SigmaTron International, Inc.

Condensed Consolidated Balance Sheets

January 31,

2021

April 30,

(Unaudited)

2020

Current assets:

Cash and cash equivalents
$
2,744,679

$
6,779,445

Accounts receivable, less allowance for doubtful accounts of

$395,969 and $727,252 at January 31, 2021 and April 30, 2020,
respectively

26,289,585

30,804,976
Inventories, net

86,050,438

87,179,369
Prepaid expenses and other assets

1,107,079

1,510,943
Refundable and prepaid income taxes

947,830

1,699,970
Other receivables

8,724,894

2,642,094

Total current assets

125,864,505

130,616,797

Property, machinery and equipment, net

33,312,831

33,935,760

Intangible assets, net

2,085,137

2,350,949
Deferred income taxes

284,434

284,435
Other assets

8,387,575

8,891,090

Total other long-term assets

10,757,146

11,526,474

Total assets
$
169,934,482

$
176,079,031

Liabilities and stockholders' equity:

Current liabilities:

Trade accounts payable
$
48,645,860

$
55,770,953
Accrued wages

5,321,315

4,206,825
Accrued expenses

2,867,481

2,670,504
Income taxes payable

453,558

469,143
Current portion of long-term debt

6,596,970

2,878,160
Current portion of finance lease obligations

1,651,807

1,902,295
Current portion of operating lease obligations

1,944,321

2,150,161

Total current liabilities

67,481,312

70,048,041

Long-term debt, less current portion

35,169,381

38,537,064
Income taxes payable

404,975

452,619
Finance lease obligations, less current portion

1,353,434

1,884,722
Operating lease obligations, less current portion

5,065,611

5,281,811
Other long-term liabilities

1,434,054

810,769
Deferred income taxes

141,515

188,206

Total long-term liabilities

43,568,970

47,155,191

Total liabilities

111,050,282

117,203,232



		July 31,
		2021		April 30,
		(Unaudited)		2021

Current assets:
Cash and cash equivalents	$	3,186,580	$	3,509,229

Accounts receivable, less allowance for doubtful accounts of
$100,000 at July 31, 2021 and April 30, 2021, respectively		33,753,786		28,783,161
Inventories, net		113,143,188		98,078,601
Prepaid expenses and other assets		1,893,486		1,314,834
Refundable and prepaid income taxes		447,714		388,766
Notes receivable		8,876,594		7,014,594
Other receivables		3,419,814		2,464,678

Total current assets		164,721,162		141,553,863

Property, machinery and equipment, net		35,328,032		34,186,918


Intangible assets, net		1,909,627		1,996,749
Deferred income taxes		1,685,937		1,647,143
Right-of-use operating lease assets		12,257,463		13,015,986
Other assets		1,685,772		1,772,748

Total other long-term assets		17,538,799		18,432,626

Total assets	$	217,587,993	$	194,173,407

Liabilities and stockholders' equity:
Current liabilities:
Trade accounts payable	$	77,246,626	$	62,656,451
Accrued wages		7,191,954		6,283,987
Accrued expenses		2,499,012		2,457,882
Income taxes payable		1,939,692		1,331,504
Deferred revenue		2,172,350		423,971
Current portion of long-term debt		2,144,470		7,862,058
Current portion of finance lease obligations		1,312,029		1,455,638
Current portion of operating lease obligations		3,077,781		2,843,758

Total current liabilities		97,583,914		85,315,249

Long-term debt, less current portion		37,515,217		34,783,825
Income taxes payable		357,331		404,975
Finance lease obligations, less current portion		1,539,252		1,180,496
Operating lease obligations, less current portion		9,719,562		10,474,601
Other long-term liabilities		1,493,548		1,465,200

Total long-term liabilities		50,624,910		48,309,097

Total liabilities		148,208,824		133,624,346

Commitments and contingencies

Stockholders' equity:

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

authorized, none issued or outstanding

-

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

authorized, 4,257,508 and 4,242,508 shares issued and

outstanding at January 31, 2021 and April 30, 2020, respectively

42,365

42,265
Capital in excess of par value

23,652,354

23,619,513
Retained earnings

35,189,481

35,214,021

Total stockholders' equity

58,884,200

58,875,799

Total liabilities and stockholders' equity
$
169,934,482

$
176,079,031

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.


Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares
authorized, NaN issued or outstanding		-		-
Common stock, $0.01 par value; 12,000,000 shares
authorized, 4,284,508 and 4,269,508 shares issued and
outstanding at July 31, 2021 and April 30, 2021, respectively		42,575		42,560
Capital in excess of par value		23,784,838		23,751,461
Retained earnings		45,551,756		36,755,040

Total stockholders' equity		69,379,169		60,549,061

Total liabilities and stockholders' equity	$	217,587,993	$	194,173,407

‎

SigmaTron International, Inc.

Condensed Consolidated Statements of Operations



		Three Months		Three Months		Nine Months		Nine Months		Three Months		Three Months
		Ended		Ended		Ended		Ended		Ended		Ended
		January 31,		January 31,		January 31,		January 31,		July 31,		July 31,
		2021		2020		2021		2020		2021		2020
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Net sales	$	71,531,348	$	67,407,268	$	201,674,728	$	216,272,561	$	85,739,434	$	60,524,956
Cost of products sold		65,618,649		61,885,491		184,730,296		196,660,966		76,156,956		56,252,765

Gross profit		5,912,699		5,521,777		16,944,432		19,611,595		9,582,478		4,272,191

Selling and administrative expenses		5,212,629		5,469,654		15,693,893		16,997,268		6,111,015		5,059,525

Operating income		700,070		52,123		1,250,539		2,614,327
Operating income (loss)										3,471,463		(787,334)

Other expense (income)		189,341		(29,944)		144,632		(107,169)
Gain on extinguishment of long-term debt										(6,282,973)		-
Other income										(37,141)		(4,098)
Interest expense		287,371		401,837		934,248		1,455,837		237,916		338,264
Income (loss) before income tax expense		223,358		(319,770)		171,659		1,265,659		9,553,661		(1,121,500)

Income tax (benefit) expense		(25,910)		(102,731)		196,199		460,490
Income tax expense (benefit)										756,945		(220,834)

Net income (loss)	$	249,268	$	(217,039)	$	(24,540)	$	805,169	$	8,796,716	$	(900,666)


Earnings (loss) per share – basic	$	0.06	$	(0.05)	$	(0.01)	$	0.19	$	2.06	$	(0.21)

Earnings (loss) per share – diluted	$	0.06	$	(0.05)	$	(0.01)	$	0.19	$	2.02	$	(0.21)


Weighted average shares of common stock outstanding
Basic		4,257,508		4,242,508		4,255,334		4,242,300		4,275,410		4,250,986

Weighted average shares of common stock outstanding
Diluted		4,310,290		4,242,508		4,255,334		4,260,022		4,353,912		4,250,986

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.	The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.								The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

‎

SigmaTron International, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended January 31, 2021 (Unaudited)

Capital in

Total

Preferred

Common

excess of par

Retained

stockholders’

stock

stock

value

earnings

equity

Balance at May 1, 2020
$
-

$
42,265

$
23,619,513

$
35,214,021

$
58,875,799

Restricted stock awards

-

31

15,198

-

15,229

Net loss

-

-

-

(900,666)

(900,666)

Balance at July 31, 2020
$
-

$
42,296

$
23,634,711

$
34,313,355

$
57,990,362

Net income

-

-

-

626,858

626,858

Balance at October 31, 2020
$
-

$
42,296

$
23,634,711

$
34,940,213

$
58,617,220

Restricted stock awards

-

69

17,643

-

17,712

Net income

-

-

-

249,268

249,268

Balance at January 31, 2021
$
-

$
42,365

$
23,652,354

$
35,189,481

$
58,884,200


	For the three months ended July 31, 2021 (Unaudited)
						Capital in				Total
		Preferred		Common		excess of par		Retained		stockholders’
		stock		stock		value		earnings		equity

Balance at May 1, 2021	$	-	$	42,560	$	23,751,461	$	36,755,040	$	60,549,061

Recognition of stock-based ‎compensation		-		-		20,035		-		20,035

Restricted stock awards		-		15		13,342		-		13,357

Net income		-		-		-		8,796,716		8,796,716

Balance at July 31, 2021	$	-	$	42,575	$	23,784,838	$	45,551,756	$	69,379,169

For the nine months ended January 31, 2020 (unaudited)

Capital in

Total

Preferred

Common

excess of par

Retained

stockholders’

stock

stock

value

earnings

equity

Balance at May 1, 2019
$
-

$
42,146

$
23,474,379

$
34,770,924

$
58,287,449

Cumulative-effect adjustment for the adoption of Topic 842

-

-

-

(5)

(5)

Net income

-

-

-

361,025

361,025

Balance at July 31, 2019
$
-

$
42,146

$
23,474,379

$
35,131,944

$
58,648,469

Net income

-

-

-

661,183

661,183

Balance at October 31, 2019
$
-

$
42,146

$
23,474,379

$
35,793,127

$
59,309,652

Recognition of stock-based
compensation

-

-

90,432

-

90,432

Restricted stock awards

-

44

20,514

-

20,558

Net loss

-

-

-

(217,039)

(217,039)

Balance at January 31, 2020
$
-

$
42,190

$
23,585,325

$
35,576,088

$
59,203,603


	For the three months ended July 31, 2020 (Unaudited)
						Capital in				Total
		Preferred		Common		excess of par		Retained		stockholders’
		stock		stock		value		earnings		equity

Balance at May 1, 2020	$	-	$	42,265	$	23,619,513	$	35,214,021	$	58,875,799

Restricted stock awards		-		31		15,198		-		15,229

Net loss		-		-		-		(900,666)		(900,666)

Balance at July 31, 2020	$	-	$	42,296	$	23,634,711	$	34,313,355	$	57,990,362

‎

SigmaTron International, Inc.

