UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]   Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934.
      For the fiscal year ended April 30, 2004

                                       Or

[ ]   Transition Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934. For the transition period from
      ----------- to -----------.

                         Commission file number 0-23248

                          SIGMATRON INTERNATIONAL, INC.
                          -----------------------------
             (Exact name of registrant as specified in its charter)

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

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

Registrant's telephone number, including area code: 847-956-8000
Securities registered pursuant to Section 12(g) of the Act:

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

Indicate by check mark 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]

The aggregate market value of the voting common equity held by non-affiliates of
the registrant as of October 31, 2003 (the last business day of the registrant's
most recently completed second fiscal quarter) was $68,611,732, based on the
closing sale price of $19.18 per share as reported by Nasdaq Small Cap Market as
of such date.

The number of outstanding shares of the registrant's Common Stock, as of July 9,
2004, was 3,750,954.

                       DOCUMENTS INCORPORATED BY REFERENCE

Those sections or portions of the definitive proxy statement of SigmaTron
International, Inc., for use in connection with its annual meeting of
stockholders, which will be filed within 120 days of the fiscal year ended April
30, 2004, are incorporated by reference into Part III of this Form 10-K.



                                TABLE OF CONTENTS


                                                                                                           
PART I

       ITEM 1.         BUSINESS.............................................................................   3
       ITEM 2.         PROPERTIES...........................................................................  11
       ITEM 3.         LEGAL PROCEEDINGS....................................................................  12
       ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................  12
       ITEM 4A.        EXECUTIVE OFFICERS OF THE REGISTRANT.................................................  12

PART II

       ITEM 5.         MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                         MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES..................................  13
       ITEM 6.         SELECTED CONSOLIDATED FINANCIAL DATA.................................................  14
       ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                         CONDITION AND RESULTS OF OPERATIONS................................................  14
       ITEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES
                         ABOUT MARKET RISK..................................................................  20
       ITEM 8.         FINANCIAL STATEMENT AND SUPPLEMENTARY DATA...........................................  20
       ITEM 9.         CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
                         ACCOUNTING AND FINANCIAL DISCLOSURE................................................  20
       ITEM 9A.        CONTROLS AND PROCEDURES..............................................................  20

PART III

       ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................  20
       ITEM 11.        EXECUTIVE COMPENSATION...............................................................  20
       ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                         AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.....................................  20
       ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................  21
       ITEM 14.        PRINCIPAL ACCOUNTING FEES AND SERVICES...............................................  21

PART IV

       ITEM 15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
                         ON FORM 8-K........................................................................  21

SIGNATURES    ..............................................................................................  25




                                     PART 1

ITEM 1.  BUSINESS

CAUTIONARY NOTE:

      In addition to historical financial information, this discussion of the
business of SigmaTron International, Inc. its wholly owned subsidiary Standard
Components de Mexico S.A., its wholly owned foreign enterprise Wujiang SigmaTron
Electronics Co., Ltd. ("SigmaTron China"), its 42.5% owned affiliate SMT
Unlimited L.P. ("SMTU") and its procurement branch SigmaTron Taiwan (the
"Company") and other Items in this Annual Report on Form 10-K contain
forward-looking statements concerning the Company's business or results of
operations. These statements should be evaluated in the context of the risks and
uncertainties inherent in the Company's business, including the Company's
continued dependence on certain significant customers; the continued market
acceptance of products and services offered by the Company and its customers;
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 availability and cost of necessary components; regulatory compliance; the
continued availability and sufficiency of the Company's credit arrangements;
changes in U.S., Mexican, Chinese or Taiwanese regulations affecting the
Company's business; the continued stability of the Mexican and Chinese economic
systems, labor and political conditions; and the ability of the Company to
manage its growth; including its recent expansion into China. These and other
factors which may affect the Company's future business and results of operations
are identified throughout the Company's Annual Report on Form 10-K and risk
factors contained therein and may be detailed from time to time in the Company's
filings with the Securities and Exchange Commission. These statements speak as
of the date of this report and the Company undertakes no obligation to update
such statements in light of future events or otherwise.

OVERVIEW

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

      The Company provides manufacturing and assembly services ranging from the
assembly of individual components to the assembly and testing of boxbuild
electronic products. The Company has the ability to produce assemblies requiring
mechanical as well as electronic capabilities. The products assembled by the
Company are then incorporated into finished products sold in various
marketplaces, particularly appliance, consumer electronics, gaming, fitness,
industrial electronics, telecommunications and automotive.

      The Company operates manufacturing facilities in Elk Grove Village,
Illinois; Las Vegas, Nevada; Acuna, Mexico; and Wujiang, China. The Company
maintains materials sourcing offices in Elk Grove Village, Illinois; Las Vegas,
Nevada; Acuna, Mexico; and Taipei, Taiwan. The Company provides warehousing
services in Del Rio, Texas and Huntsville, Alabama. In addition, the Company's
42.5% owned affiliate, SMTU, provides EMS in Fremont, California.

      The Company is a Delaware corporation which was organized on November 16,
1993 and commenced business when it became the successor to all of the assets
and liabilities of SigmaTron L.P., an Illinois limited partnership, through a
reorganization on February 8, 1994.

                                        3



PRODUCTS AND SERVICES

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

      Manufacturing and Related Services. As its customers experience greater
competition and shorter product life cycles in their respective industries, the
Company has responded by expanding its existing prototype services. The Company
provides quick-turnaround, turnkey prototype services at all of its locations.

      Materials Procurement. The Company is primarily a turnkey manufacturer and
directly sources all, or a substantial portion, of the components necessary for
its product assemblies, rather than receiving the raw materials from its
customers on consignment. Material procurement includes the purchasing,
management, storage and delivery of raw components required for the manufacture
or assembly of a customer's product based upon the customer's orders. The
Company procures components from a select group of vendors which meet its
standards for timely delivery, high quality and cost effectiveness, or as
directed by its customers. Raw materials used in the assembly and manufacture of
printed circuit boards and electronic assemblies are generally available from
several suppliers, unless restricted by the customer.

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

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

      The Company performs PTH assembly both manually and with automated
component insertion and soldering equipment. Although SMT is a more
sophisticated interconnect technology, the Company intends to continue providing
PTH assembly services for its customers because it believes that SMT will not
entirely eliminate the need for PTH technology. The Company believes that OEMs
with products not limited by internal space constraints will continue to favor
PTH over SMT. SigmaTron is also capable of assembling fine pitch and ball grid
array ("BGA") components. BGA is used for more complex circuit boards required
to perform at higher speeds.

      In addition to printed circuit board assemblies, the Company also
manufactures DC-to-AC inverters, coils, transformers and cable and harness
assemblies. These products are manufactured using both automated and
semi-automated preparation and insertion equipment and manual assembly
techniques. The Company also offers boxbuild services, which integrate its
printed circuit board and other manufacturing and assembly technologies into
higher level sub-assemblies and end products.

                                        4



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

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

MARKETS AND CUSTOMERS

      The company's customers are in the appliance, gaming, industrial
electronics, fitness, telecommunications, consumer electronics and automotive
industries. As of April 30, 2004, the Company had approximately 160 active
customers ranging from Fortune 500 companies to small, privately held
enterprises.

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



                                                                  PERCENT OF NET SALES
                                                                ------------------------
                                       TYPICAL                  FISCAL   FISCAL   FISCAL
       MARKETS                     OEM APPLICATION               2002     2003     2004
       -------                     ---------------              ------   ------   ------
                                                                      
Appliances               Household appliance controls             21.2%    30.2%    36.4%

Gaming                   Slot machines, lighting displays         17.7     21.3     17.9

Industrial Electronics   Motor controls, power supplies           19.3     10.1     13.8

Fitness                  Treadmills, exercise bikes               15.8     13.7     13.4

Telecommunications       Pagers, microphones and modems           16.6      9.5     10.9

Consumer Electronics     Carbon monoxide alarms, tanning beds      8.3     13.3      7.1

Automotive               Automobile interior lighting              1.1      1.9       .5
                                                                ------   ------   ------
Total                                                              100%     100%     100%


      For the fiscal year ended April 30, 2004, Spitfire Controls, Inc. and Life
Fitness accounted for 35.7% and 13.0%, respectively, of the Company's net sales.
For the fiscal year ended April 30, 2003, Spitfire Controls, Inc. and Life
Fitness accounted for 27.2% and 13.3%, respectively, of the Company's net sales.
In fiscal 2002, Spitfire Controls, Inc. and Life Fitness accounted for 20.7% and
15.2%, respectively, of net sales. The Company expects that these customers as a
group will continue to account for a significant percentage of the Company's net
sales, although the individual percentages may vary from period to period.

SALES AND MARKETING

      The Company markets its services through 18 independent manufacturers'
representative organizations that together currently employ approximately 49
sales personnel in the United States and Canada. Independent manufacturers'
representative organizations receive variable commissions based on orders
received by the Company and are assigned specific accounts, not territories. The
members of the Company's senior management are actively involved in sales and
marketing efforts and the Company has 5 direct sales people.

                                        5



      Sales volume and gross profit margins can vary considerably among
customers and products depending on the type of services rendered by the
Company. Specifically, variations in orders for turnkey services versus
consignment services and variations in the number of orders for products with
high raw material costs can lead to significant fluctuations in the Company's
operating results. Further, customers' orders can be delayed, rescheduled or
canceled at any time, which can significantly impact the operating results of
the Company. The ability to replace such delayed or lost sales in a short period
of time is not assured.

MEXICO OPERATIONS

      The Company's wholly owned subsidiary, Standard Components de Mexico, S.A,
a Mexican corporation, is located in Acuna, Mexico, a border town across the Rio
Grande River from Del Rio, Texas, and is 155 miles west of San Antonio. Standard
Components de Mexico, S.A. was incorporated and commenced operation in 1969. The
Company believes that one of the key benefits to having operations in Mexico is
its access to cost-effective labor resources while having geographic proximity
to the United States.

      The Company provides funds for salaries, wages, overhead and capital
expenditure items as necessary to operate Standard Components de Mexico, S.A.
The Company provides funding to Standard Components de Mexico, S.A. in U.S.
dollars, which are exchanged for pesos as needed. The fluctuation of the peso
from time to time, without an equal or greater increase in Mexican inflation,
has not had a material impact on the financial results of the Company. In fiscal
2004 the Company paid approximately $9,400,000 to Standard Components de Mexico,
S.A. for services provided. At April 30, 2004 the Mexican operation had
approximately 900 employees.

CHINA OPERATIONS

      The Company has entered into an agreement with governmental authorities in
the economic development zone of Wujiang, Jiangsu Province, Republic of China,
pursuant to which the Company became the lessee of approximately nine U.S.
acres. The term of the land lease is 50 years. A manufacturing plant and
dormitories were built during fiscal 2004. The manufacturing plant and office
space is approximately 80,000 square feet, which can be expanded if conditions
require it. SigmaTron China operates as the Company's wholly owned foreign
enterprise.

      During the fourth quarter the plant started prototype and pilot production
in order to gain customer approval of our processes. Production is planned to
slowly ramp up during fiscal 2005. The plant has also started the process of
obtaining ISO registration. At April 30, 2004 the China operation had 43
employees.

COMPETITION

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

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

      There can be no assurance that competition from existing or potential
competitors will not have a material adverse impact on the Company's business,
financial condition or results of operations. The introduction of lower priced
competitive products or significant price reductions by the Company's
competitors could result in price reductions that would adversely affect the
Company's business, financial condition, and results of operations, as would the
introduction of new technologies which render the Company's manufacturing
process technology less competitive or obsolete.

