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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

Form 10-Q

__________________

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2024

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-23248

SIGMATRON INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)


Delaware	36-3918470
(State or other jurisdiction 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)

Registrant’s telephone number, including area code: (847) 956-8000

Title of each class

Common Stock $0.01 par value per share

Trading Symbol

SGMA

Name of each exchange on which registered

The NASDAQ Capital Market

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

‎

SigmaTron International, Inc.

October 31, 2024

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

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

Large Accelerated Filer ¨ Accelerated Filer ¨

Non-accelerated Filer x Smaller Reporting Company x

Emerging Growth Company ¨

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

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of December 17, 2024: 6,119,288

SigmaTron International, Inc.

Index



PART 1.	FINANCIAL INFORMATION:		Page No.
	Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets – October 31, 2024 (Unaudited) and April 30, 2024	4
		Condensed Consolidated Statements of Operations – (Unaudited)
		Three and SixMonths Ended October 31, 2024 and 2023	6
		Condensed Consolidated Statements of Changes in Stockholders’
		Equity – (Unaudited) Three and Six Months Ended October 31, 2024 and 2023	7
		Condensed Consolidated Statements of Cash Flows – (Unaudited)
		Six Months Ended October 31, 2024 and 2023	8
		Notes to Condensed Consolidated Financial Statements – (Unaudited)	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations	31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risks	44
	Item 4.	Controls and Procedures

PART II	OTHER INFORMATION:
	Item 1.	Legal Proceedings	45
	Item 1A.	Risk Factors	45
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
	Item 3.	Defaults Upon Senior Securities	46
	Item 4.	Mine Safety Disclosures	46
	Item 5.	Other Information	46
	Item 6.	Exhibits	47
		Signatures	48


SigmaTron International, Inc.
Condensed Consolidated Balance Sheets

		October 31,
		2024		April 30,
		(Unaudited)		2024

Current assets:
Cash and cash equivalents	$	3,983,483	$	2,417,360

Accounts receivable, less allowance for credit losses of $18,615
and $59,466 at October 31, 2024 and April 30, 2024, respectively		30,476,541		32,043,985
Inventories, net		116,052,575		128,850,901
Prepaid expenses and other assets		1,057,064		1,886,701
Refundable and prepaid income taxes		1,207,096		1,716,372
VAT receivables		5,653,099		6,569,984
Other receivables		2,490,377		2,417,316

Total current assets		160,920,235		175,902,619

Property, machinery and equipment, net		31,626,827		33,755,078

Intangible assets, net		816,538		979,188
Deferred income taxes		-		4,432,210
Right-of-use assets		10,090,512		7,463,301
Other assets		1,207,854		1,261,579

Total other long-term assets		12,114,904		14,136,278

Total assets	$	204,661,966	$	223,793,975

Liabilities and stockholders' equity:
Current liabilities:
Trade accounts payable	$	48,103,672	$	50,593,099
Customer deposits		8,173,213		10,738,596
Accrued wages		6,020,593		6,746,466
Accrued expenses		1,952,470		2,554,260
Income taxes payable		1,232,228		897,847
Deferred revenue		5,144,305		3,111,062
Contingent warrants		2,889,000		-
Current portion of long-term debt		59,867,827		66,244,227
Current portion of finance lease obligations		2,043,612		2,214,127
Current portion of operating lease obligations		3,155,101		2,789,107

Total current liabilities		138,582,021		145,888,791

Long-term debt, less current portion		2,607,322		3,339,160
Income taxes payable		152,100		294,993
Deferred income taxes		353,942		-
Finance lease obligations, less current portion		2,180,940		3,147,447
Operating lease obligations, less current portion		7,257,123		4,958,247
Other long-term liabilities		76,592		93,084

Total long-term liabilities		12,628,019		11,832,931

Total liabilities		151,210,040		157,721,722


SigmaTron International, Inc.
Condensed Consolidated Balance Sheets - Continued

		October 31,
		2024		April 30,
		(Unaudited)		2024

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value; 500,000 shares
authorized, none issued or outstanding		-		-
Common stock, $0.01 par value; 12,000,000 shares
authorized, 6,119,288 shares issued and outstanding
at October 31, 2024 and April 30, 2024		61,193		61,193
Capital in excess of par value		42,588,896		42,453,394
Retained earnings		10,801,837		23,557,666

Total stockholders' equity		53,451,926		66,072,253

Total liabilities and stockholders' equity	$	204,661,966	$	223,793,975

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

‎

SigmaTron International, Inc.