Condensed Consolidated Statements of Cash Flows

Nine

Nine

Months Ended

Months Ended

January 31,

January 31,

2021

2020

(Unaudited)

(Unaudited)

Cash flows from operating activities

Net (loss) income
$
(24,540)

$
805,169

Adjustments to reconcile net (loss) income

to net cash provided by operating activities:

Depreciation and amortization of property, machinery and equipment

3,807,281

3,684,890
Amortization of right-of-use operating lease assets

1,643,659

1,650,057
Stock-based compensation

-

90,432
Restricted stock expense

32,941

20,558
Deferred income tax (benefit) expense

(46,690)

-
Amortization of intangible assets

265,812

272,081
Amortization of financing fees

115,987

86,369
Loss from disposal or sale of machinery and equipment

171,698

19,782
Changes in operating assets and liabilities

Accounts receivable

4,515,391

5,834,858
Inventories

1,128,931

11,697,762
Prepaid expenses and other assets

(2,570,066)

(966,414)
Refundable and prepaid income taxes

752,140

(49,236)
Income taxes payable

(63,229)

52,290
Trade accounts payable

(7,125,093)

(7,988,390)
Operating lease liabilities

(422,040)

592,062
Accrued expenses and wages

1,739,518

(1,148,827)

Net cash provided by operating activities

3,921,700

14,653,443

Cash flows from investing activities

Purchases of machinery and equipment

(2,636,505)

(2,133,826)
Advances on other receivables

(4,006,500)

-

Net cash used in investing activities

(6,643,005)

(2,133,826)

Cash flows from financing activities

Proceeds under equipment notes

2,397,015

-
Payments of contingent consideration

-

(57,537)
Payments under finance lease and sale leaseback agreements

(1,501,321)

(1,623,661)
Payments under equipment notes

(501,930)

(308,775)
Proceeds under building notes payable

6,500,000

-
Payments under building notes payable

(6,401,702)

(210,000)
Borrowings under revolving line of credit

300,857,651

254,679,833
Payments under revolving line of credit

(302,157,766)

(265,009,957)
Payments of debt financing costs

(505,408)

(50,184)

Net cash used in financing activities

(1,313,461)

(12,580,281)



		Three		Three
		Months Ended		Months Ended
		July 31,		July 31,
		2021		2020
		(Unaudited)		(Unaudited)

Cash flows from operating activities
Net income (loss)	$	8,796,716	$	(900,666)

Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization of property, machinery and equipment		1,356,277		1,265,719
Stock-based compensation		20,035		-
Restricted stock expense		13,357		15,229
Deferred income tax (benefit) expense		(38,794)		1,544
Gain on extinguishment of long-term debt		(6,282,973)		-
Amortization of intangible assets		87,122		89,036
Amortization of financing fees		18,606		36,926
Loss from disposal or sale of machinery and equipment		9,497		4,242
Changes in operating assets and liabilities
Accounts receivable		(4,970,625)		2,787,494
Inventories		(15,064,587)		1,972,771
Prepaid expenses and other assets		482,233		(583,689)
Refundable and prepaid income taxes		(58,948)		(59,240)
Income taxes payable		560,544		(270,663)
Trade accounts payable		14,590,175		(11,118,270)
Operating lease liabilities		(521,016)		730,722
Accrued expenses and wages		848,620		886,244
Deferred Revenue		1,748,379		-

Net cash provided by (used in) operating activities		1,594,618		(5,142,601)

Cash flows from investing activities
Purchases of machinery and equipment		(2,901,827)		(966,856)
Advances on notes receivable		(1,862,000)		(1,131,900)

Net cash used in investing activities		(4,763,827)		(2,098,756)

Cash flows from financing activities
Proceeds under equipment notes		-		1,128,608
Payments under finance lease and sale leaseback agreements		(494,730)		(549,758)
Payments under equipment notes		(261,863)		(118,599)
Payments under building notes payable		(119,365)		(80,416)
Borrowings under revolving line of credit		93,348,538		76,661,576
Payments under revolving line of credit		(89,462,832)		(73,725,348)
Payments of debt financing costs		(163,188)		(8,055)

Net cash provided by financing activities		2,846,560		3,308,008

Change in cash and cash equivalents

(4,034,766)

(60,664)
Cash and cash equivalents at beginning of period

6,779,445

1,005,810

Cash and cash equivalents at end of period
$
2,744,679

$
945,146

Supplementary disclosures of cash flow information

Cash paid for interest
$
910,598

$
1,456,738
Cash paid for income taxes

367,061

588,915
Purchase of machinery and equipment financed

under finance leases

719,545

671,446
Financing of insurance policy

242,514

381,345

Change in cash and cash equivalents		(322,649)		(3,933,349)
Cash and cash equivalents at beginning of period		3,509,229		6,779,445

Cash and cash equivalents at end of period	$	3,186,580	$	2,846,096

Supplementary disclosures of cash flow information
Cash paid for interest	$	296,405	$	338,898
Cash paid for income taxes		293,707		96,288
Purchase of machinery and equipment financed
under finance leases		709,877		671,446
Financing of insurance policy		65,706		83,048
Gain on extinguishment of long-term debt		6,282,973		-

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note A - Description of the Business

SigmaTron International, Inc., its subsidiaries, foreign enterprises and international procurement office (collectively, the “Company”) operates in ~~one~~1 business segment as an independent provider of electronic manufacturing services (“EMS”), which includes printed circuit board assemblies and completely assembled (box-build) electronic products. In connection with the production of assembled products, the Company also provides services to its customers, including (1) automatic and manual assembly and testing of products; (2) material sourcing and procurement; (3) manufacturing and test engineering support; (4) design services; (5) warehousing and distribution services; and (6) assistance in obtaining product approval from governmental and other regulatory ~~bodies.~~ bodies.

Note B - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of SigmaTron International, Inc. (“SigmaTron”), SigmaTron’s wholly-owned subsidiaries Standard Components de Mexico S.A., AbleMex, S.A. de C.V., Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., Spitfire Controls (Cayman) Co. Ltd. and wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and SigmaTron Electronic Technology Co., Ltd. (“SigmaTron China”) and international procurement office SigmaTron Taiwan branch (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month period ended JanuaryJuly 31, 2021 is not necessarily indicative of the results that may be expected for the year ending April 30, 2021.2022. The condensed consolidated balance sheet at April 30, 2020,2021, was derived from audited annual financial statements but does not contain all of the footnotes disclosures from the annual financial statements. For further information, refer to the condensed consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2020. 2021.

COVID-19 and CARES Act

A pandemic of respiratory ~~disease (abbreviated~~diseases, including variants (commonly known as "COVID-19") began to spread globally, including to the United States, in early 2020. ~~On March 11, 2020, the World Health Organization (WHO) declared COVID-19 to be a public health emergency of international concern.~~ The full impact of the COVID-19 outbreak is inherently uncertain at the time of this report. The COVID-19 outbreak has resulted in travel restrictions and in some cases, prohibitions of non-essential activities, disruption and shutdown of certain businesses and greater uncertainty in global financial markets.The full extent to which COVID-19 impacts the Company’s business, global supply chain, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited 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 quickly and to what extent normal economic and operating conditions can resume.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note B - Basis of Presentation - Continued

Even after COVID-19 has subsided, the Company may continue to experience materially adverse impacts to its business as a result of its 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 as to the effect of the spread of COVID-19, and, as a result, the ultimate impact of COVID-19, or a similar health epidemic or pandemic, is highly uncertain and subject to change. The Company has adopted several measures in response to the COVID-19 outbreak. To date, the Company has been able to continue to meet the needs of its customers. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have a material adverse effect on the Company’s results of future operations, financial position, and liquidity ~~for the remainder of~~in fiscal year ~~2021 and beyond.~~2022.

On March 27, 2020, former President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. It also appropriated funds for the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP Loan”) loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19.

As further described in Note E, the Company received funds under the PPP Loan in the amount of $6,282,973. The ~~application for these funds required the~~PPP Loan was due to mature on April 23, 2022. The Company ~~to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations~~was notified of the Company. This certification further required the Company to take into account its current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the ~~loan attendant to these funds, is dependent~~PPP Loan by the SBA on ~~the Company having initially qualified for the loan~~July 9, 2021 and ~~qualifying~~it covers all principal and accrued interest. The accounting for the forgiveness is reflected in the Company’s Statement of ~~such loan based on its adherence to~~Operations under the ~~forgiveness criteria.~~extinguishment of PPP Loan debt.

~~Due to~~Under the ~~size~~terms of all PPP Loans, all aspects of the PPP Loan ~~it is~~remain subject to review ~~which introduces a layer~~by the SBA. While the Company is not aware of ~~uncertainty. If, despite the Company’s actions and certification that it satisfied all eligibility requirements for the PPP Loan,~~any issues, if it is later determined that it violated applicable laws or was otherwise ineligible to receive the PPP Loan, the Company will be required to repay the PPP Loan in its entirety in a lump sum and may be subject to additional ~~penalties, which could also result in adverse publicity and damage to the Company’s reputation.~~penalties. If these events were to transpire, they could have a material adverse effect on the Company’s business, results of operations, financial condition and liquidity for the remainder of fiscal year ~~2021~~2022 and beyond.