                                        6



CONSOLIDATION

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

GOVERNMENTAL REGULATIONS

      The Company's operations are subject to certain foreign, federal, state
and local regulatory requirements relating to environmental, waste management
and health and safety matters. Management believes that the Company's business
is operated in material compliance with all such regulations. The cost to the
Company of such compliance to date has not had a material impact on the
Company's business, financial condition or results of operations. However, there
can be no assurance that violations will not occur in the future as a result of
human error, equipment failure or other causes. The Company cannot predict the
nature, scope or effect of environmental legislation or regulatory requirements
that could be imposed or how existing or future laws or regulations will be
administered or interpreted. Compliance with more stringent laws or regulations,
as well as more vigorous enforcement policies of regulatory agencies, could
require substantial expenditures by the Company and could have a material impact
on the Company's business, financial condition and results of operations.

BACKLOG

      The Company's backlog as of April 30, 2004 was approximately $38,600,000.
Backlog consists of contracts or purchase orders with delivery dates scheduled
within the next twelve months. The Company currently expects to ship
substantially all of the April 30, 2004 backlog by the end of the 2005 fiscal
year. Backlog as of April 30, 2003 totaled approximately $39,000,000. Variations
in the magnitude and duration of contracts and purchase orders received by the
Company and delivery requirements generally may result in substantial
fluctuations in backlog from period to period. Because customers may cancel or
reschedule deliveries, backlog may not be a meaningful indicator of future
revenue.

EMPLOYEES

      The Company employed approximately 1,255 people as of April 30, 2004,
including 44 engaged in engineering or engineering related services, 1,110 in
manufacturing and 101 in administrative and marketing functions.

      The Company has a labor contract with Production Workers Union Local No.
10, AFL-CIO, covering the Company's workers in Elk Grove Village, Illinois which
expires on November 30, 2006. The Company's Mexican subsidiary, Standard
Components de Mexico S.A., has a labor contract with Sindicato De Trabajadores
de la Industra Electronica, Similares y Conexos del Estado de Coahuila, C.T.M.
covering the Company's workers in Acuna, Mexico which expires on January 15,
2005.

      Since the time the Company commenced operations, it has not experienced
any union related work stoppages. The Company believes its relations with both
unions and its other employees are good.

RISK FACTORS

      In addition to the other risks identified herein, the Company's business
is subject to the following risks:

THE COMPANY'S ABILITY TO SECURE AND MAINTAIN SUFFICIENT CREDIT ARRANGEMENTS IS
KEY TO ITS CONTINUED OPERATIONS.

      The ability of the Company to secure and maintain sufficient credit
arrangements is key to its continued operations. The Company entered into an
Amended Loan and Security Agreement in January 2004, which

                                        7



provides for a revolving credit facility. The maximum borrowing limit under the
revolving credit facility is limited to the lesser of: (i) $13,000,000 or (ii)
an amount equal to the sum of 85% of the receivable borrowing base and the
lesser of $6,500,000 or varying percentages of the inventory base. The Amended
Loan and Security Agreement expires on September 30, 2005 and is subject to
certain financial covenants. At April 30, 2004 the Company was in compliance
with its financial covenants and had no borrowings under this line of credit.

            On June 25, 2004 SMTU amended its loan and security agreement
("Agreement") covering its revolving credit facility. Under the amended terms of
the Agreement, the maximum borrowing limit is the lesser of (i) $3,000,000, or
(ii) an amount equal to the sum of (A) eighty-five percent (85%) of the net
amount eligible accounts receivable outstanding at such date; (B) fifty percent
(50%) of eligible inventory at such date and (C) fifty percent (50%) of the net
amount of foreign Solectron eligible accounts receivable outstanding at such
date; provided, however, that the aggregate amount of advances for eligible
inventory shall not exceed one million five hundred thousand dollars
($1,500,000) at any time and the aggregate amount of advances for foreign
Solectron eligible accounts receivable shall not exceed five hundred thousand
dollars ($500,000) at any time. The amended revolving credit facility matures on
July 31, 2005. Borrowings under the revolving credit facility bear interest at
the bank's prime plus 2.0% (6.0% at April 30, 2004). The Company is obligated to
pay an annual commitment fee of 1/4 of 1.0% on the average daily unused portion
of the revolving credit facility. The available portion of the revolving credit
facility at April 30, 2004 was $132,798.

      In August 1999, the Company entered into a guaranty agreement with SMTU's
lender to guarantee the obligation of SMTU under its revolving credit facility
to a maximum of $2,000,000 plus interest and related costs associated with the
enforcement of the guaranty. In connection with the guaranty agreement, one of
the limited partners of SMTU and a Vice President of SMTU have each executed a
guaranty to the lender to reimburse the Company for up to $500,000 of payments
made by the Company under its guaranty to the lender in excess of $1,000,000. In
addition, the limited partner has agreed to indemnify the Company for 50% of all
payments made on behalf of SMTU to the lender. The limited partner's obligation
to the Company under the indemnity is reduced dollar for dollar to the extent
the limited partner would otherwise be obligated to pay more than $1,000,000 as
a result of his guaranty to the lender. The amended revolving credit facility
expires on July 31, 2005 and no liability has been recorded by the Company
related to its guaranty.

THE COMPANY EXPERIENCES VARIABLE OPERATING RESULTS.

      The Company's results of operations have varied and may continue to
fluctuate significantly from period to period, including on a quarterly basis.
Consequently, results of operations in any period should not be considered
indicative of the results for any future period, and fluctuations in operating
results may also result in fluctuations in the price of the Company's Common
Stock.

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

      -     Changes in sales mix to customers

      -     Changes in availability and cost of components

      -     Volume of customer orders relative to capacity

      -     Market demand and acceptance of our customers' products

      -     Price erosion within the EMS marketplace

THE COMPANY'S CUSTOMER BASE IS CONCENTRATED.

      Sales to the Company's five largest customers accounted for 68%, 59% and
51% of net sales for the fiscal years ended April 30, 2004, 2003 and 2002,
respectively. Significant reduction in sales to any of the Company's major
customers or the loss of a major customer could have a material impact on the
Company's operations. If the Company cannot replace canceled or reduced orders,
sales will decline, which could have a material impact on the results of
operations.

                                        8



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

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

THE COMPANY AND ITS CUSTOMERS MUST KEEP CURRENT WITH THE INDUSTRY'S
TECHNOLOGICAL CHANGES.

      The market for the Company's manufacturing services is characterized by
rapidly changing technology and continuing product development. The future
success of the Company's business will depend in large part upon its customers'
ability to maintain and enhance their technological capabilities, develop and
market manufacturing services which meet changing customer needs and
successfully anticipate or respond to technological changes in manufacturing
processes on a cost-effective and timely basis.

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

THE COMPANY HAS INTENSE INDUSTRY COMPETITION.

      The EMS industry is highly fragmented and characterized by intense
competition. Many of the Company's competitors have substantially greater
experience, as well as greater manufacturing, purchasing, marketing and
financial resources than the Company.

THE COMPANY HAS FOREIGN OPERATIONS THAT MAY POSE ADDITIONAL RISKS.

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

      The Company has opened an operation in China in order to better support
and grow its customer base. It is uncertain whether the China operation will
have a material impact, either positive or negative, on the Company's business,
financial condition and results of operations. The success of the operation is
dependent on the Company's ability to obtain new business; its ability to hire
and train qualified personnel and to implement an efficient manufacturing
environment. Other factors could have a material impact on the business,
including the political climate, stability of the economy, the need for
additional capital to expand operations in China, and effects of public health
issues (e.g., Severe Acute Respiratory Syndrome or SARS).

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

THERE IS A RISK OF FLUCTUATION OF VARIOUS CURRENCIES INTEGRAL TO THE COMPANY'S
OPERATIONS.

      The Company purchases some of its material components and funds some of
its operations in foreign

                                        9



currencies. From time to time the currencies fluctuate against the U.S. dollar.
Such fluctuations could have a measurable impact on the Company's operations and
performance. These fluctuations are expected to continue. The Company does not
utilize derivatives or hedge foreign currencies to reduce the risk of such
fluctuations.

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

      The Company 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. The Company
could operate at a cost disadvantage compared to competitors who have greater
direct buying power from suppliers.

THE COMPANY IS DEPENDENT ON KEY PERSONNEL.

      The Company depends significantly on its President and Chief Executive
Officer, Gary R. Fairhead, and on other executive officers. The loss of the
services of any of these key employees could have a material impact on the
Company's business and results of operations. In addition, despite significant
competition, continued growth and expansion of the Company's contract
manufacturing business will require that it attract, motivate and retain
additional skilled and experienced personnel.

FAVORABLE LABOR RELATIONS IS IMPORTANT TO THE COMPANY.

      The Company currently has labor union contracts with certain of its
employees. Although the Company believes its labor relations are good, any labor
disruptions, whether union-related or otherwise, could significantly impair the
Company's business, substantially increase the Company's costs or otherwise have
a material impact on the Company's results of operations.

FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD SUBJECT THE COMPANY TO
LIABILITY.

      The Company is subject to a variety of environmental regulations relating
to the use, storage, discharge and disposal of hazardous chemicals used during
its manufacturing process. Any failure by the Company to comply with present or
future regulations could subject it to future liabilities or the suspension of
production which could have a material impact on the Company's results of
operations.

THE PRICE OF THE COMPANY'S STOCK IS VOLATILE.

      The price of the Company's Common Stock historically has experienced
significant volatility due to fluctuations in the Company's revenue and
earnings, other factors relating to the Company's operations, the market's
changing expectations for the Company's growth, overall equity market conditions
and other factors unrelated to the Company's operations. In addition, the
limited float of the Company's Common Stock and the limited number of market
makers also affect the volatility of the Company's Common Stock. Such
fluctuations are expected to continue.

THE COMPANY HAS MADE INVESTMENTS IN AND ADVANCES TO AFFILIATES.

      In August 1999, the Company entered into a guaranty agreement with SMTU's
lender to guarantee the obligation of SMTU under its revolving line of credit to
a maximum of $2,000,000 plus interest and related costs associated with the
enforcement of the guaranty. In connection with the guaranty agreement, one of
the limited partners of SMTU and a Vice President of SMTU have each executed a
guaranty to the lender to reimburse the Company for up to $500,000 of payments
made by the Company under its guaranty to the lender in excess of $1,000,000. In
addition, the limited partner has agreed to indemnify the Company for 50% of all
payments made on behalf of SMTU to the lender. The limited partner's obligation
to the Company under the indemnity is reduced dollar for dollar to the extent
the limited partner would otherwise be obligated to pay more than $1,000,000 as
a result of his guaranty to the lender. The amended revolving line of credit
expires on July 31, 2005 and no liability has been recorded by the Company
related to its guaranty.

                                       10




      The Company also has guaranteed lease obligations of approximately
$114,000 for SMTU. The Company has been indemnified by one of the other limited
partners in the amount of $57,000 for the guaranteed lease obligations and no
liability has been recorded by the Company related to its guaranty.

      The Company adopted the provisions of FASB Financial Interpretation No.
46R ("FIN 46R"), Consolidation of Variable Interest Entities as of November 1,
2003 as it relates to its 42.5% owned affiliate SMTU and consolidated SMTU in
the accompanying financial statements and footnotes to the financial statements
from the earliest date reported.

BEING A PUBLIC COMPANY INCREASES OUR ADMINISTRATIVE COSTS.

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

ITEM 2.  PROPERTIES

      The Company has manufacturing facilities located in Elk Grove Village,
Illinois; Las Vegas, Nevada; Wujiang, China; Fremont, California and Acuna,
Mexico. In addition, the Company provides inventory management services through
its Del Rio, Texas, warehouse facilities and materials procurement services
through its Elk Grove Village, Illinois; Las Vegas, Nevada; Acuna, Mexico; and
Taipei, Taiwan offices and a warehouse facility in Huntsville, Alabama.

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



                       SQUARE                                                             OWNED/
       LOCATION         FEET                        SERVICES OFFERED                      LEASED
---------------------  -------  --------------------------------------------------------  ------
                                                                                 
Elk Grove Village, IL  118,000  Corporate Headquarters, assembly and testing of PTH, SMT
                                and BGA, box-build, prototyping, warehousing              Owned

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

Wujiang, China         147,500  High volume assembly, and testing of PTH and SMT,
                                box-build                                                   *

Las Vegas, NV           38,250  Automatic insertion and cable assembly, PTH, SMT and      Leased
                                testing

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

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

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


*The Company's Wujiang, China building is owned by the Company and the land is
leased with a 50 year term.

