Process control and yield management
solutions for semiconductor productions -- 3.9 4.1

Consumer Electronics Carbon monoxide alarms, sprinkler systems,
battery backup sump pumps 6.4 1.1 0.8

Automotive Automobile interior lighting 0.8 0.2 0.7
---- ---- ----
Total 100% 100% 100%
==== ==== ====

For the fiscal year ended April 30, 2007, Spitfire Controls, Inc. and
Life Fitness accounted for 24.8% and 16.9%, respectively, of the Company’s
net sales. 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. Although the Company does not have long term contracts with these
two customers, the Company expects that 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 37 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, 2007.

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, Mexico, a
border town 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 2007 the Company paid approximately
$19,400,000 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, 2007, approximately $531,500 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 J, 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, 2007, this
operation had 213 employees.

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 K 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 were required to be in
compliance with the European Standard of RoHS 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, 2007, was approximately
$47,680,000. The Company currently expects to ship substantially all of the
remaining April 30, 2007, backlog by the end of the 2008 fiscal year. Backlog
as of April 30, 2006, totaled approximately $52,875,000. 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 2,470 people as of April 30,
2007, including 128 engaged in engineering or engineering related services,
2,037 in manufacturing and 305 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, 2009. 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, 2008.

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 55 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 46 Chief Financial Officer, Vice President - Finance,
Treasurer and Secretary since February 1994.

Gregory A. Fairhead 51 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 46 Vice President - Director of Materials and Assistant
Secretary since February 1994.

Daniel P. Camp 58 Vice President - China Operation since 2003, and
General Manager/Vice President of Mexican Operations
from 1994 to 2003.

Raj B. Upadhyaya 52 Executive Vice President - Hayward / Tijuana since
2005. Mr. Upadhyaya was the Vice President of
the Fremont operation (SMTU) 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.

On July 31, 2006, the Company amended the credit facility to
increase the revolving credit facility from $22,000,000 to $27,000,000. The
Company also has a term loan which was increased in July 2006 to $4,000,000
from $2,750,000 on July 31, 2006. Interest payments only are due monthly
through June 30, 2007 and quarterly principal payments of $250,000 are due
each quarter beginning with the quarter ending June 30 2007, through the
quarter ending June 30, 2011. Interest payments continue to be due monthly
throughout the term. In October 2006, the Company amended the credit
facility to increase the revolving credit facility from $27,000,000 to
$32,000,000. The increase of $5,000,000 was for a term of six months and
expired on April 30, 2007. In April 2007, the amended revolving credit
facility was renewed in the amount of $32,000,000 and will expire on
September 30, 2009. The amended revolving credit facility is limited to the
lesser of: (i) $32,000,000 or (ii) an amount equal to the sum of 85% of the
receivable borrowing base and the lesser of $16,000,000 or a percentage of the
inventory base. In January and April 2007, the Company’s financial
covenants were amended. On April 30, 2007, $24,219,015 was outstanding
under the revolving credit facility and $4,000,000 under the term loan. There
was approximately $5,100,000 of unused credit available as of April 30, 2007.
The Company was in compliance with its financial covenants at April 30,
2007.

The Company anticipates credit facilities, cash flow from operations
and leasing resources will be adequate to meet its working capital
requirements in fiscal year 2008. 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 56%,
64% and 63% of net sales for the fiscal years ended April 30, 2007, 2006 and
2005, respectively. Further, the Company’s two largest customers accounted
for 24.8% and 16.9% of net sales, for the fiscal year ended April 30, 2007.
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.
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 were required to be in
compliance with the European Standard of 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. 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.

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.

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. 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 and the stability of the
Chinese economy.

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 viability 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 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. Controls are limited in their
effectiveness by human error, including faulty judgments in decision-making.
Further, controls can be circumvented by collusion of two or more people or
by management override of controls. Because of the limitations of a cost
effective control system, error and fraud may occur and not be detected. In
July 2007, the Company amended its Code of Conduct policy to include a
fraud prevention policy, requiring diligence and reporting to senior
management any suspected fraud activity. In addition, the Company has a
number of internal control policies designed to discover and deal with
potential fraud activities.

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 in the future.

The Company’s goodwill may be impaired in future periods.

