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, 2021.2023.

Or

 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)

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

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

ý Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ý Yes o No

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

Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer ý Smaller Reporting Company ý

Emerging Growth Company o

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act.) oYes ý No

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of October 31, 2020,2022, the last business day of the registrant’s most recently completed second fiscal quarter was $11,921,231$23,548,787 based on the closing sale price of $3.21$4.73 per share as reported by NASDAQ Capital Market as of such date.

The number of outstanding shares of the registrant’s Common Stock, $0.01 par value, as of July 20, 202114, 2023 was 4,284,508.6,091,288.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections or portions of the definitive proxy statement of SigmaTron International, Inc., for use in connection with its 20212023 annual meeting of stockholders, which the Company intends to file within 120 days of the fiscal year ended April 30, 2021,2023, are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

CAUTIONARY NOTE:

In addition to historical financial information, this discussion of the business of SigmaTron International, Inc. (“SigmaTron”), its wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex, S.A. de C.V., Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., and Spitfire Controls (Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and Wujiang SigmaTron Electronic Technology Co., Ltd. (collectively, “SigmaTron China”) and, its international procurement office, SigmaTron International Inc. Taiwan branchBranch, and Wagz, Inc. (19 percent ownership as of April 1, 2023) (“Wagz”), (collectively, the “Company”) and other Items in this Annual Report on Form 10-K contain forward-looking statements concerning the Company’s business or results of operations. Words such as “continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectations of the Company. Because these forward-looking statements involve risks and uncertainties, the Company’s plans, actions and actual results could differ materially. Such statements should be evaluated in the context of the direct and indirect risks and uncertainties inherent in the Company’s business including, but not necessarily limited to, the risks inherent in any merger, acquisition or business combination; the Company’s continued dependence on certain significant customers; the continued market acceptance of products and services offered by the Company and its customers; pricing pressures from the Company’s customers, suppliers and the market; the activities of competitors, some of which may have greater financial or other resources than the Company; the variability of the Company’s operating results; the results of long-lived assets and goodwill impairment testing; the ability to achieve the expected benefits of acquisitions as well as the expenses of acquisitions; the collection of aged account receivables; the variability of the Company’s customers’ requirements; the impact of inflation on the Company’s operating results; the availability and cost of necessary components and materials; the impact acts of war may have to the supply chain and the Company’s customers; the ability of the Company and its customers to keep current with technological changeswithin its industries; regulatory compliance, including conflict minerals; the continued availability and sufficiency of the Company’s credit arrangements,arrangements; the costs of borrowing under the Company’s senior and subordinated credit facilities, including under the phase-out ofrate indices that replaced LIBOR; increasing interest rates; the ability to meet the Company’s financial and restrictive covenants under its loan agreements; changes in U.S., Mexican, Chinese, Vietnamese or Taiwanese regulations affecting the Company’s business; the turmoil in the global economy and financial markets; the spread ofpublic health crises, including COVID-19 and variants (commonly known as “COVID-19”) which has threatened the Company’s financial stability by causing a decrease in consumer revenues, caused a disruption to the Company’s global supply chain, and caused plant closings or reduced operations thus reducing output at those facilities; the continued availability of scarce raw materials, exacerbated by global supply chain disruptions, necessary for the manufacture of products by the Company; the stability of the U.S., Mexican, Chinese, Vietnamese and Taiwanese economic, labor and political systems and conditions; currency exchange fluctuations; and the ability of the Company to manage its growth. These and other factors which may affect the Company’s future business and results of operations are identified throughout the Company’sthis Annual Report on Form 10-K, and as risk factors, may be detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These statements speak as of the date of such filings, and the Company undertakes no obligation to update such statements in light of future events or otherwise unless otherwise required by law.

Overview

SigmaTron is a Delaware corporation, which was organized on November 16, 1993, and commenced operations when it became the successor to all of the assets and liabilities of SigmaTron L.P., an Illinois limited partnership, through a reorganization on February 8, 1994.1994 as part of going public.

ThePrior to April 1, 2023, the Company operatesoperated in one business segmenttwo reportable segments as an independent provider of Electronic Manufacturing Serviceselectronic manufacturing services (“EMS”), which includes printed circuit board assemblies and completely assembled (box-build) electronic products. In connection withas a provider of products to the production of assembled products, the Company also provides services to its customers, including (1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousingpet technology (“Pet Tech”)

market. The majority of the Pet Tech Segment was sold, effective as of April 1, 2023, and distribution services;following such date, the Company operates in one reportable segment, the EMS segment. The EMS segment includes printed circuit board assemblies, electro-mechanical subassemblies and (6) assistance in obtaining product approval from governmentalcompletely assembled (box-build) electronic products. The Pet Tech segment offered electronic products such as the Freedom Smart Dog Collar ™, a wireless, geo-mapped fence, and other regulatory bodies. The Company provides these manufacturing services through an international networkwellness system, and apparel and accessories.

Except as otherwise noted, the description of facilities located in the United States, Mexico, China, Vietnam and Taiwan.Company’ business below reflects its continuing operations. Refer to Note P - Discontinued Operations, to the consolidated financial statements for activity associated with discontinued operations.

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 industrial electronics, consumer electronics and medical/life sciences. In some instances, the Company manufactures and assembles the completed finished product for its customers.

In connection with the production of assembled products, the Company provides services to its customers, including (1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousing and distribution services; (6) assistance in obtaining product approval from governmental and other regulatory bodies and (7) compliance reporting. The Company operatesprovides these manufacturing services through an international network of facilities located in the United States, Mexico, China, Vietnam and Taiwan.

The Company began its Pet Technology operations after the December 2021 acquisition of Wagz, Inc. During the fourth quarter of fiscal 2023, the Company exited its active involvement in the Pet Tech business that is conducted by Wagz through the sale by the Company of a majority stake in Wagz, effective as of April 1, 2023. See “Recent Developments” below for additional information.

The Company’s headquarters is in Elk Grove Village, Illinois, United States of America (“U.S.”); which also operates as a manufacturing facility. In addition, the Company has manufacturing facilities in Union City, California, U.S.; Acuna, Coahuila, Mexico (“MX”); Chihuahua, Chihuahua, MX; and Tijuana, Baja California, MX; Suzhou, Jiangsu Province, China; and Ho Chi MinhBien Hoa City, Dong Nai Province, Vietnam. In addition, the Company maintains an International Procurement Office and Compliance and Sustainability Center (“IPO”) in Taipei, Taiwan. The Company also provides design services in Elgin, Illinois, U.S. and warehousing services in Del Rio, Texas;Texas, U.S.; El Paso, Texas;Texas, U.S.; Elk Grove Village, IL;Illinois, U.S.; and San Diego, California.California, U.S. The Company has an information technology office in Taichung, Taiwan.

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

For the fiscal year ended 2021April, 30 2023, the Company reported pre-tax profitincome of approximately $2,100,000 and$17,200,000 from continuing operations. The Company reported sales of approximately $278,000,000.$414,400,000. The Company reported strong results for the fourth quarter of fiscal year 2021, including pre-tax profit of approximately $1,900,000end revenue results increased 9.5%, compared to the prior fiscal year. The higher sales related to both increased customer demand and sales of approximately $76,000,000. The year end results were strong despite the first fiscal quarter, which was the height of the COVID-19 pandemicprice increases passed on to customers for the Company.raw material and other operating cost increases. These results were obtained after incurring significant non-reoccurring expenses during the year related to changing the Company’ primary bank, COVID-19 related expenses, including reconfiguring operations to provide a safe environment and expenses related to a proposed acquisition of Wagz, Inc.  Furthermore, the continuingdespite continued electronic component shortages in the marketplace havemarketplace. This has led to lower productivity on occasion, rapidly growing inventory levels and pressure on working capital, as the marketplace has remained volatile. 

Going forward, theThe Company’s backlog remains at an all-time high with demand staying strong across the vast majority of markets and customers the Company serves. The Company has several new customers of significance that the Company expects to begin shipping to in the first half of fiscal year 2022. However, the electronic component marketplace remains volatile in terms of bothcontinued supply and price. Itchain shortages could well negatively impact the Company’s ability to ship the backlog on time.a timely basis.  This is a problem faced by almost every customer and competitor in the EMS industry, and the Company does not seeanticipates the situation improving soon.through fiscal 2024.  The Company’s supply chain and operations teams havecontinue to face challenges which continue for the foreseeable future andas it would seem they will remain forstarts fiscal year 2022.  The Company does not see any signs of weakening in the semiconductor demand across all markets, nor does the Company see any additional capacity coming online anytime soon. 2024.

Recent Developments

On May 29, 2020, SigmaTron and Wagz, Inc. (“Wagz”), a privately held company in the pet technology market, entered into a Convertible Secured Promissory Note in the principal sum of up to $4,052,478.  On January 27, 2021, Wagz issued an additional Convertible Secured Promissory Note to the Company in the principal sum of up to $1,588,328. On April 30, 2021, Wagz issued an additional Convertible Secured Promissory Note to the Company in the principal amount of $1,249,966. On April 30, 2021, Wagz issued a Secured Promissory Note to the Company in the principal amount of $308,329 (collectively, the “Notes”). At April 30, 2021, $7,014,594 and $184,507 was outstanding under Note receivable and Other receivables, respectively, in the consolidated balance sheet. The Notes are due (the “Maturity Date”) on the earliest to occur of (a) December 31, 2021 or, if the closing of the Company’s proposed acquisition of Wagz (the “Closing”) does not occur due to the Company’s termination, that date which is twelve (12) months after the date of such termination, (b) upon the closing of a sale of all or substantially all of the assets or common stock of Wagz

(other than the Closing), or (c) an Event of Default (as defined in the Notes). Interest is payable at the rate of four percent (4%) per annum and is payable on the Maturity Date. The Notes are collateralized by substantially all assets of Wagz.

On June 4, 2020, SigmaTron and Wagz, announced that they executed a Letter of Intent (“LOI”) relating to a proposed acquisition. Subject to the terms and conditions set forth in the LOI, SigmaTron expects to issue approximately 2,443,870 shares of SigmaTron common stock that would result in the stockholders of Wagz owning in the aggregate approximately one-third of the combined company. The potential benefits to the Company from that transaction were summarized in the June 4, 2020 announcement. On July 19, 2021 the definitive agreement was signed. The parties expect the transaction to close by September 30, 2021 and it remains subject to achievement of certain milestones and satisfaction of conditions by both parties prior to Closing including the Company having determined that the Wagz Freedom Smart Collar™ meets certain criteria, and the approval by the stockholders of both SigmaTron and Wagz.Recent Developments

A pandemicOn December 31, 2021, the Company acquired 100% of respiratory diseases, including variants (commonly knownthe stock of Wagz under the terms of the Agreement and Plan of Merger dated July 19, 2021, as "COVID-19") beganamended by the First Amendment to spread globally, includingAgreement and Plan of Merger dated December 7, 2021 (the “Merger Agreement”). Prior to the United States,acquisition, the Company had an investment in early 2020. The full impactWagz of $600,000, and held Convertible Secured Promissory Notes issued by Wagz of $12,000,000 and Secured Promissory Notes issued by Wagz of $1,380,705. Pursuant to the Merger Agreement, prior to the acquisition, the Convertible Secured Promissory Notes converted to 12,000,000 shares of Wagz common stock, resulting in a 25.5% ownership in Wagz. As described in Note F – Acquisition and Disposition, the Company’s 25.5% equity interest in Wagz common stock was remeasured to fair value of $6,299,765, resulting in a non-cash impairment charge of $6,300,235 in fiscal 2022.

Pursuant to the Merger Agreement, 2,443,870 shares of common stock of the COVID-19 outbreakCompany were issued in the merger for a value of $25,245,177, of which 1,546,592 shares are allocated to Wagz shareholders (excluding the Company) for a total value of $15,976,295, and 897,278 shares are allocated to the Company and treated as treasury stock for a total value of $9,268,881, recorded in the Consolidated Statements of Changes in Stockholders’ Equity of Item 15(a) Exhibits and Financial Statement Schedules under Issuance of stock for acquisition and Purchase of treasury stock related to acquisition, respectively. The treasury shares were retired as of April 30, 2022.

During the fourth quarter of fiscal 2023, the Company exited its active involvement in the Pet Tech business that is inherently uncertain atconducted by Wagz through the timesale by the Company of this report. The COVID-19 outbreak has resulteda majority stake in travel restrictions and in some cases, prohibitionsWagz, effective as of non-essential activities, disruption and shutdown of certain businesses and greater uncertainty in global financial markets.April 1, 2023. The Company cannot predictentered into a Stock Purchase Agreement (“SPA”) by and among the extentCompany, Wagz, Vynetic LLC, a Delaware limited liability company (“Buyer”), and Terry B. Anderton, co-founder of Wagz and principal of Buyer (“Anderton”), pursuant to which the COVID-19 outbreak will continueCompany sold to impact its business or operating results, which is highly dependent on inherently uncertain future developments, including the severity and durationBuyer 81% of the COVID-19 outbreakissued and outstanding shares of common stock of Wagz (the “Shares”) for the purchase price of one dollar. Under the SPA, the Company also agreed to provide a $900,000 working capital term loan (the “Wagz Loan”) to Wagz during the month of April 2023. The Company agreed to work with Wagz as an EMS provider pursuant to a manufacturing agreement, but the Company did not commit to extending any further financial support beyond the Wagz Loan. On April 28, 2023, the sale of the majority interest in Wagz pursuant to the SPA was consummated with effect as of April 1, 2023, and as a result, as of the closing, the Company holds a minority 19% ownership of the Shares and Buyer holds a majority 81% of the Shares.

OnMarch2,2023, the Company received an EventofDefaultandReservationofRightsnoticefromeachofJPMorgan Chase Bank, N.A., lender under the Company’s Amended and Restated Credit Agreement(“JPMNotice”),and TCW Asset Management Company LLC, as administrative agent (“Agent”), and other lenders party to the Company’s Term Loan Agreement (the “TCWLenders”)(“TCW Notice”togetherwiththe JPMNotice,the“Notices”). The Notices indicated the occurrence of certain events of default under the JPM Credit Agreement and the actions taken by governmentsTerm Loan Agreement. See Note I – Long-term Debt, for more information.