Reclassifications

Certain amounts recorded in the prior-period consolidated financial statements presented have been reclassified to conform to the current-period financial statement presentation. These reclassifications had no effect on previously reported results of operations.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note C - Inventories, net

The components of inventory consist of the following:



	January 31,		April 30,		July 31,		April 30,
	2021		2020		2021		2021

Finished products	$	20,427,311	$	20,998,329	$	24,443,995	$	22,858,073
Work-in-process		5,446,277		5,215,280		6,975,389		5,601,560
Raw materials		61,418,165		62,316,122		84,138,114		72,033,278
		87,291,753		88,529,731		115,557,498		100,492,911
Less excess and obsolescence reserve		(1,241,315)		(1,350,362)		(2,414,310)		(2,414,310)
	$	86,050,438	$	87,179,369	$	113,143,188	$	98,078,601

Note D - Earnings Per Share and Stockholders’ Equity

The following table sets forth the computation of basic and diluted earnings (loss) per share:


	Three Months Ended				Nine Months Ended				Three Months Ended
	January 31,				January 31,					July 31,		July 31,
	2021		2020		2021		2020		2021		2020

Net income (loss)	$	249,268	$	(217,039)	$	(24,540)	$	805,169	$	8,796,716	$	(900,666)
Weighted-average shares
Basic		4,257,508		4,242,508		4,255,334		4,242,300		4,275,410		4,250,986
Effect of dilutive stock options		52,782		-		-		17,722		78,502		-

Diluted		4,310,290		4,242,508		4,255,334		4,260,022		4,353,912		4,250,986

Basic earnings (loss) per share	$	0.06	$	(0.05)	$	(0.01)	$	0.19	$	2.06	$	(0.21)

Diluted earnings (loss) per share	$	0.06	$	(0.05)	$	(0.01)	$	0.19	$	2.02	$	(0.21)

Options to purchase 513,232 shares of common stock were outstanding at ~~January~~July 31, 2021 and 2020. There were no102,000 options granted during the ~~nine~~three month ~~periods~~period ended ~~January~~July 31, 2021 and 0 options were granted during the three month period ended July 31, 2020. There was no$20,035 and $0 stock option expense recognized for the three ~~and nine~~ month periods ended ~~January~~July 31, 2021 and ~~2020. There was no~~2020, respectively. The balance of unrecognized compensation expense related to the Company’s stock option plans at ~~January~~July 31, 2021 and ~~2020.~~2020 was $225,734 and $0, respectively. For the three month period ended ~~January~~July 31, 2021 and 2020, ~~143,781~~72,643 and ~~151,282~~299,129 shares, respectively, were not included in the diluted weighted average common shares outstanding calculation as they were anti-dilutive. For the nine month periods ended January 31, 2021 and 2020, 240,160 and 214,177 shares, respectively, were not included in the diluted weighted average common shares outstanding calculation as they were anti-dilutive.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt

Debt and capital lease obligations consisted of the following at ~~January~~July 31, 2021 and April 30, ~~2020:~~2021:


		January 31,		April 30,		July 31,		April 30,
		2021		2020		2021		2021

Debt:
Notes Payable - Banks	$	31,914,633	$	33,472,125	$	29,514,345	$	32,137,919
Notes Payable - Buildings		7,020,859		6,922,561		6,818,398		6,937,763
Notes Payable - Equipment		3,195,363		1,300,278		3,661,776		3,923,639
Unamortized deferred financing costs		(364,504)		(279,740)		(334,832)		(353,438)
Total debt		41,766,351		41,415,224		39,659,687		42,645,883
Less current maturities		6,596,970		2,878,160		2,144,470		7,862,058
Long-term debt	$	35,169,381	$	38,537,064	$	37,515,217	$	34,783,825

Finance lease obligations	$	3,005,241	$	3,787,017	$	2,851,281	$	2,636,134
Less current maturities		1,651,807		1,902,295		1,312,029		1,455,638
Total finance lease obligations, less current portion	$	1,353,434	$	1,884,722	$	1,539,252	$	1,180,496

Notes Payable – Banks

Prior to January 29, 2021, the Company had a senior secured credit facility with U.S. ~~Bank.~~Bank National Association (“U.S. Bank”). The revolving credit facility allowed the Company to borrow up to the lesser of (i) $45,000,000 (the“Revolving Line Cap”) less reserves or (ii) the Borrowing Base, but no more than 80% of the Company’s Revolving Line Cap. Prior to its payoff and termination, the U.S. Bank senior secured credit facility was due to expire on March 31, 2022. On January 29, 2021, the Company paid the balance outstanding under the senior secured credit facility in the amount of $25,574,733. The unamortized deferred financing costs of $158,476 were expensed in ~~the third quarter of~~ fiscal year 2021 upon extinguishment of the debt.

On January 29, 2021, the Company entered into 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 ~~revolving~~ credit facility ~~of up to $50,000,000 (the “Facility”)~~ maturing on January 29, ~~2026.~~ 2026, 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’s assets including mortgages on its two Illinois properties.

The Facility allows 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 unless the~~ “REVLIBOR30 Rate” (as defined in the ~~agreement)~~Agreement) unless the REVLIBOR30 Rate is not available, in which case the interest is generally the rate 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 ~~January~~July 31, 2021),; or “Eurodollar Loans,” the interest on which is based on (X) an interest rate per annum (rounded upwards, if

SigmaTron International, Inc.

July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

necessary, to the next 1/16 of 1%) equal to the LIBO Rate (as defined in the Agreement) for any

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note E - Long-term Debt - Continued~~

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 ~~domestic~~ 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 ~~(i)~~(a) 10% of the revolving commitment and ~~(ii)~~(b) the outstanding principal amount of the term loans. The Company was not in a FCCR trigger period as of July 31, 2021. Deferred financing costs of ~~$354,454~~$361,734 were capitalized induring the ~~third quarter of~~ fiscal year ended April 30, 2021 and will be amortized over the term of the ~~agreement.~~Agreement. As of ~~January~~July 31, 2021, there was ~~$25,584,380~~$28,853,375 outstanding and ~~$10,390,073~~$19,454,713 of unused availability under the ~~JPMorgan Chase Bank, N.A.~~ ~~facility~~revolving Facility compared to an outstanding balance of ~~$26,884,494~~$24,967,668 and ~~$13,850,575 of~~$15,947,990 unused availability ~~under the U.S. Bank senior secured credit facility~~ at April 30, ~~2020.~~2021. As of ~~January~~July 31, 2021 and April 30, ~~2020,~~2021, the unamortized amount offset against outstanding debt was ~~$351,204~~$325,787 and ~~$218,062,~~$343,890, respectively.

On April 23, 2020, the Company received a PPP ~~Loan~~loan from U.S. Bank, as lender, pursuant to the Paycheck Protection Program of the CARES Act, as administered by the SBA in the amount of $6,282,973. The Company submitted its loan forgiveness application on March 26, 2021. 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 is reflected in the ~~form~~Company’s Statement of Operations as a ~~promissory note, matures on April 23, 2022. No additional collateral or guarantees were provided~~non-cash gain upon extinguishment of PPP Loan debt. Under the terms of all PPP Loans, all aspects of the PPP Loan remain subject to review by the SBA. While the Company ~~for~~is not aware of any issues, if it is later determined that it violated applicable laws or was otherwise ineligible to receive the PPP ~~Loan. The PPP~~ Loan, ~~provides for customary events of default. Under~~ the CARES Act, loan forgiveness may be available for the sum of documented payroll costs, rent payments, mortgage interest and covered utilities during the 24-week period beginning on the date of loan disbursement. The amount of loan forgiveness will be reduced if recipients terminate employees or reduce salaries during the covered period. The Company will be required to repay ~~any portion of the outstanding principal 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~~in its entirety in a lump sum and may be ~~forgiven by the SBA. All aspects of the PPP Loan are~~ subject to review by the SBA, including without limitation, the Company’s eligibility for and the size of the loan. The review procedures have not been made public. The Company cannot predict the outcome of that review nor be assured that all or any part of the PPP Loan will be forgiven. To the extent that all or part of the PPP Loan is not forgiven, the Company will be required to make payments, including interest accruing at an annual interest rate of 1.0%, beginning on the date of disbursement.additional penalties.

On March 15, 2019, the Company’s wholly-owned subsidiary, SigmaTron Electronic Technology Co., Ltd., entered into a credit facility with China Construction Bank. On January 26, 2021, the agreement was amended. Under the agreement SigmaTron Electronic Technology Co., Ltd. can borrow up to 9,000,000 Renminbi, approximately ~~$1,391,000~~$1,393,000 as of ~~January~~July 31, 2021, and the facility is collateralized by Wujiang SigmaTron Electronics Co., Ltd.’s manufacturing building. Interest is payable monthly and the facility bears a fixed interest rate of 3.85%. The term of the facility extends to January 6, 2022. There was no$660,970 outstanding ~~balance~~ under the facility at ~~January~~July 31, 2021 compared to an outstanding balance of ~~$304,658~~$824,159 at April 30, ~~2020.~~2021.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

Notes Payable – Buildings

The Company entered into a mortgage agreement on December 21, 2017, in the amount of $5,200,000, with U.S. Bank to refinance the property that serves as the Company’s corporate headquarters and its Illinois manufacturing facility in Elk Grove Village, Illinois. The note required the Company to pay monthly principal payments in the amount of $17,333, bore interest at a fixed rate of 4.0% per year and was payable over a ~~fifty-one~~fifty one month period. Deferred financing costs of $74,066 were capitalized in fiscal year 2018 which were amortized over the term of the agreement. On January 29, 2021, the Company repaid its U.S. Bank mortgage ~~agreement for~~in the ~~remaining~~ amount outstanding of $4,576,000, using proceeds from the ~~JPMorgan Chase Bank, N.A. mortgage agreement.~~Facility extended by Lender. The Company recorded a prepayment penalty of $120,842 in ~~the third quarter of~~ fiscal year 2021. The remaining deferred financing costs of $21,365 were expensed in ~~the third quarter of~~ fiscal year 2021.