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

***A portion of the facility is leased.

                                       11



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

      In addition, SMTU leases a facility in Fremont, California totaling 24,500
square feet. The Company has guaranteed lease payments of approximately $114,000
for SMTU, and has been indemnified by one of the SMTU limited partners to the
extent of 50% of the lease payment guaranty.

ITEM 3.  LEGAL PROCEEDINGS

      During the fiscal year ended April 30, 2002, the Company received a Charge
of Discrimination from the Equal Employment Opportunity Commission regarding a
former employee claiming unspecified damages resulting in a lawsuit being filed
against the Company. The Company believes that it has meritorious defenses to
the charges and is defending itself vigorously in this action. Although the
charges do not specify a dollar amount, based on information presently available
to the Company, the Company believes that the resolution of these charges will
not have a material adverse effect on the financial condition or results of the
operations of the Company.

      During the fiscal year ended April 30, 2003, a lawsuit was filed by the
liquidating trustee of Circuit Systems, Inc. ("CSI") against Gary R. Fairhead,
President and CEO of the Company and a former director of CSI ("Fairhead"), and
other former directors of CSI, alleging, in part, that Fairhead had breached his
fiduciary duty to CSI and its stockholders in a number of respects. Fairhead
joined the CSI Board in 1995, resigning in early 2001. Fairhead has indicated to
the Company that the Company may have a duty under certain circumstances to (i)
indemnify him against all expenses, including legal fees, judgments and amounts
paid in settlement actually incurred by him in connection with the CSI lawsuit,
and (ii) advance his costs incurred in defending against these claims. Fairhead
has not made any request to the Company for indemnity or advancement of expenses
in the lawsuit, and the Company has taken no position on either issue.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter was submitted to a vote of security holders in the fourth
quarter of fiscal 2004.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT



       NAME          AGE                               POSITION
       ----          ---                               --------
                    
Gary R. Fairhead      52  President and Chief Executive Officer.
                          Gary R. Fairhead has been the President of the Company since January
                          1990.  Gary R. Fairhead is the brother of Gregory A. Fairhead.

Linda K. Blake        43  Chief Financial Officer, Vice President - Finance, Treasurer and
                          Secretary since February 1994.


                                       12



ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT- CONTINUED



       NAME          AGE                               POSITION
       ----          ---                               --------
                    
Gregory A. Fairhead   48  Executive Vice President - Operations and Assistant Secretary.
                          Gregory A. Fairhead has been Executive Vice President since February
                          2000 and is Assistant Secretary.  Mr. Fairhead was Vice President -
                          Mexican Operations for the Company from February 1990 to February
                          2000.  Gregory A. Fairhead is the brother of Gary R. Fairhead.

John P. Sheehan       43  Vice President - Director of Materials and Assistant Secretary since
                          February 1994.

Daniel P. Camp        55  Vice President - China Operation since 2003, Mr. Camp was the General
                          Manager/Vice President of Mexican Operations from 1994 to 2003.


                                     PART II

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

      The Company's Common Stock is traded on the Nasdaq SmallCap System under
the symbol SGMA. The following table sets forth the range of quarterly high and
low bid information for the Common Stock for the periods ended April 30, 2004
and 2003.

                            Common Stock as Reported
                                    by Nasdaq



  Period                              High                 Low
  ------                              ----                 ---
                                                    
Fiscal 2004:
Fourth Quarter                      $25.890               $ 9.900
Third Quarter                        33.860                16.000
Second Quarter                       28.500                12.800
First Quarter                        14.990                 5.630

Fiscal 2003:
Fourth Quarter                      $ 7.350               $ 3.650
Third Quarter                         4.800                 3.270
Second Quarter                        5.090                 2.900
First Quarter                         4.250                 2.470


      As of July 9, 2004, there were approximately 70 holders of record of the
Company's Common Stock, which does not include shareholders whose stock is held
through securities position listings. The Company estimates there to be
approximately 1,500 beneficial owners of the Company's Common Stock.

                                       13



      The Company has not paid cash dividends on its Common Stock since
completing its February 1994 initial public offering and does not intend to pay
any dividends in the foreseeable future. So long as any indebtedness remains
unpaid under the Company's revolving loan facility, the Company is prohibited
from paying or declaring any cash or other dividends on any of its capital
stock, except stock dividends, without the written consent of the lender under
the facility.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA



                                                                Years Ended April 30
                                                                --------------------
                                                        (In thousands except per share data)

                                                2000       2001       2002       2003       2004
                                                ----       ----       ----       ----       ----
                                                                           
Net Sales                                     $114,203   $120,798   $102,293   $105,824   $100,494

Income (loss) before income tax
  expense (benefit) and minority
  interest                                       1,360     <1,856>     2,486      9,023      9,219

Net income (loss)                                  767     <1,156>     1,542      5,715      5,406

Total Assets                                    65,316     68,818     51,809     53,400     62,998

Long-term debt and capital lease
  obligations (including current
  maturities)                                   27,620     30,930     17,514      9,911      7,025

Net income (loss) per common share-
  Basic                                       $   0.27   $  <0.40>  $   0.54   $   1.98   $   1.58

Net income (loss) per common share-
  Diluted                                     $   0.27   $  <0.40>  $   0.52   $   1.70   $   1.53


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

CRITICAL ACCOUNTING POLICES

      Management Estimates and Uncertainties - The preparation of consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates made in preparing the consolidated
financial statements include depreciation and amortization periods, the
allowance for doubtful accounts and reserves for inventory. Actual results could
materially differ from these estimates.

      Revenue Recognition - Revenues from sales of product including the
Company's electronic manufacturing service business are recognized when the
product is shipped. In general it is the Company's policy to recognize revenue
and related costs when the order has been shipped from our facilities, which is
also usually the same point that title passes under the terms of the purchase
order. Periodically inventory is held on consignment and revenue is recognized
when the product is consumed by the Company's customer. Based on the Company's
history of providing contract manufacturing services, we believe that
collectibility is reasonably assured.

                                       14



      Inventories - Inventories are valued at the lower of cost or market. Cost
is determined by the first-in, first-out method. The Company establishes
inventory reserves for valuation, shrinkage, and excess and obsolete inventory.
The Company records provisions for inventory shrinkage based on historical
experience to account for unmeasured usage or loss. Actual results differing
from these estimates could significantly affect the Company's inventories and
cost of products sold. The Company records provisions for excess and obsolete
inventories for the difference between the cost of inventory and its estimated
realizable value based on assumptions about future product demand and market
conditions. Actual product demand or market conditions could be different than
projected by management.

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

NEW ACCOUNTING STANDARDS

      Consolidation of variable interest entities - FIN 46R is an interpretation
of Accounting Research Bulletin No. 51 and revises the requirements for
consolidation by business enterprises of variable interest entities. FIN 46R
applies immediately to variable interest entities created after January 31, 2003
and to variable interest entities in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim period ending
after December 15, 2003, to variable interest entities in which an enterprise
holds a variable interest acquired before February 1, 2003. FIN 46R applies to
public enterprises as of the beginning of the applicable interim or annual
period and to nonpublic enterprises as of the end of the applicable annual
period. It may be applied prospectively with a cumulative-effect adjustment as
of the date on which it is first applied or by restating previously issued
financial statements for one or more years with a cumulative-effect adjustment
as of the beginning of the first year restated. The Company adopted FIN 46R as
of November 1, 2003 as it relates to its 42.5% owned affiliate SMTU.

      The accompanying financial statements include the financial position and
results of operations and cash flows for SMTU, with the remaining 57.5%
reflected as a "minority interest." Previously the Company had reflected such
investment on the equity method. The Company adopted the provision of FIN 46R
for its investment in SMTU and has restated all periods presented in the
accompanying financial statements and footnotes to the financial statements.

CAUTIONARY NOTE:

      The following discussion provides an analysis of the Company's financial
condition and results of operations, and should be read in conjunction with the
Selected Consolidated Financial Data and the Consolidated Financial Statements
of the Company, and the Notes thereto, appearing in this Annual Report on Form
10-K, as well as in conjunction with the cautionary note concerning
forward-looking information which appears at the beginning of Item 1 and the
risk factors which appear at the end of Item 1.

OVERVIEW

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

                                       15



      As services provided by the EMS industry have continued to increase over
the past several months lead-time for components have increased. Pricing for
components and related commodities has escalated in the short term and may
continue to increase in the future periods. The impact of these price increases
could have a negative material effect on the Company's gross margins and
operating results.

      The Company relies on numerous third-party suppliers for components used
in the Company's production process. Certain of these components are available
only from single sources or a limited number of suppliers. In addition, a
customer's specifications may require the Company to obtain components from a
single source or a small number of suppliers. The loss of any such suppliers
could have a material impact on the Company's results of operations, and the
Company may be required to operate at a cost disadvantage compared to
competitors who have greater direct buying power from suppliers.

      Sales volume can be misleading as an indication of the Company's financial
performance. Gross profit margins can vary considerably among customers and
products depending on the type of services rendered by the Company. Variations
in the number of turnkey orders compared to consignment orders can lead to
significant fluctuations in the Company's revenue levels and margins. Further,
generally customers' orders can be delayed, rescheduled or canceled at any time,
which can significantly impact the operating results of the Company. In
addition, the ability to replace such delayed or lost sales in a short period of
time cannot be assured.

      As a manufacturing company, the Company includes all fixed manufacturing
overhead in cost of products sold. The inclusion of fixed manufacturing overhead
in cost of goods sold magnifies the fluctuations in gross profit margin
percentages caused by fluctuations in net sales and capital expenditures.
Specifically, fluctuations in the mix of consignment and turnkey contracts could
have an effect on the cost of goods sold and the resulting gross profit as a
percentage of net sales. 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. However, turnkey contracts typically have
lower gross margins due to the large material content. Historically, more than
90% of the Company's sales have been from turnkey orders.

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

RESULTS OF OPERATIONS:

FISCAL YEAR ENDED APRIL 30, 2004 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2003

      Net sales decreased 5% to $100,494,122 in fiscal 2004 from $105,824,257 in
the prior year. The Company's sales decreased in the consumer electronics,
gaming and fitness industries during fiscal 2004. The Company continued to
experience sales growth within the appliance marketplace. The Company's
concentration in a specific industry increases the Company's risk due to
business and economic factors within that specific industry. The Company's five
largest customers accounted for 68% and 62% of net sales in fiscal 2004 and
2003, respectively. Sales to the Company's largest customers can vary from
period to period. In addition, the Company generally does not obtain long-term
purchase contracts. Any significant change in orders from these customers could
materially impact the Company's operating results.

      Gross profit decreased to $19,115,930 in fiscal 2004 from $19,919,683 in
the prior year. The reduction in absolute dollars of gross profit is primarily
due to lower sales volume for the fiscal year ended 2004. Gross profit increased
as a percent to net sales to 19.0% compared to 18.8% in fiscal 2003. The overall
increase as a percentage is due to product life cycles, product mix and
component pricing. The Company's gross profit margin can vary considerably due
to price erosion within the EMS industry, product mix, component pricing,
overall capacity utilization, product life cycle, the mix of turnkey and
consignment orders and labor cost. There can be no assurance gross profit
margins will not decrease in the future.

                                       16



      Selling and administrative expenses decreased in fiscal 2004 to $9,664,903
from $10,048,229 in fiscal 2003. The decrease is primarily due to the receipt of
approximately $283,000 in settlement of an insurance claim, and a reduction in
commission and legal expenses. The Company anticipates administrative expenses
and professional fees in conjunction with Sarbanes-Oxley compliance will
increase significantly in future periods.

      Interest expense decreased to $239,792 from $847,846. The decrease is
primarily attributed to the reduction in the loan balance of the Company's
credit facility and lower interest rates.