OnApril28,2023,theCompanyenteredinto(i)a Waiver,ConsentandAmendment No.1tothe JPM CreditAgreement(“JPMWaiver”) withWagzandJPM,aslender, which waived certain events of default under and businesses in relation amended certain terms of theJPMCreditAgreementand(ii)a Waiver,Consent andAmendmentNo.1to COVID-19 containment. The Company has adopted several measures in response to the COVID-19 outbreak. For more information on CreditAgreement(“TCW Waiver”) withWagz,the potential impactTCWLendersand Agent (collectivelywiththeTCWLendersandJPM,the“LenderParties”), which waived certain events of default under and amended certain terms of the COVID-19 pandemic onTerm LoanAgreement(togetherwiththeJPMCredit Agreement the Company, see “Item 1A. Risk Factors“Credit Agreements”).See Note E – The ongoing COVID-19 global pandemicLong-term Debt, for more information.

As described above, theCompanyexiteditsactiveinvolvementinthePet Techbusinessthat wasconductedby Wagzthrough thesalebytheCompanyofamajoritystakein Wagz,effective as of April1,2023. Inconnectionwiththe Waivers and measures taken in response thereto have adversely affectedsuch sale, the Company’s results of operationsLender Parties agreed to release Wagz and its financial condition, andproperty from the full impactlien of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.”Lender Parties under the Credit Agreements.

Products and Services

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

Manufacturing and Testing Services: The Company’s core business is the assembly and testing of all types of electronic printed circuit board assemblies (“PCBA”) and often incorporating these PCBAs into electronic modules used in all types of devices and products that depend on electronics for their operation. This assembly work utilizes state of the art manufacturing and test equipment to deliver highly reliable products to the Company’s customers. The Company supports new product introduction (“NPI”), low volume / volume/high mix as well as high volume/low mix assembly work at all levels of assembly and texttest complexity. From simple component assembly through the most complicated industry testing, the Company offers most of the services required to build the vast majority of electronic devices commercially availablerequired in the market today.

Design Services: To complement the manufacturing services it offers its customers, the Company also offers design for manufacturingmanufacturability (“DFM”), and design for test (“DFT”) review services to help customers ensure that the products they have designed are optimized for production and testing. The Company also offers complete product design services.services for certain markets.

Supply Chain Management: The Company provides complete supply chain management for the procurement of components needed to build customers’ products. This includes the procurement and management of all types of electronic components and related mechanical parts such as plastics and metals.metal. The Company’s resources supporting this activity are provided both on a plant specific basis as well as globally

through its IPO in Taipei, Taiwan. Each of its sites is linked together using the same Enterprise Resource Planning (“ERP”) system and custom IScoreIscore software tools with real-time on-line visibility for customer access. The Company procures material from major manufacturers and distributors of electronic parts all over the world.

The Company relies on numerous third-party suppliers for components used in the Company’s production process. Certain of these components are available only from single-sources or a limited number of suppliers. In addition, a customer’s specifications may require the Company to obtain components from a single-source or a small number of suppliers. The loss of any such suppliers could have a material impact on the Company’s results of operations. Further, the Company could operate at a cost disadvantage compared to competitors who have greater direct buying power from suppliers. The Company orders material from its suppliers consistent with the purchase orders and binding forecasts it receives from its customers. See “Item 1A. Risk Factors – The availability of raw components or an increase in theirRaw material price mayincreases and supply shortages could adversely affect the Company’s operations and profits”results”.

Warehousing and Distribution: The Company provides both in-house and third-party warehousing, shipping, and customs brokerage for certain border crossings as part of its service offering. This includes international shipping, drop shipments to the end customer as well as support of inventory optimization activities such as kanban and consignment.

Government Compliance, Green, Sustainability, and Social Responsible Initiatives: The Company supports initiatives that promote sustainability, green environment and social responsibility. The Company helps its customers in achieving effective compliance. Those include, but are not limited to, Restrictions of Hazardous Substances (“RoHS”), Restriction of Chemicals (“REACH”) and Conflict Minerals regulations.

Manufacturing Locations and Certifications: The Company’s manufacturing locations are strategically located to support our customers with locations in Elk Grove Village, Illinois U.S.; Union City, California U.S.; Acuna, Chihuahua and Tijuana, Mexico; Suzhou, ChinaChina; and Ho Chi MinhBien Hoa City, Vietnam. The Company’s ability to transition manufacturing to lower cost regions without jeopardizing flexibility and service differentiates it from many competitors. Manufacturing certifications and registrations are location specific,

and include ISO 9001:2015, ISO 14001:2004, ISO 14001:2015, IATF 16949:2016, Medical ISO 13485:2016 and FDB Certification Aerospace AS9100D and International Traffic in Arms Regulations (“ITAR”) certifications.

In addition, the Company provided products, design and manufacturing services to the pet technology market through its previously wholly owned subsidiary, Wagz. Wagz offered electronic products such as the Freedom Smart Dog Collar™, a wireless, geo-mapped fence, and wellness system, and apparel and accessories. It also sold its products online. The Company sold a majority of the stock of Wagz on April 28, 2023, effective as of April 1, 2023. The Company still owns 19 percent of Wagz common stock as a passive investment as of April 30, 2023.

Markets and Customers

The Company’s customers are in the industrial electronics, consumer electronics and medical/life sciences industries. As of April 30, 2021,2023, the Company had approximately 225160 active customers ranging from Fortune 500 companies to small, privately held enterprises.

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

For the fiscal year ended April 30, 2021,2023, the Company’s largest two customers, Whirlpool Inc. and Electroluxcustomer accounted for 17.9% and 16.2%, respectively,13.4% of the Company’s net sales. For the fiscal year ended April 30, 2020, Whirlpool Inc. and Electrolux2022, the Company’s largest customer accounted for 16.7% and 14.1%, respectively,21.8% of the Company’s net sales. The Company believes that Whirlpool Inc. and Electrolux will continue to account for a significant percentage of the Company’s net sales, although the percentage of net sales may vary from period to period.

The majority of sales are made to U.S. based customers and denominated in USD. The following geographic data includes net sales based on the country location of the Company’s operation providing the electronic manufacturing service for the year ended April 30, 20212023 and 2020:2022:

Sales and Marketing

Many of the members of the Company’s senior management are actively involved in sales and marketing efforts, and the Company has four direct sales employees. The Company also markets its services through six independent manufacturers’ representative organizations that together currently employ 14 sales personnel in the United States and Canada. Independent manufacturers’ representatives’representative organizations receive variable commissions based on orders received by the Company and are assigned specific accounts, not territories. In addition, the Company markets itself through its website and tradeshows. Wagz sold its products primarily online.

Mexico, China, Vietnam and Taiwan Operations

The Company’s wholly-owned subsidiary, Standard Components de Mexico, S.A, a Mexican corporation,entity, is located in Acuna, Coahuila, Mexico, a border town across the Rio Grande River from Del Rio, Texas, U.S. and is 155 miles west of San Antonio. Standard Components de Mexico, S.A. was incorporated and commenced operations in 1968 and had 939854 employees at April 30, 2021.2023. The Company’s wholly-owned subsidiary, AbleMex S.A. de C.V., a Mexican corporation,entity, is located in Tijuana, Baja California, Mexico, a border town south of San Diego, California.California, U.S. AbleMex S.A. de C.V. was incorporated and commenced operations in 2000. The operation had 408436 employees at April 30, 2021.2023. The Company’s wholly-owned subsidiary, Digital Appliance Controls de Mexico S.A., a Mexican corporation,entity, operates in Chihuahua, Chihuahua, Mexico, located approximately 235 miles from El Paso, Texas.Texas, U.S. Digital Appliance Controls de Mexico S.A. was incorporated and commenced operations in 1997. The operation had 594455 employees at April 30, 2021.2023. The Company believes that one of the key benefits to having operations in Mexico is its access to cost-effective labor resources while having geographic proximity to the United States.

The Company’s wholly-owned foreign enterprises, Wujiang SigmaTron Electronics Co., Ltd. and Wujiang SigmaTron Electronic Technology Co., Ltd., are located in Suzhou, China. The Company has entered into an agreement with governmental authorities in the economic development zone of Wujiang, Jiangsu Province, Peoples Republic of China, pursuant to which the Company became the lessee of a parcel of land of approximately 100 Chinese acres. The term of the land lease is 50 years. The Company built a manufacturing plant, office space and dormitories on this site during 2004. In fiscal year 2015, the China facility expanded and added 40,000 square feet in warehouse and manufacturing. The total square footage of the facility is 216,950 and the operation had 417349 employees as of April 30, 2021.2023. Both Wujiang SigmaTron China entitiesElectronics Co., Ltd.and Wujiang SigmaTron Electronic Technology Co., Ltd. operate at this site.

The Company’s wholly-owned subsidiary, Spitfire Controls (Cayman) Co. Ltd., owns all of the equity of the subsidiary, Spitfire Controls (Vietnam) Co. Ltd., and does not conduct any other operations. Spitfire Controls (Vietnam) Co. Ltd. is located in Amata Industrial Park, Bien Hoa City, Dong Nai Province, Vietnam, and is 18 miles east of Ho Chi MinhBien Hoa City. Spitfire Controls (Vietnam) Co. Ltd. was incorporated and commenced operation in 2005 and had 334295 employees as of April 30, 2021.2023.

The Company maintains an IPOinternational procurement office (“IPO”) in Taipei, Taiwan which was incorporated in 1991. The total square footage of the office is 4,685 square feet. The Company has an information technology office in Taichung, Taiwan. The total square footage of the office is 1,650 square feet. The Company had 3438 employees located in the Taiwan offices as of April 30, 2021.2023.

The Company provides funds for manufacturing services such as salaries, wages, inventory purchases for certain locations, overhead and capital expenditure items as necessary to operate its wholly-owned Mexican, Vietnamese and Chinese subsidiaries and foreign enterprises and the IPO in Taiwan. The Company provides funding in U.S. Dollars, which are exchanged for Pesos, Dong, Renminbi, and New Taiwan dollars. The fluctuation of currencies from time to time, without an equal or greater increase in inflation, could have a material impact on the financial results of the Company. The impact of currency fluctuations for the fiscal year ended April 30, 2021,2023, resulted in net foreign currency transaction losses of approximately $285,389$892,642 compared to net foreign currency losses of $285,654$412,218 in the prior fiscal year. In fiscal year 2021,2023, the Company paid approximately $59,020,000$60,070,000 to its foreign subsidiaries for manufacturing services. All intercompany balances have been eliminated upon consolidation.

The consolidated financial statements as of April 30, 2021,2023, include the accounts and transactions of SigmaTron, its wholly-owned subsidiaries, Standard Components de Mexico, S.A., AbleMex S.A. de C.V., Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., and Spitfire Controls (Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and Wujiang SigmaTron Electronic Technology Co., Ltd., its IPO, SigmaTron International, Inc. Taiwan Branch, and international procurement office, SigmaTron Taiwan Branch.Wagz, Inc. (19 percent ownership as of April 1, 2023). The functional currency of the Company’s foreign subsidiaries operations is the U.S. Dollar. Intercompany transactions are eliminated in the consolidated financial statements.

Competition

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

Consolidation

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

Governmental Regulations

The Company’s operations are subject to certain foreign government, U.S. federal, state and local regulatory requirements relating to, among others, environmental, waste management, consumer, labor and health and safety matters.  Management believes that the Company’s business is operated in compliance with all such regulations, which include European regulations known as Restriction of Hazardous Substances (“RoHS”) and Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”).  From time-to-time the Company's customers request REACH required information and certifications on the assemblies the Company manufactures for them.  These requests require the Company to gather information from component suppliers to verify the presence and level of mass of any substances of very high concerns (“SVHCs”) greater than 0.1% in

the assemblies the Company manufactures based on customer specifications.  If any SVHCs are present at more than 0.1% of the mass of the item, the specific concentration and mass of the SVHC must be reported to proper authorities by the Company's customer.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) introduced reporting requirements for verification of whether the Company directly (or indirectly through suppliers of components) is purchasing the minerals or metals gold, columbite-tantalite, cassiterite, wolframite and their derivatives (tin, tungsten, and tantalum), that are being provided by sources in the conflict region of the Democratic Republic of Congo (“DRC”) and contributing conflict.  Consistent with recent prior years, in May 2021, the Company filed Form SD with the Securities and Exchange Commission stating the Company’s supply chain remains DRC conflict undeterminable.

The Company’s costs of compliance with environmental laws, including conflict mineral reporting, is estimated to be a total of approximately $1,800,000 for the three most recently completed fiscal years ending April 30, 2021.  Additional or modified requirements may be imposed in the future.  If such additional or modified requirements are imposed, or if conditions requiring remediation are found to exist, the Company may be required to incur additional expenditures.

Backlog

The Company relies on binding forecasted orders and purchase orders (firm orders) from its customers to estimate backlog. The Company’s backlog of firm orders as of April 30, 2021,2023, and April 30, 2020,2022, was approximately $307,130,000$387,350,000 and $272,550,000,$485,670,000, respectively. The Company believes a significant portion of the backlog at April 30, 2021,2023, will ship in fiscal year 2022.2024. Because customers may cancel or reschedule deliveries, backlog may not be a meaningful indicator of future revenue. Variations in the magnitude and duration of contracts, forecasts and purchase orders received by the Company and delivery requirements generally may result in substantial fluctuations in backlog from period to period.

EmployeesHuman Capital Resources

The Company employed approximately 3,2002,950 full-time employees of which approximately 500 were located in the U.S. as of April 30, 2021.2023. There were 224approximately 250 engaged in engineering or engineering-related services, 2,6332,300 in manufacturing and 339400 in administrative functions, including supply chain, accounting, management and marketing functions.sales and marketing.