Condensed Consolidated Statements of Operations



		Three Months		Three Months		Six Months		Six Months
		Ended		Ended		Ended		Ended
		October 31,		October 31,		October 31,		October 31,
		2024		2023		2024		2023
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Net sales	$	74,719,360	$	98,691,684	$	159,496,338	$	196,822,040
Cost of products sold		67,815,156		89,003,929		146,186,940		177,483,065

Gross profit		6,904,204		9,687,755		13,309,398		19,338,975

Selling and administrative expenses		6,370,511		6,613,634		12,994,377		13,456,439

Operating income		533,693		3,074,121		315,021		5,882,536

Other income		-		6,503		-		25,130
Change in fair value of warrants		(626,000)		-		(626,000)		-
Interest expense, net		(4,701,108)		(2,708,696)		(6,969,383)		(5,427,774)
(Loss) income before income tax expense		(4,793,415)		371,928		(7,280,362)		479,892

Income tax expense		(4,673,254)		(343,666)		(5,475,467)		(189,531)

Net (loss)/income	$	(9,466,669)	$	28,262	$	(12,755,829)	$	290,361


(Loss) earnings per share - basic	$	(1.55)	$	-	$	(2.08)	$	0.05

(Loss) earnings per share - diluted	$	(1.55)	$	-	$	(2.08)	$	0.05

Weighted average shares of common stock outstanding
Basic		6,119,288		6,091,331		6,119,288		6,092,761

Weighted average shares of common stock outstanding
Diluted		6,119,288		6,190,696		6,119,288		6,166,524

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 six months ended October 31, 2024 (Unaudited)
						Capital in				Total
		Preferred		Common		excess of par		Retained		stockholders’
		stock		stock		value		earnings		equity

Balance at May 1, 2024	$	-	$	61,193	$	42,453,394	$	23,557,666	$	66,072,253

Recognition of stock-based ‎compensation		-		-		71,174		-		71,174

Net loss		-		-		-		(3,289,160)		(3,289,160)

Balance at July 31, 2024	$	-	$	61,193	$	42,524,568	$	20,268,506	$	62,854,267

Recognition of stock-based ‎compensation		-		-		64,328		-		64,328

Net loss		-		-		-		(9,466,669)		(9,466,669)

Balance at October 31, 2024	$	-	$	61,193	$	42,588,896	$	10,801,837	$	53,451,926


For the six months ended October 31, 2023 (Unaudited)
						Capital in				Total
		Preferred		Common		excess of par		Retained		stockholders’
		stock		stock		value		earnings		equity

Balance at May 1, 2023	$	-	$	60,634	$	41,986,570	$	26,043,823	$	68,091,027

Recognition of stock-based ‎compensation		-		-		184,817		-		184,817

Net income		-		-		-		262,099		262,099

Balance at July 31, 2023	$	-	$	60,634	$	42,171,387	$	26,305,922	$	68,537,943

Recognition of stock-based ‎compensation		-		-		64,938		-		64,938

Exercise of stock options		-		30		9,570		-		9,600

Restricted stock awards		-		43		13,175		-		13,218

Net income		-		-		-		28,262		28,262

Balance at October 31, 2023	$	-	$	60,707	$	42,259,070	$	26,334,184	$	68,653,961

‎

SigmaTron International, Inc.

Condensed Consolidated Statements of Cash Flows



		Six		Six
		Months Ended		Months Ended
		October 31,		October 31,
		2024		2023
		(Unaudited)		(Unaudited)

Cash flows from operating activities
Net (loss)/income	$	(12,755,829)	$	290,361

Adjustments to reconcile net (loss) income to net cash provided by
operating activities
Depreciation and amortization of property, machinery and equipment		2,829,394		3,000,751
Stock-based compensation		135,502		249,755
Restricted stock expense		-		13,218
Provision for credit losses		40,851		71,508
Fair value adjustment of contingent warrants		2,889,000		-
Deferred income tax expense (benefit)		4,786,152		(266,579)
Amortization of intangible assets		162,650		166,224
Amortization of financing fees		2,411,956		350,295
Loss from disposal or sale of machinery and equipment		7,158		43,287
Changes in operating assets and liabilities
Accounts receivable		1,526,593		5,244,132
Inventories		12,798,326		19,214,849
Prepaid expenses and other assets		1,774,858		(1,302,933)
Right-of-use assets		(2,627,211)		1,348,411
Refundable and prepaid income taxes		509,276		10,366
Income taxes payable		191,488		(1,161,108)
Trade accounts payable		(2,489,427)		(13,146,965)
Customer deposits		(2,565,383)		8,216,454
Operating lease liabilities		2,664,870		(1,520,403)
Accrued expenses and wages		(1,391,827)		(914,063)
Deferred revenue		2,033,243		(4,140,944)
Net cash provided by operating activities		12,931,640		15,766,616

