SigmaTron International, Inc. Announces Agreement with Its Secured Lenders and Sale of a Majority Position of Wagz, Inc.

ELK GROVE VILLAGE, Ill., May 04, 2023 (GLOBE NEWSWIRE) -- SigmaTron International, Inc. (NASDAQ: SGMA), an electronic manufacturing services provider (“EMS”) (“Company”), today announced that on April 28, 2023, it reached an agreement with its secured lenders going forward and sold a majority position of its wholly owned subsidiary, Wagz, Inc. (“Wagz”). As previously reported on March 20, 2023, via Form 8-K, during the preparation of the Company’s third quarter financial statements, it was determined that updated projections resulted in a triggering event for the Company’s goodwill and long-lived asset groups. Under GAAP, the review resulted in the Company concluding that the carrying amounts for the goodwill and long-lived asset groups were impaired, and the Company would incur non-cash impairment charges of approximately $23.1 million. These impairment charges coupled with Wagz’ operating losses resulted in the Company’s failure to maintain certain financial covenants and ratios imposed by, and as a result triggered events of default under, the Company’s credit agreements with J.P. Morgan Chase Bank, N.A. and TCW Asset Management Company, as Administrative Agent (“Secured Lenders”). Subsequent to that report on Form 8-K, on March 27, 2023, the Company reported receiving a delinquency notification letter from Nasdaq indicating that the Company was not in compliance with the continued listing requirements of Nasdaq for failing to timely file the Company’s Form 10-Q for the fiscal quarter ended January 31, 2023. This notification also constituted a default under our credit agreements with our Secured Lenders.

During fiscal year 2023 Wagz was in the process of developing three new products that were scheduled to be released during the middle of calendar year 2023. Sales of existing products during this development period did not materialize to expectations and resulted in a significantly higher level of losses and cash consumption than anticipated. Sales were negatively impacted by a shortage of parts for production for several months, resulting in missing the holiday season for sales, a slowing economy relating to inflation and a slower than anticipated acceptance of the product by the market. Thus, when projections were updated, it was determined that there was an impairment, as discussed above.