      In fiscal 2004 tax expense was $3,550,038, which resulted in an effective
rate of 39.6% compared to $3,251,511 in income tax expense and an effective rate
of 36.2% in fiscal 2003.

      Net income for fiscal 2004 was $5,405,732, which resulted in basic
earnings per share of $1.58 and dilutive earnings per share of $1.53. Net income
for fiscal 2003 was $5,714,924. Basic and dilutive earnings per share were $1.98
and $1.70, respectively for fiscal 2003.

FISCAL YEAR ENDED APRIL 30, 2003 COMPARED
TO FISCAL YEAR ENDED APRIL 30, 2002

      Net sales increased 3.4% to $105,824,257 in fiscal 2003 from $102,292,588
in the prior year. The primary reason for the increase in sales was due to the
increased sales volume in the appliance market. Sales can be misleading as an
indication of the Company's financial performance. Gross profit margins can vary
considerably among customers and products depending on the type of services
rendered by the Company, specifically the variation of orders for turnkey
services versus consignment services. Variations in the number of turnkey orders
compared to consignment orders can lead to significant fluctuations in the
Company's revenue levels and margins. Further, generally, customers' orders can
be delayed, rescheduled or canceled at any time, which can significantly impact
the operating results of the Company. In addition, the ability to replace such
delayed or lost sales in a short period of time cannot be assured.

      Gross profit increased to $19,919,683 in fiscal 2003 compared to
$11,529,270 in fiscal 2002. The increase in gross profit is primarily related to
higher revenue volume and increased capacity utilization. Other factors
contributing to the increase in gross profit include product mix, labor cost and
component pricing. Gross profit can vary significantly from quarter to quarter.
Management continues to re-evaluate and align its overhead structure with
current customer requirements.

      Selling and administrative expenses increased from $8,790,341 or 8.6% of
net sales in fiscal 2002 to $10,048,229 or 9.5% of net sales in fiscal 2003. The
increase is primarily due to an increase in insurance and bad debt expense and
bonus accruals, which was partially offset by a reduction in bank and
professional fees.

      Interest expense decreased in fiscal 2003 to $847,846 from $2,041,438 in
fiscal 2002. The overall decrease was primarily due to a reduction in the loan
balance of the Company's credit facility and a lower interest rate. Interest
expense as a percent of sales decreased to 0.8% of sales compared to 2.0% in the
prior fiscal year.

      In fiscal 2003 tax expense was $3,251,551 which resulted in an effective
tax rate of $36.2% compared to $943,603 in income tax expense and an effective
tax rate of 37.9% in fiscal 2002.

      As a result of the forgoing, the Company recorded net income of $5,714,924
in fiscal 2003 compared to $1,542,056 in fiscal 2002. Diluted earnings per share
for the year ended April 30, 2003 was $1.70 compared to $0.52 in fiscal 2002.
Basic earnings per share were $1.98 and $0.54 for the year ended April 30, 2003
and 2002, respectively.

                                       17



QUARTERLY RESULTS AND SEASONALITY

      The Company's results of operations have varied significantly and may
continue to fluctuate from quarter to quarter. Operating results are affected by
a number of factors, including timing of orders from and shipments to major
customers, component pricing and shortages, the volume of orders as related to
the Company's capacity, timing of expenditures in anticipation of future sales,
price erosion within the electronics industry, capacity utilization, the mix of
turnkey and consignment business, competition within the electronic industry,
the gain or loss of significant customers and variations in the demand for
products in the industries served by the Company. A significant portion of the
Company's expenses are relatively fixed in nature and planned expenditures are
based in part on anticipated orders. The inability to adjust expenditures to
compensate for a decline in net sales may magnify the adverse impact of such
decline on the Company's results of operations. The Company's customers
generally require short delivery cycles. In the absence of substantial backlog,
quarterly sales and operating results depend on the volume and timing of orders
received during the quarter, which can be difficult to forecast. In addition,
variations in the size and delivery schedules of purchase orders received by the
Company, as well as changes in customers' delivery requirements or the
rescheduling or cancellations of orders and commitments, may result in
substantial fluctuations in backlog from period to period. Accordingly, the
Company believes that backlog may not be a meaningful indicator of future
operating results.

LIQUIDITY AND CAPITAL RESOURCES:

      In fiscal 2004 the Company financed operations through cash provided by
operating activities. During the period, cash provided by operating activities
was primarily related to net income and a decrease in income taxes payable.

      Net cash used for investing activities included approximately $4,000,000
for the start up of the manufacturing operation in China. The Company financed
$3,600,000 for the purchase of its corporate headquarters and Midwestern
manufacturing facility. Capital expenditures for machinery and equipment
accounted for approximately $1,600,000 in investing activities. The Company
anticipates its capital expenditures requirements for fiscal 2005 to be
approximately $5,000,000.

      The Company raised approximately $4,315,000 from the exercise of stock
options in fiscal 2004. In addition, the Company has recorded a tax benefit of
approximately $5,185,000 associated with the tax deductible compensation arising
from the exercise of stock options during fiscal 2004.

      The Company anticipates its credit facility, cash flow from operations and
leasing resources will be adequate to meet its working capital requirements in
fiscal 2005. In the event the business grows rapidly or the Company considers an
acquisition, additional financing resources could be necessary. There is no
assurance the Company can obtain equity or debt financing at acceptable terms.

      The Company entered into an Amended Loan and Security Agreement in January
2004, which provides for a revolving credit facility. The maximum borrowing
limit under the revolving credit facility is limited to the lesser of: (i)
$13,000,000 or (ii) an amount equal to the sum of 85% of the receivable
borrowing base and the lesser of $6,500,000 or varying percentages of the
inventory base. The Amended Loan and Security Agreement expires in September
2005. At April 30, 2004 the Company was in compliance with its financial
covenants and had no outstanding borrowings under this facility.

      The loan facility is collateralized by substantially all of the assets of
the Company and contains certain financial convenants, including specific
covenants pertaining to the maintenance of minimum tangible net worth and net
income. The agreement also restricts annual lease rentals and capital
expenditures and the payment of dividends or distributions of any cash or other
property on any of its capital stock except that common stock dividends may be
distributed by a stock split or dividends prorata to its stockholders.

      On June 25, 2004 SMTU amended its loan and security agreement
("Agreement") covering its revolving credit facility. Under the amended terms of
the Agreement, the maximum borrowing limit is the lesser of (i) $3,000,000, or
(ii) an amount equal to the sum of (A) eighty-five percent (85%) of the net
amount eligible accounts receivable outstanding at such date; (B) fifty percent
(50%) of eligible inventory at such date and (C) fifty percent (50%) of the net
amount of foreign Solectron eligible accounts receivable outstanding at such
date;

                                       18



provided, however, that the aggregate amount of advances for eligible inventory
shall not exceed one million five hundred thousand dollars ($1,500,000) at any
time and the aggregate amount of advances for foreign Solectron eligible
accounts receivable shall not exceed five hundred thousand dollars ($500,000) at
any time. The amended revolving credit facility matures on July 31, 2005.
Borrowings under the revolving credit facility bear interest at the bank's prime
plus 2.0% (6.0% at April 30, 2004). The Company is obligated to pay an annual
commitment fee of 1/4 of 1.0% on the average daily unused portion of the
revolving credit facility. The available portion of the revolving credit
facility at April 30, 2004 was $132,798.

      The Agreement is collateralized by substantially all of the assets of SMTU
and contains certain financial covenants, including specific covenants
pertaining to the maintenance of tangible net worth and net income before
partnership distributions. As of April 30, 2004 SMTU was in compliance with
these debt covenants. At April 30, 2004 and 2003 SMTU had outstanding borrowing
of $1,118,514 and $1,476,443, respectively.

      In August 1999, the Company entered into a guaranty agreement with SMTU's
lender to guarantee the obligation of SMTU under its revolving line of credit to
a maximum of $2,000,000 plus interest and related costs associated with the
enforcement of the guaranty. In connection with the guaranty agreement, one of
the limited partners of SMTU and a Vice President of SMTU have each executed a
guaranty to the lender to reimburse the Company for up to $500,000 of payments
made by the Company under its guaranty to the lender in excess of $1,000,000. In
addition, the limited partner has agreed to indemnify the Company for 50% of all
payments made on behalf of SMTU to the lender. The limited partner's obligation
to the Company under the indemnity is reduced dollar for dollar to the extent
the limited partner would otherwise be obligated to pay more than $1,000,000 as
a result of his guaranty to the lender. The revolving line of credit expires on
July 31, 2005 and no liability has been recorded by the Company related to its
guaranty.

      The Company provides funds for salaries, wages, overhead and capital
expenditure items as necessary to operate its wholly owned subsidiary Standard
Components de Mexico, S.A. The Company provides funding to Standard Components
de Mexico, S.A. in U.S. dollars, which are exchanged for pesos as needed. The
fluctuation of the peso from time to time, without an equal or greater increase
in Mexican inflation, has not had a material impact on the financial results of
the Company. In fiscal 2004 the Company paid approximately $9,400,000 to
Standard Components de Mexico, S.A. for services provided.

      The Company adopted the provisions of FASB Interpretation No. 46R ("FIN
46R"), Consolidation of Variable Interest Entities as of November 1, 2003, as it
relates to its 42.5% owned affiliate SMTU and consolidated SMTU in the
accompanying financial statements and footnotes to the financial statements from
the earliest date reported.

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

Contractual Obligations



Fiscal year ended:       2005         2006         2007         2008         2009      Thereafter      Total
-------------------   ----------   ----------   ----------   ----------   ----------   ----------   -----------
                                                                               
Capital leases        $  712,222   $  262,706   $   49,035            -            -            -   $ 1,023,963
Operating leases         726,190      628,780      628,903      652,681      550,557      380,120     3,567,231
Long-term bank debt            -    1,118,514            -            -            -            -     1,118,514
Long-term mortgage       370,339      360,388      350,436      340,484    2,894,461            -     4,316,108
Long-term purchase
   obligation            374,268      374,268      374,268      187,134            -            -     1,309,938
                      ----------   ----------   ----------   ----------   ----------   ----------   -----------
                      $2,183,019   $2,744,656   $1,402,642   $1,180,299   $3,445,018   $  380,120   $11,335,754


                                       19



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

      Not applicable.

ITEM 8.  FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

      The response to this item is included in Item 15(a) of this Report.

ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURE

      Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

      The Company maintains a set of disclosure controls and procedures that are
designed to ensure that information required to be disclosed by the Company in
the reports filed by the Company under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission. Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision of the President and Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, the
President and Chief Executive Officer and the Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective.

      There have been no significant changes in the Company's internal controls
or other factors that could significantly affect those controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement, filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended April 30, 2004.

ITEM 11. EXECUTIVE COMPENSATION

      The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement, filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended April 30, 2004.

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

      The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement, filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended April 30, 2004.

                                       20



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement, filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended April 30, 2004

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

      The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement, filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company's
fiscal year ended April 30, 2004

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

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

                                       21



                                INDEX TO EXHIBITS

      (a)(3)

3.1   Certificate of Incorporation of the Company, incorporated herein by
      reference to Exhibit 3.1 to Registration Statement on Form S-1, File No.
      33-72100, dated February 9, 1994.

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

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

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

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

*10.4 1994 Outside Directors Stock Option Plan - filed as Exhibit 10.15 to the
      Company's Registration Statement on Form S-1, File No. 33-72100, and
      hereby incorporated by reference.

10.5  The Company's 1997 Directors' Stock Option Plan - filed as Exhibit A to
      the Company's 1997 Proxy Statement filed on August 18, 1997 and hereby
      incorporated by reference.

10.6  Organization Agreement between the Company and other Partners of SMT
      Unlimited L.P. dated September 15, 1994 - filed as Exhibit 10.23 to the
      Company's Form 10-K for the fiscal year ended April 30, 1995 and hereby
      incorporated by reference.