Cash flows from investing activities
Purchases of machinery and equipment		(708,301)		(405,413)
Net cash used in investing activities		(708,301)		(405,413)


SigmaTron International, Inc.
Condensed Consolidated Statements of Cash Flows - Continued

		Six		Six
		Months Ended		Months Ended
		October 31,		October 31,
		2024		2023
		(Unaudited)		(Unaudited)

Cash flows from financing activities
Proceeds from the exercise of common stock options		-		9,600
Proceeds under equipment notes		-		783,461
Payments under finance lease agreements		(1,137,022)		(955,337)
Payments under equipment notes		(775,995)		(552,965)
Payments under building notes payable		(26,395)		(24,923)
Proceeds under term loan agreement		1,241,940		-
Payments under term loan agreement		(500,000)		(500,000)
Borrowings under revolving line of credit		167,311,601		202,602,581
Payments under revolving line of credit		(172,522,993)		(213,829,509)
Payments of debt financing costs		(4,248,352)		(463,214)
Net cash used in financing activities		(10,657,216)		(12,930,306)

Change in cash and cash equivalents		1,566,123		2,430,897
Cash and cash equivalents at beginning of period		2,417,360		819,129

Cash and cash equivalents at end of period	$	3,983,483	$	3,250,026

Supplementary disclosures of cash flow information
Cash paid for interest	$	4,628,192	$	5,132,648
Cash paid for income taxes		700,666		1,600,055
Purchase of machinery and equipment financed
under finance leases		-		2,567,029
Right-of-use assets obtained in exchange for operating
lease liabilities		4,261,324		1,531
Financing of insurance policy		47,672		73,837
The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

SigmaTron International, Inc.

October 31, 2024

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, “SigmaTron” or the “Company”) operates in one reportable segment as an independent provider of electronic manufacturing services (“EMS”). EMS includes printed circuit board assemblies, electro-mechanical subassemblies and completely assembled (box-build) electronic products. In connection with the production of assembled products, EMS 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; (6) assistance in obtaining product approval from governmental and other regulatory bodies and (7) compliance reporting.

The Company’s primary secured credit agreements, being the Amended and Restated Credit Agreement dated as of July 18, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “JPM Credit Agreement”) by and among the Company, the other loan party thereto and JPMorgan Chase Bank, N.A, as lender (“JPM”), and the Credit Agreement dated as of July 18, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement” and together with the JPM Credit Agreement, the “Credit Agreements”) by and among the Company, the financial institutions identified therein (the “TCW Lenders”) and TCW Asset Management Company LLC, as administrative agent for the TCW Lenders (in such capacity, the “Agent,” and collectively with the TCW Lenders and JPM, the “Lender Parties”), contain financial covenants relating to (i) the Fixed Charge Coverage Ratio (as defined in the Credit Agreements), which is the ratio of the Company’s fixed payments on its indebtedness made during any fiscal period minus non-financed capital expenditures to EBITDA (as defined in the Credit Agreements) and (ii) the Total Debt to EBITDA Ratio (as defined in the Credit Agreements), which is the ratio of the Company’s borrowed money or letters of credit to EBITDA.

As of August 19, 2024, the Company was not in compliance with the financial covenants under the Credit Agreements as follows: the Fixed Charge Coverage Ratio for multiple twelve month periods including those ending on April 30, 2024 and July 31, 2024 was less than 1.10:1.00, the Total Debt to EBITDA Ratio for the twelve month period ending on April 30, 2024 was greater than 4.50:1.00, and the Total Debt to EBITDA Ratio for the twelve month period ending on July 31, 2024 was greater than 4.25:1.00 (collectively, the “2024 Covenant Defaults”). In addition, the Company received a delinquency notification letter from Nasdaq, dated August 16, 2024, indicating that the Company was not in compliance with the continued listing requirements of Nasdaq for failing to timely file the Company’s Form 10-K annual report for the fiscal year ended April 30, 2024. This notification also constituted a default under the Credit Agreements (collectively with the 2024 Covenant Defaults, the “2024 Defaults”). The Company had 60 days from the date of the Nasdaq delinquency notice, or until October 15, 2024, to file a plan with Nasdaq to regain compliance. On September 10, 2024, the Company received a notification letter from Nasdaq indicating that the Company had regained compliance with the applicable continued listing requirements based on the filing of the Company’s Form 10-K annual report for the fiscal year ended April 30, 2024.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note A - Description of the Business - Continued

covenant compliance failures based on current revenue levels (see Note B - Basis of Presentation - Going Concern for additional information) the Company continues to classify this debt as current liabilities as of October 31, 2024.