The Company entered into a mortgage agreement on December 21, 2017, in the amount of $1,800,000, with U.S. Bank to refinance the property that serves as the Company’s engineering and design center in Elgin, Illinois. The note required the Company to pay monthly principal payments in the amount of $6,000, bore interest at a fixed rate of 4.0% per year and was payable over a ~~fifty-one~~fifty one month period. Deferred financing costs of $65,381 were capitalized in the fiscal year 2018 which were amortized over the term of the agreement. On January 29, 2021, the Company repaid its U.S. Bank mortgage ~~agreement for~~in the ~~remaining~~ amount outstanding of $1,584,000, using proceeds from the ~~JPMorgan Chase Bank, N.A. mortgage agreement.~~Facility extended by Lender. The Company recorded a prepayment penalty of $41,830 in ~~the third quarter of~~ fiscal year 2021.The remaining deferred financing costs of $18,859 were expensed in ~~the third quarter of~~ fiscal year 2021.

The ~~Company~~Company’s Facility with Lender, entered into ~~two term notes~~ on January 29, 2021, also included two term loans, in the aggregate principal amount of ~~$6,500,0000, with JPMorgan Chase Bank, N.A. secured against certain properties owned by the Company.~~$6,500,000. The ~~notes~~loans require the Company to pay ~~monthly~~ aggregate principal payments in the amount of $36,111 ~~and bears~~per month for 60 months, plus monthly payments of interest thereon at (A) the REVLIBOR30 Rate, unless the REVLIBOR30 Rate is not available, in which case the interest is generally the rate 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%~~2.5%; (effectively 2.75% per annum at ~~January~~July 31, 2021) ~~and~~; or “Eurodollar Loans,” the interest on which is ~~payable over a sixty month period.~~ 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 2.5%. Deferred financing costs of $10,050 were capitalized ~~in the third quarter of~~during fiscal year 2021 which are amortized over the term of the agreement. As of ~~January~~July 31, 2021, the unamortized amount included as a reduction to long-term debt was ~~$10,050.~~ ~~Final payments~~$9,045. A final aggregate payment of approximately $4,368,444 is due on or before January ~~31,~~29, 2026. The outstanding balance was ~~$6,500,000~~ $6,319,445 at ~~January~~July 31, 2021 compared to an outstanding balance of $6,427,778 at April 30, 2021.

SigmaTron International, Inc.

July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

Rate as published by The Wall Street Journal. The note is payable over a 120 month period. The outstanding balance was ~~$520,859~~$498,953 and ~~$552,561~~$509,985 at ~~January~~July 31, 2021 and April 30, ~~2020,~~2021, respectively.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note E - Long-term Debt - Continued~~

Notes Payable – Equipment

The Company routinely enters into secured note agreements with Engencap Fin S.A. DE C.V. to finance the purchase of equipment. The terms of these secured note agreements mature from November 1, 2021 through May 1, 2023, with quarterly installment payments ranging from $11,045 to $37,941 and a fixed interest rate ranging from 6.65% to 8.00%.

The Company routinely enters into secured note agreements with FGI Equipment Finance LLC to finance the purchase of equipment. The terms of these secured note agreements mature from March 1, 2025 through ~~October 2025,~~April 1, 2026, with quarterly installment payments ranging from $10,723 to $69,439 and a fixed interest rate of 8.25%.

Annual maturities of the Company’s debt, net of deferred financing fees for the remaining periods as of ~~January~~July 31, 2021, are as follows:


		Bank		Building		Equipment		Total			Bank		Building		Equipment		Total

For the remaining 3 months of the fiscal year ending April 30:	2021	$	5,221,926	$	83,096	$	220,624	$	5,525,646
For the remaining 9 months of the fiscal year ending April 30:										2022	$	660,970	$	359,059	$	775,680	$	1,795,709
For the fiscal years ending April 30:	2022		1,108,327		478,423		877,428		2,464,178	2023		-		481,085		825,854		1,306,939
	2023		-		481,085		652,117		1,133,202	2024		-		483,904		781,148		1,265,052
	2024		-		483,904		592,628		1,076,532	2025		-		486,890		837,710		1,324,600
	2025		-		486,890		633,149		1,120,039	2026		28,527,588		4,742,119		441,384		33,711,091
	2026		25,219,876		4,751,165		219,417		30,190,458	2027		-		60,068		-		60,068
	Thereafter		-		256,296		-		256,296	Thereafter		-		196,228		-		196,228
		$	31,550,129	$	7,020,859	$	3,195,363	$	41,766,351		$	29,188,558	$	6,809,353	$	3,661,776	$	39,659,687

Finance Lease and Sales Leaseback Obligations

The Company enters into various finance lease and sales leaseback agreements. The terms of the lease agreements mature through ~~June 2024,~~January 1, 2025, with monthly installment payments ranging from $1,455 to $40,173 and a fixed interest rate ranging from 3.75% to 12.73%.

Note F - Income Tax

The income tax ~~benefit~~expense was ~~$25,910~~$756,945 for the three month period ended ~~January~~July 31, 2021 compared to an income tax benefit of ~~$102,731~~$220,834 for the same period in the prior fiscal year. The Company’s effective tax rate was ~~(11.60)%~~7.92% and ~~32.13%~~19.69% for the quarters ended ~~January~~July 31, 2021 and 2020, respectively. The increase in income tax expense ~~was $196,199~~ for the ~~nine~~three month period ended January 31, 2021 compared to an income tax expense of $460,490 for the same period in the prior fiscal year. The Company’s effective tax rate was 114.29% and 36.40% for the nine month period ended January 31, 2021 and 2020, respectively. The decrease in income tax benefit and effective tax rate for the three

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note F - Income Tax - Continued~~

~~month period ended January~~July 31, 2021 compared to the same period in the previous year is due to income recognized in the current quarter compared to a loss in the previous ~~year, and variations in income earned by jurisdiction.~~year. The decrease ~~in income tax expense and increase~~ in effective tax rate ~~for the nine month period ended January 31, 2021 compared to the same period in the previous year~~ is due to ~~a decrease in~~tax exempt income recognized in the current ~~nine month period compared~~quarter.

SigmaTron International, Inc.

July 31, 2021

Notes to ~~the same period in the previous year and variations in income earned by jurisdiction.~~ Condensed Consolidated Financial Statements

(Unaudited)

Note F - Income Tax - Continued

As described in Note E, the Company received a PPP Loan under the CARES Act of ~~$6,282,963.~~$6,282,973. For federal income tax purposes, the CARES Act expressly provides that any forgiveness or cancellation of all or part of such loans will not be treated as income for tax purposes. On January 6, 2021 the IRS issued Revenue Ruling 2021-02 allowing deductions for the payments of eligible expenses when such payments would result in the forgiveness of a loan under the PPP. The ruling supersedes previous IRS guidance stating that such deductions would be disallowed. The Company received full forgiveness of its PPP Loan on July 9, 2021. In accordance with the CARES Act and IRS Revenue Ruling 2021-02, the loan forgiveness amount was excluded from income for tax purposes.

The Company has not changed its plans to indefinitely reinvest the earnings of the Company’s foreign subsidiaries. The cumulative amount of unremitted earnings for which U.S. income taxes have not been recorded is ~~$4,705,000~~$5,538,000 as of ~~January~~July 31, 2021.

Note G - Commitments and Contingencies

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, results of operations or cash flows.

Note H - Significant Accounting Policies

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

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note H - Significant Accounting Policies - Continued~~

allowance for deferred taxes and valuation of long-lived assets. Actual results could materially differ from these estimates.

The potential impact of future disruptions and continued economic uncertainty over COVID-19 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.

SigmaTron International, Inc.

July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note H - Significant Accounting Policies - Continued

Revenue Recognition - The following table presents the Company’s revenue disaggregated by the principal end-user markets it serves:

Three Months Ended

Nine Months Ended

January 31,

January 31,

Net trade sales by
end-market

2021

2020

2021

2020

Industrial Electronics

$
36,433,938

$
38,609,780

$
108,705,275

$
122,856,692

Consumer Electronics

30,680,777

25,632,036

82,520,093

81,106,780

Medical / Life Sciences

4,416,633

3,165,452

10,449,360

12,309,089

Total Net Trade Sales

$
71,531,348

$
67,407,268

$
201,674,728

$
216,272,561


		Three Months Ended
		July 31,		July 31,
Net trade sales by ‎end-market		2021		2020
Industrial Electronics	$	47,244,892	$	36,617,258
Consumer Electronics		32,603,876		21,168,239
Medical / Life Sciences		5,890,666		2,739,459
Total Net Trade Sales	$	85,739,434	$	60,524,956

During the three ~~and nine~~ month ~~periods~~period ending ~~January~~July 31, 2021, no0 revenues were recognized from performance obligations satisfied or partially satisfied in previous periods and no0 amounts were allocated to performance obligations that remain unsatisfied or partially unsatisfied at ~~January~~July 31, 2021. The Company is electing not to disclose the value of the remaining unsatisfied performance obligation with a duration of one year or less as permitted by the practical expedient in ASU 2014-09, “Revenue from Contracts with Customers.” The Company had no material remaining unsatisfied performance obligations as of ~~January~~July 31, 2021, with an expected duration of greater than one year.

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

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note H - Significant Accounting Policies - Continued~~

judgment and estimates by management about the forecasts of future taxable income and are consistentwith 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’s valuation allowance was ~~$969,149~~$1,058,648 and ~~$989,194~~$1,138,736 as of ~~January~~July 31, 2021 and April 30, ~~2020,~~2021, respectively.

SigmaTron International, Inc.

July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note H - Significant Accounting Policies - Continued

Investment in Wagz - The Company has recorded an investment in Wagz, Inc. (“Wagz”), a privately held company whose equity does not have a readily determinable fair value. As permitted by ASC 321, Investments - Equity Securities, paragraph 321-35-2, the Company has elected to carry its investment in Wagz equity at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or a similar investment of the same issuer until the investment no longer qualifies to be measured under paragraph 321-35-2. At ~~January~~July 31, 2021 and April 30, ~~2020,~~2021, the Company continued to recognize the fair value of the Wagz common stock at ~~$600,000.~~ $600,000, which is recorded within other assets.