The Company makes a considerable effort to maintain a qualified and engaged work force. The Company makes a concerted effort to engage its employees and provide opportunities for growth and the Company believes that its employee relations are good. The Company considers the health and safety of its employees a key priority, and even more so sinceduring the COVID-19 pandemic started.pandemic. The Company has adopted various safety, cleaning and social distancing protocols.protocols consistent with the requirements of each jurisdiction. The Company is committed to removing conditions that may cause personal injury or occupational illness.

SigmaTron has a labor contract with Chemical & Production Workers Union Local No. 30, AFL-CIO, covering the Company’s workers in Elk Grove Village, Illinois which expires on November 30, 2021.2024. The Company’s Mexican subsidiary, Standard Components de Mexico S.A., has a labor contract with Sindicato De Trabajadores de la Industra Electronica, Similares y Conexos del Estado de Coahuila, C.T.M. covering the Company’s workers in Acuna, Mexico which expires on February 7, 2022.2024. The Company’s subsidiary located in Tijuana, Mexico has a labor contract with Sindicato Mexico Moderno De Trabajadores De La, Baja California, C.R.O.C. The contract does not have an expiration date. The Company’s subsidiary located in Ho Chi MinhBien Hoa City, Vietnam, has a labor contract with CONG DOAN CO SO CONG TY TNHH Spitfire Controls Vietnam. The contract expires on April 30, 2022.2025.

Since the time the Company commenced operations, it has not experienced any union-related work stoppages.

Available Information

The Company’s website address is www.sigmatronintl.com. The Company announces material information, including press releases and financial information regarding the Company, through a variety of means,

including the Company’s website, the Investors subpage of its website (www.sigmatronintl.com/investors/), press releases, filings with the SEC and social media, in order to achieve broad, non-exclusionary distribution of information to the public. The Investors subpage is accessible by clicking on the tab labeled “Investors” on the Company’s website home page. The Company also uses these channels to expedite public access to time-critical information regarding the Company in advance of or in lieu of distributing a press release or a filing with the SEC disclosing the same information. Therefore, investors should look to these channels for important and time-critical information. In addition, the Company is subject to the informational requirements of the Exchange Act and files or furnishes reports, proxy statements, and other information with the SEC. Such reports and other information filed by the Company with the SEC are available free of charge on its website when such reports are simultaneously available on the SEC’s website at http://www.sec.gov.www.sec.gov. The Company encourages investors, the media and others interested in the Company to review the information it posts on these various channels, as such information could be deemed to be material information.

The contents of the websites referred to above are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.

Information about our Executive Officers

James E. Barnes

39

Executive Vice President, Operations and Global Accounts since 2018. Vice President of Operations from 2014 to 2018. Director of Operations from 2011 to 2014. Senior Program Manager from 2010 to 2011. Program Manager from 2005 to 2010. Inventory Analyst from 2004 to 2005.

ITEM 1A. RISK FACTORS

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

The ongoing COVID-19 global pandemicBusiness and measures taken in response thereto have adversely affected the Company’s results of operations and its financial condition, and the full impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.Operational Risks

The Company’s business, results of operations, and financial condition were adversely affected by the COVID-19 pandemic in the fourth quarter of fiscal year 2020, especially beginning in mid-March, and such impact continued in fiscal year 2021. The COVID-19 pandemic and both public and private measures taken to contain it have negatively affected the Company’s business, results of operations, financial condition, and liquidity, all of which may continue or worsen.

The Company’s financial condition and results of operationsinventory levels have been and may be furtheradversely impacted by the COVID-19 pandemic in several ways, including, the following:

-          interruptions, availability or delays in global shipping to transport our products

-          further slowdown or stoppage in the supply chain

-          further disruptions to our operations, including additional facility closures and restrictions

crisis, with an unprecedented impact on our operations

-          limitations on employee resources and availability, including sickness and government

           restrictions

-          greater difficulty in generating sales or collecting customer receivables

-          an increase in the cost of or obtaining debt or equity financing or the Company’s ability to fund

           operations or investment opportunities

-          changes to the carrying value of our intangible assets and

-          an increase in regulatory restrictions or continued market volatility that could negatively impact

           the Company’s stock priceworking capital requirements.

The Company hasimpact of component shortages on sales of finished goods and willthe resulting increase in inventory levels have been unprecedented. Accordingly, we have been actively working with our suppliers to acquire scarce resources and with our customers to share the burden of these factors, while investing in systems to increase visibility into long-term supply and demand. Nevertheless, resulting improvements on the results of the Company’s operations are not certain and may continue to take actions to manage its expensesbe elusive. The continued impact of increased inventory levels on working capital requirements materially increases our operating costs and to conserve its financial resources.if it continues unabated, could materially and adversely affect our business and results of operations.

The Company’s future strategies, prospects,

Raw material price increases and plans for growth may also be negatively impacted by the COVID-19 pandemic.supply shortages could adversely affect results.

The full extent to which COVID-19 impacts the Company’s business, resultssupply of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limitedraw materials to the duration and spread of the outbreak within the U.S., China, Mexico, Vietnam and Taiwan, its severity, the actions to contain the virus or treat its impact, and how quicklyCompany and to what extent normal economicits component parts suppliers could be interrupted for a variety of reasons, including availability and operating conditions can resume. Even afterpricing. In particular, inflation, changes in trade policies, the imposition of duties and tariffs, potential retaliatory countermeasures, public health crises (such as the COVID-19 has subsided,pandemic), and geopolitical conflicts (including involving Russia, Belarus, or the Company may continue to experience materially adverse impacts to its businessUkraine, which supply raw materials, such as a result of the pandemic’s global economic impact, including any recession that has occurred or may occur in the future. There are no comparable recent events which may provide guidance asneon, palladium and nickel, to the effect ofsemiconductor industry) could adversely impact the spread of COVID-19, and, as a result, the ultimate impact of COVID-19,price or a similar health epidemic or pandemic, is highly uncertain and subject to change. The Company does not yet know the full extent of the impacts on its business, its operations or the global economy as a whole. However, the effects could have a material impact on the Company’s results of operations. While it continues to monitor the business metrics that it has historically used to predict its financial performance, it is uncertain as to whether these metrics will continue to function as they have in the past.

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

The Company relies on numerous third-party suppliersPrices for components usedraw materials necessary for production have fluctuated significantly in the Company’s production process. Certain of these components are available only from single-sources or a limited number of suppliers. In addition, a customer’s specifications may require the Company to obtain components from a single-source or a small number of suppliers. The loss of any such suppliers could have a material impact on the Company’s results of operations. Further, the Company could operate at a cost disadvantage compared to competitors who have greater buying power from suppliers. The Company does not enter into long-term purchase agreements with major or single-source suppliers, but the Company frequently places cancellable scheduled purchase orders with suppliers that extend out as far as one year. The current component market place remains volatile. The Company’s orders for components are always based on the changing needs of its customers. Many components are on allocation. Currently there is not enough manufacturing capacity to meet demand for raw components. In some cases shipment to the Company’s customers have been delayed. Component shortages are expected to continue during fiscal year 2022.

Wagz’s repayment of the Convertible Debtpast and Secured Promissory Note issued to the Company is not certain.

As of April 30, 2021, Wagz is indebtedcurrently experiencing upward pricing pressure on raw materials. Historically, it has been difficult to SigmaTron under the terms of a Convertible Secured Promissory Notepass increased prices for components and raw materials through to our customers in the maximum principal amountform of $4,052,478 dated May 29, 2020; a Convertible Secured Promissory Note, in the maximum principal amount of $1,588,328 dated January 27, 2021; and a Convertible Secured Promissory Note in the maximum principal amount of $1,249,966 (together with any additional convertible debt issued by Wagz to the Company, the “Convertible Debt”); and a Secured Promissory Note in the maximum principal amount of $308,329 dated April 30, 2021.  It is anticipated that the Company will convert the Convertible Debt into Wagz common stock in the Company’s anticipated acquisition of Wagz.  However, the consummation of the acquisition is subject to numerous conditions (see Item 1. CAUTIONARY NOTE; Recent Developments), which, if not satisfied, could prevent the acquisition. The Notes are due on the earliest to occur of (a) December 31, 2021 or, if the Closing does not occur due to the Company’s termination of the Agreement, that date which is twelve (12) months after the date of such SigmaTron Termination, (b) upon the closing of a sale of all or substantially all of the assets or common stock of Wagz (other than the Closing), or (c) an Event of Default.  If Wagz is unable to pay the Convertible Debt or Secured Promissory Note, and the Company forecloses its security interest in the Wagz collateral, there is no assurance that the Company will recover sufficient value from the Wagz collateral to pay the Convertible Debt in full. On July 19, 2021 the definitive agreement was signed.

price increases. The Company may not be able to providepass along increased raw material and components parts prices to its customers in the working capital that Wagz will need form of price increases or its ability to funddo so could be delayed. Significant price increases for components and raw materials could adversely affect the Company's results of operations untiland operating margins. Consequently, its cashflow is sufficient.

The Company is Wagz’s primary sourceresults of working capital to finance its operations.  As of April 30, 2021, Wagz is already indebted to the Company a total of $6,890,772 in Convertible Debtoperations and $308,329 in a Secured Promissory Note and it is expected that Wagz will need additional working capital before its cashflow will sustain its operations.  It is not certain how much more working capital that Wagz will need.  It is also not certain that the Company will be able to provide all of the working capital that Wagz will need.  Among other conditions, the Company’s primary secured lender has limited the Company’s advances to Wagz to $5,000,000 made after January 29, 2021, of which $1,475,000 has been made from February 1, 2021 through April 30, 2021.  As of May 1, 2021 through July 20, 2021 an additional $1,537,000 was advanced to Wagz. If Wagz does not have sufficient working capital, it may not be able to bring its products to market andfinancial condition may be forced to liquidate, without paying the Convertible Debt or the Secured Promissory Note in full.   If Wagz is unable to pay the Convertible Debt and the Secured Promissory Note in full, and the Company forecloses its security interest in the Wagz collateral, there is no assurance that the Company will recover sufficient value from the Wagz collateral to pay the Convertible Debt and the Secured Promissory Note in full.adversely affected.

The Company experiences variable operating results.

The Company’s results of operations have varied and may continue to fluctuate significantly from period to period, including on a quarterly basis. Consequently, results of operations in any period should not be

considered indicative of the results for any future period, and fluctuations in operating results may also result in fluctuations in the price of the Company’s common stock.

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

-          changes in sales mix to customersavailability and rising component costs

-          changes in availability and rising component costssales mix to customers

-          volume of customer orders relative to capacity

-          market demand and acceptance of our customers’ products

-          price erosion within the EMS marketplace

-          capital equipment requirements needed to remain technologically competitive

-          volatility in the U.S. and international economic and financial markets

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

-          component availability

-          variation in demand for the Company’s customers’ products

-          customers’ attempts to manage their inventory

-          design changes

-          acquisitions of or consolidation among customers

Most of the Company’s stock is volatile.customers’ production schedules are volatile, which makes it difficult to schedule production and achieve maximum efficiency at the Company’s manufacturing facilities and manage inventory levels.

The priceCompany’s inability to forecast the level of customer orders with certainty can make it difficult to schedule production and maximize utilization of manufacturing capacity and manage inventory levels. The Company could be required to increase or decrease staffing and more closely manage other expenses in order to meet the anticipated demand of its customers. Orders from the Company’s customers could be cancelled or delivery schedules could be deferred as a result of changes in our customers’ demand, thereby adversely affecting the Company’s results of operations in any given period.

We have, and may in the future, encounter complications with acquisitions, which could potentially harm our business.

To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the Company’s common stock historically has experiencedacquired operations. The integration of acquired businesses may be further complicated by difficulties managing operations in geographically dispersed locations. The integration of acquired businesses may not be successful and could result in disruption by diverting management’s attention from the core business. Also the acquired business’s products or services may not be accepted by the market. In addition, the integration of acquired businesses may require that we incur significant volatility due to fluctuationsrestructuring charges or other increases in our expenses and working capital requirements, which reduce our return on invested capital. Acquisitions may involve numerous other risks and challenges including but not limited to: potential loss of key employees and customers of the acquired companies; the potential for deficiencies in internal controls at acquired companies; lack of experience operating in the Company’s revenuegeographic market or industry sector of the acquired business; constraints on available liquidity, and earnings, other factors relatingexposure to the Company’s operations, the market’s changing expectations for the Company’s growth, overall equity market conditionsunanticipated liabilities of acquired companies. These and other factors unrelatedcould harm our ability to the Company’s operations. In addition, the limited floatachieve anticipated levels of the Company’s common stockprofitability at acquired operations or realize other anticipated benefits of an acquisition, and the limited number of market makers alsocould adversely affect the volatility of the Company’s common stock. Such fluctuations are expected to continue in the future.our consolidated business and operating results.

Market Risks

Persistent inflation could have a material adverse impact on our business, operating results and financial condition.

Inflation has risen globally to levels not experienced in years. Inflation directly and indirectly increases the costs of operating expenses such as fuel, energy, transportation, materials, and labor. We may not be able to increase our product prices enough to offset these increased costs, and any increase in our product prices may reduce our future customer orders and profitability. Inflation may further erode consumer confidence, and negatively impact the market for our customers’ products. Persistent inflation could exacerbate other risk factors discussed in this Annual Report on Form 10-K.

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

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

-          recessionary periods in our customers’ markets

-          increased competition among our customers and their competitors

-          the inability of our customers to develop and market their products

-          recessionary periods inthe inability of our customers’ marketscustomers to obtain all necessary material to manufacture their products

-          the potential that our customers’ products become obsolete

-          our customers’ inability to react to rapidly changing technology

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

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

Uncertainty over the erosion of global consumer confidence amidst concerns about volatile energy costs, geopolitical issues, the availability and cost of credit, declining asset values, inflation, unemployment, and the stability and solvency of financial institutions, financial markets, businesses, and sovereign nations has slowed global economic growth. The economic recovery of recent years is fragile. The Company’s sales and gross margins depend significantly on market demand for its customers’ products. The uncertainty in the U.S. and international economic and political environments could result in a decline in demand for our customers’ products in any industry. Further, any adverse changes in tax rates and laws or trade policies affecting our customers could result in decreasing gross margins. Any of these potential negative economic conditions may reduce demand for the Company’s customers’ products and adversely affect the Company’s sales. Consequently, the Company’s past operating results, earnings and cash flows may not be indicative of the Company’s future operating results, earnings and cash flows.