On August 19, 2024 (the “Third Amendment Effective Date”), the Lender Parties waived the 2024 Defaults pursuant to (i) the Waiver and Amendment No. 3 to Credit Agreement (the “JPM Amendment”) between the Company and JPM, and (ii) the Waiver and Amendment No. 3 to Credit Agreement (the “TCW Amendment” and together with the JPM Amendment, the “2024 Amendments”) by and among the Company, the TCW Lenders, and the Agent. In consideration of the TCW Amendment, the Company and the Agent also entered into the Third Amendment Fee Letter to the TCW Credit Agreement (the “Fee Letter”) dated as of the Third Amendment Effective Date. The 2024 Amendments also amended the financial covenants and certain other terms of the Credit Agreements, including, among other things, that the Company will pursue and close a Replacement Transaction (as defined in the Credit Agreements) to pay the obligations under the Credit Agreements in full no later than September 30, 2025 unless the Company meets certain debt ratios for the twelve month period ending on August 31, 2025. See Waivers and Amendments No. 3 within Note E – Long-term Debt for more information.

The Company is taking steps to reduce its debt and cost structure. Most recently, since the beginning of calendar year 2024, these actions include the sale of its Elgin, Illinois property and consolidation of the Elgin operations to the Elk Grove Village, Illinois headquarters, reduction of headcounts at various operations and corporate, and inventory reduction. Subsequent to October 31, 2024, during December 2024, the Company executed a sale/leaseback transaction with respect to its Elk Grove Village, Illinois headquarters, using the proceeds to further reduce its debt position. For further discussion of the transaction, see Note K – Subsequent Event.

The Company continues to explore other strategic initiatives to further reduce its debt to enable it to comply with increasingly stringent financial covenants. Delays or a failure to effectively reduce debt, including due to circumstances outside of our control, could have an adverse effect on our financial position and results of operations.

Note B - Basis of Presentation – Going Concern

The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Over the past two years the Company has been in violation of financial covenants in its Credit Agreements (further discussion in Note E – Long-term Debt). Pursuant to amendments to those Credit Agreements, the Company must satisfy revised terms to those agreements, which include meeting certain revised financial covenant ratios as well as the requirement to pursue and close a Replacement Transaction to pay the Obligations (as defined in the Credit Agreements) in full no later than September 30, 2025 unless the Company meets certain debt ratios for the twelve month period ending on August 31, 2025. If the Company continues to see softness in demand, the Company’s ability to meet covenants in the near term may be at risk. In the event of non-compliance with the Company’s debt covenants, the Company may not have the ability to satisfy its obligations as they become due.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note B - Basis of Presentation – Going Concern - Continued

The ability of the Company to continue as a going concern is dependent on the Company having adequate capital to fund its operating plan and performance. Management’s plans to continue as a going concern may include raising additional capital through sales of equity securities and borrowing, focusing the Company on its most profitable elements, and exploring alternative funding sources on an as needed basis such as execution of a sales-leaseback transaction as disclosed in Note K – Subsequent Event. However, management cannot provide any assurances that the Company will be successful in accomplishing its plans. The COVID-19 pandemic, supply chain challenges, inflationary pressures and the broader business climate in its industry have negatively impacted the Company’s business operations and is expected to continue to do so and, these impacts may include reduced access to capital. The ability of the Company to continue as a going concern may be dependent upon its ability to successfully secure other sources of financing and sustain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The Company’s primary sources of liquidity have traditionally been comprised of cash and cash equivalents as well as availability under credit agreements in place at the time. The Company is obligated to either meet certain debt ratios by August 31, 2025 or find a Replacement Transaction no later than September 30, 2025. While the Company expects to have sufficient financial resources available on acceptable terms, there can be no assurance this will occur, particularly in light of increasingly conservative financial markets.

The accompanying unaudited condensed consolidated financial statements of the Company, its subsidiaries, Standard Components de Mexico, S.A., AbleMex S.A. de C.V., Digital Appliance Controls de Mexico, S.A. de C.V., Spitfire Controls (Vietnam) Co. Ltd., and Spitfire Controls (Cayman) Co. Ltd., wholly-owned foreign enterprises Wujiang SigmaTron Electronics Co. Ltd., and Wujiang SigmaTron Electronic Technology Co., Ltd., its international procurement office, SigmaTron International Inc. Taiwan Branch, and Wagz, Inc. (majority of business sold, effective as of April 1, 2023), 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 8 of Regulation S-X.