On May 29, 2020, SigmaTron and Wagz, a privately held company in the pet technology market, entered into a Convertible Secured Promissory Note ~~with the Company~~ in the principal sum of up to $4,052,478. On January 27, 2021, Wagz ~~entered into~~issued an additional Convertible Secured Promissory Note ~~with~~to the Company in the principal sum of up to $1,588,328. ~~The outstanding~~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. On July 31, 2021, Wagz issued an additional Convertible Secured Promissory Note to the Company in the principal amount of $1,905,712. On July 31, 2021, Wagz issued a Secured Promissory Note to the Company in the principal amount of $38,723 (collectively, the “Notes”). At July 31, 2021, $8,876,594 and $243,980 was outstanding under Notes receivable and Other receivables, respectively, in the consolidated balance sheet compared to $7,014,594 and $184,507, respectively, at April 30, 2021. The Notes are due ~~and payable~~(the “Maturity Date”) on the earliest to occur of ~~(1) August~~(a) December 31, ~~2021; (2)~~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;~~Wagz (other than the Closing), or ~~(3)~~(c) an ~~event~~Event of ~~default (the Maturity Date)~~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~~Notes are collateralized ~~against~~by substantially all assets of Wagz. ~~At January 31, 2021, $5,539,594 was outstanding under other receivables.~~

On June 4, 2020, ~~the Company~~SigmaTron and Wagz, announced that they ~~had~~ executed a ~~letter~~Letter of ~~intent~~Intent (“LOI”) relating to a proposed ~~business combination.~~acquisition. Subject to the terms and conditions set forth in the LOI, ~~the Company~~SigmaTron expects to issue approximately 2,443,870 shares of ~~its~~SigmaTron common stock that would result in the stockholders of Wagz owning in the aggregate approximately one-third of the combined company. On July 19, 2021 the definitive agreement was signed. The parties expect the transaction to close by ~~the end of the fourth quarter of fiscal year~~September 30, 2021 and ~~the acquisition~~it remains subject to achievement of certain milestones and satisfaction of conditions by both parties prior to ~~closing such as finalizing a material definitive agreement,~~Closing including the Company ~~potentially raising additional capital~~having determined that ~~it projects will be needed for~~ the ~~expanded operations,~~Wagz Freedom Smart Dog Collar™ meets certain criteria, and the approval by the stockholders of both ~~the Company~~SigmaTron and Wagz.

In November 2020, Wagz sought short-term financing for its operations and secured a commitment from Angel Business Credit, LLC (“ABC”) for a loan of $250,000 conditioned on Wagz granting ABC a security interest in its assets and Gary R. Fairhead executing a personal guaranty. Mr. Fairhead is the Company’s President and CEO; his personal guaranty requires the approval of the Audit Committee of the Company’s Board of Directors. After consideration, the Audit Committee determined that Mr. Fairhead’s guaranty was in the best interests of the Company and approved the guaranty. The loan closed on November 12, 2020, and its principal, plus interest equal to $5,000, were due on the maturity

SigmaTron International, Inc.

July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note H - Significant Accounting Policies – Continued

date, December 10, 2020. The loan was paid in full on December 8, 2020. As a result, Mr. Fairhead’s guaranty was cancelled and ABC’s security interest was terminated.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note H - Significant Accounting Policies – Continued~~

New Accounting Standards:

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13, as amended by ASU 2019-04 and ASU 2019-05, introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. For small reporting companies, ASU ~~2016-~~

132016-13 is effective for annual and interim reporting periods beginning after December 15, 2022, and the guidance is to be applied using the modified-retrospective approach. Earlier adoption is ~~permitted for annual and interim reporting periods beginning after December 15, 2018.~~permitted. The Company is currently evaluating the ~~new~~impact of this guidance ~~and has not determined the impact this ASU may have~~ on its consolidated financial statements.

~~In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~”, which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application of Topic 740. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and early adoption is permitted. Adoption of Topic 740 is not expected to have a material effect on the Company’s consolidated financial statements. If in a future interim reporting period the Company recognizes a year-to-date loss in excess of its forecasted full-year loss in a certain jurisdiction, the adoption of this ASU could affect how much tax benefit is recorded in an interim period related to that loss.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides optional ~~guidance~~expedients and exceptions for a period of time to ease the potential burden in accounting for the transition from reference rates that are expected to be discontinued. Regulators and market participants in various jurisdictions have undertaken efforts to eliminate certain reference rates and introduce new reference rates that are based on a larger and more liquid population of observable transactions. The ~~changes provide optional expedients and exceptions for applying US GAAP~~amendments in this update apply only to ~~contract,~~contracts, hedging relationships and other transactions ~~affected by~~that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ~~ASU 2020-04 is effective~~The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for ~~all entities~~hedging relationships existing as of ~~March 12, 2020 and can be adopted no later than~~ December 31, ~~2022.~~2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In January 2021, the FASB issued clarification on the scope of relief related to the reference rate reform. The Company is currently evaluating the ~~new~~impact of this guidance ~~and has not determined the impact this ASU may have~~ on its consolidated financial statements.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note I – Leases

The Company leases office and storage space, vehicles and other equipment under non-cancellable operating leases with initial terms typically ranging from 1 to 5 years. At contract inception, the Company reviews the facts and circumstances of the arrangement to determine if the contract is or contains a lease. The Company follows the guidance in Topic 842 “Leases” to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if the Company has the right to direct the use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to direct the use of an underlying asset, the Company considers if they have the right to direct how and for what purpose the asset is used throughout the period of use and if they control the decision-making rights over the asset.

The Company’s lease terms may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when extension or termination options are present and include such options in the calculation of the lease term when it is reasonably certain that it will exercise those options.

The Company has elected to include both lease and non-lease components in the determination of lease payments. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments.

At commencement, lease-related assets and liabilities are measured at the present value of future lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company exercises judgment in determining the incremental borrowing rate based on the information available when the lease commences to measure the present value of future payments.

Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.

Operating leases are included in other assets, current operating lease obligations, and operating lease obligations (less current portion) on the Company’s consolidated balance sheet. Finance leases are included in property, plant and equipment and current and long-term portion of finance lease obligations on the Company’s consolidated balance sheet. Short term leases with an initial term of 12 months or less are not presented on the balance sheet with expense recognized as incurred.

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note I – Leases – Continued

The following table presents lease assets and liabilities and their balance sheet classification:


			January 31,		April 30,			July 31,		April 30,
	Classification		2021		2020	Classification		2021		2021
Operating Leases:
Right-of-use Assets	Other assets	$	6,784,197	$	7,235,166	Right-of-use operating lease assets	$	12,257,463	$	13,015,986
Operating lease current liabilities	Current portion of operating lease obligations		1,944,321		2,150,161
Operating lease noncurrent liabilities	Operating lease obligations, less current portion		5,065,611		5,281,811
Operating lease current ‎liabilities						Current portion of operating lease ‎obligations		3,077,781		2,843,758
Operating lease noncurrent ‎liabilities						Operating lease obligations, less ‎current portion		9,719,562		10,474,601
Finance Leases:
Right-of-use Assets	Property, plant and equipment		5,881,027		6,443,954	Property, machinery and equipment, ‎net		5,616,959		5,843,068
Finance lease current liabilities	Current portion of finance lease obligations		1,651,807		1,902,295
Finance lease noncurrent liabilities	Finance lease obligations, less current portion		1,353,434		1,884,722
Finance lease current ‎liabilities						Current portion of finance lease ‎obligations		1,312,029		1,455,638
Finance lease noncurrent ‎liabilities						Finance lease obligations, less ‎current portion		1,539,252		1,180,496

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note I – Leases – Continued

The components of lease expense for the three ~~and nine~~ month ~~periods~~period ended ~~January~~July 31, 2021 and 2020, are as follows:


		Three Months	Three Months	Nine Months	Nine Months
		Ended	Ended	Ended	Ended		Three Months Ended
		January 31,	January 31,	January 31,	January 31,		July 31,	July 31,
	Classification	2021	2020	2021	2020	Classification	2021	2020
Operating Leases:
Operating lease cost	Operating expenses	351,751	635,692	1,078,763	1,855,525	Operating expenses	591,358	373,696
Variable lease cost	Operating expenses	80,109	74,133	236,803	221,927	Operating expenses	97,354	78,347
Short term lease cost	Operating expenses	1,350	1,350	4,050	4,050	Operating expenses	1,800	1,350
Finance Leases:
Amortization of right-of-use assets	Operating expenses	457,359	361,363	1,370,094	1,092,931
Amortization of ‎right-of-use assets						Operating expenses	594,103	419,693
Interest expense	Interest expense	70,698	67,377	193,099	209,503	Interest expense	66,404	66,358
Total		961,267	1,139,915	2,882,809	3,383,936		1,351,019	939,444

The weighted average lease term and discount rates for the quarter ended ~~January~~July 31, 2021 and 2020, are as follows:


			Three Months Ended
	January 31,	January 31,	July 31,	July 31,
	2021	2020	2021	2020
Operating Leases:
Weighted average remaining lease term (months)	57.80	44.20	52.90	59.30
Weighted average discount rate	3.0%	3.8%	3.1%	3.1%
Finance Leases:
Weighted average remaining lease term (months)	32.75	26.42	23.98	24.43
Weighted average discount rate	7.7%	6.6%	8.2%	7.6%

SigmaTron International, Inc.