Our exposure to financially troubled customers or suppliers may adversely affect the Company’s financial results.

On occasion, we provide services to customers, and rely upon suppliers that have in the past and may in the future experience financial difficulty. If any of the Company’s customers have financial difficulties, the Company could encounter delays or defaults in the payment of amounts owed for accounts receivable and inventory obligations. ThisAdditionally, if our suppliers experience financial difficulties, we could have difficulty sourcing supplies necessary for production requirements. These risks may be heightened by the effects of the COVID-19 pandemic and recent economic volatility. Any financially troubled customer or supplier could have a significant adverse impact on the Company’s results of operations and financial condition.

The Company’s customer base is concentrated.

Sales to the Company’s five largest customers accounted for 57.8%47.4% and 51.4%55.3% of net sales for the fiscal years ended April 30, 2021,2023, and April 30, 2020,2022, respectively. For the fiscal year ended April 30, 2021,2023, two customers accounted for 17.9%13.4% and 16.2%12.2% of net sales of the Company, and 3.8%6.8% and 5.6%4.6%, respectively, of accounts receivable. For the fiscal year ended April 30, 2020,2022, two customers accounted for 16.7%21.8% and 14.1%11.7% of net sales of the Company, and 3.6%4.0% and 5.0%3.2%, respectively, of accounts receivable. Significant reductions in sales to any of the Company’s major customers or the loss of a major customer could have a material impact on the Company’s operations. If the Company cannot replace cancelled or reduced orders, sales will decline, which could have a material adverse impact on the results of operations. There can be no assurance that the Company will retain any or all of its largest customers. This risk may be further complicated by pricing pressures and intense competition prevalent in our industry.

The Company faces intense industry competition and downward pricing pressures.

The EMS industry is highly fragmented and characterized by intense competition. Many of the Company’s competitors have greater experience, as well as greater manufacturing, purchasing, marketing and financial resources than the Company. Competition from existing or potential new competitors may have a material adverse impact on the Company’s business, financial condition or results of operations. The introduction of lower priced competitive products, significant price reductions by the Company’s competitors or significant pricing pressures from its customers could adversely affect the Company’s business, financial condition, and results of operations.

Customer relationships with start-up companies present more risk.

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

International Operations Risks

The Company’s ability to secure and maintain sufficient credit arrangements is key to its continuedCompany has significant foreign operations that may pose additional risks.

On January 29, 2021,The Company manufactures product in facilities located in Mexico, China, Vietnam and the United States. These operations may be subject to a number of risks, including:

-the political climate and relations with the United States, including the impact of trade wars, tariffs and trade barriers (including quotas)

-political and economic instability (including acts of terrorism, territorial disputes, pandemics, civil unrest, forms of violence, and outbreaks of war), which could impact our ability to ship, manufacture, or receive product

-the instability of the foreign economies

-burdens of complying with a wide variety of foreign laws and labor practices

-unexpected changes in regulatory requirements and laws

-difficulties in staffing, turnover and managing onshore and offshore operations

-export duties, import controls

-legal authority of the Company entered intoto operate and expand its business in foreign countries

-impact of physical and operational risks from natural disasters, severe weather events, and climate change

-impact of future temporary closures and labor constraints as a Credit Agreement (the “Agreement”) with JPMorgan Chase Bank, N.A. (“Lender”), pursuant to which Lender has agreed to provide the Company with a secured credit facility maturing on January 29,2026,result of which (a) up to $50,000,000 is available on a revolving loan basis, and (b) an aggregate of $6,500,000 was borrowed pursuant to two term loans (the “Facility”). The Facility is secured by substantially all of SigmaTron’ assets including mortgages on its two Illinois properties.COVID-19.

The Facility allowsCompany obtains many of its materials and components through its IPO in Taipei, Taiwan. The Company’s access to these materials and components is dependent on the Company to choose among interest rates at which it may borrow funds for revolving loans:  “CBFR Loans,” the interest on which is based on (A) the “REVLIBOR30 Rate” (as defined in the Agreement) unless the REVLIBOR30 Rate is not available, in which case the interest is generally the ratecontinued viability of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S., plus (B) an applicable margin of 2.0% (effectively 2.25% per annum at April 30, 2021); or “Eurodollar Loans,” the interest on which is based on (X) an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the LIBO Rate (as defined in the Agreement) for any interest period multiplied by the Standard Reserve Rate (as defined in the Agreement) plus (Y) an applicable margin of 2.0%.  Under the revolving portion of the Facility, the Company may borrow up to the lesser of (i) $50,000,000 or (ii) an amount equal to a percentage of the eligible receivable borrowing base plus a percentage of the inventory borrowing base. The Facility is collateralized by a lien on substantially all of the assets of the Company. Under the Agreement, a minimum Fixed Charge Coverage Ratio (“FCCR”) financial covenant of 1.10x is applicable only during an FCCR trigger period which occurs when (i) an event of default (as defined in the Agreement) has occurred and is continuing, and Lender has elected to impose a FCCR trigger period upon notice to the Company or (ii) availability falls below the greater of (a) 10% of the revolving commitment and (b) the outstanding principal amount of the term loans.its Asian suppliers.

On April 23, 2020,Approximately 37% of the total assets of the Company received a PPP Loan from U.S. Bank,are located in foreign jurisdictions outside the United States as lender, pursuant to the Paycheck Protection Programof April 30, 2023; 25% and 10% of the CARES Act, as administered by the U.S. Small Business Administration (the “SBA”)total assets were located in the amountMexico and China, respectively, and 2% in other foreign locations. As of $6,282,973 (the “PPP Loan”). The PPP Loan matures on April 23, 2022. The Company was notified30, 2022, approximately 35% of the forgiveness of the PPP Loan by the SBA on July 9, 2021total assets were located in foreign jurisdictions; 20% and it covers all principal12% were located in China and accrued interest. The accounting for the forgiveness will be reflectedMexico, respectively and 3% in the Company’s first quarter financial statements for fiscal year 2022.other foreign locations.

On March 15, 2019,There is a risk of fluctuation of various currencies integral to the Company’s wholly-owned subsidiary, SigmaTron Electronic Technology Co., Ltd., entered intooperations.

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 credit facility with China Construction Bank. On January 26, 2021,material impact on the agreement was amended. UnderCompany’s results of operations and performance. The impact of currency fluctuations for the agreement SigmaTron Electronic Technology Co., Ltd. can borrow up to 9,000,000 Renminbi, approximately $1,380,000 as offiscal year ended April 30, 2021,2023, resulted in net foreign currency transaction losses of $892,642 compared to net foreign currency losses of $412,218 in the prior year. These fluctuations are expected to continue and could have a negative impact on the facilityCompany’s results of operations. The Company has not, and is collateralized by Wujiang SigmaTron Electronics Co., Ltd.’s manufacturing building. Interest is payable monthly andnot expected to, utilize derivatives or hedge foreign currencies to reduce the facility bears a fixed interest raterisk of 3.85% per annum. The termsuch fluctuations.

Unanticipated changes in our tax position, the adoption of new tax legislation or exposure to additional tax liabilities could adversely affect our financial results.

We base our tax position upon our understanding of the facility extendscurrent tax laws of the various countries in which we have assets or conduct activities. Our tax position, however, is subject to January 6, 2022. There was $824,159 outstanding under the facility at April 30, 2021 compared to an outstanding balance of $304,658 at April 30, 2020.review and possible challenge by

taxing authorities and to possible changes in law. We cannot determine in advance the extent to which some jurisdictions may assess additional tax or interest and penalties on such additional taxes. Given the scope of our international operations and our international tax arrangements, changes to the manner in which U.S. based multinational companies are taxed in the U.S. could have a material impact on our financial results and competitiveness. Based on current and future tax policy in Washington D.C., our effective tax rates and overall cash taxes may change in the future and could have an impact on our financial results.

Financing and Capital Risks

If we fail to comply with our credit agreements in future periods, we may be unable to secure any required waivers or amendments from the lenders and repayment obligations on our outstanding indebtedness may be accelerated.

Our credit agreements contain numerous financial and operating covenants with which we must comply. In the fourth quarter of fiscal year 2023, the Company was able to negotiate amendments and waivers with both J.P. Morgan Chase and TCW Asset Management Company as a result of our failure to maintain certain covenants as of January 31, 2023. As of April 30, 2023, we were in compliance with these covenants. However, our continued compliance with our obligations in general and these financial covenants in particular is dependent on our financial results, which are subject to fluctuation as described elsewhere in the risk factors discussed in this Annual Report on Form 10-K. If we fail to comply with the covenants in the future and if our lenders do not agree to waive any future non-compliance, we may be unable to borrow funds and any outstanding indebtedness could become immediately due and payable, which could materially harm our business.

The Company’s current credit facilities may become unavailable.

We cannot be certain that we will be able to amend the credit facilities or revise covenants, if necessary, to accommodate changes or developments in our business and operations. It is possible that counterparties to our financial agreements, including our credit facilities and receivables factoring programs, may not be willing or able to meet their obligations, either due to instability in the global financial markets or otherwise, which could, among other impacts, increase the duration of our cash collection cycle. Furthermore, our ability to meet any current or future financing covenants will largely depend on our financial performance, which in turn will be subject to general economic conditions and financial, business and other factors. The cessation of any of our current credit facilities could cause a material adverse effect on the Company’s business, results of operations and financial condition.

We may fail to secure or maintain necessary additional financing or capital.

While we currently believe we have ample liquidity to finance our business and manage the financial impact of current economic challenges, we can give no assurance that our existing credit arrangements will provide all of the financing capacity that we will need in the future. If the current credit facilities are not adequate, we may seek to raise additional capital by issuing additional equity, modifying our existing or obtaining new credit facilities, or through a combination of these methods. Our ability to issue additional common stock, other equity securities or debt securities may be hampered by any actual or perceived weakness or volatility in our stock price. Any such securities also likely will be dilutive to stockholders’ ownership interests. We may not be able to obtain capital when we want or need it, or on satisfactory terms. The failure to have access to sufficient capital could adversely materially affect the Company’s business, results of operations and financial condition.

Increasing interest rates for our borrowings could adversely affect our results of operations.

The Company pays interest on outstanding borrowings under its secured credit facilities and certain other long-term debt obligations at interest rates that fluctuate. In recent months, global inflation and other factors have resulted in a substantial increase in interest rates, and future borrowing costs may not be entitledrise further. Adverse changes in the Company’s interest rates could have a material adverse effect on its financial condition and 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 forgivenessfluctuations 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 its recently receivedthe Company’s common stock also affects the volatility of the Company’s common stock. Such fluctuations are expected to continue in the future.

Although forgiven, the Company’s Paycheck Protection Program Loan (“PPP Loan”), and its application for the PPP Loan could in the future be determined remains subject to have been impermissible.audit.

On April 23, 2020, the Company received proceeds ofa $6,282,973 from a loanPPP Loan under the PPP of the CARES Act, which it has used to retain current U.S. employees, maintain payroll and make lease and utility payments. The PPP Loan matureswas forgiven on April 23, 2022 if not forgiven and bears annual interest at a rate of 1.0%. DueJuly 9, 2021. However, due to the size of the PPP Loan, it is subject to review by the lender and the SBA, which introduces an additional layer of uncertainty.

Under the CARES Act, small businesses may apply for a PPP Loan if they employ no more than 500 employees, or are a business in an industry that has an employee-based size standard establishedaudit by the SBA that is greater than 500 employees. The Company operates under NAICS Code 334418 where the maximum employee headcount for a small business is 750. In establishing eligibility for a PPP Loan, the Company has considered its U.S. resident headcount based on the SBA rules in place at the time of its application, which the Company believes places the Company within the eligibility parameters.

Under the CARES Act, forgiveness of a PPP Loan is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the 24-week period beginning on the date of loan approval. The Company may be requiredup to repay any portion of the outstanding principal of its PPP Loan that is not forgiven, along with accrued interest, and it cannot provide any assurance that it will be eligible for loan forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA. If the PPP Loan is not forgiven, the Company will be required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 23, 2022 any principal amount outstanding on the PPP Loan. The Company was notified of the forgiveness of the PPP Loan by the SBA on July 9, 2021 and it covers all principal and accrued interest. The accounting for the forgiveness will be reflected in the Company’s first quarter financial statements for fiscal year 2022.

Even though the PPP Loan has been forgiven, it remains subject to audit by the SBA. In order to apply for the PPP Loan, the Company was required to certify, that the current economic uncertainty, including, among other factors, the short term customer demand reduction, made the PPP Loan request necessary to support its ongoing operations. The Company made this certification in good faithsix years after analyzing, among other things, the continued employment of its entire U.S. workforce, certain obvious “work-from-home” limitations associated with the nature of its business, and its ability to meet fixed cost obligations, in light of customer concerns. Furthermore, the Company considered its classification as a “smaller reporting company” under SEC rules and its need for additional funding to continue operations, and its lack of ability to currently access alternative forms of capital in the current market environment to fund working capital requirements. Based on this analysis,forgiveness. While the Company believes that it satisfied all eligibility criteria for the PPP Loan, andthere is a risk that on audit, the receipt of the PPP Loan is consistent with the broad objectives of the CARES Act. If, despite the Company’s actions and certification that it satisfied all eligibility requirements for the PPP Loan, it is laterCompany will be determined that it violated applicable laws or was otherwiseto have been ineligible to receive the PPP Loan, it mayLoan. In that case, the Company could be required to repay the PPP Loan in its entirety in a lump sum orand be subject to additional penalties and interest which could also result inand adverse publicity and damage to the Company’s reputation. If these events were to transpire, they could have a material adverse effect on the Company’s business, results of operations and financial condition.