Current accounting standards require an annual assessment of
goodwill for impairment. This annual assessment requires the Company to
determine the fair value of its reporting unit and compare this fair value to the
carrying value of the reporting unit. In the event the carrying value exceeds
the fair value of the reporting unit, the Company would be required to
calculate a goodwill impairment charge. Determination of the fair value of the
reporting unit involves consideration of several factors, including the market
price of the Company’s common stock, as well as current and projected
performance of the Company. The Company completed its annual goodwill
impairment test for the year ended April 30, 2007. The goodwill impairment
analysis indicated there was no goodwill impairment for the year ended April
30, 2007 as the fair value of the reporting unit exceeded the carrying value of
the reporting unit by approximately 1%. However, in the event the Company
does not achieve projected performance or there is a decline in the market
price of the Company’s stock, we may be required to record an impairment
charge for goodwill in the future, which charge would reduce net income and
earnings per share.

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
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 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

At April 30, 2007, 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 67,700 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 and ***** Just-in-time inventory management and delivery *****
Tlaquepaque, Mexico

* 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 J,
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 Tijuana, Mexico leases
expire June 2009. 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 believes the existing facilities will meet its future needs. However,
the Company is considering expanding its Acuna manufacturing operation during
fiscal 2008. All facilities are adequately insured.

ITEM 3. LEGAL PROCEEDINGS

Since the beginning of the 2007 fiscal year, the Company was not a party to any
material legal proceedings.

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 2007.

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, 2007,
and 2006.

Common Stock as Reported by Nasdaq

Period High Low
------ ------ ------
Fiscal 2007:
Fourth Quarter $10.95 $ 7.90
Third Quarter 11.00 8.56
Second Quarter 10.94 7.32
First Quarter 10.19 7.11

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

As of July 13, 2007, 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 1,690 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)
------------------------------------------------
2007 *2006 2005 2004 2003
------- ------- ------- ------- --------
Net Sales $165,909 $124,786 $94,312 $84,178 $84,342
Income before income tax
expense (benefit), minority
interest and discontinued operations 2,595 2,862 8,150 8,446 6,432

Net Income from continuing
operations 1,698 1,926 4,840 4,934 4,063

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

Net Income 1,698 1,882 4,699 5,406 5,714

Earnings (loss) per share-basic
Continuing operations 0.45 0.51 1.29 1.44 1.41
Discontinued operations (0.00) (0.01) (0.04) 0.14 0.57
------- ------- ------- ------- --------
Total 0.45 0.50 1.25 1.58 1.98
======= ======= ======= ======= ========
Earnings (loss) per share-diluted
Continuing operations 0.44 0.49 1.27 1.39 1.21
Discontinued operations (0.00) (0.01) (0.04) 0.14 0.49
------- ------- ------- ------- --------
Total 0.44 0.48 1.23 1.53 1.70
======= ======= ======= ======= ========

Total assets 109,402 98,940 66,543 62,998 53,400

Long-term debt and capital lease
obligations (including current
maturities 36,551 30,396 7,194 7,025 9,911

* 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 SigmaTron International, Inc., its wholly-owned subsidiaries
Standard Components de Mexico S.A., and AbleMex S.A. de C.V., acquired
in July 2005, and 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,”
“anticipate,” “will,” “expects,” “believe,” “plans,” and similar expressions
identify forward-looking statements. These forward-looking statements are
based on the current expectations of SigmaTron (including its subsidiaries).
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 RoHS; 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 continued 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 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 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 United States,
Mexico, 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.

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 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 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.

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 year
ended April 30, 2007.

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, 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 services 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 generally 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 fiscal 2007, the Company completed its annual assessment of
impairment regarding the goodwill recorded. The Company calculates fair
value of the reporting unit utilizing a combination of a discounted cash flow
approach and certain market approaches which considered both the
Company’s market capitalization and trading multiples of comparable
companies. The calculations of fair value of the reporting unit involves
significant judgment and different underlying assumptions could result in
different calculated fair values. The goodwill impairment analysis indicated
there was no goodwill impairment for the year ended April 30, 2007 as the fair
value of the reporting unit exceeded the carrying value of the reporting unity
by approximately 1%. However, in the event the Company does not achieve
projected performance or there is a decline in the market price of the
Company’s stock, we may be required to record an impairment charge for
goodwill in the future, which charge would reduce net income and earnings
per share.