~~January~~July 31, 2021

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note I – Leases – Continued

Future payments due under leases reconciled to lease liabilities are as follows:


		Operating Leases		Finance Leases		Operating Leases		Finance Leases
For the remaining 3 months of the fiscal year ending April 30:
2021	$	626,171	$	569,072
For the remaining 9 months of the fiscal year ending April 30:
2022					$	2,577,133	$	1,252,099
For the fiscal years ending April 30:
2022		1,995,402		1,576,456
2023		2,002,572		700,135		3,452,535		942,692
2024		1,483,139		369,550		2,975,364		612,106
2025		818,840		117,355		2,354,451		391,259
2026		289,041		-		1,867,550		-
2027						343,006		-
Thereafter		208,099		-		150,252		-
Total undiscounted lease payments		7,423,264		3,332,568		13,720,291		3,198,156
Present value discount, less interest		413,332		327,327		922,948		346,875
Lease liability	$	7,009,932	$	3,005,241	$	12,797,343	$	2,851,281

Supplemental disclosures of cash flow information related to leases for the ~~nine~~three months ended ~~January~~July 31, 2021 and 2020 are as follows:


	Nine Months
	Ended		Three Months Ended
	January 31,		July 31,
Other Information	2021	2020	2021	2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	193,099	209,503	66,404	66,358
Operating cash flows from operating leases	162,220	197,970	101,667	54,021
Financing cash flows from finance leases	1,501,321	1,623,661	494,730	549,758
Supplemental non-cash information on lease labilities arising from obtaining right-of-use assets:
Right-of-use assets obtained in exchange for new finance lease liabilities	719,545	671,446
Right-of-use assets obtained in exchange for operating lease liabilities	1,192,690	2,348,231
Supplemental non-cash information on lease labilities arising from ‎obtaining right-of-use assets:
Right-of-use assets obtained in exchange for ‎new finance lease liabilities			709,877	-
Right-of-use assets obtained in exchange for ‎operating lease liabilities			-	334,530

SigmaTron International, Inc.

~~January~~July 31, 2021

Item 2.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., Spitfire Controls (Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co., Ltd. and SigmaTron Electronic Technology Co., Ltd. (collectively, “SigmaTron China”) and international procurement office SigmaTron Taiwan branch (collectively, the “Company”) and other Items in this Quarterly Report on Form 10-Q 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, ~~and~~acquisition or business ~~combination,~~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 ~~covenant;~~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 ~~“Coronavirus”~~“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.~~law.

‎

SigmaTron International, Inc.

~~January~~July 31, 2021

Overview:

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

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

Sales can be a misleading indicator of the Company’s financial performance. Sales levels can vary considerably among customers and products depending on the type of services (turnkey versus consignment) rendered by the Company and the demand by customers. Consignment orders require the Company to perform manufacturing services on components and other materials supplied by a customer, and the Company charges only for its labor, overhead and manufacturing costs, plus a profit. In the case of turnkey orders, the Company provides, in addition to manufacturing services, the components and other materials used in assembly. Turnkey contracts, in general, have a higher dollar volume of sales for each given assembly, owing to inclusion of the cost of components and other materials in net sales and cost of goods sold. Variations in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the Company’s revenue and gross margin levels. Consignment orders accounted for less than 1% of the Company’s revenues for the three ~~and nine~~ month periods ended ~~January~~July 31, 2021 and ~~2020, respectively.~~July 31, 2020.

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.

The Company ~~changed its primary lender~~reported an excellent quarter to ~~J.P. Morgan Chase on January 29,~~start fiscal year 2022. Pre-tax income was $9,553,661, which included forgiveness of the Company’s Small Business Administration (“SBA”) Paycheck Protection Program Loan (“PPP Loan”) in the amount of $6,282,973. The extinguishment of debt of $6,282,973 was recorded as income during the quarter ended July 31, 2021. The ~~change~~Company posted revenue of ~~banks resulted in debt extinguishment expenses~~$85,739,434. Both of ~~approximately $360,000 associated with~~ the ~~old debt being incurred in January 2021. However, even with~~revenue and pre-tax income numbers, excluding the ~~expense, the Company reported a pre-tax profit~~PPP Loan income, are records for the ~~third quarter of fiscal 2021~~Company’s quarterly operating results.

While the Company’s backlog remains strong, it continues to face continuing challenges on the supply chain side. Semiconductor products, in particular, remain difficult to locate and for the first nine months of fiscal 2021. During the first fiscal quarter the Company was impacted by COVID-19 and its revenue was significantly reduced. In addition, heading into the fourth quarter of fiscal 2021 theoften are purchased at a premium. The Company has ~~a record backlog.~~seen several customers start to push out orders but other customers continue to ramp up and increase demand. It is difficult to predict how this will sort itself out going

With that record backlog, the Company finds itself facing a new set of challenges. Tremendous demand for electronic components and, in particular, semiconductor products has continued to accelerate and the Company’s supply chain is volatile. Some parts are on allocation. Price increases have impacted many parts. In some cases suppliers missed their shipping commitments. The Company is working closely with its supply chain and customers. At this time there is every indication

SigmaTron International, Inc.

~~January~~July 31, 2021

that this will continue through the balance of calendar 2021. Also, the Company was negatively affected in February 2021 by the winter storms that paralyzed Texas and parts of Mexico. The Company’s largest operation in Acuna/Del Rio was shut down for a week and the operation in Chihuahua for two days. Both operations returned to normal during the month.

~~In addition to the record backlog, the Company has several new customers it is engaging with and has a record number of new opportunities going~~ forward. The Company ~~has continued~~expects the shortage of certain components will be with it through calendar 2022 and perhaps part or all of 2023. This is dependent upon a continuing strong economy. Several of the Company’s new customers have started to ~~make progress on its proposed acquisition of Wagz, Inc.~~increase demand and ~~is even more excited about the opportunities it believes it will bring to both companies. Hopefully~~ the Company ~~will be~~expects its revenue to grow going forward, especially in ~~a position to issue a separate press release on that situation soon.~~ the safety and renewable energy markets.

~~While~~On July 21,2021, the Company ~~still has many challenges in its industry, in general, it sees several strong quarters ahead~~ and ~~should have good momentum~~Wagz signed a definitive Agreement and are working towards closure. The Company remains encouraged by the current market reaction to the latest version of the Wagz Freedom Smart Dog Collar and continues to believe that the upside of the transaction is significant for the shareholders and the Company looks forward to closing ~~out fiscal 2021 and heading into fiscal 2022.~~that transaction.

Results of Operations:

The following table sets forth selective financial data as a percentage of net sales for the periods indicated.


	Three Months	Three Months	Nine Months	Nine Months
	Ended	Ended	Ended	Ended	Three Months Ended
	January 31,	January 31,	January 31,	January 31,	July 31,	July 31,
	2021	2020	2021	2020	2021	2020
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)

Net sales	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Operating expenses:
Cost of products sold	91.7	91.8	91.6	90.9	88.8	92.9
Selling and administrative expenses	7.3	8.1	7.8	7.9	7.1	8.4
Total operating expenses	99.0	99.9	99.4	98.8	95.9	101.3
Operating income	1.0%	0.1%	0.6%	1.2%	4.1%	-1.3%

Net Sales

Net sales increased for the three month period ended ~~January~~July 31, 2021, to ~~$71,531,348~~$85,739,434 from ~~$67,407,268~~$60,524,956 for the three month period ended ~~January 31, 2020. Net sales decreased for the nine month period ended January 31, 2021 to $201,674,728 from $216,272,561 for the nine month period ended January~~July 31, 2020. The Company’s sales increased for the three month period ended ~~January~~July 31, 2021, as compared to the prior year in the consumer electronics, and medical/life science marketplaces. The increase in sales dollars for these marketplaces was partially offset by a decrease in sales dollars in the industrial electronics marketplace. The Company’s sales decreased for the nine month period ended January 31, 2021, as compared to the prior year in the industrial electronics and medical/life science marketplaces. ~~The decrease in sales dollars for these marketplaces was partially offset by an increase in sales dollars in the consumer electronics marketplace.~~ Sales ~~decreased by approximately 7% for the nine month period ended January 31, 2021, as compared to the same periods in the prior year due to the COVID-19 pandemic that significantly impacted sales~~ in the first ~~quarter of fiscal 2021. The COVID-19 situation remains volatile~~three months increased due to increasing demand from existing and ~~customer demand could change quickly.~~ new customers.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

Gross Profit

Gross profit dollars increased during the three month period ended ~~January~~July 31, 2021, to ~~$5,912,699~~$9,582,478 or ~~8.3%~~11.2% of net sales compared to ~~$5,521,777~~$4,272,191 or 8.2% of net sales for the same period in the prior fiscal year. Gross profit dollars decreased during the nine month period ended January 31, 2021, to $16,944,432 or 8.4% of net sales compared to $19,611,595 or 9.1%7.1% of net sales for the same period in the prior fiscal year. The ~~decrease~~increase in gross profit for the ~~nine~~three month period ended ~~January~~July 31, 2021, was primarily the result of ~~decreased~~increased sales in the first quarter of fiscal ~~2021 due to the COVID-19 pandemic and approximately $800,000 of COVID-19 related expenses. It is likely the COVID-19 related expenses will continue for the balance of this fiscal year.~~ 2022.

Selling and Administrative Expenses

Selling and administrative expenses ~~decreased~~increased to ~~$5,212,629~~$6,111,015 or ~~7.3%~~7.1% of net sales for the three month period ended ~~January~~July 31, 2021, compared to ~~$5,469,654~~$5,059,525 or ~~8.1%~~8.4% of net sales for the same period in the prior fiscal year. The net ~~decrease~~increase in selling and administrative expenses for the three month period

SigmaTron International, Inc.