*10.7 2000 Outside Directors' Stock Option Plan and hereby incorporated by
      reference - filed as Appendix 1 to the Company's 2000 Proxy Statement
      filed on August 21, 2000.

*10.8 2000 Employee Stock Option Plan - filed as Appendix 2 to the Company's
      2000 Proxy Statement filed on August 21, 2000 and hereby incorporated by
      reference.

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

10.10 Amended and Restated Agreement between Nighthawk Systems, Inc. and
      SigmaTron International Inc., dated January 1, 2000, filed as Exhibit
      10.25 to the Company's Form 10-K for the year ended April 30, 2000 and
      hereby incorporated by reference.

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

10.12 Lease Agreement # GE005 between SigmaTron International, Inc. and General
      Electric Capital Corporation dated December 21, 2000, filed as Exhibit
      10.28 to the Company's Form 10-Q for the quarter ended January 31, 2001
      and hereby incorporated by reference.

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

                                       22



10.14 Lease Agreement # 200029352 between SigmaTron International, Inc. and
      Citicorp Vendor Finance, Inc. dated March 15, 2001, filed as Exhibit 10.28
      to the Company's Form 10-K for the year ended April 30, 2001 and hereby
      incorporated by reference.

10.15 Amended Loan and Security Agreement between SigmaTron International, Inc.
      and LaSalle National Association, dated October 16, 2002, filed as Exhibit
      10.27 to the Company's Form 10-Q for the quarter ended October 31, 2002
      and hereby incorporated by reference.

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

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

10.18 Amended Loan and Security Agreement between SigmaTron International, Inc.
      and LaSalle Bank, dated January, 2004, filed as Exhibit 10.21 to the
      Company's Form 10-Q for the quarter ended January 31, 2004 and hereby
      incorporated by reference.

10.19 Amended Loan and Security Agreement between SMT Unlimited L.P. and LaSalle
      Bank, dated June 25, 2004.

22.1  Subsidiaries of the Registrant - filed as Exhibit 22.1 of the Company's
      Registration Statement on Form S-1, File No. 33-72100, and hereby
      incorporated by reference.

23.1  Consent of Grant Thornton LLP

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

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

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

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

      * Indicates management contract or compensatory plan.

      (b)   Reports on Form 8-K

            The Company furnished a report on Form 8-K on September 8, 2003 to
            announce financial results for the quarter ended July 31, 2003, and
            hereby incorporated by reference.

            The Company furnished a report on Form 8-K on December 8, 2003 to
            announce financial results for the quarter ended October 31, 2003,
            and hereby incorporated by reference.

            The Company furnished a report on Form 8-K on March 8, 2004 to
            announce financial results for the quarter ended January 31, 2004,
            and hereby incorporated by reference.

      (c)   Exhibits

            The Company hereby files as exhibits to this Report the exhibits
            listed in Item 15(a)(3) above, which are attached hereto or
            incorporated herein.

                                       23



      (d)   Financial Statements Schedules

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

                                       24


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                          SIGMATRON INTERNATIONAL, INC.

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

                              Dated:  July 20, 2004

      KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned directors and
officers of SigmaTron International, Inc., a Delaware corporation, which is
filing an Annual Report on Form 10-K with the Securities and Exchange Commission
under the provisions of the Securities Exchange Act of 1934 as amended, hereby
constitute and appoint Gary R. Fairhead and Linda K. Blake, and each of them,
each of their true and lawful attorneys-in fact and agents; with full power of
substitution and resubstitution, for him and in his name, place and stead, in
all capacities, to sign any or all amendments to the report to be filed with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as each of them might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities, and on the dates indicated.



     Signature                                    Title                                           Date
     ---------                                    -----                                           ----
                                                                                        
/s/ Franklin D. Sove                Chairman of the Board of Directors                        July 20, 2004
--------------------
Franklin D. Sove

/s/ Gary R. Fairhead                President and Chief Executive Officer                     July 20, 2004
--------------------                (Principal Executive Officer)
Gary R. Fairhead

/s/ Linda K. Blake                  Chief Financial Officer, Secretary and Treasurer          July 20, 2004
------------------                  (Principal Financial Officer and Principal
Linda K. Blake                      Accounting Officer)

/s/ John P. Chen                    Director                                                  July 20, 2004
----------------
John P. Chen

/s/ W.L. McClelland                 Director                                                  July 20, 2004
-------------------
W.L. McClelland

/s/ Thomas W. Rieck                 Director                                                  July 20, 2004
-------------------
Thomas W. Rieck

/s/ Dilip S. Vyas                   Director                                                  July 20, 2004
-----------------
Dilip S. Vyas

/s/ Carl Zemenick                   Director                                                  July 20, 2004
-----------------
Carl Zemenick


                                       25


                          INDEX TO FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULES



                                                                                                              PAGE
                                                                                                           
SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................................................       F-2

CONSOLIDATED FINANCIAL STATEMENTS

   CONSOLIDATED BALANCE SHEETS
     ASSETS.............................................................................................       F-3
     LIABILITIES AND STOCKHOLDERS' EQUITY...............................................................       F-4
   CONSOLIDATED STATEMENTS OF INCOME....................................................................       F-5
   CONSOLIDATED STATEMENT OF CHANGES IN
     STOCKHOLDERS' EQUITY...............................................................................       F-6
   CONSOLIDATED STATEMENTS OF CASH FLOWS................................................................       F-7
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................................................       F-8


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

                                      F-1


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
SigmaTron International, Inc.

We have audited the accompanying consolidated balance sheets of SigmaTron
International, Inc. (a Delaware corporation) and subsidiaries and its affiliate
SMT Unlimited L.P. as of April 30, 2004 and 2003, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended April 30, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SigmaTron
International, Inc. and subsidiaries and it affiliate, SMT Unlimited L.P. as of
April 30, 2004 and 2003, and the results of its operations and its cash flows
for the each of the three years in the period ended April 30, 2004, in
conformity with accounting principles generally accepted in the United States of
America.

                                                        /s/ GRANT THORNTON LLP

Chicago, Illinois
June 25, 2004

                                      F-2


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
CONSOLIDATED BALANCE SHEETS
APRIL 30,



                                                                                     2004                2003
                                                                                 -----------         ------------
                                                                                               
                                ASSETS
CURRENT ASSETS
  Cash                                                                           $ 5,145,814         $    424,844
  Restricted cash                                                                    100,000                    -
  Accounts receivable, less allowance for doubtful
    accounts of $120,000 at April 30, 2004
    and 2003, respectively                                                        12,651,272           13,632,888
  Inventories, net                                                                14,168,357           14,108,025
  Prepaid and other assets                                                         1,315,127              868,420
  Refundable income taxes                                                            275,583              146,822
  Deferred income taxes                                                            1,902,551              214,142
  Other receivables                                                                  415,253               48,772
                                                                                 -----------         ------------
       Total current assets                                                       35,973,957           29,443,913

PROPERTY, PLANT AND EQUIPMENT, NET                                                25,707,901           19,096,970

OTHER ASSETS                                                                       1,316,814            1,277,498
                                                                                 -----------         ------------

           TOTAL ASSETS                                                          $62,998,672         $ 49,818,381
                                                                                 ===========         ============


The accompanying notes are an integral part of these statements.

                                      F-3

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



                                                               2004          2003
                                                            -----------   -----------
                                                                    
         LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Trade accounts payable                                    $ 7,475,026   $ 7,919,777
  Accrued expenses                                            4,540,744     4,953,502
  Income taxes payable                                                -     1,422,212
  Notes payable - buildings                                     430,000       250,000
  Capital lease obligations                                     640,436       985,280
                                                            -----------   -----------

        Total current liabilities                            13,086,206    15,530,771

NOTES PAYABLE - BANKS                                         1,118,514     1,476,443

NOTES PAYABLE - BUILDINGS,
  LESS CURRENT PORTION                                        4,536,159     3,108,417

CAPITAL LEASE OBLIGATIONS,
  LESS CURRENT PORTION                                          299,536       939,968

SUBORDINATED DEBENTURE PAYABLE                                1,050,000     1,050,000

DEFERRED INCOME TAXES                                         1,265,714     1,185,061

                                                            -----------   -----------
        Total liabilities                                    21,356,129    23,290,660

MINORITY INTEREST IN AFFILIATE                                  439,787       235,051

COMMITMENTS AND CONTINGENCIES                                         -             -

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value; 500,000 shares
    authorized, none issued and outstanding                           -             -
  Common stock, $.01 par value; 6,000,000 shares
    authorized, 3,750,954 and 2,933,855 shares issued and
    outstanding at April 30, 2004 and 2003, respectively         37,510        29,340
  Capital in excess of par value                             19,056,525     9,560,341
  Retained earnings                                          22,108,721    16,702,989
                                                            -----------   -----------

        Total stockholders' equity                           41,202,756    26,292,670
                                                            -----------   -----------

        TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                              $62,998,672   $49,818,381
                                                            ===========   ===========


The accompanying notes are an integral part of these statements.

                                      F-4


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



                                                             2004             2003            2002
                                                         -------------    -------------   -------------
                                                                                 
Net sales                                                $ 100,494,122    $ 105,824,257   $ 102,292,588

Cost of products sold                                       81,378,192       85,904,574      90,763,318
                                                         -------------    -------------   -------------

Gross profit                                                19,115,930       19,919,683      11,529,270

Selling and administrative expenses                          9,664,903       10,048,229       8,790,341
                                                         -------------    -------------   -------------

        Operating income                                     9,451,027        9,871,454       2,738,929

Other income                                                         -                -      (1,917,847)
Interest expense - banks and capital lease obligations         239,792          847,846       2,041,438
Interest income                                                 (7,500)               -        (107,723)
                                                         -------------    -------------   -------------

        Income before income tax expense and
         minority interest of affiliate                      9,218,735        9,023,608       2,723,061

Income tax expense                                           3,550,038        3,251,551         943,603
                                                         -------------    -------------   -------------
Income before minority interest of affiliate                 5,668,697        5,772,057       1,779,458

Minority interest in income of affiliate                       262,965           57,133         237,402
                                                         -------------    -------------   -------------

        NET INCOME                                       $   5,405,732    $   5,714,924   $   1,542,056
                                                         =============    =============   =============

Net income per common share
  Basic                                                  $        1.58    $        1.98   $        0.54
                                                         =============    =============   =============

  Diluted                                                $        1.53    $        1.70   $        0.52
                                                         =============    =============   =============

Weighted-average shares of common
  stock outstanding
    Basic                                                    3,423,999        2,885,652       2,881,227
                                                         =============    =============   =============

    Diluted                                                  3,541,297        3,355,076       2,967,258
                                                         =============    =============   =============


The accompanying notes are an integral part of these statements.

                                      F-5


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE YEARS ENDED APRIL 30, 2002, 2003 AND 2004



                                                                   Capital in                   Total
                                      Preferred       Common     excess of par   Retained    stockholders'
                                        stock          stock         value       earnings       equity
                                    -------------   -----------   -----------   -----------   -----------
                                                                              
Balance at May 1, 2001              $           -   $    28,812   $ 9,436,554   $ 9,446,009   $18,911,375

Net income                                      -             -             -     1,542,056     1,542,056
                                    -------------   -----------   -----------   -----------   -----------

Balance at April 30, 2002                       -        28,812     9,436,554    10,988,065    20,453,431

Exercise of options                             -           528       123,787             -       124,315

Net income                                      -             -             -     5,714,924     5,714,924
                                    -------------   -----------   -----------   -----------   -----------

Balance at April 30, 2003                       -        29,340     9,560,341    16,702,989    26,292,670

Exercise of options                             -         8,170     4,310,695             -     4,318,865

Tax benefit of exercise of option               -             -     5,185,489             -     5,185,489

Net income                                      -             -             -     5,405,732     5,405,732
                                    -------------   -----------   -----------   -----------   -----------

Balance at April 30, 2004           $           -   $    37,510   $19,056,525   $22,108,721   $41,202,756
                                    =============   ===========   ===========   ===========   ===========


The accompanying notes are an integral part of these statements.