Adverse market conditions could reduce our future salesRegulatory and earnings per share.Legal Risks

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

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.

The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements.  It has also initiated tariffs on certain foreign goods, including steel and aluminum and other raw materials utilized by the Company.  Changes in U.S. trade policy could result in one or more of the U.S.’ trading partners adopting responsive trade policy making it more difficult or costly for the Company to import our productscomponents from those countries.  This in turn could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in a lower margin on products sold.

China and the European Union havehas imposed tariffs on U.S. products in retaliation for new U.S. tariffs. Additional tariffs could be imposed by China and the European Union in response to proposed increased tariffs on products imported from China and the European Union.China.  There is also a concern that the imposition of additional tariffs by the United States could result in the adoption of additional tariffs by other countries.  The resulting trade war could have a significant adverse effect on world trade and the world economy.  To the extent that trade tariffs and other restrictions imposed by the United States increase the price of or limit the amount of steel, aluminum and othercertain raw materials utilized by the Company imported into the United States, the costs of our raw materials may be adversely affected and the demand from our customers for products and services may be diminished, which could adversely affect our revenues and profitability.

We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.  The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could adversely impact our business, financial condition and results of operations.

The CompanyChanges in securities laws and regulations may not be able to achieveincrease the expected benefits of the proposed business combination between SigmaTronCompany’s compliance efforts and Wagz (the “Wagz acquisition”), including anticipated revenue and cost synergies; costs associated with achieving synergies or integrating Wagz may exceed its expectations; and there is no assurance that the acquisition will close.costs.

The Company may not be able to achieve the expected benefitsSarbanes-Oxley Act of the Wagz acquisition, including anticipated revenue and cost synergies. There can be no assurance that the Wagz acquisition will be beneficial to the Company. Moreover, the Company may not be able to integrate the assets acquired in the Wagz acquisition or achieve our expected cost synergies without increases in costs or as a result of other difficulties. Although Wagz will be a stand-alone operation of SigmaTron, the integration process may be complex, costly and time-consuming. While it is anticipated that certain expenses will be incurred to achieve operational synergies, such expenses are difficult to estimate accurately, and may exceed current estimates. Accordingly, the benefits from the Wagz acquisition may be offset by costs incurred or delays in integrating the businesses. Any unexpected costs or delays incurred in connection with the integration of Wagz could have an adverse effect on the Company’s business, results of operations, financial condition and prospects,2002, as well as rules subsequently implemented by the market priceSEC and listing requirements subsequently adopted by Nasdaq in response to Sarbanes-Oxley, have required changes in corporate governance practices, internal control policies and securities disclosure and compliance practices of its common stock.

The overall integration ofpublic companies. More recently the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships,Dodd-Frank Act has required changes to our corporate governance, compliance practices and diversion of management’s attention. In addition, even ifsecurities disclosures, and the operations ofSEC recently approved pay versus performance disclosures and Nasdaq’s board diversity proposal, immediately increasing the Company’s business and Wagz’s business are integrated successfully, the Company may not realize the full benefits of the Wagz acquisition, including the synergies, cost savings or sales or growth opportunities that it expects. These benefits may not be achieved within the anticipated time frame, or at all.

There is no assurance that the acquisition of Wagz will be consummated, and in addition to related risks disclosed above relating to Wagz’s repayment of certain Convertible Debt and Secured Promissory Note, failure to close the transaction may create other expenses and other detrimental business consequences to the Company.

disclosure

An adverse changerequirements. Proposed regulations by the SEC mandating new disclosures of environmental, social and governance information, including climate-related risks, targets and goals and their financial impact, could be adopted in the interest rates forfuture. Compliance with these rules has increased our borrowings could adversely affect our results of operations.

The Company pays interest on outstanding borrowings under its senior secured credit facilitylegal, financial and certain other long-term debt obligations at interest rates that fluctuate. An adverse changeaccounting costs, and those costs will increase if additional requirements are imposed. These legal developments may result in the Company having difficulty in attracting and retaining qualified directors or officers. The Company’s interest ratesfailure to comply with present or future regulations could result in the SEC or Nasdaq levying sanctions against the Company or even moving to delist its stock. Such consequences, as well as compliance costs, could have a material adverse effectimpact on itsthe Company’s business, financial condition and results of operations.

The phase-outConflict Minerals regulations may cause the Company to incur additional expenses and could increase the cost of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate or modification of the method used to calculate LIBOR, maycomponents contained in its products and adversely affect interest rates which may have an adverse impact on the Company.its inventory supply chain.

In July 2017,The Dodd-Frank Act, and the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announcedrules promulgated by the Securities and Exchange Commission (“SEC”) thereunder, require the Company to attempt to determine and report annually whether any Conflict Minerals contained in our products originated from the DRC or an adjoining country. The Dodd-Frank Act and these rules could affect our ability to source components that it intendscontain Conflict Minerals at acceptable prices and could impact the availability of Conflict Minerals, since there may be only a limited number of suppliers of conflict-free Conflict Minerals. Our customers may require that our products contain only conflict-free Conflict Minerals, and our revenues and margins may be negatively impacted if we are unable to stop compelling banksmeet this requirement at a reasonable price or are unable to submit LIBOR rates after 2021. It is unclear whether LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed thatpass through any increased costs associated with meeting this requirement. Additionally, the Secured Overnight Financing Rate (“SOFR”) as the rate that represents best practice as the alternative to LIBOR for use in financialCompany may suffer reputational harm with our customers and other derivatives contractsstakeholders if our products are not conflict-free. The Company could incur significant costs in the event we are unable to manufacture products that are currently indexed to United States dollar LIBOR. ARRC has proposed a paced market transition plan to SOFR from LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to financial and other derivative contracts exposed to LIBOR. Uncertainty exists ascontain only conflict-free Conflict Minerals or to the transition process and broad acceptanceextent that we are required to make changes to products, processes, or sources of SOFR as the primary alternative to LIBOR. The interest rate for the Company’s secured credit facility is calculated using LIBOR. At this time,supply due to the foregoing requirements or pressures.

The Company’s operations are subject to numerous other regulations and failure to comply with all applicable regulations could subject the Company to liability.

The Company is subject to a lackvariety of consensus existingregulations, including environmental regulation of the use, storage, discharge and disposal of hazardous chemicals used during its manufacturing process; disclosures relating to cancer-causing substances in drinking water as required under California Proposition 65; and compliance with the European Union’s requirements relating to what rate or rates may become accepted alternativescertain chemical and hazardous substances including under the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Act and the Restriction of Hazardous Substances (RoHS-2) Directive. To date, the cost to LIBOR, it is impossible to predict the effectCompany of any such alternativescompliance has not had a material impact on the Company’s liquidity.business, financial condition or results of operations. However, if LIBOR ceasesfederal, state and local legislation and regulation are constantly evolving. Further, increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, federal, state or local requirements or industry standards to existreduce or a new methodmitigate climate change and other environmental risks. The Company cannot predict the nature, scope or effect of calculating LIBOR is adopted, the Company’s lender may, on notice toregulatory legislation or requirements that could be imposed or how existing or future laws or regulations will be administered or interpreted. Any failure by the Company select an interest rate to replace LIBOR in accordancecomply with present or future regulations, whether as a result of human error, equipment failure or other causes, could subject it to future liabilities to customers or governmental agencies, the Agreement,suspension of production, increased costs or reputational harm with our customers and there is a risk that the replacement rate will be less favorable toother stakeholders. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies, could require substantial expenditures by the Company than the rates based on LIBOR. In addition, these changes mayand could have an adversea material impact on the value of or interest earned on any LIBOR-based marketable securities, loans and derivatives that are included in the Company’s financial assets and liabilities, which may have a material adverse effect on itsbusiness, financial condition and results of operations.

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

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

Technology Risks

It is increasingly difficult to protect the Company’s Information Technology (“IT”) systems.

With the increased use of technologies to conduct business, a company is susceptible to operational, information security and related risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyberattacks include gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption (e.g., ransomware attacks). Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended users). Cyber incidents affecting the Company or its service providers have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Company’s ability to conduct business in the ordinary course, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, additional compliance costs and, in extreme cases, have caused companies to cease doing business. Cyber events also can affect counterparties or entities with which the Company does business, governmental and other regulatory authorities, banks, insurance companies and other financial institutions, among others. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. While the Company has established risk management systems designed to prevent such cyber incidents, there are inherent limitations in such systems including the possibility that the Company has not prepared for certain risks that have not been or are not possible to have been identified. Further, the Company may have limited ability to influence, and cannot control, the cyber security plans and systems put in place by its service providers or any other third parties whose operations may affect the Company. The Company could be negatively impacted as a result.

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

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

With the increased use of technologies such as the Internet to conduct business, a company is susceptible to operational, information security and related risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyberattacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption (e.g., ransomware attacks). Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended

users). Cyber incidents affecting the Company or its service providers have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Company’s ability to conduct business in the ordinary course, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, additional compliance costs and, in extreme cases, have caused companies to cease doing business. Cyber events also can affect counterparties or entities with which the Company does business, governmental and other regulatory authorities, banks, insurance companies and other financial institutions, among others. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. While the Company has established risk management systems to prevent such cyber incidents, there are inherent limitations in such systems including the possibility that the Company has not prepared for certain risks that have not been or are not possible to have been identified. Further, the Company may be able to influence, but cannot control, the cyber security plans and systems put in place by its service providers or any other third parties whose operations may affect the Company. The Company could be negatively impacted as a result.

Most of the Company’s customers’ production schedules are volatile, which makes it difficult to schedule production and achieve maximum efficiency at the Company’s manufacturing facilities and manage inventory levels.

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

-          component availability

-          customers’ attempts to manage their inventory

-          variation in demand for the Company’s customers’ products

-          design changes, or

-          acquisitions of or consolidation among customers

Many of the Company’s customers production schedules are volatile. The Company’s inability to forecast the level of customer orders with certainty can make it difficult to schedule production and maximize utilization of manufacturing capacity and manage inventory levels. The Company could be required to increase or decrease staffing and more closely manage other expenses in order to meet the anticipated demand of its customers. Orders from the Company’s customers could be cancelled or delivery schedules could be deferred as a result of changes in our customers’ demand, thereby adversely affecting the Company’s results of operations in any given period.

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

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

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

The market for the Company’s manufacturing services is characterized by rapidly changing technology and continuing product development. The future success of the Company’s business will depend in large part upon our customers’ ability to maintain and enhance their technological capabilities, and our ability to 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.

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

The Company purchases some of its material components and funds some of its operations in foreign currencies. From time to time the currencies fluctuate against the U.S. Dollar. Such fluctuations could have a material impact on the Company’s results of operations and performance. The impact of currency fluctuations for the fiscal year ended April 30, 2021, resulted in net foreign currency transaction losses of $285,389

compared to net foreign currency losses of approximately $286,000 in the prior year. These fluctuations are expected to continue and could have a negative impact on the Company’s results of operations. The Company did not, and is not expected to, utilize derivatives or hedge foreign currencies to reduce the risk of such fluctuations.

The Company has foreign operations that may pose additional risks.

The Company has substantial manufacturing operations in multiple countries. Therefore, the Company’s foreign businesses and results of operations are dependent upon numerous related factors, including the stability of the foreign economies, the political climate, relations with the United States, prevailing worker wages, the legal authority of the Company to operate and expand its business in a foreign country, the ability to identify, hire, train and retain qualified personnel and operating management in Mexico, China and Vietnam, and the Company’s ability to manage disruptions resulting from foreign government lockdowns and other actions taken in response to the COVID-19 pandemic.

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

Approximately 39% of the total assets of the Company are located in foreign jurisdictions outside the United States as of April 30, 2021, 21% and 15% of the total assets were located in Mexico and China, respectively, and 3% in other foreign locations. As of April 30, 2020, approximately 37% of the total assets were located in foreign jurisdictions, 17% were located in each of China and Mexico, and 3% in other foreign locations.Human Capital Risks

The Company depends on management and skilled personnel.

The Company depends significantly on its President/CEO/Chief Executive Officer and Chairman of the Board, President and other executive officers. The Company’s employees generally are not bound by employment agreements and the Company cannot assure that it will retain its executive officers or skilled personnel. The loss of the services of any of these key employees could have a material impact on the Company’s business and results of operations. In addition, despitedue to significant competition in the labor market, continued growth and expansion of the Company’s EMS business will require that the Company attract, motivate and retain additional skilled and experienced personnel. The Company’s future growth depends on the contributions and abilities of key executives and skilled, experienced employees. The Company’s future growth also depends on its ability to recruit and retain high-quality employees. A failure to obtain or retain the number of skilled employees necessary to support the Company’s efforts, a loss of key employees or a significant shortage of skilled, experienced employees could jeopardize its ability to meet its growth targets.

Favorable labor relations are important to the Company.Company, and failures to comply with domestic or international employment laws could result in significant damages.

The Company currently has labor union contracts with its employees constituting approximately 49%48% and 46%51% of its workforce for fiscal years 20212023 and 2020,2022, respectively. Although the Company believes its labor relations are good, any labor disruptions, whether union-related or otherwise, could significantly impair the Company’s business, substantially increase the Company’s costs or otherwise have a material impact on the Company’s results of operations.

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

The Company is also subject to a variety of environmental regulations relatingdomestic and foreign employment laws, including those related to the use, storage, dischargesafety, wages, discrimination, harassment, organizing, employee privacy and disposalseverance. Allegations of hazardous chemicals used during its manufacturing process. To date, the cost to the Companyviolations 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 occurthese laws could result 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

Companydefense costs, damages, settlements and could have a material impact on the Company’s business, financial condition and results of operations. Any failure by the Company to comply with present or future regulations could subject it to future liabilities or the suspension of productionfines, which could have a material negative impact on the Company’s results of operations.

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

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

Customer relationships with start-up companies present more risk.

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

Changes in securities laws and regulations may increase costs.Company's financial results.