July 31, 2021

ended ~~January~~July 31, 2021, was attributable to ~~a decrease~~an increase in ~~sales salaries, financing fees~~bonus expense and ~~travel and lodging.~~miscellaneous taxes. The ~~decrease~~increase in the foregoing ~~selling and administrative~~ expenses was partially offset by an increase in bonus expense, bank closing costs and miscellaneous general and administrative expense. Selling and administrative expenses decreased to $15,693,893 or 7.8% of net sales for the nine month period ended January 31, 2021, compared to $16,997,268 or 7.9% of net sales for the same period in the prior fiscal year. The net decrease in selling and administrative expenses for the nine month period ended January 31, 2021, was attributable to a decrease in sales ~~salaries, financing fees, accounting professional fees~~expenses and ~~travel and lodging. The decrease in the foregoing selling and administrative expenses was partially offset by an increase in~~ legal professional ~~fees and miscellaneous general and administrative expense.~~ fees.

Interest Expense

Interest expense decreased to ~~$287,371~~$237,916 for the three month period ended ~~January~~July 31, 2021, compared to ~~$401,837 for the same period in the prior fiscal year. Interest expense decreased to $934,248 for the nine month period ended January 31, 2021, compared to $1,455,837~~$338,264 for the same period in the prior fiscal year. The decrease in interest expense for the three ~~and nine~~ month ~~periods~~period ended ~~January~~July 31, 2021, was due to the ~~decreased borrowings under~~lower interest rates from the Company’s banking arrangements and ~~mortgage~~decreased long-term debt obligations.

Income Tax Expense

The income tax ~~benefit~~expense was ~~$25,910~~$756,945 for the three month period ended ~~January~~July 31, 2021, compared to an income tax benefit of ~~$102,731~~$220,834 for the same period in the prior fiscal year. The Company’s effective tax rate was ~~(11.60)%~~7.92% and ~~32.13%~~19.69% for the quarters ended ~~January~~July 31, 2021 and 2020, respectively. The income tax expense was $196,199 for the nine month period ended January 31, 2021, compared to an income tax expense of $460,490 for the same period in the prior fiscal year. The Company’s effective tax rate was 114.29% and 36.40% for the nine month period ended January 31, 2021 and 2020, respectively. The decreaseincrease in income tax ~~benefit and effective tax rate~~expense for the three month period ended ~~January~~July 31, 2021 compared to the same period in the previous year is due to income recognized in the current quarter compared to a loss in the previous ~~year, and variations in income earned by jurisdiction.~~year. The decrease ~~in income tax expense and increase~~ in effective tax rate ~~for the nine month period ended January 31, 2021 compared to the same period in the previous year~~ is

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

due to ~~a decrease in~~tax exempt income recognized in the current ~~nine month period compared~~quarter due to the ~~same period in~~gain on extinguishment of the ~~previous year and variations in income earned by jurisdiction.~~ PPP Loan debt.

Net Income

Net income increased to ~~$249,268~~$8,796,716 for the three month period ended ~~January~~July 31, 2021, compared to a net loss of ~~$217,039~~$900,666 for the same period in the prior fiscal year. ~~Net~~A substantial part of the increase in net income ~~decreased~~was attributable to ~~a net loss~~the one-time extinguishment of ~~$24,540~~the PPP Loan debt. Basic and diluted earnings per share for the ~~nine month period ended January 31, 2021,~~first quarter of fiscal year 2022 were $2.06 and $2.02 respectively, compared to ~~net income~~basic and diluted loss per share of ~~$805,169~~$0.21 for the same period in the prior fiscal year. Basic and diluted earnings per share for the third quarter of fiscal year 2021 were $0.06, compared to basic and diluted loss per share of $0.05 for the same period in the prior fiscal year. Basic and diluted loss per share for the nine month period ended were $0.01, compared to basic and diluted earnings per share of $0.19 for the same period in the prior fiscal year.

Liquidity and Capital Resources:

Operating Activities.

Cash flow provided by operating activities was $3,921,700$1,594,618 for the ninethree months ended JanuaryJuly 31, 2021.2021,which included the effect of the extinguishment of the PPP Loan debt. During the ninefirst three months of fiscal year 2021,2022, cash flow provided by operating activities was primarily the result of a decreasenet income, an increase in both accounts receivablepayable and inventorydeferred revenue in the amount of $4,515,391$14,590,175 and $1,128,931, respectively,$1,748,379, respectively. Cash flow from operating activities was offset by an increase in both inventory and accounts receivable in the amount of $15,064,587 and $4,970,625, respectively. The increase in accounts payable is the result of more favorable payment terms with vendors and increased inventory purchases. The increase in inventory is 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 used in operating activities was $5,142,601 for the three months ended July 31, 2020. During the first three months of fiscal year 2021, cash flow used in operating activities was primarily the result of net loss, a decrease in accounts payable of ~~$7,125,093 and an increase in prepaid expenses and other assets of $2,570,066.~~$11,118,270. The decrease in accounts payable was primarily the result of the timing of ~~payments in the ordinary course of business.~~

payments. Cash flow ~~provided by~~used in operating activities was ~~$14,653,443 for the nine months ended January~~partially

SigmaTron International, Inc.

July 31, 2020. During the first nine months of fiscal year 2020, cash flow provided by operating activities was primarily the result of net income, a decrease in inventory of $11,697,762 and a decrease in accounts receivable of $5,834,858. The decrease in inventory was primarily the result of the implementation of an inventory reduction program. Cash flow provided by operating activities was partially 2021

offset by the result of a decrease in accounts ~~payable~~receivable and inventory of ~~$7,988,390~~$2,787,494 and ~~a decrease in accrued expenses and wages.~~$1,972,771, respectively.

Investing Activities.

Cash used in investing activities was ~~$6,643,005~~$4,763,827 for the ~~nine~~three months ended ~~January~~July 31, 2021. During the ~~nine~~first three months of fiscal year ~~2021~~2022 the Company purchased ~~$2,636,505~~$2,901,827 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 $3,500,000 in fiscal year ~~2021.~~2022. The Company anticipates ~~future~~ 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 or leases at acceptable terms, if at all, in the future. During the ~~nine~~first three months of fiscal year ~~2021~~2022 the Company made advances of ~~$4,006,500~~$1,862,000 to Wagz. As more fully described in Note H – Significant Accounting Policies, ~~in June 2020,~~on July 19, 2021, the Company ~~announced~~signed a Definitive Agreement for a proposed business combination with Wagz. The advances were made in conjunction with the proposed business combination.

Cash used in investing activities was $2,098,756 for the three months ended July 31, 2020. During the first ~~nine~~three months of fiscal year ~~2020,~~2021, the Company purchased ~~$2,133,826~~$966,856 in machinery and equipment used in the ordinary course of business. The Company made additional machinery and equipment purchases of ~~$2,512,499~~$3,780,460 during the balance of fiscal year ~~2020.~~2021. During the first three months of fiscal year 2021 the Company made advances of $1,131,900 to Wagz.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

Financing Activities.

Cash ~~used in~~provided by financing activities of ~~$1,313,461~~$2,846,560 for the ~~nine~~first three months ended ~~January~~July 31, 2021, was primarily the result of net ~~payments~~borrowings under the line of credit.

Cash ~~used in~~provided by financing activities of ~~$12,580,281~~$3,308,008 for the ~~nine~~first three months ended ~~January~~July 31, 2020, was primarily the result of net ~~payments~~borrowings under the line of credit.

Financing Summary.

Notes Payable – Banks

On January 29, 2021, the Company entered into 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 ~~revolving~~ credit facility maturing on January 29,2026, 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

SigmaTron International, Inc.

July 31, 2021

two term loans (the “Facility”) ~~maturing~~. The Facility is secured by substantially all of SigmaTron’s assets including mortgages on ~~January 29, 2026~~its two Illinois properties.

The Facility allows 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)~~Agreement) unless the REVLIBOR30 Rate is not available, in which case the interest is generally the rate 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 ~~January~~July 31, 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 ~~domestic~~ 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 ~~(i)~~(a) 10% of the revolving commitment and ~~(ii)~~(b) the outstanding principal amount of the term loans. The Company was not in a FCCR trigger period as of July 31, 2021. Deferred financing costs of ~~$354,454~~$361,734 were capitalized induring the ~~third quarter of~~ fiscal year ended April 30, 2021 and will be amortized over the term of the ~~agreement.~~Agreement. As of ~~January~~July 31, 2021, there was ~~$25,584,380~~$28,853,375 outstanding and ~~$10,390,073~~$19,454,713 of unused availability under the ~~JPMorgan Chase Bank, N.A.~~ ~~facility~~revolving Facility compared to an outstanding balance of ~~$26,884,494~~$24,967,668 and ~~$13,850,575 of~~$15,947,990 unused availability ~~under the U.S. Bank senior secured credit facility~~ at April 30, ~~2020.~~2021. As of ~~January~~July 31, 2021 and April 30, ~~2020,~~2021, the unamortized amount offset against outstanding debt was ~~$351,204~~$325,787 and ~~$218,062,~~$343,890, respectively.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

On April 23, 2020, the Company received a PPP ~~Loan~~loan from U.S. Bank, as lender, pursuant to the Paycheck Protection Program of the CARES Act, as administered by the SBA in the amount of $6,282,973. The Company submitted its loan forgiveness application on March 26, 2021. 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 is reflected in the ~~form~~Company’s Statement of ~~a promissory note, matures on April 23, 2022. No additional collateral or guarantees were provided~~Operations under the extinguishment of PPP Loan debt. Under the terms of all PPP Loans, all aspects of the PPP Loan remain subject to review by the SBA. While the Company ~~for~~is not aware of any issues, if it is later determined that it violated applicable laws or was otherwise ineligible to receive the PPP ~~Loan. The PPP~~ Loan, ~~provides for customary events of default. Under~~ the CARES Act, loan forgiveness may be available for the sum of documented payroll costs, rent payments, mortgage interest and covered utilities during the 24-week period beginning on the date of loan disbursement. The amount of loan forgiveness will be reduced if recipients terminate employees or reduce salaries during the covered period. The Company will be required to repay ~~any portion of the outstanding principal 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~~in its entirety in a lump sum and may be ~~forgiven by the SBA. All aspects of the PPP Loan are~~ subject to review by the SBA, including without limitation, the Company’s eligibility for and the size of the loan. The review procedures have not been made public. The Company cannot predict the outcome of that review nor be assured that all or any part of the PPP Loan will be forgiven. To the extent that all or part of the PPP Loan is not forgiven, the Company will be required to make payments, including interest accruing at an annual interest rate of 1.0%, beginning on the date of disbursement.additional penalties.