New Accounting Standards -

In February 2006, the FASB issued Statement of Financial
Accounting Standard No. 155, “Accounting for Certain Hybrid Instruments”
(SFAS 155). FASB 155 allows financial instruments that have embedded
derivatives to be accounted for as a whole (eliminating the need to bifurcate
the derivative from its host) if the holder elects to account for the whole
instrument on a fair value basis. This statement is effective for all financials
instruments acquired or issued after the beginning of the entity’s first fiscal
year that begins after September 15, 2006. The Company does not expect the
adoption of SFAS 155 will have a material impact on its consolidated financial
statements.

In July 2006, the FASB issued FIN 48, “Accounting for Uncertainty
in Income Taxes” to create a single model to address accounting for
uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes
by prescribing a minimum recognition threshold a tax position is required to
meet before being recognized in the financial statements. FIN 48 also provides
guidance and derecognition, classification, interest and penalties, accounting
in interim periods, disclosures, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company adopted FIN 48 as
of May 1, 2007, as required. The Company has estimated that its potential
impact to retained earnings is expected to be no greater than $500,000.

In September 2006, FASB issued SFAS No. 157 (SFAS 157), “Fair
Value Measurements”. SFAS 157 establishes a common definition for fair
value to be applied to U.S. GAAP guidance requiring use of fair value,
establishes a framework for measuring fair value, and expands disclosure
about such fair value measurements. SFAS 157 is effective for fiscal years
beginning after November 15, 2007. The Company is currently assessing the
impact of SFAS 157 may have on its financial statements.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value
Options for Financial Assets and Financial Liabilities (SFAS No. 159). SFAS
159 permits entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The Company is
currently assessing the impact of SFAS 159 may have on financial statements.

Results of Operations:

FISCAL YEAR ENDED APRIL 30, 2007 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2006

Net sales increased 32.9% to $165,909,106 in fiscal year 2007 from
$124,786,476 in the prior year. The Company’s sales increased in the
industrial electronics, appliance, gaming, telecommunications, fitness,
semiconductor and life sciences marketplaces during fiscal year 2007 as
compared to the prior year. The increase in sales volume was partially offset
by price reductions to customers. The Company anticipates pricing pressures
from customers will continue in fiscal year 2008. The increase in the
industrial electronics, semiconductor and life sciences industries is primarily
due to sales to customers as the result of the acquisition of Able. The increase
in sales in the appliance, gaming, telecommunications and fitness marketplaces
is primarily due to sales to customers existing prior to the Able acquisition.
The increase in sales for fiscal year 2007 was also due to short term demand
related to the RoHS standard transition and the addition of several new
significant customers.

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 56% and 64% of net sales for fiscal years
2007 and 2006, respectively.

Gross profit increased to $17,758,756 or 10.7% of net sales in fiscal
year 2007 compared to $14,800,099 or 11.9% of net sales in the prior period.
The decrease in the Company’s gross profit as a percentage of sales is the
result of the operating inefficiencies caused by the RoHS conversion required
by many customers, and the longer than expected integration of Able into
SigmaTron. The Company also experienced increased raw material cost for
various integrated circuits, plastics and stamping due to soaring commodity
prices, for steel and precious metals, and continuous pricing pressures from
customers. Transportation and regulatory costs also escalated.

Selling and administrative expenses increased in fiscal year 2007 to
$12,872,353 or 7.8% of net sales compared to $10,925,646 or 8.8% of net
sales in fiscal year 2006. The increase is primarily due to additional personnel
in the sales and purchasing departments and an increase in commission
expense. Amortization expense increased in fiscal 2007 due to the intangibles
related to the acquisition of Able. The Company anticipates it will incur
additional professional fees related to Sarbanes-Oxley, specifically in
compliance with the requirements of Section 404, Internal Control Over
Financial Reporting, in future periods.

Interest expense increased to $2,574,180 in fiscal year 2007
compared to $1,421,455 in fiscal year 2006. The interest expense increased
due to increased borrowings under the Company’s lines of credit to support
working capital requirements, additional capital leases for machinery and
equipment and rising interest rates. Interest expense for fiscal year 2008 is
expected to be comparable to the amount of interest expense recorded in fiscal
year 2007.

In fiscal year 2007 tax expense from continuing operations was
$896,179 which resulted in an effective rate of 34.5% compared to $935,589
in income tax expense and an effective rate of 32.7% in fiscal year 2006. The
tax rate in fiscal years 2007 and 2006 is impacted by the Company’s
operations in foreign countries.

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.