                                      F-6

SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30,



                                                           2004            2003            2002
                                                       ------------    ------------    ------------
                                                                              
Cash flows from operating activities
  Net income                                           $  5,405,732    $  5,714,924    $  1,542,056
  Adjustments to reconcile net income to net
    cash provided by operating activities
      Depreciation and amortization                       2,682,530       3,456,773       2,905,123
      Provision for doubtful accounts                             -        (124,786)         70,004
      Provision for inventory obsolescence                 (169,926)              -        (121,500)
      Deferred income taxes                              (1,607,756)         69,780         114,704
      Changes in assets and liabilities
        Accounts receivable                                 981,616      (2,219,235)      1,714,710
        Inventories                                         109,594         233,995      10,776,530
        Prepaid expenses and other assets                (1,015,409)        349,221       2,747,885
        Refundable income taxes                            (128,761)              -               -
        Minority interest in affiliate                      205,241        (272,075)        237,402
        Trade accounts payable                             (444,749)      1,588,230      (6,138,406)
        Accrued expenses                                   (412,761)      1,496,498         489,404
        Income taxes                                     (1,422,212)      1,405,119          17,093
                                                       ------------    ------------    ------------

           Net cash provided by operating activities      4,183,139      11,698,444      14,355,005

Cash flows from investing activities
  Proceeds from sale of machinery and equipment                   -           1,282               -
  Purchases of machinery and equipment                   (9,231,061)     (1,666,103)       (975,351)
                                                       ------------    ------------    ------------

           Net cash used in investing activities         (9,231,061)     (1,664,821)       (975,351)

Cash flows from financing activities
  Proceeds from exercise of options                       4,318,865         124,315               -
  Tax benefits of options exercised                       5,185,489               -               -
  Borrowings (payments) under building notes payable      1,607,742        (245,546)              -
  Net payments from other notes payable                           -         (58,749)         58,749
  (Payments) under
    capital lease obligations                              (985,275)     (1,182,644)     (3,065,451)
  Net payments under line of credit                        (357,929)     (8,593,535)    (10,030,572)
                                                       ------------    ------------    ------------

           Net cash provided by (used in)
             financing activities                         9,768,892      (9,956,159)    (13,037,274)
                                                       ------------    ------------    ------------

           INCREASE IN CASH                               4,720,970          77,464         342,380

Cash at beginning of year                                   424,844         347,380           5,000
                                                       ------------    ------------    ------------

Cash at end of year                                    $  5,145,814    $    424,844    $    347,380
                                                       ============    ============    ============

Supplementary disclosures of cash flow information
  Cash paid for interest                               $    461,549    $  1,117,848    $  2,402,483
  Cash paid for income taxes, net of (refunds)            1,322,633       1,881,210        (146,293)
  Tax benefit of options exercised                        5,185,489               -               -
  Acquisition of buildings financed
    under bank notes                                      3,600,000       1,950,000               -


The accompanying notes are an integral part of these statements.

                                      F-7


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2004, 2003 AND 2002

NOTE A - DESCRIPTION OF THE BUSINESS

SigmaTron International, Inc. (the "Company") operates in one business segment
as an independent provider of electronic manufacturing services, which includes
printed circuit board assemblies and completely assembled (boxbuild) electronic
products. In connection with the production of its assembled products, the
Company; its wholly owned subsidiary, Standard Components de Mexico, S.A.; its
affiliate, SMT Unlimited L.P. ("SMTU"); its wholly owned foreign enterprise
Wujiang SigmaTron Electronic Co., Ltd. ("SigmaTron China"); and its procurement
branch, SigmaTron Taiwan, provide services to their customers including (1)
automatic and manual assembly and testing of products; (2) material sourcing and
procurement; (3) design, manufacturing and test engineering support; (4)
warehousing and shipment services; and (5) assistance in obtaining product
approval from governmental and other regulatory bodies. The Company provides
these manufacturing services through an international network of facilities
located in North America, China and Taiwan.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION POLICY

The consolidated financial statements include the accounts and transactions of
the Company, its wholly-owned subsidiary, Standard Components de Mexico, S.A.,
SMTU, SigmaTron China and its procurement branch, SigmaTron Taiwan. The
functional currency of the Mexican and Chinese subsidiaries and procurement
branch, SigmaTron Taiwan is the U.S. dollar. The Company adopted the provisions
of Financial Accounting Standards Board ("FASB") Interpretation No. 46R, ("FIN
46R") "Consolidation of Variable Interest Entities" as of November 1, 2003 as it
relates to its 42.5% owned affiliate SMTU and consolidated SMTU from the
earliest date reported. The Company owns 42.5% of SMTU and previously reported
its ownership under the equity method. Significant intercompany accounts and
transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

                                      F-8


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and all highly liquid short-term
investments maturing within three months of the purchase date.

RESTRICTED CASH

Restricted cash represents amounts held in escrow as it relates to the
acquisition of the Company's corporate headquarters and midwestern manufacturing
facility. The amounts become unrestricted upon settlement of all matters related
to the acquisition of the facility.

ACCOUNTS RECEIVABLE

The majority of the Company's accounts receivable are due from companies in the
consumer electronics, gaming, fitness, industrial electronics,
telecommunications, home appliances and automotive industries. Credit is
extended based on evaluation of a customer's financial condition, and generally,
collateral is not required. Accounts receivable are due in accordance with
agreed upon terms, and are stated at amounts due from customers net of an
allowance for doubtful accounts. Accounts outstanding longer than the
contractual payments terms are considered past due. The Company determines its
allowance by considering a number of factors, including the length of time trade
accounts receivable are past due, the Company's previous loss history, the
customer's current ability to pay its obligation to the Company, and the
condition of the general economy and the industry as a whole. The Company writes
off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out method. The Company establishes inventory reserves for
valuation, shrinkage, and excess and obsolete inventory. The Company records
provisions for inventory shrinkage based on historical experience to account for
unmeasured usage or loss. Actual results differing from these estimates could
significantly affect the Company's inventories and cost of products sold. The
Company records provisions for excess and obsolete inventories for the
difference between the cost of inventory and its estimated realizable value
based on assumptions about future product demand and market conditions. Actual
product demand or market conditions could be different than projected by
management.

                                      F-9


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

PLANT PROPERTY AND EQUIPMENT

Machinery and equipment are valued at cost. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful life of the assets:


                                                    
Buildings                                                20 years
Machinery and equipment                                5-12 years
Office equipment                                          5 years
Leasehold improvements                                   15 years


INCOME TAXES

Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing income available to common
stockholders (the numerator) by the weighted-average number of common shares
outstanding (the denominator) for the period. The computation of the diluted
earnings per share is similar to the basic earnings per share, except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potentially dilutive common shares had been
issued.

REVENUE RECOGNITION

Revenues from sales of product including the Company's electronic manufacturing
service business are recognized when the product is shipped. In general it is
the Company's policy to recognize revenue and related costs when the order has
been shipped from its facilities, which is also usually the same point that
title passes under the terms of the purchase order. Periodically inventory is
held on consignment and revenue is recognized when the product is consumed by
the Company's customer. Based on the Company's history of providing contract
manufacturing services, the Company believes that collectibility is reasonably
assured.

SHIPPING AND HANDLING COSTS

The Company records shipping and handling costs net, within selling and
administrative expenses. Customers are typically invoiced for shipping costs.
Shipping and handling costs totaled $77,495, $113,238 and $93,150 in fiscal
2004, 2003 and 2002, respectively.

                                      F-10


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include receivables, notes payable, accounts
payable and accrued liabilities. The fair values of financial instruments are
not materially different from their carrying values.

LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards SFAS No. 144,
accounting for the impairment of long-lived assets is reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If the fair value of an asset is determined to be less
than the carrying amount of the asset, a loss is recognized for the difference.

STOCK INCENTIVE PLANS

The Company maintains various stock incentive plans. See Note N for additional
information regarding these plans. The Company accounts for these plans under
the recognition and measurement principles of APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. The Company
recognizes compensation cost for restricted shares and restricted stock units to
employees. As of April 30, 2004, there are no issued restricted shares or
restricted stock units. No compensation cost is recognized for stock option
grants. All options granted under the Company's plans had an exercise price
equal to the market value of the underlying common stock on the date of grant.
The following table illustrates the effect on net earnings and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation," to stock-based compensation.
The following table also provides the amount of stock-based compensation cost
included in net earnings as reported.



                                                         2004           2003            2002
                                                      -----------    -----------    -----------
                                                                           
Net income as reported                                $ 5,405,732    $ 5,714,924    $ 1,542,056

Deduct total stock-based employee compensation
   expense determined under fair value based method
   for awards granted, modified, or settled, net of
   related tax effects                                   (266,528)      (563,018)    (1,090,795)
                                                      -----------    -----------    -----------

Pro forma net income                                  $ 5,139,204    $ 5,151,906    $   451,261
                                                      ===========    ===========    ===========


                                      F-11


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

STOCK INCENTIVE PLANS - CONTINUED



                           2004    2003    2002
                           -----   -----   -----
                                  
Earnings per share
   Basic - as reported     $1.58   $1.98   $ .54
   Basic - pro forma        1.50    1.78     .16

   Diluted - as reported    1.53    1.70     .52
   Diluted - pro forma      1.45    1.54     .15


RISKS AND UNCERTAINTIES

The Company's inventories include parts and components that may be specialized
in nature or subject to customers' future usage requirements. The Company has
programs to minimize the required inventories on hand and actively monitors
customer purchase orders and backlog. The Company uses estimated allowances to
reduce recorded amounts to market values, such estimates could change in the
future.

NEW ACCOUNTING STANDARDS

In January 2003, Financial Interpretation No. 46 ("FIN46R"), is an
interpretation of Accounting Research Bulletin No. 51 and revises the
requirements for consolidation by business enterprises of variable interest
entities. FIN 46R applies immediately to variable interest entities created
after January 31, 2003 and to variable interest entities in which an enterprise
obtains an interest after that date. It applies in the first fiscal year or
interim period ending after December 15, 2003, to variable interest entities in
which an enterprise holds a variable interest acquired before February 1, 2003.
FIN 46R applies to public enterprises as of the beginning of the applicable
interim or annual period and to nonpublic enterprises as of the end of the
applicable annual period. It may be applied prospectively with a
cumulative-effect adjustment as of the date on which it is first applied or by
restating previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated. The
Company adopted FIN 46R as of November 1, 2003 as it relates to its 42.5% owned
affiliate SMTU. SMTU has been an affiliate of the Company since 1995. The
Company's investment and receivables from SMTU totaled approximately $3,350,000
at April 30, 2004.

The accompanying financial statements include the financial position and results
of operations and cash flows for the Company's 42.5% owned affiliate, SMTU, with
the remaining 57.5% reflected as a "minority interest." Previously the Company
had reflected such investment on the equity method. The Company adopted the
provision of FIN 46R for its investment in SMTU and has restated all periods
presented.

                                      F-12


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The consolidation of SMTU had the following effect on amounts previously
reported by SigmaTron.



                                               Previously    As currently
                                                reported      reported
                                              ------------   ------------
                                                       
April 30, 2003 Total assets                   $ 45,105,994   $ 49,818,381
April 30, 2003 Total liabilities                19,142,532     23,525,711
April 30, 2003 Total stockholders equity        25,963,462     26,292,670
April 30, 2003 Net sales                        93,165,149    105,824,257
April 30, 2003 Net income                        5,385,716      5,714,924
April 30, 2003 Earnings per share - basic     $       1.87   $       1.98
April 30, 2003 Earnings per share - diluted   $       1.61   $       1.70


In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." This statement
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an issuer classify a
financial instrument that is within the scope as a liability (or an asset in
some circumstances) because that financial instrument embodies an obligation of
the issuer. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim periods beginning after June 15, 2003, except for mandatory
redeemable financial instruments of nonpublic entities. The adoption of this
statement did not have a material effect on its results of operations or
financial position.