SigmaTron International, Inc.

July 31, 2021

Notes Payable – Buildings

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

The Company entered into a mortgage agreement on March 3, 2020, in the amount of $556,000, with The Bank and Trust SSB to finance the purchase of the property that serves as the Company’s warehousing and distribution center in Del Rio, Texas. The note requires the Company to pay monthly installment payments in the amount of ~~$6,103, bears interest~~$6,103. Interest accrues at a fixed rate of 5.75% per year until March 3, 2025, and adjusts thereafter, on an annual basis, equal to 1.0% over the Prime Rate as published by The Wall Street Journal. The note is payable over a 120 month period. The outstanding balance was ~~$531,578~~$498,953 and ~~$552,561~~$509,985 at ~~October~~July 31, ~~2020~~2021 and April 30, ~~2020,~~2021, respectively.

SigmaTron International, Inc.

July 31, 2021

Notes Payable – Equipment

Finance Lease and Sales Leaseback Obligations

Other

The Company provides funds for salaries, wages, overhead and capital expenditure items as necessary to operate its wholly-owned Mexican, Vietnamese and Chinese subsidiaries and the Taiwan IPO. The Company provides funding in U.S. Dollars, which are exchanged for Pesos, Dong, Renminbi, and New Taiwan dollars. The fluctuation of currencies from time to time, without an equal or greater increase in inflation, could have a material impact on the financial results of the Company. The impact of currency fluctuations for the ~~nine~~three month period ended ~~January~~July 31, 2021, resulted in net foreign currency transaction losses of ~~$168,539~~$54,385 compared to net foreign currency losses of approximately ~~$268,400~~$145,670 for the same period in the prior year. During the ~~nine~~first three months of fiscal year ~~2021,~~2022, the Company paid approximately ~~$43,690,000~~$16,300,000 to its foreign subsidiaries for manufacturing services. All intercompany balances have been eliminated upon consolidation.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

The Company expects that the significant disruption in business activity and the financial markets created by the COVID-19 global pandemic will impact several sources of its liquidity, and is therefore continuously and critically reviewing its liquidity and anticipated capital requirements. For more information on the potential impact of the COVID-19 pandemic on the Company, see Note B - Basis of Presentation.

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

Off-balance Sheet Transactions:

The Company has no off-balance sheet transactions.

SigmaTron International, Inc.

July 31, 2021

Tabular Disclosure of Contractual Obligations:

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

Item 3.Quantitative and Qualitative Disclosures About Market Risks.

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

Item 4.Controls and Procedures.

Disclosure Controls:

The Company’s management, including its President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 13a-15(e) and 15(d)-15(e) thereunder) as of ~~January~~July 31, 2021. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and its President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of ~~January~~July 31, 2021.

Internal Controls:

There has been no change in the Company’s internal control over financial reporting during the ~~nine~~three months ended ~~January~~July 31, 2021, that has materially affected or is reasonably likely to materially affect, its internal control over financial reporting. The Company’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP.

~~SigmaTron International, Inc.~~

~~January 31, 2021~~

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

SigmaTron International, Inc.

July 31, 2021

Item2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

‎

SigmaTron International, Inc.

~~January~~July 31, 2021

Item 6.Exhibits.


10.1	Lease No. ~~13,~~15, entered into ~~November 18, 2020,~~June 10, 2021, is an attachment to Master Lease No. 2017389 dated August 15, 2017 by and between First American Commercial Bancorp, Inc. and SigmaTron International, Inc.

~~10.2~~31.1	Credit Agreement dated as of January 29, 2021 between SigmaTron International, Inc. and JPMorgan Chase Bank, N.A. incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 4, 2021.

~~31.1~~	Certification of Principal Executive Officer of the Company Pursuant to Rule 13a-14(a) under the Exchange Act, as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

31.2	Certification of Principal Financial Officer of the Company Pursuant to Rule 13a-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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

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

101.INS	Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)

101.SCH	Inline XBRL Taxonomy Extension ~~Scheme~~Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

‎

SigmaTron International, Inc.

~~January~~July 31, 2021

SIGNATURES:

~~SIGNATURES~~:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIGMATRON INTERNATIONAL, INC.


/s/ Gary R. Fairhead		~~March 11,~~September 13, 2021

Gary R. Fairhead		Date
President and CEO (Principal Executive Officer)


/s/ Linda K. Frauendorfer		~~March 11,~~September 13, 2021

Linda K. Frauendorfer		Date
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal
Accounting Officer)


Delaware	36-3918470
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2201 Landmeier Road
Elk Grove Village, Illinois	60007
(Address of principal executive offices)	(Zip Code)



PART 1.	FINANCIAL INFORMATION:				Page No.
	Item 1.		Condensed Consolidated Financial Statements
			Condensed Consolidated Balance Sheets – J~~anuary~~uly 31, 2021 (Unaudited) and April 30, ~~2020~~2021		4
			Condensed Consolidated Statements of Operations – (Unaudited)
			Three ~~and Nine~~ Months Ended J~~anuary~~July 31, 2021 and 2020		6
			Condensed Consolidated Statements of Changes in Stockholders’
			Equity – (Unaudited) Three ~~and Nine~~Months Ended J~~anuary~~uly 31, 2021 and 2020		7
			Condensed Consolidated Statements of Cash Flows – (Unaudited)
			N~~ine~~ Three Months Ended ~~January~~July 31, 2021 and 2020		8
			Notes to Condensed Consolidated Financial Statements – (Unaudited)		10
	Item 2.		Management’s Discussion and Analysis of Financial Condition and
			Results of Operations		25
	Item 3.		Quantitative and Qualitative Disclosures About Market Risks		33
	~~Item 4.~~	~~Controls and Procedures~~		33

~~PART II~~	~~OTHER INFORMATION:~~Item 4.		Controls and Procedures		33

PART II	OTHER INFORMATION:
	Item 1.		Legal Proceedings		34 33
	Item 1A.		Risk Factors		34 33
	Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		34 33
	Item 3.		Defaults Upon Senior Securities		34
	Item 4.		Mine Safety Disclosures		34
	Item 5.		Other Information		34
	Item 6.		Exhibits		35
			Signatures		36

Commitments and contingencies

Stockholders' equity:
Preferred stock, $.01 par value; 500,000 shares
authorized, none issued or outstanding		-		-
Common stock, $.01 par value; 12,000,000 shares
authorized, 4,257,508 and 4,242,508 shares issued and
outstanding at January 31, 2021 and April 30, 2020, respectively		42,365		42,265
Capital in excess of par value		23,652,354		23,619,513
Retained earnings		35,189,481		35,214,021

Total stockholders' equity		58,884,200		58,875,799

Total liabilities and stockholders' equity	$	169,934,482	$	176,079,031

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.



		Nine		Nine
		Months Ended		Months Ended
		January 31,		January 31,
		2021		2020
		(Unaudited)		(Unaudited)

Cash flows from operating activities
Net (loss) income	$	(24,540)	$	805,169

Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization of property, machinery and equipment		3,807,281		3,684,890
Amortization of right-of-use operating lease assets		1,643,659		1,650,057
Stock-based compensation		-		90,432
Restricted stock expense		32,941		20,558
Deferred income tax (benefit) expense		(46,690)		-
Amortization of intangible assets		265,812		272,081
Amortization of financing fees		115,987		86,369
Loss from disposal or sale of machinery and equipment		171,698		19,782
Changes in operating assets and liabilities
Accounts receivable		4,515,391		5,834,858
Inventories		1,128,931		11,697,762
Prepaid expenses and other assets		(2,570,066)		(966,414)
Refundable and prepaid income taxes		752,140		(49,236)
Income taxes payable		(63,229)		52,290
Trade accounts payable		(7,125,093)		(7,988,390)
Operating lease liabilities		(422,040)		592,062
Accrued expenses and wages		1,739,518		(1,148,827)

Net cash provided by operating activities		3,921,700		14,653,443

Cash flows from investing activities
Purchases of machinery and equipment		(2,636,505)		(2,133,826)
Advances on other receivables		(4,006,500)		-

Net cash used in investing activities		(6,643,005)		(2,133,826)

Cash flows from financing activities
Proceeds under equipment notes		2,397,015		-
Payments of contingent consideration		-		(57,537)
Payments under finance lease and sale leaseback agreements		(1,501,321)		(1,623,661)
Payments under equipment notes		(501,930)		(308,775)
Proceeds under building notes payable		6,500,000		-
Payments under building notes payable		(6,401,702)		(210,000)
Borrowings under revolving line of credit		300,857,651		254,679,833
Payments under revolving line of credit		(302,157,766)		(265,009,957)
Payments of debt financing costs		(505,408)		(50,184)

Net cash used in financing activities		(1,313,461)		(12,580,281)

Change in cash and cash equivalents		(4,034,766)		(60,664)
Cash and cash equivalents at beginning of period		6,779,445		1,005,810

Cash and cash equivalents at end of period	$	2,744,679	$	945,146

Supplementary disclosures of cash flow information
Cash paid for interest	$	910,598	$	1,456,738
Cash paid for income taxes		367,061		588,915
Purchase of machinery and equipment financed
under finance leases		719,545		671,446
Financing of insurance policy		242,514		381,345