Net income decreased to $1,698,324 in fiscal year 2007 compared to
$1,882,132 in fiscal year 2006. Diluted earnings per share for the year ended
April 30 2007, was $0.44 compared to $0.48 in fiscal year 2006. Basic
earnings per share was $0.45 and $0.50 for the year ended April 30, 2007 and
2006, respectively.

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, (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 years ended April 30 2006, and
2005, respectively.

Liquidity and Capital Resources:

Cash flow (used in) operating activities was ($2,308,847) for the year
ended April 30, 2007 compared to cash flow provided by operations of
$1,997,144 in fiscal 2006. Cash used in operations was the result of a
significant increase in inventories of $10,075,504 and an increase in accounts
receivable of $2,549,567. The increase in inventories is attributable to an
increase in the number of customers, customer required safety stock, RoHS
transition, and inefficiencies at the Company’s Hayward and Tijuana
operations. The inefficiencies were due to the integration of Able into
SigmaTron and the expansion of the Tijuana operations. Cash used in
operating activities was partially offset by net income, the non-cash effect of
depreciation and amortization and an increase in trade payables.

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 $6,100,000. 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 fiscal year 2007 the Company purchased approximately
$4,500,000 in machinery and equipment and it anticipates it will make
additional machinery and equipment acquisitions during fiscal year 2008. The
Company executed three to five year capital leases to finance approximately
$2,100,000 of the acquisitions in fiscal year 2007.

In fiscal 2006 the Company purchased approximately $6,300,000 in
machinery and equipment. The Company executed three to five year capital
leases to finance several of the purchases in fiscal year 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. The effective date of the transaction was July 1, 2005. Able was
merged into the Company on November 1, 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 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.

Financing Transactions.

Cash provided by financing activities was $4,106,815 for the year
ended April 30, 2007, compared to $22,345,050 in fiscal 2006. Cash
provided by financing was the result of increased borrowing under the
revolving credit facility of $5,057,115 and an increase of $1,000,000 in the
term loan during fiscal year 2007 The cash provide by financing activities was
partially offset by payments made for capital lease and building mortgage
obligations. In fiscal year 2006 cash provided by financing activities was
primarily the result of increased borrowings under the revolving credit facility
and term loan. The additional working capital was required primarily for the
acquisition of Able and to support revenue growth.

SigmaTron China entered into a loan agreement in April 2005, which
provided for a line of credit from the China Construction Bank. The interest
rate under the agreement was 5.76%. The line of credit was collateralized by
the Company’s building in Suzhou-Wujiang China and 60 of the 100 Chinese
acres leased at the property. The loan was paid in full in July 2006.

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 2007 the Company paid approximately
$19,400,000 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, 2007, approximately $531,500 was outstanding in
connection with the financing of that facility.

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, 2007, 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 3,796,345 714,751 3,081,594 0 0
Capital Leases, including
current maturities 5,451,210 2,000,508 3,161,065 289,637 0
Operating leases 4,523,350 1,449,590 3,015,480 58,280 0
Bank debt 30,952,347 3,283,333 27,669,014 0 0
---------- --------- ---------- ------- ---
Total contractual cash
obligations 44,723,252 7,448,182 36,927,153 347,917 0
========== ========= ========== ======= ===

Maturities for notes payable and bank debt include estimated interest payments
based on prevailing interest rates at April 30, 2007.

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 $282,000 for the year ended April 30, 2007. As of April 30,
2007, the Company had no short-term investments and approximately
$28,000,000 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, 2007. 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, 2007.

There has been no change in our internal control over financial
reporting during the quarter ended April 30, 2007, 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, 2007.

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) Exhibits:

Exhibit 10.16 – Fifteenth Amendment to Loan and Security
Agreement between SigmaTron International, Inc. and LaSalle Bank National
Association, dated as of April 30, 2007, filed as Exhibit 10.16.

(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 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.

10.7 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. *

10.8 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. *

10.9 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.

10.10 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.

10.11 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.

10.12 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.

10.13 Twelfth Amendment to Loan and Security Agreement between
SigmaTron International, Inc. and LaSalle Bank National
Association, dated July 31, 2006, filed as Exhibit 10.21 to the
Company’s Form 10-Q for the quarter ended July 31, 2006, and
hereby incorporated by reference.

10.14 Thirteen Amendment to Loan and Security Agreement between
SigmaTron International, Inc. and LaSalle Bank National
Association, dated October 20, 2006, filed as Exhibit 10.22 to the
Company’s Form 10-Q for the quarter ended October 31, 2006, and
hereby incorporated by reference.