RECLASSIFICATIONS

Certain amounts in the 2002 and 2003 financial statements have been reclassified
to conform with the 2004 presentation.

                                      F-13


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE C - ALLOWANCE FOR DOUBTFUL ACCOUNTS

Changes in the Company's allowance for doubtful accounts are as follows:



                       2004         2003        2002
                    ---------    ---------    ---------
                                     
Beginning balance   $ 120,000    $ 276,470    $ 244,782
Bad debt expense        2,650       77,759       70,004
Write-offs             (2,650)    (234,229)     (38,316)
Recoveries                  -            -            -
                    ---------    ---------    ---------

Ending balance      $ 120,000    $ 120,000    $ 276,470
                    =========    =========    =========


NOTE D - INVENTORIES

Inventories consist of the following at April 30:



                               2004           2003
                            -----------   -----------
                                    
Finished products           $ 3,400,742   $ 3,984,576
Work in process               1,221,160     1,242,028
Raw materials                10,245,349     9,750,241
                            -----------   -----------

                             14,867,251    14,976,845

Less obsolescence reserve       698,894       868,820
                            -----------   -----------

                            $14,168,357   $14,108,025
                            ===========   ===========


Changes in the Company's inventory obsolescence reserve are as follows:



                       2004        2003         2002
                    ---------    ---------   ---------
                                    
Beginning balance   $ 868,820    $ 754,644   $ 488,817
Write-offs                  -      114,176     387,327
Recoveries           (169,926)           -    (121,500)
                    ---------    ---------   ---------

Ending balance      $ 698,894    $ 868,820   $ 754,644
                    =========    =========   =========


                                      F-14


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE E - OTHER INCOME

In 2002, other income primarily comprises compensation from one of the Company's
customers relating to cancelled purchase order commitments.

NOTE F -  PROPERTY, PLANT AND EQUIPMENT, NET

Machinery and equipment consist of the following at April 30:



                                                                                        2004            2003
                                                                                    -----------     -----------
                                                                                              
Land and buildings                                                                  $ 8,832,653     $ 1,950,000
Property, plant and equipment                                                        19,126,937      15,767,907
Office equipment                                                                      2,578,362       2,497,991
Tools and dies                                                                          268,630         268,630
Leasehold improvements                                                                1,838,958       2,616,194
Equipment under capital leases                                                       13,185,881      13,185,881
                                                                                    -----------     -----------

                                                                                     45,831,421      36,286,603
Less accumulated depreciation and amortization, including amortization of assets
    under capital leases of $6,868,759 and $5,813,891 at April 30, 2004 and
    2003, respectively                                                               20,123,520      17,189,633
                                                                                    -----------     -----------

Property, plant and equipment, net                                                  $25,707,901     $19,096,970
                                                                                    ===========     ===========


NOTE G - GUARANTEES

In August 1999, the Company entered into a guaranty agreement with SMTU's lender
to guarantee the obligation of SMTU under its revolving line of credit to a
maximum of $2,000,000 plus interest and related costs associated with the
enforcement of the guaranty. In connection with the guaranty agreement, one of
the limited partners of SMTU and a Vice President of SMTU have each executed a
guaranty to the lender to reimburse the Company for up to $500,000 of payments
made by the Company under its guaranty to the lender in excess of $1,000,000. In
addition, the limited partner has agreed to indemnify the Company for 50% of all
payments made on behalf of SMTU to the lender. The limited partner's obligation
to the Company under the indemnity is reduced dollar for dollar to the extent
the limited partner would otherwise be

                                      F-15


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE G - GUARANTEES - CONTINUED

obligated to pay more than $1,000,000 as a result of his guaranty to the lender.
The revolving line of credit expires on July 31, 2005 and no liability has been
recorded by the Company related to its guaranty.

NOTE H - NOTES PAYABLE

The Company amended its loan and security agreement in February 2004, that
provides for a revolving credit facility, an $800,000 equipment loan facility,
and a $2,000,000 letter-of-credit facility. The maximum borrowing limit under
the revolving credit facility is limited to the lesser of (i) $13,000,000 or
(ii) an amount equal to the sum of up to 85% of the receivables borrowing base
and the lesser of $6,500,000 or up to 50% of the inventory borrowing base, as
defined. At April 30, 2004 and 2003, the Company had outstanding borrowings of
$0 and $1,653,963, respectively.

Borrowings under the revolving line of credit bear interest at the prime rate up
to prime rate plus 0.5% (4.0% - 4.5% at April 30, 2004). The Company must also
pay an unused commitment fee equal to 0.25% on the revolving credit facility. As
of April 30, 2004, the Company had an available line of credit of $13,000,000.
The revolving credit facility matures September 30, 2005. At April 30, 2004, the
Company was in compliance with its financial covenants and had no borrowing
under this facility.

Borrowings under the equipment loan bear interest at prime plus 0.5%. The
equipment loan matures August 2005. No amounts were outstanding under the
equipment loan facility at April 30, 2004.

The loan and security agreement is collateralized by substantially all of the
assets of the Company and contains certain financial covenants, including
specific covenants pertaining to the maintenance of minimum tangible net worth
and net income. The agreement also restricts annual lease rentals and capital
expenditures and the payment of dividends or distributions of any cash or other
property on any of its capital stock, except that common stock dividends may be
distributed by a stock split or dividends pro rata to its stockholders.

On June 25, 2004 SMTU amended its loan and security agreement ("Agreement")
covering its revolving credit facility. Under the amended terms of the
Agreement, the maximum borrowing limit is the lesser of (i) $3,000,000, or (ii)
an amount equal to the sum of (A) eighty-five percent (85%) of the net amount
eligible accounts receivable outstanding at such date; (B) fifty percent (50%)
of eligible inventory at such date and (C) fifty (50%) of the net amount of
foreign Solectron eligible accounts receivable outstanding at such date;
provided, however, that the

                                      F-16


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE H - NOTES PAYABLE - CONTINUED

aggregate amount of advances for eligible inventory shall not exceed one million
five hundred thousand dollars ($1,500,000) at any time and the aggregate amount
of advances for foreign Solectron eligible accounts receivable shall not exceed
five hundred thousand dollars ($500,000) at any time. The amended revolving
credit facility matures on July 31, 2005. Borrowings under the revolving credit
facility bear interest at the bank's prime plus 2.0% (6.0% at April 30, 2004).
The Company is obligated to pay an annual commitment fee of 1/4 of 1.0% on the
average daily unused portion of the revolving credit facility. The available
portion of the revolving credit facility at April 30, 2004 was $132,798.

The Agreement is collateralized by substantially all of the assets of SMTU and
contains certain financial covenants, including specific covenants pertaining to
the maintenance of tangible net worth and net income before partnership
distributions. As of April 30, 2004 SMTU was in compliance with these debt
covenants. At April 30, 2004 and 2003 SMTU had outstanding borrowings of
$1,118,514 and $1,476,443, respectively.

On November 19, 2003 the Company purchased the property that serves as the
Company's corporate headquarters and its Midwestern manufacturing facility. The
Company executed a note with LaSalle Bank N.A. in the amount of $3,600,000. The
note bears a fixed interest rate of 5.43% and is payable in sixty monthly
installments. A final payment of approximately $2,700,000 is due on or before
November 30, 2008. At April 30, 2004, $3,525,000 was outstanding.

NOTE I - ACCRUED EXPENSES

Accrued expenses consist of the following at April 30:



                         2004           2003
                      ----------     ----------
                               
Payroll               $1,552,855     $1,992,531
Bonuses                1,941,402      1,942,200
Interest payable         542,200        539,793
Commissions               49,905         45,734
Professional fees        454,382        433,244
                      ----------     ----------

                      $4,540,744     $4,953,502
                      ==========     ==========


                                      F-17


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE J - RELATED-PARTY TRANSACTIONS AND COMMITMENTS

The Company had a related-party transaction with Circuit Systems, Inc., which
filed for protection under Chapter 11 of the Federal bankruptcy code, and is now
known as Circuit Systems, Inc. Liquidating Grantor's Trust, dated October 14,
2001 ("CSI"), a former shareholder of the Company. CSI divested itself of the
investment in common stock of the Company in April 2001. The transaction
primarily involved the leasing of operating space. The Company leased space in
Elk Grove Village, Illinois, at a base rental of $33,800 per month, with an
additional $7,000 per month for property taxes. The lease required the Company
to pay maintenance and utility expenses. Subsequent to the renewal agreement,
CSI sold the building to a non-related party. The Company's exercise of the
renewal option was acknowledged by the new owner. Rent and property tax expense
related to the agreement totaled approximately $270,000 from May 2003 through
mid-November 2003 and $495,000 and $493,000 for the twelve month periods ended
April 30, 2003 and 2002, respectively.

At April 30, 2003 the Company had non-interest bearing receivables of
approximately $114,000 for advances to a company in which an officer of the
Company is an investor. The balance was paid in full during fiscal 2004. This
receivable was guaranteed by an officer of the Company.

During 1996, the Company invested $1,200 in exchange for a 12% limited
partnership interest in Lighting Components, L.P. ("LC") and invested $1,300 in
Lighting Components, Inc., which is the general partner of LC, in exchange for
13% of its capital stock. At April 30, 1998, the Company had also made advances
to LC in exchange for subordinated debentures and promissory notes totaling
$280,000. The subordinated debentures and promissory notes totaling $280,000
were fully reserved at April 30, 1998.

In addition to the subordinated debentures and promissory notes, at April 30,
2000, the Company had recorded miscellaneous receivables, interest and trade
receivables from LC of $1,560,000, against which a reserve of $789,000 was
recorded. The Company wrote off its investment in LC of $2,500 in the statement
of operations for the year ended April 30, 2001. In April 2001, LC sold certain
assets to a third party. In connection with the asset sale, the Company received
a $400,000 promissory note receivable from a third party. Payments were due on
the promissory note as follows: $125,000 plus accrued interest due January 1,
2002, $125,000 plus accrued interest due January 1, 2003, and $150,000 plus
accrued interest due January 1, 2004. The payment obligations for $125,000 due
January 1, 2003, and 2002, plus accrued interest were paid in December 2002 and
2001, respectively. The payment obligation of $150,000 due January 1, 2004 was
paid in January 2004 plus accrued interest. Interest on the promissory note will
accrue at 5% per annum. The third party also agreed to pay LC royalties on
certain sales derived from the purchase of the acquired assets as defined in the
agreement. LC or its successor will receive royalty payments through April 30,
2007. Per the terms of a separate agreement, the Company will receive its share
of the royalty payments. These royalty payments, if any, will be recorded by the
Company as received and reflected as payments on the notes.

                                      F-18


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE K - INCOME TAXES

The income tax provision (benefit) for the years ended April 30 consists of the
following:



                   2004           2003           2002
                ----------     ----------     ----------
                                     
Current
    Federal     $2,763,249     $2,654,888     $  417,415
    State          483,944        421,535        134,207
    Foreign        102,200        105,348        277,277
Deferred
    Federal        174,922         59,313         99,998
    State           25,723         10,467         14,706
                ----------     ----------     ----------

                $3,550,038     $3,251,551     $  943,603
                ==========     ==========     ==========


As a result of the redemption of stock options, the Company was able to obtain
an income tax benefit related to stock issued to employees in the amount of
approximately $5,200,000. This tax benefit does not affect net income, but
rather is added to additional paid in capital. As a result the Company generated
a net tax operating loss, which will offset taxes already paid in fiscal 2004,
as well as offset future tax liability. This created a refundable income tax and
a future tax benefit. Since a portion of the benefit is not recognized in the
current period, it is netted against the income tax payable and recorded as a
deferred tax asset.