The Sarbanes-Oxley ActCompany has recorded identifiable intangible assets on its balance sheet as a result of 2002, as well as rules subsequently implemented by the SECoperations and listing requirements subsequently adopted by NASDAQ in response to Sarbanes-Oxley, have required changes in corporate governance practices, internal control policies and securities disclosure and compliance practicesacquisitions. A number of public companies. More recently the Dodd-Frank Act requires changes to our corporate governance, compliance practices and securities disclosures. Compliance following the implementation of these rules has increased our legal, financial and accounting costs. The Company expects increased costs related to these new regulations to continue, including, but not limited to, legal, financial and accounting costs. These developmentsfactors may result in impairments to intangible assets, including significant negative industry or economic trends, disruptions to our business, increased competition and significant changes in the Company having difficulty in attracting and retaining qualified membersuse of the board or qualified officers. Further, the costs associated with the compliance withassets. For example, we concluded that our goodwill and implementationlong-lived assets as of procedures under these lawsApril 30, 2023 were impaired and related rules could haverecorded asset impairment charges equal to a material impact on the Company’stotal of $23,096,771, which adversely impacted our results of operations. See Note F – Acquisition and Disposition, for a discussion related to impairment testing of goodwill and intangible assets for the year ended April 30, 2023. Any additional impairment charges could adversely affect the Company's financial condition or results of operations in the periods recognized.

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

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

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

The Company’s disclosure controls and internal controls can provide only reasonable assurance that the procedures will meet the control objectives. Controls are limited in their effectiveness by human error, including faulty judgments in decision-making. Further, controls can be circumvented by collusion of two or more people or by management override of controls. Therefore, the Company’s management, including the

more people or by management override of controls. Therefore, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, cannot conclude with certainty that the Company’s disclosure controls and internal controls will prevent all errors and all fraud.

Any litigation, even where a claim is without merit, could resultChanges in substantialfinancial accounting standards may affect our reported financial condition or results of operations as well as increase costs related to implementation of new standards and diversion of resources.modifications to internal controls.

In the past, the Company has been notified of claims relating to various matters including contractual matters, product liability, labor issues or other matters arisingOur consolidated financial statements are prepared in conformity with accounting standards generally accepted in the ordinary course of business. InUnited States, or U.S. GAAP. These principles are subject to amendments made primarily by the event of any such claim,Financial Accounting Standards Board (FASB) and the Company may be required to spendSEC. A change in those policies can have a significant amounteffect on our reported results and may affect our reporting of money and resources, even wheretransactions which are completed before a change is announced. Changes to accounting rules or challenges to our interpretation or application of the claim is without merit or coveredrules by insurance. Accordingly, the resolution of such disputes, even those encountered in the ordinary course of business, couldregulators may have a material adverse effect on our reported financial results or on the Company’s business, consolidated financial conditions and results of operations.way we conduct business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

AtPrior to April 30, 2021,1, 2023, the Company, operatingoperated in one business segmenttwo reportable segments as an independent provider of electronic EMS, and a provider hadof products to the Pet Tech market. The majority of the Pet Tech Segment was sold, effective as of April 1, 2023, and following such date, the Company operates in one reportable segment, the EMS segment. The Company has manufacturing facilities located in Elk Grove Village, Illinois U.S., Union City, California U.S.,; Acuna, Coahuila, Mexico, Chihuahua, Chihuahua, Mexico and Tijuana, Mexico, Ho Chi MinhBaja California, Mexico; Bien Hoa City, Dong Nai Province, Vietnam and Suzhou, Jiangsu Province, China. In addition, the Company provides material procurement services through all its locations.maintains an IPO in Taipei, Taiwan. The Company provides design services in Elgin, Illinois, U.S. The Company has an information technology office in Taichung, Taiwan.

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

*The Company’s Suzhou, China buildings are owned by the Company and the land is leased from the Chinese government for a 50 year term ending on July 15, 2053.

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

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

The Union City and San Diego, California, U.S., Tijuana, Baja California and Chihuahua, Chihuahua Mexico, Ho Chi MinhBien Hoa City, Dong Nai Province, Vietnam, and Del Rio and El Paso, Texas, U.S. properties are occupied pursuant to leases of the premises. The lease agreement for the El Paso, Texas, U.S. property expires January 2030. The lease agreement for the Del Rio, Texas, U.S. property expires November 2025. The lease agreement for the San Diego, California, U.S. property expires August 2024. The lease agreement for the Union City, California, U.S. property expires June 2026. The Chihuahua, Chihuahua, Mexico lease expires July 2021.April 2024. The Tijuana, Baja California, Mexico lease expires November 2023. The lease agreement for the Ho Chi MinhBien Hoa City, Dong Nai Province, Vietnam property expires June 2025. The Company’s manufacturing facilities located in Acuna, Coahuila, Mexico, Del Rio, Texas, U.S., Elgin, Illinois, U.S., and Elk Grove Village, Illinois, U.S., are owned by the Company, except for a portion of each facility in Acuna, Coahuila, Mexico and Del Rio, Texas, U.S., which are leased. The Company has an option to buy the leased portion of the facility in Acuna, Coahuila, Mexico. The properties in Del Rio, Texas, U.S., Elk Grove Village, Illinois, U.S., and Elgin, Illinois, U.S., are financed under separate mortgage loan agreements. The Company leases the IPO office in Taipei, Taiwan to coordinate Far East purchasing activities. The Company leases the information technology office in Taichung, Taiwan. The Company believes its current facilities are adequate to meet its current needs. In addition, the Company believes it can find alternative facilities to meet its needs in the future, if required.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

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

Market Information

The Company’s common stock is traded on the NASDAQ Capital Market System under the symbol SGMA.

As of July 20, 2021,19, 2023, there were approximately 3070 holders of record of the Company’s common stock, which does not include stockholders whose stock is held through securities position listings. The Company estimates there to be approximately 1,4003,000 beneficial owners of the Company’s common stock.

Equity Compensation Plan Information

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

ITEM 6. SELECTED FINANCIAL DATA

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

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. (“SigmaTron”), its wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex, S.A. de C.V., Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., and Spitfire Controls (Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and Wujiang SigmaTron Electronic Technology Co., Ltd. (collectively, “SigmaTron China”) and, its international procurement office SigmaTron International, Inc. Taiwan branch, and Wagz, Inc. (19 percent ownership as of April 1, 2023), (collectively, the “Company”) and other Items in this Annual Report on Form 10-K contain forward-looking statements concerning the Company’s business or results of operations. Words such as “continue,” “anticipate,” “will,” “expect,” “believe,” “plan,” and similar expressions identify forward-looking statements. These forward-looking statements are based on the current expectationsSee “Item 1. Business—Cautionary Note” for a discussion of the Company. Because these forward-looking statements involveand the associated risks and uncertainties, the Company’s plans, actions and actual results could differ materially. Such statements should be evaluated in the context of the direct and indirect risks and uncertainties inherent in the Company’s business including, but not necessarily limited to, the risks inherent in any merger, acquisition or business combination; the Company’s continued dependence on certain significant customers; the continued market acceptance of products and services offered by the Company and its customers; pricing pressures from the Company’s customers, suppliers and the market; the activities of competitors, some of which may have greater financial or other resources than the Company; the variability of the Company’s operating results; the results of long-lived assets impairment testing; the ability to achieve the expected benefits of acquisitions as well as the expenses of acquisitions; the collection of aged account receivables; the variability of the Company’s customers’ requirements; the impact of inflation on the Company’s operating results; the availability and cost of necessary components and materials; the ability of the Company and its customers to keep current with technological changes within its industries; regulatory compliance, including conflict minerals; the continued availability and sufficiency of the Company’s credit arrangements, including the phase-out of LIBOR; the ability to meet the Company’s financial and restrictive covenants under its loan agreements; changes in U.S., Mexican, Chinese, Vietnamese or Taiwanese regulations affecting the Company’s business; the turmoil in the global economy and financial markets; the spread of COVID-19 and variants (commonly known as “COVID-19”) which has threatened the Company’s financial stability by causing a decrease in consumer revenues, caused a disruption to the Company’s global supply chain, caused plant closings or reduced operations thus reducing output at those facilities; the stability of the U.S., Mexican, Chinese, Vietnamese and Taiwanese economic, labor and political systems and conditions; currency exchange fluctuations; and the ability of the Company to manage its growth. These and other factors which may affect the Company’s future business and results of operations are identified throughout the Company’s Annual Report on Form 10-K, and as risk factors, may be detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These statements speak as of the date of such filings, and the Company undertakes no obligation to update such statements in light of future events or otherwise unless otherwise required by law.uncertainties.

Overview

ThePrior to April 1, 2023, the Company operatesoperated in one business segmenttwo reportable segments as an independent provider of EMS, whichand as a provider of products to the Pet Tech market. A majority of the Pet Tech Segment was sold on April 28, 2023, effective as of April 1, 2023, and following such date, the Company operates in one reportable segment, the EMS segment. The EMS segment includes printed circuit board assemblies, electro-mechanical subassemblies and completely assembled (box-build) electronic products. In connection withThe Pet Tech reportable segment offered electronic products such as the production of assembled products, the Company also provides services to its customers, including (1) automatic

Freedom Smart Dog Collar™, a wireless, geo-mapped fence, and manual assemblywellness system, and testing of products; (2) material sourcingapparel and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousing and distribution services; and (6) assistance in obtaining product approval from governmental and other regulatory bodies. The Company provides these manufacturing services through an international network of facilities located in the United States, Mexico, China, Vietnam and Taiwan.accessories.

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

In connection with the production of assembled products, the Company provides services to its customers, including (1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousing and distribution services; (6) assistance in obtaining product approval from governmental and other regulatory bodies and (7) compliance

reporting. The Company provides these manufacturing services through an international network of facilities located in the United States, Mexico, China, Vietnam and Taiwan.

See “Item 1. Business—Recent Developments” for additional information.

Sales can be a misleading indicator of the Company’s financial performance. Sales levels can vary considerably among customers and products depending on the type of services (turnkey versus consignment) rendered by the Company and the demand by customers. Consignment orders require the Company to perform manufacturing services on components and other materials supplied by a customer, and the Company charges only for its labor, overhead and manufacturing costs, plus a profit. In the case of turnkey orders, the Company provides, in addition to manufacturing services, the components and other materials used in assembly. Turnkey contracts, in general, have a higher dollar volume of sales for each given assembly, owing to inclusion of the cost of components and other materials in net sales and cost of goods sold. Variations in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the Company’s revenue and gross margin levels. Consignment orders accounted for less than 1% of the Company’s revenues for each of the fiscal years ended April 30, 20212023 and April 30, 2020.2022.

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

Factors Affecting Results

COVID-19.Supply Chain Component Shortages. The Company’s business, results of operations, and financial condition werecontinue to be adversely affected by supply chain issues due to world-wide component shortages. The Company anticipates continuing supply chain issues in fiscal 2024.

Impairment of Goodwill and Long-Lived Assets. During the COVID-19 pandemic in the fourththird quarter of fiscal year 2020, especially beginning in mid-March,2023, the Company determined its goodwill and such impact continued through fiscal year 2021. The COVID-19 pandemiclong-lived asset group was fully impaired and both publican impairment charge of $23,096,771 was recorded. This non-cash charge was recorded to impairment of goodwill and private measures taken to contain it have negatively affectedintangible assets on the Company’s business, resultsunaudited condensed consolidated statements of operations, financial condition, and liquidity, all of which may continue or worsen.operations. See Note H – Intangible Assets, for more information.

PPP Loan and CARES Act. During the fourth fiscal quarter of 2020 the Company received a $6,282,973 PPP Loan. The Company received the PPP Loan under the CARES Act. The Company believes it met the requirements for eligibility. To the extent that part or all of the loan is forgiven under the program, that benefit will be recorded in the quarter in which the forgiveness occurs. During the fourth fiscal quarter of 2020 and continuing inthrough fiscal year 2021,2022, the Company had operational interruptions and incurred significant expenses related to the COVID-19 pandemic at all of its operations.  In some locations the interruptions and expenses were worse than others.

For more information on the potential impact of the COVID-19 pandemic on the Company, see “Item 1A. Risk Factors – The ongoing COVID-19 global pandemic and measures taken in response thereto have adversely affected the Company’s results of operations and its financial condition, and the full impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted.” The Company was notified of the forgiveness of the PPP Loan by the SBA on July 9, 2021 and it covers all principal and accrued interest.interest were forgiven. The accounting for the forgiveness will beis reflected in the Company’s firstStatement of Operations as a non-cash gain upon extinguishment of long-term debt.

Recent Developments

The Company began its Pet Technology operations after the December 31, 2021 acquisition of Wagz, Inc. The Company sold a majority of the business on April 28, 2023, effective as of April 1, 2023. Wagz has developed and brought to market a high tech pet collar and has multiple other products in development. Wagz is an IoT company which both owns intellectual property and secures recurring revenue through subscriptions for its services. During the fourth quarter financial statements forof fiscal year 2022.2023, the Company exited its active involvement in the Pet Tech business that is conducted by Wagz through the sale by the Company of a majority stake in Wagz, effective as of April 1, 2023. See “Item 1. Business—Recent Developments” for additional information.

OnMarch2,2023, the Company received theJPMNoticeandtheTCW Notice. The Notices indicated the occurrence of certain events of default under the JPM Credit Agreement and the Term Loan Agreement. See Note I – Long-term Debt, for more information.

OnApril28,2023,theCompanyenteredinto(i) the JPMWaiver withWagzandJPM,aslender, which waived certain events of default under and amended certain terms of theJPMCreditAgreementand(ii) the TCW Waiver withWagz,theTCWLendersand Agent, which waived certain events of default under and amended certain terms of the Term LoanAgreement.See Note I – Long-term Debt and “Item 1. Business—Recent DevelopmentsDevelopments”, for more information.