10.15 Fourteenth Amendment to Loan and Security Agreement between
SigmaTron International, Inc. and LaSalle Bank National
Association, dated January 2007, filed as Exhibit 10.23 to the
Company’s Form 10-Q for the quarter ended January 31, 2007, and
hereby incorporated by reference.

10.16 Fifteenth Amendment to Loan and Security Agreement between
SigmaTron International, Inc. and LaSalle Bank National
Association, dated April 30, 2007, filed as Exhibit 10.16.

21.1 Subsidiaries of the Registrant to the Company’s Form 10-K for the
fiscal year ended April 30, 2006, and hereby incorporated by
reference.

21.2 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,
Principal Executive Officer and Director

Dated: July 24, 2007

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.

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 24, 2007
---------------------------
Franklin D. Sove

/s/ Gary R. Fairhead President and Chief Executive Officer, July 24, 2007
--------------------------- Principal Executive Officer and Director
Gary R. Fairhead

/s/ Linda K. Blake Chief Financial Officer, Secretary and Treasurer July 24, 2007
--------------------------- (Principal Financial Officer and Principal
Linda K. Blake Accounting Officer)

/s/ John P. Chen Director July 24, 2007
---------------------------
John P. Chen

/s/ Thomas W. Rieck Director July 24, 2007
---------------------------
Thomas W. Rieck

/s/ Dilip S. Vyas Director July 24, 2007
---------------------------
Dilip S. Vyas

/s/ Carl Zemenick Director July 24, 2007
---------------------------
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, 2007 and 2006and the related consolidated statements
of income, stockholders' equity and cash flows for the years 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, 2007 and 2006 and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.

As described in Note Q to the consolidated financial statements, effective May 1, 2006,
the Company adopted the fair value method of accounting provisions of Statement of
Financial Accounting Standard No. 123 (revised 2004), "Share Based Payment."

/s/ BDO Seidman, LLP
Chicago, Illinois
July 16, 2007

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) for the year
ended April 30, 2005. These 2005 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
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 for the year ended April 30, 2005 in
conformity with accouting 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,

2007 2006
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,769,653 $ 3,269,925
Accounts receivable, less allowance for doubtful
accounts of $150,000 and $268,920 at April 30,
2007 and 2006, respectively 20,279,874 17,747,414
Inventories, net 40,849,791 31,250,050
Prepaid and other assets 1,289,207 1,329,774
Refundable income taxes -- 476,000
Deferred income taxes 1,251,241 957,069
Other receivables 224,189 332,298
------------ -----------
Total current assets 66,663,956 55,362,530

PROPERTY, MACHINERY AND EQUIPMENT, NET 30,971,107 30,544,307

LONG-TERM ASSETS
Other assets 1,006,126 1,548,240
Intangible assets, net of amortization of $1,308,228
and $583,650 at April 30, 2007 and 2006, respectively 1,461,772 2,186,350
Goodwill 9,298,945 9,298,945
------------ -----------
Total long-term assets 11,766,843 13,033,535
------------ -----------
TOTAL ASSETS $109,401,906 $98,940,372
============ ===========

The accompanying notes are an integral part of these statements.

F-4

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

2007 2006
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 15,473,660 $13,444,928
Accrued expenses 2,613,636 2,163,542
Accrued payroll 2,241,289 1,743,076
Income taxes payable 243,956 839,438
Notes payable - bank 1,000,000 1,000,000
Notes payable - buildings 528,092 430,000
Capital lease obligations 1,690,437 1,408,485
------------ -----------
Total current liabilities 23,790,708 21,029,469

NOTES PAYABLE - BANKS 27,219,015 21,161,900

NOTES PAYABLE - BUILDINGS,
LESS CURRENT PORTION 2,988,372 3,591,088

CAPITAL LEASE OBLIGATIONS,
LESS CURRENT PORTION 3,125,297 2,804,345

DEFERRED INCOME TAXES 2,537,493 2,458,759
------------ -----------
Total liabilities 59,660,885 51,045,561

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 3,786,956 shares issued and
outstanding at April 30, 2007 and 2006, respectively 37,950 37,870
Capital in excess of par value 19,315,104 19,167,289
Retained earnings 30,387,967 28,689,652
------------ -----------
Total stockholders' equity 49,741,021 47,894,811
------------ -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $109,401,906 $98,940,372
============ ===========

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,

2007 2006 2005
------------ ------------ -----------
Net sales