The reason for the differences between the income tax provision and the amounts
computed by applying the statutory Federal income tax rates to income before
income tax expense for the years ended April 30 are as follows:



                                              2004             2003             2002
                                          -----------      -----------      -----------
                                                                   
Income tax at
     Federal rate                         $ 3,134,369      $ 3,068,026      $   925,840
     State income tax, net of federal        (227,136)         278,213           88,577
     Benefit of stock option exercise         275,583                -                -
     Other, net                               367,222          (94,688)         (70,814)
                                          -----------      -----------      -----------

                                          $ 3,550,038      $ 3,251,551      $   943,603
                                          ===========      ===========      ===========


                                      F-19


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE K - INCOME TAXES - CONTINUED

Significant temporary differences that result in deferred tax assets and
(liabilities) at April 30, 2004 and 2003, are as follows:



                                             2004             2003
                                         -----------      -----------
                                                    
Allowance for doubtful accounts          $    27,300      $    27,300
Inventory obsolescence reserve               101,399          101,399
Net operating loss carry-forward           1,738,924                -
Accruals not currently deductible             92,248          128,553
Inventory                                    110,846           37,505
                                         -----------      -----------

Current deferred tax asset                 2,070,717          294,757

Prepaid insurance                           (168,166)         (80,615)
                                         -----------      -----------
Current deferred tax liability              (168,166)         (80,615)

Net current deferred tax asset           $ 1,902,551      $   214,142
                                         ===========      ===========




                                             2004             2003
                                         -----------      -----------
                                                    
Ownership in SMTU                        $    20,352      $  (105,753)
Impairment reserve                            71,098          128,720
                                         -----------      -----------
Long-term deferred tax asset                  91,450           22,967

Gain on involuntary conversion              (224,281)     $  (224,281)
Machinery and equipment                   (1,132,884)        (983,747)
                                         -----------      -----------
Long-term deferred tax liability          (1,357,165)       1,208,028)

Net long-term deferred tax liability     $(1,265,715)     $(1,185,061)
                                         ===========      ===========


                                      F-20


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE L - 401(k) RETIREMENT SAVINGS PLAN

The Company sponsors 401(k) retirement savings plans, which are available to all
non-union U.S. employees. The Company may elect to match participant
contributions ranging from $300 - $500 annually. The Company contributed
$68,252, $52,848 and $60,684 to the plans during the fiscal years ended April
30, 2004, 2003 and 2002, respectively. The Company paid total expenses of
$10,932, $11,589 and $11,653 for the fiscal years ended April 30, 2004, 2003 and
2002, respectively, relating to costs associated with the administration of the
plans.

NOTE M - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of uncollateralized accounts receivable. For the
year ended April 30, 2004, two customers accounted for 36% and 13%,
respectively, of net sales of the Company, and 26% and 6%, respectively, of
accounts receivable at April 30, 2004. For the year ended April 30, 2003, two
customers accounted for 27% and 13%, respectively, of net sales of the Company,
and 19% and 4%, respectively, of accounts receivable at April 30, 2003. For the
year ended April 30, 2002, two customers accounted for 21% and 15%,
respectively, of net sales of the Company, and 29% and 3%, respectively, of
accounts receivable at April 30, 2002.

                                      F-21


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE N - LEASES

The Company leases certain facilities under various operating leases. The
Company also leases various machinery and equipment under capital leases.

Future minimum lease payments under leases with terms of one year or more are as
follows at April 30, 2004:



                                                 Capital             Operating
         Years ending April 30,                   leases               leases
         ----------------------                -----------          -----------
                                                              
         2005                                  $   712,222          $   726,190
         2006                                      262,706              628,780
         2007                                       49,035              628,903
         2008                                            -              652,681
         2009                                            -              550,557
         Thereafter                                      -              380,120
                                               -----------          -----------

                                                 1,023,963            3,567,231
                                               ===========          ===========

Less amounts representing interest                  83,992
                                               -----------

                                                   939,971

Less current portion                               640,436
                                               -----------

                                               $   299,535
                                               ===========


Rent expense incurred under operating leases was approximately $659,000,
$886,000 and $836,000 for the years ended April 30, 2004, 2003 and 2002,
respectively.

In July 1997, the Company refinanced some machinery and equipment under a
sale/leaseback arrangement. The equipment was sold for approximately $1,400,000
million in cash. The Company has the option to purchase the equipment at the end
of the lease term for $1. The transaction has been accounted for as a financing
lease, wherein the property remains on the balance sheet and will continue to be
depreciated, and a financing obligation equal to the proceeds has been recorded.
The lease was paid in full during fiscal 2004 and the option to purchase the
equipment at the end of the lease for $1 was exercised.

                                      F-22


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE O - STOCK OPTIONS

The Company has stock option plans ("Option Plans") under which certain members
of management and outside non-management directors may acquire up to 1,303,500
shares of common stock. Options to be granted under the management plans total
967,500, with the non-management director plans allowing for a total of 336,000
options to be granted. At April 30, 2004, the Company has 178,154 shares
reserved for future issuance to management under the Option Plans. The Option
Plans are interpreted and administered by the Compensation Committee of the
Board of Directors. The maximum term of options granted under the Option Plans
is generally 10 years. Options granted under the Option Plans are either
incentive stock options or nonqualified options. Options forfeited under the
Option Plans are available for reissuance. Options granted under these plans are
granted at an exercise price equal to the fair market value of a share of the
Company's common stock on the date of grant. Management options of 26,900 vest
over five years with the remaining 663,470 management options vesting over three
years from the date of grant, provided the optionee remains an employee of the
Company. Options granted to non-employee directors are vested on the date of
grant.

The Company has elected to follow APB Opinion No. 25 in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting method provided for under SFAS No. 123 requires the use of
option-valuation models that were not developed for use in valuing employee
stock options. Under APB Opinion No. 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized. Pro forma
information regarding net income and earnings per share is required by SFAS No.
123 as if the Company had accounted for its employee stock options granted
subsequent to December 31, 1994, under the fair value method of that statement.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period.

The weighted-average grant date fair value of the options granted during fiscal
2004, 2003 and 2002 was $0, $2.84 and $2.31, respectively.

The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-valuation model with the following assumptions:



                                               2004            2003             2002
                                               ----          --------         --------
                                                                     
Expected dividend yield                         N/A               .0%              .0%
Expected stock price volatility                 N/A            0.794            1.653
Average risk-free interest rate                 N/A             2.78%            5.48%
Weighted-average expected life of options       N/A          5 years          5 years


                                      F-23


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE O - STOCK OPTIONS - CONTINUED

Option-valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate in management's
opinion, the existing method does not necessarily provide a reliable single
measure of the fair value of the Company's employee stock options.

The table below summarizes option activity through April 30, 2004:



                                                                            Number of
                                                         Weighted-           options
                                                          average          exercisable
                                        Number of         exercise           at end
                                         options           price             of year
                                       ----------        ---------         -----------
                                                                  
Outstanding at April 30, 2001            741,098           $6.63             561,205
Options granted during 2002              394,000            2.47
Options forfeited during 2002             (4,605)           6.76
                                       ---------

Outstanding at April 30, 2002          1,130,493            5.16             748,497
Options granted during 2003               72,500            4.36
Options exercised during 2003            (52,757)           2.36
Options cancelled during 2003           (179,000)           7.09
Options forfeited during 2003             (1,866)           4.66
                                       ---------

Outstanding at April 30, 2003            969,370            4.89             833,304
Options exercised during 2004           (818,751)           5.63
                                       ---------
Outstanding at April 30, 2004            150,619            2.71             137,284
                                       =========


Information with respect to stock options outstanding and stock options
exercisable at April 30, 2004, follows:



                                                              Options outstanding
                                          -----------------------------------------------------------
                                              Number            Weighted-average          Weighted-
                                          outstanding at           remaining               average
Range of exercise prices                  April 30, 2004        contractual life       exercise price
------------------------                  --------------      -------------------      --------------
                                                                              
    $  2.20 - 5.63                           147,519              7.88 years              $  2.51
     10.25 - 14.50                             3,100              6.17 years                12.25
                                             -------
                                             150,619
                                             =======


                                      F-24


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE O - STOCK OPTIONS - CONTINUED



                                         Options exercisable
                                  ----------------------------------
                                      Number             Weighted-
                                  exercisable at          average
Range of exercise prices          April 30, 2004      exercise price
------------------------          --------------      --------------
                                                
    $  2.20 - 5.63                    134,184            $  2.36
     10.25 - 14.50                      3,100              12.25
                                      -------

                                      137,284
                                      =======


NOTE P - EARNINGS PER SHARE

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



                                                         2004          2003           2002
                                                     ----------     ----------     ----------
                                                                          
Net income available to common stockholders          $5,405,732     $5,714,924     $1,542,056
                                                     ==========     ==========     ==========

Weighted-average shares
   Basic                                              3,423,999      2,885,652      2,881,227
   Effect of dilutive warrants and stock options        117,298        469,424         86,031
                                                     ----------     ----------     ----------

   Diluted                                            3,541,297      3,355,076      2,967,258
                                                     ==========     ==========     ==========

Basic earnings per share                             $     1.58     $     1.98     $      .54

Diluted earnings per share                           $     1.53     $     1.70     $      .52


Options to purchase 150,619, 969,370 and 1,130,493 shares of common stock were
outstanding at April 30, 2004, 2003 and 2002, respectively.

                                      F-25


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE Q - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly financial data for fiscal
2004, 2003 and 2002:



                                           First           Second             Third           Fourth
                                          quarter          quarter           quarter          quarter
                                       ------------      ------------     ------------     ------------
                                                                               
2004

Net sales                              $ 24,833,797      $ 26,526,879     $ 23,906,181     $ 25,227,265
Gross margin                              4,713,943         5,558,548        4,447,000        4,396,439
Net income                                1,307,497         1,812,736        1,192,840        1,092,658
Net income per common share
       Basic                                   0.44              0.54             0.33             0.29
       Diluted                                 0.38              0.52             0.33             0.29

2003

Net sales                              $ 22,983,430      $ 26,148,122     $ 27,879,095     $ 28,813,610
Gross margin                              3,621,139         4,625,818        5,068,980        6,603,746
Net income                                  616,201         1,137,368        1,642,944        2,318,411
Net income per common share
       Basic                                   0.21              0.39             0.58             0.79
       Diluted                                 0.19              0.34             0.49             0.58

2002

Net sales                              $ 21,073,760      $ 30,278,195     $ 27,369,529     $ 23,571,104
Gross margin                                249,429         4,134,557        3,940,683        3,204,601
Net (loss) income                          (270,842)          923,849          591,361          297,688
Net (loss) income per common share
       Basic                                  (0.09)             0.32             0.21             0.10
       Diluted                                (0.09)             0.32             0.21             0.09


                                      F-26


SIGMATRON INTERNATIONAL, INC., SUBSIDIARIES AND AFFILIATE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
APRIL 30, 2004, 2003 AND 2002

NOTE R - LITIGATION

During the fiscal year ended April 30, 2002, the Company received a Charge of
Discrimination from the Equal Employment Opportunity Commission regarding a
former employee claiming unspecified damages resulting in a lawsuit being filed
against the Company. The Company believes that it has meritorious defenses to
the charges and is defending itself vigorously in this action. Although the
charges do not specify a dollar amount, based on information presently available
to the Company, the Company believes that the resolution of these charges will
not have a material adverse effect on the financial condition or results of the
operations of the Company.

During the fiscal year ended April 30, 2003, a lawsuit was filed by the
liquidating trustee of Circuit Systems, Inc. ("CSI") against Gary R. Fairhead,
President and CEO of the Company and a former director of CSI ("Fairhead"), and
other former directors of CSI, alleging, in part, that Fairhead had breached his
fiduciary duty to CSI and its stockholders in a number of respects. Fairhead
joined the CSI Board in 1995, resigning in early 2001. Fairhead has indicated to
the Company that the Company may have a duty under certain circumstances to (i)
indemnify him against all expenses, including legal fees, judgments and amounts
paid in settlement actually incurred by him in connection with the CSI lawsuit,
and (ii) advance his costs incurred in defending against these claims. Fairhead
has not made any request to the Company for indemnity or advancement of expenses
in the lawsuit, and the Company has taken no position on either issue.

                                      F-27