On May 29, 2020, SigmaTronAs described in Note I – Long-term Debt, theCompanyexiteditsactiveinvolvementinthePet Techbusinessthatisconductedby Wagzthrough thesalebytheCompanyofamajoritystakein Wagz,effective as of April1,2023. Inconnectionwiththe Waivers and such sale, the Lender Parties agreed to release Wagz Inc. (“Wagz”), a privately held company inand its property from the pet technology market, entered into a Convertible Secured Promissory Note in the principal sum of up to $4,052,478.  On January 27, 2021, Wagz issued an additional Convertible Secured Promissory Note to the Company in the principal sum of up to $1,588,328. On April 30, 2021, Wagz issued an additional Convertible Secured Promissory Note to the Company in the principal amount of $1,249,966. On April 30, 2021, Wagz issued a Secured Promissory Note to the Company in the principal amount of $308,329 (collectively, the “Notes”). At April 30, 2021, $7,014,594 and $184,207 was outstanding under Note receivable and Other receivables, respectively, in the consolidated balance sheet. The Notes are due (the “Maturity Date”) on the earliest to occur of (a) December 31, 2021 or, if the closinglien of the Company’s proposed acquisition of Wagz (the “Closing”) does not occur due toLender Parties under the Company’s termination, that date which is twelve (12) months after the date of such termination, (b) upon the closing of a sale of all or substantially all of the assets or common stock of Wagz (other than the Closing), or (c) an Event of Default (as defined in the Notes). Interest is payable at the rate of four percent (4%) per annum and is payable on the Maturity Date. The Notes are collateralized by substantially all assets of Wagz.

On June 4, 2020, SigmaTron and Wagz, announced that they executed a Letter of Intent (“LOI”) relating to a proposed acquisition. Subject to the terms and conditions set forth in the LOI, SigmaTron expects to issue approximately 2,443,870 shares of SigmaTron common stock that would result in the stockholders of Wagz owning in the aggregate approximately one-third of the combined company. The potential benefits to the Company from that transaction were summarized in the June 4, 2020 announcement. On July 19, 2021 the definitive agreement was signed. The parties expect the transaction to close by September 30, 2021 and it remains subject to achievement of certain milestones and satisfaction of conditions by both parties prior to closing including the Company having determined that the Wagz Freedom Smart Collar™ meets certain criteria, and the approval by the stockholders of both SigmaTron and Wagz.Credit Agreements.

Critical Accounting Policies:Estimates:

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

The potential impact of future disruptions and continued economic uncertainty over public health crises, including COVID-19 and variants, and the global supply chain may have a significant adverse impact on the timing of delivery of customer orders and the levels of future customer orders. It is reasonably possible that these potential adverse impacts may result in the recognition of material impairments of the Company’s long-lived assets or other related charges in future periods.

Revenue Recognition – The Company recognizes revenue when control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s primary performance obligation to its customers is the production of finished goods electronic assembly products pursuant to purchase orders. The Company has concluded that control of the products it sells and transfers to its customers and an enforceable right to receive payment is customarily established at the point in time when the finished goods are shipped to its customers, or in some cases delivered pursuant to the specified shipping terms of each customer arrangement. With respect to consignment arrangements, control transfers and revenue is recognized at the point in time when the goods are shipped to the customer from the consignment location or when delivered to the customer (pursuant to agreed upon shipping terms). In those limited instances where finished goods delivered to the customer location are stored in a segregated area which are not controlled by the customer (title transfer, etc.) until they are pulled from the segregated area and consumed by the Company’s customer, revenue is recognized upon consumption. For tooling services, the Company’s performance obligation is satisfied at the

point in time when the customer takes possessionapproves the first article of dies or molds. For engineering, design, and testing services, the Company’s performance obligations are satisfied over time as the respective services are rendered as its customers simultaneously derive value from the Company’s performance. From the time that a customer purchase order is received and contract is established, the Company’s performance obligations are typically fulfilled within a few weeks. The Company does not have any performance obligations that require more than one year to fulfill.

Each customer purchase order sets forth the transaction price for the products and services purchased under that arrangement. The Company evaluates the credit worthiness of its customers and exercises judgment to recognize revenue based upon the amount the Company expects to be paid for each sales transaction it enters into with its customers. Some customer arrangements include variable consideration, such as volume rebates, some of which depend upon the Company’s customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company exercises judgment to estimate the most likely amount of variable consideration at each reporting date.

Inventories – Inventories are valued at cost. Cost is determined by an average cost method and the Company allocates labor and overhead to work-in-process and finished goods. In the event of an inventory write-down, the Company records expense to state the inventory at lower of cost or net realizable value. The

Company establishes inventory reserves for valuation shrinkage, and excess and obsolete inventory.inventory for which the customer is not obligated. The Company records provisions for inventory shrinkage based on historical experience to account for unmeasured usage or loss. Of the Company’s raw materials inventory, a substantial portion has been purchased to fulfill committed future orders or for which the Company is contractually entitled to recover its costs from its customers. For the remaining raw materials inventory, a provision for excess and obsolete inventories is recorded for the difference between the cost of inventory and its estimated realizable value based on assumptions about future product demand and market conditions. Upon a subsequent sale or disposal of the impaired inventory, the corresponding reserve is relieved to ensure the cost basis of the inventory reflects any reductions. Actual results differing from these estimates could significantly affect the Company’s inventories and cost of products sold as the inventory is sold or otherwise relieved.

Intangible Assets – Intangible assets are comprised of finite life intangible assets including customer relationships. Finite liferelationships, trade names and patents. The fair value recorded as of April 30, 2023 is based on significant inputs that are not observable in the market and thus represents a fair value measurement categorized within Level 3 of the fair value hierarchy. The fair value of the acquired trade names and patents was determined using the relief from royalty method, which is a risk-adjusted discounted cash flow approach. The relief from royalty method values an intangible assets are amortized onasset by estimating the royalties saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be generated by the intangible asset, multiplying it by a straight line basis over their estimated useful livesroyalty rate deemed to be avoided through ownership of 7 years except for customer relationships which are amortized on an accelerated basis over their estimated useful lifethe asset and discounting the projected royalty savings amounts back to the acquisition date using the internal rate of 15 years.return.

Impairment of Long-Lived Assets – The Company reviews long-lived assets, including amortizable intangible assets, for impairment. Property, machinery and equipment and finite life intangible assets are reviewed whenever events or changes in circumstances occur that indicate possible impairment. If events or changes in circumstances occur that indicate possible impairment, the Company first performs an impairment review based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of its assets and liabilities. This analysis requires management judgment with respect to changes in technology, the continued success of product lines, and future volume, revenue and expense growth rates. If the carrying value exceeds the undiscounted cash flows, the Company records an impairment, if any, for the difference between the estimated fair value of the asset group and its carrying value. The Company further conducts annual reviews for idle and underutilized equipment, and reviews business plans for possible impairment.

During the third quarter of fiscal 2023, the Company revised the financial outlook for the Pet Tech segment, resulting in lower projected sales and net income for future periods. The Company assessed the overall market acceptance of the current Wagz product offerings after the holiday season and determined that this constituted a triggering event for the Company’s long-lived asset groups, primarily consisting of patents, trade names and certain fixed assets. The Company reviewed the undiscounted future cash flows for the identified long-lived asset group, and the results of the analysis indicated the carrying amount for fiscal years 2021the long-lived group was not expected to be recovered.

The fair value of the identified intangible assets was estimated using the relief from royalty method, which is a risk-adjusted discounted cash flow approach. The relief from royalty method values an intangible asset by estimating the royalties saved through ownership of the asset. The relief from royalty method requires identifying the future revenue that would be generated by the intangible asset, multiplying it by a royalty rate deemed to be avoided through ownership of the asset and 2020 did not indicate that anydiscounting the projected royalty savings amounts back to the acquisition date using the internal rate of return.

The Company determined the fair value of the long-lived asset group was lower than its carrying value and recorded an intangible asset impairment charge of $9,527,773 during the three months ended January 31, 2023. This non-cash charge was recorded to impairment of goodwill and intangible assets on the unaudited condensed consolidated statements of operations. As of April 30, 2023 this non-cash charge has been reported under discontinued operations. See Note H – Intangible Assets and Note P – Discontinued Operations, for more information.

Impairment of Goodwill –Goodwill represents the cost of business acquisitions in excess of the fair value of identifiable net tangible and intangible assets acquired. On an annual basis, or more frequently if

triggering events occur, the Company compares the estimated fair value of its reporting units to the carrying value of each reporting unit to determine if a potential goodwill impairment exists. If the fair value of a reporting unit is less than its carrying value, a goodwill impairment loss is recorded for the difference. In calculating the fair value of the reporting units or specific intangible assets, management relies on a number of factors, including business plans, economic projections, anticipated future cash flows, comparable transactions and other long-livedmarket data. There are inherent uncertainties related to these factors and management's judgment in applying them in the impairment tests of goodwill and other intangible assets.

The Company observed during the third quarter of fiscal 2023, the overall lack of market acceptance of the current Wagz product offerings during the holiday season and determined this constituted a triggering event. Accordingly, the Company performed a quantitative goodwill impairment test and estimated the fair value of the Pet Tech segment based on a combination of an income approach (estimates of future discounted cash flows), a market approach (market multiples for similar companies) and a cost approach. Significant unobservable inputs and assumptions inherent in the valuation methodologies, which represented Level 3 inputs, under the fair value hierarchy, were employed and included, but were not limited to, prospective financial information, terminal value assumptions, discount rates, and multiples from comparable publicly traded companies in the Pet Tech industry.

The cost approach is based on upon the concept of replacement cost as an indicator of value. Stated another way, this approach is premised on the assumption that a prudent investor would pay no more for an asset than the amount for which the asset could be replaced. The cost approach establishes value based on the cost reproducing or replacing the property, less depreciation from physical deterioration and functional obsolescence, if present and measurable.

During the third quarter of fiscal 2023, the Company determined its goodwill was fully impaired as the fair value was lower than the carrying value and recorded an impairment charge of $13,320,534. This non-cash charge was recorded to impairment of goodwill and intangible assets were impaired.as of January 31, 2023.

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

Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive

and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company begins with historical results and changes in accounting policies, and incorporates assumptions including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment and estimates by management about the forecasts of future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income and/or loss. Valuation allowances are established when necessary to reduce deferred income tax assets to an amount more likely than not to be realized. The Company’sSigmaTron and Wagz filed or are expected to file U.S. tax returns on a consolidated basis for periods during which Wagz was wholly owned. Therefore, a valuation allowance was $1,138,736previously established on the group’s U.S. deferred tax assets during fiscal year 2022. After the sale of Wagz, SigmaTron expects to file on a standalone basis and $989,194utilize its U.S. deferred tax assets with the exception of the capital loss on sale and certain foreign tax credits. The Company has established a valuation allowance of $7,260,628 on its U.S. capital loss and foreign tax credit carryforwards and a valuation allowance of $442,889 on certain foreign loss carryforwards as of April 30, 2021 and April 30, 2020, respectively. The increase in valuation allowance is attributable to an increase in underlying NOL carryforwards in China and Vietnam.2023.

New Accounting Standards:

See Note B – Summary of Significant Accounting Policies in the consolidated financial statements.of Item 15(a) Exhibits and Financial Statement Schedules.

Results of Operations:

FISCAL YEAR ENDED APRIL 30, 20212023 COMPARED

TO FISCAL YEAR ENDED APRIL 30, 20202022

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

Net sales decreased 1.2%

Net sales increased $36,119,350, or 9.5% to $277,718,672$414,435,845 in fiscal year 2021 from $281,042,4822023, compared to $378,316,495 in fiscal 2022. Net sales were higher due to higher sales volume and certain customer price increases implemented as a result of increased raw material and other operating costs that occurred during fiscal 2023, as compared to last fiscal year. The Federal Reserve has raised interest rates several times during fiscal 2023, which has negatively affected customer demand in the prior year. Theconsumer electronics markets, but has not had the same effect in the industrial electronics and medical/life science markets. As a result, the Company’s sales decreasedincreased in fiscal year 20212023 in

industrial electronics and medical/life science compared to the prior fiscal year. The increase in sales was accompanied by a decrease in sales in consumer electronics.

Costs of products sold

Cost of products sold increased $29,057,022, or 8.7%, to $362,982,248 (87.6% of net sales) in fiscal 2023, compared to $333,925,226 (88.3% of net sales) in the prior fiscal year. The decrease in cost of products sold as a percentage of sales is primarily due to favorable sales mix, partially offset with higher material, logistics and other operating costs as a result of higher sales volumes and the impact of global supply chain disruptions that caused factory inefficiencies. Labor costs and other manufacturing costs were higher in fiscal 2023, compared to fiscal 2022, primarily due to inflationary pressures. The Company anticipates continuing supply chain issues in fiscal 2024.

Gross profit margin

Gross profit margin was 12.4% of net sales, in fiscal year 2023 compared to 11.7% of net sales in fiscal 2022. The increase in gross margins as a percentage of sales was primarily due to favorable sales mix, notwithstanding higher material, labor and other manufacturing costs during fiscal 2023, compared to fiscal 2022.

Selling and administrative expenses

Selling and administrative expenses increased $514,157, or 2.0% to $26,495,951 (6.4% of net sales) in fiscal 2023, compared to $25,981,794 (6.9% of net sales) in the prior fiscal year. The increase in selling and administrative expenses primarily relates to inflationary pressures in fiscal 2023, compared to fiscal 2022.

Gain on the extinguishment of long-term debt

On April 23, 2020, the Company received proceeds of $6,282,973 from a PPP Loan under the CARES Act, which it used to retain current U.S. employees, maintain payroll and make lease and utility payments. The PPP Loan was forgiven on July 9, 2021 and was recorded as a gain on the extinguishment of debt in fiscal 2022.

Other Income

Other income increased to $632,223 in fiscal 2023, compared to $153,614 in fiscal 2022. The increase primarily relates to insurance proceeds received related to fire damage in one of our manufacturing locations.

Interest expense, net

Interest expense, net, increased to $8,403,904 in fiscal 2023 compared to $1,500,140 in fiscal 2022. The increase primarily relates to higher average debt levels as well as increased interest rates during fiscal 2023.