The accompanying unaudited 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 six month periods ended October 31, 2024 are not necessarily indicative of the results that may be expected for the year ending April 30, 2025. The condensed consolidated balance sheet at April 30, 2024, was derived from audited annual financial statements but does not contain all of the footnote 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, 2024.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note B - Basis of Presentation – Going Concern - Continued

Reclassifications

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

Note C - Inventories, net

The components of inventory consist of the following:



	October 31,		April 30,
	2024		2024

Finished products	$	22,349,385	$	18,457,912
Work-in-process		4,134,565		4,492,609
Raw materials		91,725,314		108,224,069
		118,209,264		131,174,590
Less obsolescence reserve (1)		2,156,689		2,323,689
	$	116,052,575	$	128,850,901

(1) The obsolescence reserve primarily relates to raw materials.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note D - Earnings Per Share and Stockholders’ Equity

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


	Three Months Ended				Six Months Ended
		October 31,		October 31,		October 31,		October 31,
	2024		2023		2024		2023

Net (loss)/income	$	(9,466,669)	$	28,262	$	(12,755,829)	$	290,361

Weighted-average shares
Basic		6,119,288		6,091,331		6,119,288		6,092,761
Effect of dilutive stock options		-		99,365		-		73,763

Diluted		6,119,288		6,190,696		6,119,288		6,166,524

Basic (loss)/earnings per share	$	(1.55)	$	0.00	$	(2.08)	$	0.05

Diluted (loss)/earnings per share	$	(1.55)	$	0.00	$	(2.08)	$	0.05

Options to purchase 691,331 and 596,081 shares of common stock were outstanding and exercisable at October 31, 2024 and 2023, respectively. There were no options granted during the three month period ended October 31, 2024 and October 31, 2023, respectively. There were no options granted during the six month period ended October 31, 2024 and there were 177,000 options granted during the six month period ended October 31, 2023. There was $64,328 and $64,938 stock option expense recognized for the three month periods ended October 31, 2024 and 2023, respectively. There was $135,502 and $249,755 stock option expense recognized for the six month periods ended October 31, 2024 and 2023, respectively. The balance of unrecognized compensation expense related to the Company’s stock option plans at October 31, 2024 and 2023 was $168,414 and $487,120, respectively. There were 633,964 anti-dilutive common stock equivalents and 178,000 anti-dilutive common stock equivalents for the three month periods ended October 31, 2024 and 2023, respectively, which have been excluded from the calculation of diluted earnings per share. There were 291,288 anti-dilutive common stock equivalents and 260,886 anti-dilutive common stock equivalents for the six month periods ended October 31, 2024 and 2023, respectively, which have been excluded from the calculation of diluted earnings per share.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt

Debt and finance lease obligations consisted of the following at October 31, 2024 and April 30, 2024:


		October 31,		April 30,
		2024		2024

Debt:
Notes Payable - Banks	$	61,632,568	$	66,102,020
Notes Payable - Buildings		340,177		366,572
Notes Payable - Equipment		3,866,956		4,642,951
Unamortized deferred financing costs		(3,364,552)		(1,528,156)
Total debt		62,475,149		69,583,387
Less current maturities*		59,867,827		66,244,227
Long-term debt	$	2,607,322	$	3,339,160

Finance lease obligations	$	4,224,552	$	5,361,574
Less current maturities		2,043,612		2,214,127
Total finance lease obligations, less current portion	$	2,180,940	$	3,147,447

* Due to the 2024 Covenant Defaults, the facilities under the Credit Agreements were classified as current liabilities on the Consolidated Balance Sheet at July 31, 2024 and April 30, 2024. In addition, due to the lender demand of a Replacement Transaction by September 2025 and the risk of additional covenant compliance failures based on current revenue levels the Company continues to classify this debt as current liabilities as of October 31, 2024.

Notes Payable – Banks

The Company’s primary secured credit agreements include the Amended and Restated Credit Agreement dated as of July 18, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “JPM Credit Agreement”) by and among the Company, the other loan party thereto and JPMorgan Chase Bank, N.A, as lender (“JPM”), which provides for a secured credit facility consisting of a revolving loan facility and, until July 2022, a term loan facility, and the Credit Agreement dated as of July 18, 2022 (as amended, restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement” and together with the JPM Credit Agreement, the “Credit Agreements”) by and among the Company, the financial institutions identified therein (the “TCW Lenders”) and TCW Asset Management Company LLC, as administrative agent for the TCW Lenders (in such capacity, the “Agent,” and collectively with the TCW Lenders and JPM, the “Lender Parties”), which provides for a term loan facility. The Facility, as amended, allowed the Company to borrow on a revolving basis up to the lesser of (i) $70,000,000 or (ii) an amount equal to a percentage of the eligible receivable borrowing base plus a percentage of the inventory borrowing base minus any reserves established by Lender (the “Revolving Commitment”). The maturity date of the Facility is July 18, 2027.

The Credit Agreements contain financial covenants relating to (i) the Fixed Charge Coverage Ratio (as defined in the Credit Agreements), which is the ratio of the Company’s fixed payments on its indebtedness made during any fiscal period minus non-financed capital expenditures to EBITDA (as defined in the Credit Agreements) and (ii) the Total Debt to EBITDA Ratio (as defined in the Credit Agreements), which is the ratio of the Company’s borrowed money or letters of credit to EBITDA.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

In addition, the JPM Credit Agreement imposes a cash dominion period if there is an event of default or if availability is less than 10% of the Revolving Commitment (as defined in the JPM Credit Agreement), and such requirement continues until there is no event of default and availability is greater than 10% of the Revolving Commitment, in each case for 30 consecutive days.

In connection with the entry into the JPM Credit Agreement, Lender and TCW, as administrative agent under the Term Loan Agreement, entered into the Intercreditor Agreement, dated July 18, 2022, and acknowledged by SigmaTron and Wagz (the “ICA”), to set forth and govern the lenders’ respective lien priorities, rights and remedies under the JPM Credit Agreement and the Term Loan Agreement.

The facility under the JPM Credit Agreement is secured by: (a) a first priority security interest in SigmaTron’s (i) accounts receivable and inventory (excluding Term Priority Mexican Inventory (as defined in the ICA) and certain inventory in transit, (ii) deposit accounts, (iii) proceeds of business interruption insurance that constitute ABL BI Insurance Share (as defined in the ICA), (iv) certain other property, including payment intangibles, instruments, equipment, software and hardware and similar systems, books and records, to the extent related to the foregoing, and (v) all proceeds of the foregoing, in each case, now owned or hereafter acquired (collectively, the “ABL Priority Collateral”); and (b) a second priority security interest in Term Priority Collateral (as defined below) other than (i) real estate and (ii) the equity interests of SigmaTron’s foreign subsidiaries (unless such a pledge is requested by Lender). As of October 31, 2024, there was $23,387,327 outstanding and $15,168,702 of unused availability under the revolving loan facility compared to an outstanding balance of $28,598,719 and $13,443,766 of unused availability at April 30, 2024. As of October 31, 2024 and April 30, 2024, the unamortized deferred financing amount offset against outstanding debt was $371,735 and $592,664, respectively.

The Term Loan Agreement provides for a term loan from TCW to the Company in the principal amount of $40,000,000 (the “TCW Term Loan”). The TCW Term Loan bears interest at a rate per annum based on SOFR, plus the Applicable Margin of 7.50% (each as defined in the Term Loan Agreement). The TCW Term Loan has a SOFR floor of 1.00%. The maturity date of the TCW Term Loan is July 18, 2027. The amount outstanding as of October 31, 2024, was $38,245,241 compared to an outstanding balance of $37,503,301 at April 30, 2024. As of October 31, 2024 and April 30, 2024, the unamortized deferred financing amount offset against outstanding debt was $2,992,817 and $935,492, respectively.

The TCW Term Loan is secured by: (a) a first priority security interest in all property of SigmaTron that does not constitute ABL Priority Collateral, which includes: (i) SigmaTron’s interest in its Elk Grove Village real estate, (ii) SigmaTron’s machinery, equipment and fixtures (but excluding ABL Priority Equipment (as defined in the ICA)), (iii) the Term Priority Mexican Inventory (as defined in the ICA), (iv) SigmaTron’s stock in its direct and indirect subsidiaries, (v) SigmaTron’s general intangibles (excluding any that constitute ABL Priority Collateral), goodwill and intellectual property, (vi) the proceeds of business interruption insurance that constitute Term BI Insurance Share (as defined in the ICA), (vii) tax refunds, and (viii) all proceeds thereof, in each case, now owned or hereafter acquired (collectively, the “Term Priority Collateral”); and (b) a second priority security interest in all collateral that constitutes ABL Priority Collateral. Also, SigmaTron’s three Mexican subsidiaries pledged all of their assets as security for the TCW Term Loan. The net proceeds received

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

by the Company from the sale of the Elgin, Illinois, property in February, 2024, reduced the TCW Term Loan.

Waivers and Amendments No. 1 & 2

In March 2023, the Company received default notices from JPM and TCW due to non-compliance with certain financial covenants under their respective Credit Agreements, including the Fixed Charge Coverage Ratio and Total Debt to EBITDA Ratio. Additionally, the Company received a delinquency notification from Nasdaq for failing to timely file its Form 10-Q for the fiscal quarter ended January 31, 2023, which also constituted a default under the Credit Agreements. Consequently, the total debt balances were classified as current liabilities. On April 28, 2023, the Company entered into waivers with JPM and TCW, which waived certain events of default and amended terms of the Credit Agreements. These amendments included requirements to maintain a minimum of $2.5 million in revolver availability, modifications to the definition of EBITDA, and adjustments to the Total Debt to EBITDA Ratios. On June 15, 2023, the Company executed further amendments to extend TCW’s ability to trigger a potential corporate restructuring to occur no earlier than August 1, 2023.

Waivers and Amendments No. 3

Due to the 2024 Covenant Defaults, the facilities under the Credit Agreements were classified as current liabilities on the Consolidated Balance Sheet at July 31, 2024 and April 30, 2024. In addition, due to the lender demand of a Replacement Transaction by September 2025 and the risk of additional covenant compliance failures based on current revenue levels (see Note B - Basis of Presentation - Going Concern for additional information) the Company continues to classify this debt as current liabilities as of October 31, 2024.

In addition, the Company received a delinquency notification letter from Nasdaq, dated August 16, 2024, indicating that the Company was not in compliance with the continued listing requirements of Nasdaq for failing to timely file the Company’s Form 10-K annual report for the fiscal year ended April 30, 2024. This notification also constituted a default under the Credit Agreements (collectively with the 2024 Covenant Defaults, the “2024 Defaults”). The Company had 60 days from the date of the Nasdaq delinquency notice, or until October 15, 2024, to file a plan with Nasdaq to regain compliance. On September 10, 2024, the Company received a notification letter from Nasdaq indicating that the Company had regained compliance with the applicable continued listing requirements based on the filing of the Company’s Form 10-K annual report for the fiscal year ended April 30, 2024.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

On August 19, 2024 (the “Third Amendment Effective Date”), the Lender Parties waived the 2024 Defaults pursuant to (i) the Waiver and Amendment No. 3 to Credit Agreement (the “JPM Amendment”) between the Company and JPM, and (ii) the Waiver and Amendment No. 3 to Credit Agreement (the “TCW Amendment” and together with the JPM Amendment, the “2024 Amendments”) by and among the Company, the TCW Lenders, and the Agent. In consideration of the TCW Amendment, the Company and the Agent also entered into the Third Amendment Fee Letter (the “Fee Letter”) dated as of the Third Amendment Effective Date. The 2024 Amendments provided for, among other things, a waiver of the Company’s noncompliance with the financial covenants relating to (i) the Fixed Charge Coverage Ratio (as defined in the Credit Agreements), and (ii) the Total Debt to EBITDA Ratio (as defined in the Credit Agreements), in each case as of the Third Amendment Effective Date.

The 2024 Amendments also amended other provisions of the Credit Agreements, including to: (i) modify the minimum ratios under the Fixed Charge Coverage Ratio to range from 0.70:1.0 for the twelve months ending as of July 31, 2024, to 1.00:1.0 for the twelve months ending as of September 30, 2025 and thereafter, measured monthly; (ii) adjust the maximum ratios under the Total Debt to EBITDA Ratio to range from 6.50:1.0 for the twelve months ending as of July 31, 2024, to 3.50:1.0 for the twelve months ending as of April 30, 2027, measured quarterly; (iii) modify the definition of EBITDA to allow for additional adjustments for certain transactions and charges; (iv) provide for the reimbursement of certain fees by the Company in connection with the Amendments or the transactions contemplated thereby; (v) increase the minimum required Availability (as defined in the JPM Credit Agreement) to $3.5 million starting on the Third Amendment Effective Date; (vi) provide that the Company must pursue and close a Replacement Transaction to pay the Obligations (as defined in the Credit Agreements) in full no later than September 30, 2025 unless the Company meets certain debt ratios for the twelve month period ending on August 31, 2025; and (vii) require the Company to engage a financial advisor if requested by the Agent after November 1, 2024.

In addition, pursuant to the JPM Amendment, the parties agreed to reduce the Revolving Commitment (as defined in the JPM Credit Agreement) from $70 million to $55 million as of the Third Amendment Effective Date and pay to JPM certain amendment fees and certain additional fees if the Company does not meet certain financial milestones by the applicable measurement periods specified in the JPM Amendment.

In addition, pursuant to the TCW Amendment the parties agreed to (i) amend the principal payment schedule under the TCW Term Loan to $250,000 per quarter; (ii) extend the PIK Period (as defined in the Term Loan Agreement) for three additional quarters beyond October 31, 2024 if the Total Debt to EBITDA Ratio exceeds a certain threshold as of certain dates; (iii) permit the Company to elect to pay on a quarterly basis in-kind a portion of the Baseline Applicable Margin (as defined in the Term Loan Agreement) per annum provided no default or event of default under the Term Loan Agreement has occurred; (iv) increase a portion of the Term Loan Borrowing Base (as defined in the Term Loan Agreement) based on the value of the Company’s real estate; (v) reduce the asset coverage pre-payment ratio under the TCW Term Loan to 90% of the outstanding principal balance; and (vi) provide the Agent with the right to appoint a non-voting observer to attend regular meetings of the Company’s Board of Directors and any relevant committees.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

Also on August 19, 2024, and in connection with the TCW Amendment, the Company entered into the Fee Letter, which provides for a payment to the Agent of $395,000 added to the principal amount owed under the TCW Term Loan and for certain monthly ticking fees equal to a range of percentages of the outstanding principal amount under the TCW Term Loan, provided the Company does meet certain financial milestones by the applicable dates provided therein. In addition, pursuant to the Fee Letter, if the Company does not meet certain financial metrics from December 2024 to September 2025 as defined in the agreement, the Company has agreed to deliver to the Agent warrants to purchase shares of the Company’s common stock (the “Warrants”) in an amount equal to a percentage of the outstanding common stock of the Company on a fully diluted basis ranging from 1.25% (as of December 1, 2024) to 17.5% (as of September 1, 2025). The exercise price for the Warrants will be $0.01 per share and the Warrants would vest immediately upon issuance.

The Company evaluated the accounting for the warrants associated with the Fee Letter to determine whether the warrants should be classified as equity or as a derivative liability on the consolidated balance sheet. In accordance with ASC 815-40, Derivatives and Hedging - Contracts in the Entity’s Own Equity (ASC 815-40), the Company classifies a warrant as equity if it is indexed to the Company’s equity and several specific conditions for equity classification are met. A warrant is not considered indexed to the Company’s equity in general when it contains certain types of exercise contingencies or adjustments to exercise price. If a warrant is not indexed to the Company’s equity or it has net cash settlement that results in the Warrants to be accounted for under ASC 480, Distinguishing Liabilities from Equity, or ASC 815-40, it is classified as a derivative liability which is carried on the consolidated balance sheet at fair value with any changes in its fair value recognized currently in the statement of operations. The Company concluded that the warrants shall be classified as a liability upon entering into the Fee Letter and as a result recorded a liability of $2,263,000. In subsequent periods, these Warrants are subject to remeasurement. As of October 31, 2024, the warrants were valued at $2,889,000. The remeasurement of the warrants is recorded within the change in fair value of warrants within the Consolidated Statements of Operations.

All other material terms of the Credit Agreements, as amended by the Amendments, remain unchanged.

China Construction Bank

On March 15, 2019, the Company’s wholly-owned foreign enterprise, Wujiang SigmaTron Electronic Technology Co., Ltd., entered into a credit facility with China Construction Bank. On January 26, 2021, the agreement was amended and expired in accordance with its terms on January 6, 2022. On January 17, 2022, the agreement was renewed, and expired in accordance with its terms on December 23, 2022. On February 17, 2023, the agreement was renewed, and expired in accordance with its terms on February 7, 2024. On March 1, 2024, the agreement was renewed, and is scheduled to expire on February 1, 2025. Under the agreement Wujiang SigmaTron Electronic Technology Co., Ltd. can borrow up to 10,000,000 Renminbi, approximately $1,400,000 as of October 31, 2024, 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 3.15% per annum. There was no outstanding balance under the facility at October 31, 2024 and April 30, 2024, respectively.

SigmaTron International, Inc.

October 31, 2024

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note E - Long-term Debt - Continued

Notes Payable – Buildings

SIGMATRON INTERNATIONAL INC 10-Q