Income tax expense

Income tax expense decreased $1,988,462 to $2,991,541 in fiscal 2023, compared to $4,980,003 in fiscal 2022. The effective tax rate decreased to 17.4% in fiscal 2023, compared to 21.3% in fiscal 2022, primarily due to a decrease in the valuation allowance in the current year. The decrease in income tax expense in fiscal 2023 compared to fiscal 2022 is primarily due to decreased taxable income recognized in the current fiscal year compared to the previous fiscal year.

Net income from continuing operations

Net income from continuing operations decreased $4,171,495, to a net income of $14,194,424 in fiscal 2023, compared to a net income of $18,365,919 in fiscal 2022. Net income in fiscal 2022 included the one-time extinguishment of the PPP Loan in the amount of $6,282,973 that was recorded as a gain on the extinguishment of debt.

Net loss from discontinued operations

Net loss from discontinued operations in fiscal 2023 from the Pet Tech Segment of $34,769,809 which includes an impairment of goodwill and long-lived assets of $23,096,771 and losses on the sale of a business of $3,742,709. The fiscal 2023 discontinued losses include a tax benefit of $1,860,093. The net loss from discontinued operations for fiscal 2022 consisted of operational losses from the Pet Tech Segment of $2,879,829 and an impairment of notes receivable and investment charge of $6,300,235. The fiscal 2022 discontinued losses include a tax benefit of $678,313.

EMS Segment

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

Net sales

Net sales increased $36,119,350, or 9.5%, to $414,435,845 in fiscal 2023, compared to $378,316,495 in fiscal 2022. Net sales were higher primarily due to higher sales volume and certain customer price increases implemented as a result of increased raw material and other operating costs that occurred in fiscal 2023, compared to fiscal 2022. The Federal Reserve has raised interest rates several times during the fiscal year, which has negatively affected customer demand in the consumer electronics markets, but has not had the same effect in the industrial electronics and medical/life science markets. As a result, the Company’s sales increased in fiscal 2023 in industrial electronics and medical/life science compared to the prior fiscal year. The increase in sales was accompanied by a decrease in sales in consumer electronics.

Cost of products sold

Cost of products sold increased $29,057,022, or 8.7%, to $362,982,248 (87.6% of net sales) in fiscal 2023, compared to $333,925,226 (88.3% of net sales) in the prior fiscal year. The decrease in cost of products sold as a percentage of sales dollars for these marketplaces was partially offset by an increase in sales dollars in the consumer electronics marketplace. The overall decrease in net sales wasis primarily due to favorable sales mix, partially offset with higher material, logistics and other operating costs as a result of higher sales volumes and the impact of COVID-19 during the first quarterglobal supply chain disruptions that caused factory inefficiencies. Labor costs and other manufacturing costs were higher in fiscal year 2021.2023, primarily due to inflationary pressures. The Company anticipates continuing supply chain issues in fiscal 2024.

Gross profit

Gross profit decreased to $24,952,197, or 9.0%margin was 12.4% of net sales in fiscal year 20212023, compared to $25,104,890 or 8.9%11.7% of net sales in the prior fiscal year. The decreaseincrease in gross profit dollars for fiscal year 2021margins as a percentage of sales was primarily the result of decreased sales.due to favorable sales mix, partially offset with higher material, labor and other manufacturing costs in fiscal 2023, compared to fiscal 2022.

Selling and administrative expenses

Selling and administrative expenses decreasedincreased $514,157, or 2.0%, to $26,495,951 (6.4% of net sales) in fiscal year 20212023, compared to $21,562,413, or7.8%$25,981,794 (6.9% of net sales compared to $22,292,309, or 7.9% of net sales, in fiscal year 2020. The decrease in selling and administrative dollars was attributable to sales salaries, bad debt recoveries, travel expense and financing fees. The decreasesales) in the foregoing selling and administrative expenses were partially offset by an increase in legal fees, bonus expense and other general and administrative expenses.prior fiscal year. Selling and administrative expenses decreased as a percent of net salesincreased in fiscal 2023 primarily due to a decrease in total sellingincreased wages and administrative dollars in fiscal year 2021professional fees, partially offset by lower bonus expense, compared to the prior year.fiscal 2022.

Interest expense, net, decreased to $1,210,024 in fiscal year 2021 compared to $1,839,060 in fiscal year 2020. Interest expense decreased primarily due to the decreased borrowings and interest rates under the Company’s banking arrangements and mortgage obligations.Operating income

InOperating income increased $6,548,171, or 35.6%, to $24,957,646 (6.0% of net sales) in fiscal year 2021, the Company reported income tax expense of $557,7412023, compared to an income tax expense$18,409,475 (4.9% of $650,032 in fiscal year 2020. The effective rate for the fiscal years ended April 30, 2021 and April 30, 2020 was 26.58% and 59.47%, respectively. The decrease in income tax expense and effective tax rate is due primarily to overall foreign currency gains recognized in the foreign jurisdictionsnet sales) in the prior fiscal year. The increase was primarily due to higher sales volume and favorable sales mix, notwithstanding higher material, logistics and other operating costs.

Pet Technology Segment

The Company reportedsold a majority of the Wagz stock on April 28, 2023, effective as of April 1, 2023. The Company still owns 19 percent of Wagz common stock as a passive investment as of April 30, 2023. The activity for fiscal 2023 and fiscal 2022 have been classified as discontinued operations in the Consolidated Statements of Operations.

Wagz was acquired on December 31, 2021, and therefore only reflects financial results for fiscal 2022 after the transaction date.

The following table sets forth the percentage relationships of gross profit and expense items to net income of $1,541,019sales for the years indicated:

Net sales

Net sales increased $1,049,000 to $1,598,929 in fiscal year 20212023, compared to net income of $443,102$549,929 in fiscal 2022. Wagz was purchased on December 31, 2021 and sales for fiscal year 2020. Basic2022 only reflect four months of activity. Sales for the period are primarily comprised of hardware and diluted earnings per share foraccessories, as well as recurring subscription revenue. The Pet Tech segment experienced supply chain issues, causing certain inventory shortages during fiscal year 2021 were $0.36 each2023, which negatively affected hardware sales. In addition, the products struggled to gain market acceptance during the fiscal year.

Cost of products sold

Cost of products sold increased $1,223,025 to $1,732,352 (108.3% of net sales) in fiscal 2023, compared to basic$509,327 (92.6% of net sales) in the prior fiscal year. Cost of products sold as a percentage of sales increased during the current period primarily due to material cost increases and diluted earnings per sharelower sales volumes.

Gross profit margin

Gross profit margin was –(8.3)% of $0.10 eachnet sales in fiscal 2023, compared to a gross profit margin of 7.4% in the prior fiscal year. Gross profit margins were negative in the current period due to material cost increases and lower sales volumes.

Selling and administrative expenses

Selling and administrative expenses increased $6,736,722, to $9,656,999 in fiscal 2023, compared to $2,920,277 in the prior fiscal year. Selling and administrative costs were primarily comprised of research and development costs for new products that were expected to launch in fiscal 2024, selling and marketing expenses, as well as general and administrative expenses.

Impairment of notes receivable and investment

Prior to the acquisition on December 31, 2021, the Company had an investment in Wagz of $600,000, Convertible Secured Promissory Notes issued by Wagz of $12,000,000 and Secured Promissory Notes issued by Wagz of $1,380,705. Pursuant to the Merger Agreement, prior to the acquisition, the Convertible Secured Promissory Notes converted to 12,000,000 shares of Wagz common stock, resulting in a 25.5% ownership in Wagz. As described in Note F – Acquisition and Disposition, the Company’s 25.5% equity interest in Wagz common stock was remeasured to fair value of $6,299,765, resulting in a non-cash impairment charge of $6,300,235 in fiscal 2022.

Impairment of goodwill and other long-lived assets

In connection with the preparation and review of the financial statements for the quarter ended January 31, 2023, the Company revised the financial projections for its Pet Tech segment. The revised projections resulted in a triggering event for the Company’s goodwill and long-lived asset groups consisting of patents and trade names. As a result, the Company concluded that the carrying amount for goodwill and the long-lived asset groups was impaired and not expected to be recovered. Accordingly, a non-cash pre-tax goodwill impairment charge of $13,320,534 and a non-cash intangible assets impairment charge of $9,527,773, was recorded for the Company’s Pet Tech segment in fiscal year ended2023. In addition, Pet Tech fixed assets of $248,464 were written off due to the sale of Wagz effective April 30, 2020.1, 2023.

Operating loss

Operating loss increased $23,707,283, to $32,887,193 in fiscal 2023, compared to $9,179,910 in fiscal 2022. The increased loss was primarily due to the impairment of goodwill and other long-lived assets, lower than expected sales and increased selling and administrative expenses in fiscal 2023.

Liquidity and Capital Resources:

The Company’s liquidity requirements are primarily to fund its business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements. The Company’s primary sources of liquidity are cash flows from operations and borrowings under the revolving Facility credit agreement. The Company believes its liquidity position will be sufficient to fund its existing operations and current commitments for at least the next twelve months. However, if economic conditions remain impacted for longer than the Company expects due to inflationary pressure, supply chain disruptions, public health crises, including COVID-19 and variants, or other geopolitical risks, the Company’s liquidity position could be severely impacted. Due to availability being less than 10% of the Revolving Commitment,the Facility (as defined below) has been classified as a current liability on the Consolidated Balance Sheet as of April 30, 2023.

Operating Activities.Activities

Cash flow provided byused in operating activities was $8,098,946$13,256,804 for the fiscal year ended April 30, 2021,2023, compared to cash flow provided byused in operating activities of $15,454,294$14,381,723 for the prior fiscal year. Cash flow provided byused in operating activities was primarily the result of an increase in accounts receivable in the amount of $5,328,740, a decrease in accounts payable in the amount of $20,702,026 and a decrease in deferred revenue in the amount of $3,179,709. Cash flow from operating activities was offset by a decrease in prepaid expenses and other assets in the amount of $5,954,202. The increase in accounts receivable is the result of an increase in net income,sales. The decrease in accounts payable is the result of the timing of vendor payments. The decrease in prepaid expenses and other assets is the result of a decrease in right-of-use assets.

Cash flow used in operating activities was $14,381,723 for the fiscal year ended April 30, 2022. Cash flow used in operating activities was primarily the result of an increase in both inventory and accounts payable and accrued expenses and wagesreceivable in the amount of $6,885,498$68,297,962 and $2,436,532,$12,288,539, respectively. Cash flow from operating activities was offset by an increase in both inventoryaccounts payable and prepaid expenses and other assetsdeferred revenue in the amount of $12,072,227$33,299,432 and $9,101,731,$10,487,828, respectively. The increase in accounts payable is the result of more favorable payment terms with vendors. The increase in inventory iswas the result of an increase in inventory purchases to satisfy customer orders. Further, capacity issues in the component industry made it difficult to obtain some components to complete assemblies for shipping.

Cash flow provided by operating activities was $15,454,294 for the fiscal year ended April 30, 2020. Cash flow provided by operating activities was primarily the result of net income and an increase in accounts payable in the amount of $10,143,939. The increase in accounts payable iswas the result of more favorable payment terms with vendors. Cash flow provided by operating activities was partially offset by an increase in prepaid expensesvendors and other assets.increased inventory purchases.

Investing Activities.Activities

In fiscal year 2021,2023, cash used in investing activities was $10,228,816.$5,179,247. During fiscal year 20212023, the Company purchased $4,747,316$4,334,169 in machinery and equipment to be used in the ordinary course of business. The Company has received forecasts from current customers for increased business that would require additional investment in capital equipment and facilities. To the extent that these forecasts come to fruition, the Company anticipates that it will make additional machinery and equipment purchases up to $6,500,000 in fiscal year 2022. The Company anticipates purchases will be funded by lease transactions. However, there is no assurance that such

increased business will be obtained or that the Company will be able to obtain funding orfor leases at acceptable terms, if at all, in the future. In fiscal year 2021,During the month of April 2023, the Company made advances of $5,481,500$900,000 to Wagz as agreed upon under the SPA. On April 28, 2023, the sale of the majority interest in Wagz pursuant to the SPA was consummated effective as of April 1, 2023, and as a result, as of the closing, the Company holds a minority 19% ownership of the shares and Buyer holds a majority 81% of the shares.

In fiscal year 2022, cash used in investing activities was $10,252,100. The Company purchased $4,740,100 in machinery and equipment used in the ordinary course of business. The Company purchases were funded by the bank line of credit and lease transactions. The Company made advances of $5,512,000 to Wagz. As more fully described in Note B – Summary of Significant Accounting Policies, inIn June 2020, the Company announced a proposed business combination with Wagz. The advances were made in conjunction with the proposed business combination.

In fiscal year 2020, the Company purchased in cash $4,646,325 in machinery and equipment to be used in the ordinary course of business. The Company purchases were funded by the bank line of credit and lease transactions.

Financing Activities.Activities

Cash used inprovided by financing activities was $1,140,346$24,155,387 for the fiscal year ended April 30, 2021.2023. Cash used inprovided by financing activities was primarily the result of net paymentsborrowings under finance leasesthe line of credit and sale leaseback agreements.term loan agreement.

Cash used inprovided by financing activities was $4,265,834$29,476,071 for the fiscal year ended April 30, 2020.2022. Cash used inprovided by financing activities was primarily the result of net paymentsborrowings under the line of credit offset by the proceeds from the PPP Loan of $6,282,973.credit.

Liquidity from Discontinued Operations

During fiscal 2023 cash used in discontinued operations from operating activities was $7,264,377, primarily related to Pet Tech Segment operations and transaction related expenses associated with the sale of the Wagz business. During fiscal 2022, cash used in operating activities of $5,843,456 relates to activity from the Pet Tech Segment. Cash used in investing activities for fiscal 2023 and fiscal 2022 was $134,419 and $9,432, respectively, primarily for capital expenditures.

Financing Summary.Summary

Debt and finance lease obligations consisted of the following at April 30, 20212023 and April 30, 2020:2022: