10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13924

SIMCLAR, INC.

(Exact name of Registrant as specified in its charter)

Florida	59-1709103
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2230 W. 77^th Street

Hialeah, Florida 33016

(Address of principal executive offices,

including zip code)

(305) 556-9210

(Registrant’s telephone number,

including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class	Name of Exchange on which Registered
Common Stock, $.01 par value	The Nasdaq Capital Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
 

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 the filing requirements for at least the past 90 days. Yes x No o

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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer oAccelerated filer o

Non-accelerated filer oSmaller reporting company x

(Do not check if a smaller reporting company)

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

The aggregate market value of the Registrant’s common stock held by non-affiliates was approximately $10,577,539 on June 30, 2007.

As of March 7, 2008, the Company had issued and outstanding 6,465,345 shares of its common stock.

Documents Incorporated By Reference

Portions of our Information Statement for the 2008 Annual Meeting of Shareholders are incorporated by reference in Part III

Table of Contents

		Page
	Part I
Item 1.	Business	2
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	19
	Part II
Item 5.	Market for Registrant’s Common Equity and Related
	Stockholder Matters	20
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	21
Item 8.	Financial Statements and Supplementary Data	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure	34
Item 9A	Controls and Procedures	34
Item 9B	Other Information	35
	Part III
Item 10.	Directors and Executive Officers of the Registrant	36
Item 11.	Executive Compensation	36
Item 12.	Security Ownership of Certain Beneficial Owners and Management
	And Related Stockholder Matters	36
Item 13.	Certain Relationships and Related Transactions	36
Item 14.	Fees and Services of Independent Registered Public Accounting Firm	36
	Part IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	37
Signatures		41

Part I

Forward-Looking Statements

This document contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “estimate,” “project,” or variations of these words as well as similar words or expressions are intended to identify forward-looking statements. Readers should not place undue reliance on the forward-looking statements contained in this document, which apply only as of the date of this report. We undertake no obligation to update the information contained herein. Our actual performance and results could differ materially from those anticipated in these forward-looking statements for many reasons, including, but not limited to economic changes and changes in the electronics manufacturing services industry generally. Key risk factors that might cause or contribute to such differences include, but are not limited to, those discussed under the section entitled “Risk Factors” included herein at Item 1A.

Item 1. Business

Introduction

Simclar, Inc. (“we,” “our,” “us,” “Simclar” or “the company”) is a contract manufacturer of electronic and electro-mechanical products, providing advanced electronics manufacturing services (EMS) to original equipment manufacturers (OEMs). Our products are manufactured to customer specifications and designed for OEMs in the data processing, telecommunications, instrumentation and food preparation equipment industries. Our principal custom-designed products include complex printed circuit boards (PCBs), conventional and molded cables, wire harnesses, backplanes, and electro-mechanical assemblies. In addition, we provide OEMs with value-added, turnkey contract manufacturing services and total systems assembly and integration. We also deliver manufacturing and test engineering services and materials management, with flexible and service-oriented manufacturing and assembly services for our customers’ high-tech and rapidly changing products.

We were incorporated in Florida in 1976, acquired by Medicore, Inc., our former parent, in 1982, and became a public company in 1985. Effective June 27, 2001, control of our company was acquired by Simclar International Limited, which then transferred its ownership of our company to its parent, Simclar Group Limited(“Simclar Group”) both of which are private United Kingdom companies. Other companies of the Simclar Group are engaged in the same electronic and electro-mechanical subcontract manufacturing industry as is our company. Effective September 2, 2003, we changed our name from Techdyne, Inc. to Simclar, Inc.

Since we were acquired by Simclar Group, we have completed a series of acquisitions in North America. In July, 2003 we acquired for approximately $3.4 million in cash the outstanding stock of AG Technologies, Inc., which has since changed its name to Simclar (Mexico), Inc. In May 2005, we acquired from Simclar Group all of the outstanding shares of Simclar (North America), Inc. for a net $37,000 adjustment of an intercompany receivable. In February 2006, we acquired through a subsidiary, Simclar Interconnect Technologies, Inc., certain U.S. assets associated with the backplane assembly business of the Interconnect Technologies division of Litton Systems, Inc., a subsidiary of Northrop Grumman Corporation, for approximately $16 million in cash and the assumption of certain liabilities. See Note 11 to our accompanying audited consolidated financial statements for more information regarding the Litton acquisition.

Our executive offices are located at 2230 West 77th Street, Hialeah, Florida 33016. Our telephone number is (305) 556-9210. Our common stock is traded on the Nasdaq Capital Market (Ticker: SIMC). We maintain an Internet website at http://www.simclar.com, along with other members of the Simclar Group. We make available free of charge on our website links to our annual reports on Form 10-K, our quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (http://www.simclar.com/investor.htm). Information on our website is not incorporated by reference into this report. Additionally, individuals can access our electronically filed reports, proxy statements and other information through the Internet site maintained by the Securities and Exchange Commission at http://www.sec.gov. The public may also read and copy any materials we file with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.

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In Part III of this Form 10-K, we incorporate by reference certain information from our Information Statement for our 2008 Annual Meeting of Shareowners. We expect to file that Information Statement with the Securities and Exchange Commission (“SEC”) within 120 days of December 31, 2007, and we will promptly make it available on our website. Please refer to the Information Statement when it is available.

Electronics Manufacturing Services Industry

Until 2001, our industry exhibited significant year to year growth, due both to the growth in the overall electronics industry, and the steadily increasing number of OEMs deciding to outsource all or a significant portion of the production of their products. As a result of the general global recession beginning in 2001, and its magnified effect in the computer and telecommunications equipment segments, this pattern of growth in our industry was interrupted, and both our company and the industry as a whole experienced a decline in sales starting in 2001 and continuing through the third quarter of 2003. Beginning in the fourth quarter of 2003, our company and the industry began to experience a recovery in sales, which continued through 2007. We are continually seeking new business opportunities with existing and new customers and considering strategic acquisitions, but there is no assurance we will be successful in generating additional sales.

We believe that the fundamental factors contributing to the growth of our industry prior to 2001 contributed to the resumption of the pattern of growth that continued throughout 2007. These factors include increased capital requirements for OEMs to acquire modern, highly automated manufacturing equipment, their continuing effort to reduce inventory costs and the relative cost advantages of contract manufacturers. Using outsourcing for production of electronic assemblies also enables OEMs to focus on product development, reduce working capital requirements, and improve inventory management and marketability. We believe OEMs will continue to rely on contract manufacturers, not only for partial component assemblies, but complete turnkey manufacturing of entire finished products. We also believe that OEMs will look more to contract manufacturers to provide a broader scope of value-added services, including manufacturing, engineering and test services.

We assist our customers from initial design and engineering through materials procurement, to manufacturing of the complete product and testing. Involving contract manufacturers earlier in the manufacturing process through “concurrent engineering” allows OEMs to realize greater efficiencies and gives contract manufacturers greater impact in product design, component selection, production methods and the preparation of assembly drawings and test schematics. This process also gives the customer the ability to draw upon our manufacturing expertise at the outset and minimize manufacturing bottlenecks.

Another factor which will continue to lead OEMs to utilize contract manufacturers is reduced time-to-market. Due to the intense competition in the electronics industry, OEMs are faced with increasingly shorter product life-cycles which pressure them to reduce time constraints in bringing a product to market. This reduction can be accomplished by using a contract manufacturer’s established manufacturing expertise with its sophisticated, technically advanced and automated manufacturing processes. We believe that this, coupled with the elements discussed above, such as reduced production costs through economies of scale in materials procurement, improved inventory management, access to our manufacturing technology, engineering, testing and related expertise, will motivate OEMs to work with electronic contract manufacturers such as us.

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Business Strategy

We have focused continuous attention on controlling costs to allow us to remain competitive within our industry. Our affiliation with Simclar Group allows us to participate in the global economy, expands the product lines and services we are able to offer our customers, and increases our purchasing power for supplies and equipment.

The primary industries we serve, electronics and technology, are constantly innovating and tend to have short product life cycles. We have focused on product development and marketing in order to remain a competitive provider of electronic contract manufacturing services for OEM customers. We continue to seek to develop strong, long-term alliances with major-growth OEMs of complex, market leading products. We believe that creating and maintaining long-term relationships with customers requires providing high quality, cost-effective manufacturing services marked by a high degree of customer responsiveness and flexibility. Therefore, our strategy is to focus on leading manufacturers of advanced electronic products that generally require custom-designed, more complex interconnect products and short lead-time manufacturing services.

The acquisition of Simclar (North America), Inc. (“SNAI”) added comprehensive sheet metal fabrication and higher level assembly capabilities. The Mexico facility was expanded in 2005 to add these same capabilities. In the fourth quarter of 2007 management made the decision to transfer the SNAI customers and operations from North Carolina to Mexico to take advantage of the newer facilities and lower costs.

We further strengthened our product and service offerings to the OEM market by acquiring certain assets of the Interconnect Technologies assembly business of Litton Systems, Inc. (“Litton”), a world-leading supplier of high-performance backplane interconnect solutions to major blue-chip customers in markets as diverse as network, wireline and wireless infrastructure, and electronic data processing. Backplane interconnect systems form the core of high-end electronic systems and provide the means for power distribution and data communications between electronic sub-system building blocks.

We strive to build on our integrated manufacturing capabilities, final system assemblies and testing. The combination of our advanced backplane interconnect solutions with our capabilities to supply printed circuit board assemblies, metal fabrication, cabling solutions and higher level assemblies will create a valuable one-stop-shop for OEM system design and integration needs. In addition, vertical integration provides us with greater control over quality, delivery and cost.

To further satisfy customer needs, we develop long-term customer relationships by using our state-of-the-art technology to provide timely and quick-turnaround manufacturing and comprehensive support for materials purchases and inventory control. Through our use of electronic data interchange technology (“EDI”), the customer is able to convey its inventory and product needs on a weekly basis based on a rolling quantity forecast. More emphasis is placed on value-added turnkey business for the manufacture of complete finished assemblies. This is accomplished with extended technology, continuous improvement of our processes, and our early involvement in the design process using our computer-aided design system.

We believe that we can develop closer and more economically beneficial relationships with our customers through our geographically diverse manufacturing and assembly operations, presently located in Florida, Missouri, Ohio, and Mexico. Our diverse locations have multiple advantages by helping satisfy costs, timely deliveries and local market requirements of our customers. We will continue to pursue expansion in different markets to better serve existing customers and to obtain additional new customers. In alliance with Simclar Group, we anticipate experiencing growth and the ability to increase our global presence and competitive position.

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Products and Services

We manufacture over 1,000 products, including complete turnkey finished products, sub-assemblies, molded and non-molded cable assemblies, wire harnesses, printed circuit boards (PCBs), injection molded and electronic assembly products, for over 100 OEM customers.

Printed Circuit Boards

PCB assemblies are electronic assemblies consisting of a basic printed circuit laminate with electronic components including diodes, resistors, capacitors and transistors, inserted and wave soldered. PCBs may be used either internally within the customer’s products or in peripheral devices. The PCBs produced by the company include pin-through-hole assemblies, low and medium volume surface mount technology assemblies, and mixed technology PCBs, which include multilayer PCBs.

In pin-through-hole assembly production, electronic components with pins or leads are inserted through pre-drilled holes in a PCB and the pins are soldered to the electrical surface of a PCB. In surface mount technology production, electronic components are attached and soldered directly onto the surface of a circuit board, rather than inserted through holes. Surface mount technology components are smaller so they can be spaced more closely together and, unlike pin-through-hole components, surface mount technology components can be placed on both sides of a PCB. This allows for product miniaturization, while enhancing the electronic properties of the circuit. Surface mount technology manufacturing requires substantial capital investment in expensive, automated production equipment, which requires high usage. We are utilizing computerized testing systems in order to verify that all components have been installed properly and meet certain functional standards, that the electrical circuits have been properly completed, and that the PCB assembly will perform its intended functions.

Our Dayton, Ohio operations, with six automated lines, are more focused on PCB manufacturing, primarily for the food preparation equipment industry.

Simclar (Mexico), Inc. operates a manufacturing facility in Matamoros, Mexico, through a wholly-owned subsidiary, Simclar de México, S.A. de C.V. This Matamoros facility provides PCB manufacturing capacity similar to our Ohio facility, but enables us to compete more effectively on medium and higher volume PCB orders. Additional contract manufacturing capabilities were added with the opening of a second Matamoros facility in January 2005. Simclar (Mexico) is an international value added provider of comprehensive electronic manufacturing services to OEM’s serving the, industrial controls, medical, power equipment and automotive industries. Simclar (Mexico)’s Mexican facilities enable us to be competitive in the higher volume arena for assembly in North America.

PCB sales contributed approximately 22% of total revenues in 2007 and 26% of total revenues in 2006. Growth in PCB was not as strong as it was in other products contributing to the lower percentage of overall revenues.

Cable and Harness Assemblies

A cable is an assembly of electrical conductors insulated from each other, twisted around a central core and jacketed. Cables may be molded or non-molded.

Simclar offers a wide range of custom manufactured cable and harness assemblies for molded and mechanical applications. These assemblies include multiconductor, ribbon, co-axial cable, and discrete wire harness assemblies. We use advanced manufacturing processes, in-line inspection and computerized automated test equipment.

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We maintain a large assortment of standard tooling for D-Subminiature, DIN connectors and phono connectors. D-Subminiatures are connectors which are over-molded with the imprint of the customer’s name and part number. DIN connectors are circular connectors consisting of two to four pairs of wires used for computer keyboards.

Flat ribbon cable or ribbon cable assemblies are cables with wires (conductors) on the same plane with connectors at each end. Flat ribbon cables are used in computer assemblies and instrumentation.

Discrete cable assemblies are wires with contacts and connectors. Harnesses are prefabricated wiring with insulation and terminals ready to be attached to connectors. These products experienced very strong sales growth in 2007. Our cable and harness sales comprised approximately 27% and 24% of total revenue for 2007 and 2006, respectively.

Contract Manufacturing

Contract manufacturing involves the manufacture of complete finished assemblies with all sheet metal, power supplies, fans, PCBs as well as complete sub-assemblies for integration into an OEM’s finished products, such as speaker and lock-key assemblies and diode assemblies that consist of wire, connectors and diodes that are over-molded, packaged and bar coded for distribution. These products can be totally designed and manufactured by the company through our computer-aided design system, engineering and supply procurement. We develop manufacturing processes and tooling, and test sequences for new products of our customers. We provide design and engineering services in the early stages of product development, thereby assuring mechanical and electrical considerations are integrated with a total system. Alternatively, the customer may provide specifications and we will assist in the design and engineering or manufacture to the customer’s specifications.

In January 2005, we opened a second manufacturing facility in Matamoros, Mexico, providing additional capability to process soft-tooled sheet metal fabrication and finishing. Further expansion phases will include hard-tooled sheet metal fabrication, along with plastic injection molding, and overmolding for more complex cable and harness manufacturing.

The company expanded its product offerings by acquiring SNAI in May 2005. In the fourth quarter of 2007 management made the decision to transfer the customers and operations from North Carolina to Mexico to take advantage of newer facilities and lower costs.

Reworking and Refurbishing

Customers provide us with materials and sub-assemblies acquired from other sources, which the customer has determined require modified design or engineering changes. We redesign, rework, refurbish and repair these materials and sub-assemblies.

Contract manufacturing, sheet metal fabrication, reworking and refurbishing together amounted to approximately 6% and 11% of sales for 2007 and 2006 respectively.

Backplane Interconnect Systems

In February 2006, we acquired certain backplane assembly assets of Litton. Litton had a reputation as a world-leading supplier of high-performance backplane interconnect solutions to major blue-chip customers in markets as diverse as network, wireline and wireless infrastructure, defense and electronic data processing. Backplane interconnect systems form the core of high-end electronic systems and provide the means for power distribution and data communications between electronic sub-system building blocks. Adding the ability to provide backplane interconnect solutions with our metal fabrication, cable and harness, printed circuit board, and high level assembly capabilities enables Simclar to offer a highly appealing single source solution to the electronics OEM market.

Backplane sales contributed approximately 45% of total revenues in 2007 compared to 39% to total revenues in 2006.

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Manufacturing

We manufacture components and products that are custom designed and developed to fit specific customer requirements and specifications. Such service includes computer integrated manufacturing and engineering services, quick-turnaround manufacturing and prototype development, materials procurement, inventory management, developing customer oriented manufacturing processes, tooling and test sequences for new products from product designs received from our customers or developed by Simclar from customer requirements. Our industrial, electrical and mechanical engineers work closely with our customers’ engineering departments from inception through design, prototypes, production and packaging. We evaluate customer designs and, if appropriate, recommend design changes to improve the quality of the finished product, reduce manufacturing costs or other necessary design modifications. Upon completion of engineering, we produce prototype or preproduction samples. Materials procurement includes planning, purchasing and warehousing electronic components and materials used in the assemblies and finished products. Our engineering staff reviews and structures the bill of materials for purchase, coordinates manufacturing instructions and operations, and reviews inspection criteria with the quality assurance department. The engineering staff also determines any special capital equipment requirements, including tooling and dies, which must be acquired.

We attempt to develop a “partnership” relationship with many of our customers by providing a responsive, flexible, total manufacturing service. We have “supplier partnerships” with certain customers pursuant to which we must satisfy in-house manufacturing requirements of the customer that are based on the customer’s need on a weekly basis based on a rolling quarterly forecast.

Our PCB assembly operations are geared toward advanced surface mount technology. We provide the PCB production through state-of-the-art manufacturing equipment and processes and a highly trained and experienced engineering and manufacturing workforce. We also offer a wide range of custom manufactured cables and harnesses for molded and mechanical applications. We use advanced manufacturing processes, in-line inspection and testing to focus on process efficiencies and quality. The cable and harness assembly process is accomplished with automated and semi-automated preparation and insertion equipment and manual assembly techniques.

Finished turnkey assemblies include the entire manufacturing process from design and engineering to purchasing raw materials, manufacturing and assembly of the component parts, testing, packaging and delivery of the finished product to the customer. By contracting assembly production, OEMs are able to keep pace with continuous and complex technological changes and improvements by making rapid modifications to their products without costly retooling and without any extensive capital investments for new or altered equipment.

At our Hialeah, Florida, and Matamoros, Mexico facilities, we maintain modern state-of-the-art equipment for crimping, stripping, terminating, soldering, sonic welding and sonic cleaning which permits us to produce conventional and complex molded cables. We also maintain a large assortment of standard tooling. New manufacturing jobs may require new tooling and dies, but most presses and related equipment are standard.

The acquisition of Litton’s backplane assembly assets added these capabilities to our product offerings. Backplanes are the backbone of sophisticated electronics. They are printed circuit boards with sockets that provide interconnection for multiple printed circuit board cards. At our Springfield, Missouri facility, we maintain specialized equipment for solder and press fit technology. This equipment is designed specifically to accommodate oversized PCB's. We are focused on back panel technology through chassis integration, up to frame or rack level assembly and test.

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Supplies and Materials Management

Materials used in our operations consist of metals, electronic components such as cable, wire, resistors, capacitors, diodes, memory products, PCBs and plastic resins. On occasion some of these materials may be placed on a stringent allocation basis by our suppliers; however, due to the excess manufacturing capacity currently available at most component manufacturers, we do not anticipate any major material purchasing or availability problems occurring in the foreseeable future.

We have improved our overall efficiency of manufacturing, particularly in the area of inventory management, including purchasing, which is geared more closely to current needs resulting in reduced obsolescence problems The company procures components from a select group of vendors which meet our standards for timely delivery, high quality and cost effectiveness. In order to control inventory investment and minimize material obsolescence, components are generally ordered when we have a purchase order or commitment from our customer for the completed assembly. In addition, several of our vendors have agreed to consigned inventory arrangements, which allow us to have their product in stock but not receive it until we pull it for production. This will have a positive impact on working capital as we expand vendor participation. We continue our efforts to consolidate the majority of our electronics material “spend” with that of the entire Simclar Group, and quote and initiate contracts to the most competitive suppliers.

We use Enterprise Resource Planning (“ERP”) management technologies and manage our material pipelines and vendor base to allow our customers to increase or decrease volume requirements within established frameworks. We have Visual Manufacturing and Made 2 Manage computerized software systems providing us with material requirements planning, purchasing, and sales and marketing functions. In 2005, the company made a commitment to convert all locations to Visual Manufacturing. The goal is to create consistency in our information systems to facilitate more timely, accurate, and meaningful management information. In 2006 we successfully converted the Springfield, MO operations to Visual and in February 2007 the Dayton, OH operations successfully converted to Visual. Our Mexico operations went live with Visual in January 2008.

Quality and Process Control

All of our manufacturing locations are certified under the ISO 9001/2000 quality assurance designation. These quality assurance designations are only provided to those manufacturers which exhibit stringent quality and process control assurances after extensive evaluation and auditing by these independent quality assurance organizations. Quality control is essential to the company’s operations since customers demand strict compliance with design and product specifications, and high quality production is a primary competitive standard vital to our services.

Product components, assemblies and sub-assemblies manufactured by the company are thoroughly inspected visually and electronically to ensure all components are made to strict specifications and are functional and safe. Strict process controls relating to the entire manufacturing process are part of our standard operating procedure.

Over the years, our product and manufacturing quality have received excellent ratings. Total quality, timely delivery and customer satisfaction is our philosophy. High levels of quality in every area of our operations are essential. Quality standards are established for each operation, performance tracked against those standards, and identifying workflow and implementing necessary changes to deliver higher quality levels. We maintain regular contact with our customers to ensure adequate information exchange and other activities necessary to ensure customer satisfaction and to support our high level of quality and on-time delivery. Any adverse change in our quality and process controls could adversely affect our relationships with customers and ultimately our revenues and profitability.

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Customers

We serve a wide range of businesses, from emerging growth companies to multinational OEMs, involved in a variety of markets including computer networking systems, computer workstations, telecommunications, mass data storage systems, instrumentation and food preparation equipment industries. Our revenues are distributed over the following industry segments:

	Year Ended December 31,
	2007			2006
Telecommunications		53	%		43	%
Contract manufacturing		11	%		12	%
Data processing		8	%		12	%
Power equipment		7	%		9	%
Food prep equipment		7	%		8	%
Instrumentation		7	%		8	%
Electrical equipment and appliances		2	%		3	%
Military and government		2	%		2	%
Other		3	%		3	%

We seek to serve a sufficiently large number of customers to avoid dependence on any one customer or industry. In 2007, there were 24 customers that made up approximately 80% of our sales with our largest customer contributing approximately 21% of the revenue.

Significant reductions or delays in sales to any of these major customers would have a material adverse effect on our results of operations. In the past, certain of our customers have terminated their manufacturing relationship with us, or significantly reduced their product orders. We cannot assure you that any of our major customers will not terminate or significantly reduce or delay manufacturing orders, any of which such terminations or changes in manufacturing orders could have a material adverse effect on our results of operations.

We depend upon the continued growth, viability and financial stability of our customers, who in turn substantially depend on the growth of the personal computer, computer peripherals, communications, instrumentation, data processing and food preparation equipment industries. Most of these industries have been characterized by rapid technological change, short product life cycles, pricing and margin pressures. In addition, many of our customers in these industries are affected by general economic conditions. The factors affecting these industries in general, and/or our customers in particular, could have a material adverse effect on our results of operations. In addition, we generate significant accounts receivable in connection with providing manufacturing services to our customers. If one or more of our customers were to become insolvent or otherwise were unable to pay us for manufacturing services we have provided, our operating results and financial condition would be adversely affected.

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The table below sets forth the respective percentage of sales for the applicable period attributable to customers and related suppliers who accounted for more than 10% of our sales in any respective period.

	2007			2006
Customer 1		21	%		20	%
Customer 2		12	%		8	%
Customer 3		12	%		6	%

Marketing and Sales

We are continually pursuing expansion and diversification of our customer base. We are seeking to develop long term relationships by working closely with customers, starting with the initial product design and development stage, and continuing throughout the manufacturing and distribution process. Our principal sources of new business are the expansion in the volume and scope of services provided to existing customers, referrals from customers and suppliers, direct sales through our sales managers and executive staff, and through independent sales representatives. Our operations generate sales through eight regional sales/general managers covering the Northeast, Southeast, West and Southwest regions of the United States, as well as parts of Mexico. There are 13 in-house sales/marketing personnel in the United States. In addition to sales through sales representatives and in-house sales personnel, sales are also generated through our website at http://www.simclar.com and through catalogues, brochures and trade shows.

The independent manufacturer sales representatives, primarily marketing electronic and similar high-technology products, are retained under exclusive or non-exclusive sales representative agreements for specific territories or specific customers and are paid on a commission basis. Unless otherwise approved by Simclar, the sales representatives cannot represent any other person engaged in the business of manufacturing services similar to those of the company, nor represent any person who may be in competition with us. The agreements further prohibit the sales representative from disclosing trade secrets or calling on our customers for a period of six months to one year from termination of their agreement.

Substantially all of our sales and reorders are affected through competitive bidding. Most sales are accomplished through purchase orders with specific quantity, price and delivery terms. Some production, such as for our Kanban and Pull programs, is accomplished under open purchase orders with components released against customer request.

Backlog and Returns

Order backlogs as of December 31, 2007 were approximately $30,023,000 compared to $28,204,000 at December 31, 2006. Based on past experience and relationships with our customers and knowledge of our manufacturing capabilities, we believe that most of our backlog orders are firm and should be filled within six months. Most of the purchase orders within which the company performs do not provide for cancellation. Over the last several years, cancellations have been minimal and management does not believe that any significant amount of the backlog orders will be cancelled. However, based upon relationships with our customers, we occasionally allow cancellations and more frequently provide for the rescheduling of deliveries. The variations in the size and delivery schedules of purchase orders received by the company may result in substantial fluctuations in backlog from period to period. Since orders and commitments may be rescheduled or cancelled, and customers’ lead times may vary, backlog does not necessarily reflect the timing or amount of future sales. Historically, customer returns have not had a material adverse effect on our results of operations.

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Patents and Trademarks

We do not have nor do we rely on patents or trademarks to establish or protect our market position. Rather, we depend on design, engineering and manufacturing, cost containment, quality, and marketing skills to establish or maintain market position.

Competition

Simclar is part of a highly competitive electronic manufacturing services industry. We face competition from divisions of large electronics and high-technology firms, as well as numerous smaller specialized companies. Many of our competitors are larger and more geographically diverse and have greater financial, manufacturing and marketing resources than we have. Our main PCB competitors in the Midwest region include SMC, Diversified Systems, Epic Technologies, and CDR Manufacturing,. The primary competitors for our Mexico PCB operations include Kimball Electronics, Method Electronics, and Jabil. We have numerous competitors in the cable and harness assembly market, including Tyco, Advanced Interconnect, Amphenol, Sapphire, Volex Interconnect Systems, and Foxconn.

We believe that we are favorably positioned with regard to primary competitive factors - price, quality of production, manufacturing capability, prompt customer service, timely delivery, engineering expertise, and technical support. We also believe that our affiliation with Simclar Group enhances our competitive position internationally. However, recent consolidation trends in the electronic manufacturing services industry are resulting in changes in the competitive landscape. Increased competition could result in lower priced components and lower profit margins, or loss of customers, which could have a material adverse effect on our business, financial condition and results of operations. Compared to manufacturers who have greater direct buying power with component suppliers or who have lower cost structures, we may be operating at a cost disadvantage.

Due to the number and variety of competitors, reliable data reflective to our competitive position in the electronic components and assembly industry is difficult to develop and is not known.

Research and Development

We spend limited amounts on research and development efforts. Our products are generally manufactured to customer specifications.

Governmental Regulation

Our operations are subject to certain federal, state and local regulatory requirements relating to environmental waste management and health and safety matters. We believe that we comply with applicable regulations pertaining to health, safety and the use, storage and disposal of materials that are considered hazardous waste under applicable law. To date, our costs for compliance and governmental permits and authorizations have not been material, and we do not believe that compliance with current regulatory requirements will have a material effect on our capital expenditures, net income or competitive position. However, additional or modified requirements that may require substantial additional expenditures may be imposed in the future.

Employees

As of December 31, 2007 we had a total of approximately 950 employees.

We have no unions in our U. S. facilities, but have two unions in our Matamoros facilities. We believe that our relationships with our employees, both union and non-union, are good.

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Item 1A. Risk Factors

This Report contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the prospects discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those listed below.

The loss of a major customer would adversely affect us

A substantial percentage, approximately 45% of our sales for the year ended December 31, 2007, has been to three customers, the loss of any of which would adversely affect us. A substantial portion of our sales (21%) is with one major customer. There are no long-term contracts with any customer. Substantially all of our sales and reorders are subject to competitive bids. Sales are dependent on the success of our customers, some of which operate in businesses associated with rapid technological change, vigorous competition, short product life cycles, and pricing and margin pressures. Additionally, certain of the industries served by us are subject to economic cycles and have in the past experienced, and are likely in the future to experience, recessionary periods. Developments adverse to our major customers or their products could have an adverse effect on us. A variety of conditions, both specific to each individual customer and generally affecting each customer’s industry, may cause customers to cancel, reduce or delay purchase orders and commitments without penalty, except for payment for services rendered, materials purchased and, in certain circumstances, charges associated with such cancellation, reduction or delay.

In addition, we generate large accounts receivable in connection with our providing electronic contract manufacturing. If one or more of our customers experiences financial difficulty and is unable to pay for the services provided by us, our operating results and financial condition would be adversely affected. We expect to continue to depend on sales to a limited number of major customers.

Secured loans - existence of liens on certain assets

All of our assets have been pledged as collateral for three bank loans. We have entered into two amended credit facilities and one new credit facility with Bank of Scotland in Edinburgh, Scotland (“BoS”). These facilities were amended and increased in January 2007. Please refer to the Liquidity and Capital Resources section under Item 7 for further discussion regarding these credit facilities.

Our credit facilities impose operational and financial restrictions on us

Our credit facilities with BoS, which include an Amended Term Loan Facility Letter, an Amended Working Capital Facility Letter, a Working Capital Facility Letter, and related security agreements, guaranties and mortgage, In addition to subjecting all our assets as security for the bank financing these debt agreements, they also include substantial covenants that impose significant restrictions. Please refer to the Liquidity and Capital Resources section under Item 7 for further discussion regarding these restrictions.

Our ability to comply with these provisions may be affected by changes in our financial condition or results of our operations, or other events beyond our control. The breach of any of the covenants would result in a default under our debt facilities. A default in the covenants would permit BoS to accelerate the maturity of our credit facilities and to sell the assets securing them, which could cause us to cease operations or seek bankruptcy protection.

Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which could reduce amounts available for working capital and other general corporate purposes. The restrictions in our credit facility could also limit our flexibility in reacting to changes in our business and increases our vulnerability to general adverse economic and industry conditions.

12

We operate in a highly competitive industry and our business may be harmed by competitive pressures

Manufacturing and assembly of electro-mechanical and electronic components is a highly competitive industry characterized by a diversity and sophistication of products and components. We compete with major electronics firms that have substantially greater financial and technical resources and personnel than we do. We also face competition from many smaller, more specialized companies. We believe the primary competitive factors are pricing, quality of production, prompt customer service, timely delivery, engineering expertise, and technical assistance to customers. Among this mix of competitive standards, we believe we are competitive with respect to delivery time, quality, price and customer service. Price sensitivity becomes a paramount competitive issue in recessionary periods, and we may be at a competitive disadvantage with manufacturers with a lower cost structure, particularly off-shore manufacturers with lower labor and related production costs. To compete effectively, we must also provide technologically advanced manufacturing services, and respond flexibly and rapidly to customers’ design and schedule changes. Our inability to do so could have adverse effects on us. Customers in our industry are price-sensitive and, particularly in the recent economic downturn, there is substantial pressure from customers to reduce our prices. Our ability to remain competitive depends on our ability to meet these customer and competitive price pressures while protecting our profit margins. We have been engaged in and will have to continue cost reductions in overhead, manufacturing processes, and equipment retooling, while maintaining product flow, inventory control, and just-in-time shipping to our customers. If we are unable to accomplish these factors, we will not be competitive, and our business and operating results will be adversely impacted.

Our revenues are contingent on the health of the industries we serve

We rely on the continued growth and financial stability of our customers who operate in the following industry segments:

·   food preparation equipment;

·   data processing;

·   telecommunications;

·   contract manufacturing;

·   power equipment;

·   instrumentation; and

·   military and government.

These industry segments, to a varying extent, are subject to dynamic changes in technology, competition, short product life cycles, and economic recessionary periods. When our customers are adversely affected by these factors, we may be similarly affected.

Manufacture of electronic and electro-mechanical products, particularly designed for OEMs and manufactured to custom specifications, is cyclical, and demand for our products may decline

Our business depends substantially on both the volume of electronic and electro-mechanical production by OEMs in the data processing, telecommunications, instrumentation and food preparation industries, and new specifications and designs for these OEMs. These industries have been cyclical over the years, and have experienced oversupply as well as significantly reduced demand, as we have experienced in recent years. An economic downturn can result in lower capacity utilization of our manufacturing operations and a shift in product mix toward lower margin assemblies. Changes in economic conditions and demand can result in customer rescheduling of orders and shipments, which affect our results of operations. Moreover, our need to invest in engineering, marketing, and customer services and support capabilities will limit our ability to reduce expenses, as we would attempt to do, in response to such downturns.

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We do not have long-term contracts with customers, and cancellations, reductions or delays in orders affect our profitability

We do not typically obtain firm long-term contracts from our customers. Instead, we work closely with our customers to develop forecasts for upcoming orders, which are not binding, in order to properly schedule inventory and manufacturing. Our customers may alter or cancel their orders or demand delays in production for a number of reasons beyond our control, which may include:

·   market demand for products;

·   change in inventory control and procedures;

·   acquisitions of or consolidations among competing customers;

·   electronic design and technological advancements; and

·   recessionary economic environment.

Any one of these factors may significantly change the total volume of sales and affect our operating results, in times of a recessionary environment and reduced demand for our customers’ products and in turn, our products and services. In addition, since much of our costs and operating expenses are relatively fixed, a reduction in customer demand would adversely affect our gross margins and operating income. Although we are always seeking new business and customers, we cannot be assured that we will be able to replace deferred, reduced or cancelled orders.

Shortages of components as well as price fluctuations specified by our customers would delay shipments and adversely affect our profitability

Substantially all of our sales are derived from electro-mechanical and subcontract electronic manufacturing in which we purchase components specified by our customers. Industry-wide shortages of electronic components, particularly components for PCB assemblies, have occurred. We have from time to time experienced some supply shortages. Should our industry experience a rapid increase, shortages of components mostly likely will occur, and we may be forced to delay shipments, which could have an adverse effect on our profit margins and customer relations. Because of the continued increase in demand for surface mount components, we anticipate component shortages and longer lead times for certain components to occur from time to time. Also, we typically bear the risk of component price increases that occur, which accordingly could adversely affect our gross profit margins. As price increase pressures continue we are beginning to pass these increases on as competition allows. At times, we are forced to purchase components beyond customer demand on items which are in short supply. To the extent there is less customer demand or cancellations, we could have increased obsolescence.

Technological developments, satisfying customer designs and production requirements, quality and process controls are factors impacting our operations

Our existing and future operations are and will be influenced by several factors, including technological developments, our ability to efficiently meet the design and production requirements of our customers, our ability to control costs, our ability to evaluate new orders to target satisfactory profit margins, and our capacity to develop and manage the introduction of new products. We also may not be able to adequately identify new product trends or opportunities, or respond effectively to new technological changes. Quality control is also essential to our operations, since customers demand strict compliance with design and product specifications. Any deviation from our quality and process controls would adversely affect our relationship with customers, and ultimately our revenues and profitability.

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Our operating results are subject to annual and quarterly fluctuation which could negatively impact our stock price

There are a number of factors, beyond our control, that may affect our annual and quarterly results. These factors include:

·   the volume and timing of customer orders;

·   changes in labor and operating prices;

·   fluctuations in material cost and availability;

·   changes in domestic and international economies;

·   timing of our expenditures in anticipation of future orders;

·   increase in price competition, and competitive pressures on delivery time and product reliability;

·   changes in demand for customer products;

·   the efficiency and effectiveness of our automated manufacturing processes;

·   market acceptance of new products introduced by our customers; and

·   uneven seasonal demands by our customers.

Any one or combination of these factors can cause an adverse effect on our future annual and quarterly financial results. Fluctuations in our operating results could materially and adversely affect the market price of our common stock.

Environmental laws may expose us to financial liability and restrictions on operations

We are subject to a variety of federal, state and local laws and regulations relating to environmental, waste management, and health and safety concerns, including the handling, storage, discharge and disposal of hazardous materials used in or derived from our manufacturing processes. Proper waste disposal is a major consideration for printed circuit board manufacturers, which is a substantial part of our business, since metals and chemicals are used in our manufacturing process. Environmental controls are also essential in our other areas of electronic assembly. If we fail to comply with such environmental laws and regulations, then we could incur liabilities and fines and our operations could be suspended. This could also trigger indemnification of our lender under our credit facilities, as well as being deemed a default under such credit facilities. See “Our credit facilities impose operational and financial restrictions on us” above. Such laws and regulations could also restrict our ability to modify or expand our facilities, could require us to acquire costly equipment, or could impose other significant capital expenditures. In addition, our operations may give rise to claims of property contamination or human exposure to hazardous chemicals or conditions. Although we have not incurred any environmental problems in our operations, there can be no assurance that violations of environmental laws will not occur in the future due to failure to obtain permits, human error, equipment failure, or other causes. Furthermore, environmental laws may become more stringent and impose greater compliance costs and increase risks and penalties for violations.

Simclar Group controls over 73% of our common stock and the affairs of our company

Simclar Group owns 73.4% of our outstanding common stock. Our common stock does not provide for cumulative voting, and therefore, the remaining shareholders, other than Simclar Group, will be unable to elect any directors or have any significant impact in controlling the business or affairs of our company. The concentration of ownership with Simclar Group may also have the effect of delaying, deterring or preventing a change in control of our company, and would make transactions relating to our operations more difficult or impossible without the support of Simclar Group. Also, since we are a “controlled company” for purposes of the Nasdaq Stock Market’s corporate governance requirements, we are not required to comply with the provisions requiring that a majority of listed company directors be independent, the compensation of our executives to be determined by independent directors or nominees for election to our board of directors to be selected by independent directors.

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The price of our shares is volatile

The market price of our common stock has substantially fluctuated in the past. The market price of our common stock has been as high as $13.74 in the fourth quarter of 2007 to as low as $0.52 in the fourth quarter of 2002. Our common stock has limited trading volume, and it closed at $4.51 on March 7, 2008.

There are a variety of factors which contribute to the volatility of our common stock. These factors include domestic and international economic conditions, stock market volatility, our reported financial results, fluctuations in annual and quarterly operating results, and general conditions in the contract manufacturing and technology sectors. Announcements concerning our company and competitors, our operating results, and any significant amount of shares eligible for future sale may also have an impact on the market price of our common stock. As a result of these factors, the volatility of our common stock prices may continue in the future.

We have not declared dividends, and our credit facilities prohibit us from paying dividends without written consent from our lender

Under Florida corporate law, holders of our common stock are entitled to receive dividends from legally available funds, when and if declared by our board of directors. We have not paid any cash dividends, and our board of directors does not intend to declare dividends in the foreseeable future. Our future earnings, if any, will be used to finance our capital requirements, repay bank borrowings and fund our operations.

Our credit facilities prohibit us from paying any dividends without the written consent of the lender or making any other payments on our capital stock without the written consent of the lender. There can be no assurance that the lender will provide such consent.

Possible delisting of our stock

Our common stock trades on the Nasdaq Capital Market. There are certain qualitative and quantitative criteria for continued listing on the Nasdaq Capital Market, known as continued listingrequirements. Failure to satisfy any one of these continued listing requirements could result in our securities being delisted from the Nasdaq Capital Market. These criteria include at least two active market makers, maintenance of $2,500,000 of stockholders’ equity (or alternatively, $35,000,000 in market capitalization or $500,000 in net income from operations in the latest fiscal year or 2 of the last 3 fiscal years), a minimum bid price for our common stock of $1.00, and at least 500,000 publicly held shares with a market value of at least $1,000,000, among others. Continued listing also requires compliance with the Nasdaq Stock Market’s corporate governance listing criteria. Usually, if a deficiency occurs for a period of 30 consecutive trading days (10 consecutive trading days for failure to satisfy the minimum market capitalization requirement), the particular company is notified by Nasdaq and has a grace period in which to achieve compliance. If the company is unable to demonstrate compliance after the expiration of any applicable grace period, the security is subject to delisting. The security might be able to trade on the Nasdaq OTC Bulletin Board, a less transparent trading market which may not provide the same visibility for the company or liquidity for its securities, as does the Nasdaq Capital Market. As a consequence, an investor may find it more difficult to dispose of or obtain prompt quotations as to the price of our securities, and may be exposed to a risk of decline in the market price of our common stock.

The Nasdaq Capital Market requires that we maintain a minimum market value of public float of $1,000,000 for continued listing. The publicly trading shares, exclusive of any affiliate ownership, which is the float for our common stock, is approximately 1,658,092 shares, and as the closing price of our shares on March 7, 2008 was $4.51, we currently satisfy that maintenance requirement.

Our common stock has limited trading volume. There is the risk of being delisted from the Nasdaq Capital Market should our common stock fail to maintain a minimum bid price of $1.00 per share for 30 consecutive days, or we fail to meet other continued listing requirements In 2006, we were notified by Nasdaq of failure to meet its listing requirements due to a delay in filing our quarterly report for the second quarter of 2006, as a result of accounting errors at our Simclar (Mexico), Inc. subsidiary that led to a restatement of our 2005 and first quarter 2006 results. We were able to correct this deficiency before further action to delist our common stock. Continued satisfaction of certain of the Nasdaq Capital Market continued listing requirements is beyond our control. There is no assurance that we will continue to satisfy the continued listing maintenance criteria, which, without a timely cure, could cause our securities to be delisted from the Nasdaq Capital Market.

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A significant downturn in the general economy could adversely affect our revenue, gross margin and earnings.

Our business is subject to inflation, rising interest rates, availability of capital markets, consumer spending rates, the effects of governmental plans to manage economic conditions and other national and global economic occurrences beyond our control which could have an adverse affect on our revenue, gross margin and earnings.  As suppliers to the OEM market many of our products, and hence our revenue and gross margin, is strongly correlated with general economic conditions and with the level of business activity of our customers.  Economic weakness and constrained customer spending has resulted in the past, and may result in the future, in decreased revenue, gross margin, earnings, or growth rates.  We also have experienced, and may experience in the future, gross margin declines reflecting the effects of increased pressure for price concessions as our customers attempt to lower their cost structures and increased material costs as our suppliers attempt to increase their prices.  In this environment, we may not be able to reduce our costs sufficiently to maintain our margins.   

Failure to attract and retain qualified personnel may result in difficulties in managing our business effectively and meeting revenue growth objective.

Our ability to profitably manage and grow our business depends upon the contributions and abilities of key executives, operating officers and other personnel.  The loss of the services of any of these key employees could have a material impact on the Company's business and results of operations. In addition, continued growth and expansion of the Company's contract manufacturing business in an extremely competitive market will require that it attract, motivate and retain additional skilled and experienced personnel. The inability to satisfy these requirements could have a negative impact on the Company's ability to remain competitive in the future.

There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and may not be detected.

Simclar’s management, including our Chief Executive Officer and Chief Financial Officer, does not expect that any company’s controls, including our own, will prevent all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  The design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be evaluated in relation to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, in the company have been detected.  These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake.  Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls.  The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.  Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The following chart summarizes the principal properties leased by the company:

Space	Property	Term
16,000 sq. ft. (exec. offices, mfg.)	2230 W 77th St. Hialeah, FL	10 yrs. to August 31, 2010
12,000 sq. ft. (mfg., warehouse)	2230 W 77th St. Hialeah, FL	10 yrs. to August 31, 2010

16,000 sq. ft. (office, warehouse)	2685 N. Coria Brownsville, TX	3 yrs. to April 30, 2008
37,919 sq. ft. (mfg., office, warehouse)	Parque Industrial CYLSA Matamoros, Mexico	5 yrs. to July 15, 2011
55,524 sq. ft. (mfg., office, warehouse)	Parque Industrial CYLSA Matamoros, Mexico	13 yrs. to October 31, 2017
90,000 sq. ft. (mfg., office, warehouse)	176 Laurie Ellis Road Winterville, NC	5 yrs. to May 31, 2011
52,826 sq. ft. (mfg., office, warehouse)	1624 West Jackson Ozark, MO	5 yrs. to December 31, 2011

The company owns a 77,800 square foot manufacturing, office and warehouse facility located at 1784 Stanley Avenue in Dayton, Ohio.

In December 2006, the company entered into a lease agreement for a new facility for the SIT operation in Ozark, Missouri. The lease is an operating lease with a term of 5 years with renewal options and an estimated annual lease expense of approximately $120,000. The move to the new facility was completed in April 2007. While there was a disruption in product shipments during this process, there were neither lost revenues nor any material negative effects as a result of this move to the new facility.

We maintain state-of-the-art manufacturing, quality control, testing and packaging equipment at all of our facilities.

We believe that our equipment and facilities are suitable and adequate for our current operations and provide us with the productive capacity we need for our current business levels. We utilize approximately 60% of the capacity of each of our facilities on a one shift schedule for our business.

We are subject to a variety of environmental regulations relating to our manufacturing processes and facilities. See “Government Regulation” under Item 1 and “Risk Factors” under Item 1A.

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Item 3. Legal Proceedings

We are, from time to time, a party to litigation which arises in the normal course of our business. When a loss is deemed probable and reasonably estimable, an amount is recorded in our financial statements. Although the ultimate resolution of pending proceedings cannot be determined, in the opinion of management, the unfavorable resolution of these proceedings in the aggregate will not have a material adverse effect on our business, financial position, results of operations, or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

None.

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Part II

Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities

Market for Common Stock

The table below reflects the high and low closing sales prices for our common stock, which trades under the symbol “SIMC”, as reported by the Nasdaq Capital Market. The prices shown represent quotations between dealers, without adjustment for retail markups, markdowns or commissions and may not represent actual transactions.

2007
	High		Low
1st Quarter	$	6.67	$	5.31
2nd Quarter	$	7.25	$	5.78
3rd Quarter	$	12.19	$	5.45
4th Quarter	$	13.74	$	3.79

2006
		High		Low
1st Quarter	$	3.83	$	3.15
2nd Quarter	$	11.33	$	3.70
3rd Quarter	$	13.18	$	4.36
4th Quarter	$	8.99	$	4.35

Approximate Number of Holders of Common Stock

On December 31, 2007, there were approximately 46 shareholders of record of our common stock. Our transfer agent is Continental Stock Transfer & Trust Company, 17 Battery Place, 8^th Floor, New York, New York 10004. 

Dividends

We have not paid, nor do we have any present plans to pay cash dividends on our common stock in the immediate future. In addition, our credit facilities with the Bank of Scotland prohibit us from declaring or paying dividends on our common stock without the Bank of Scotland’s written consent. See Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Liquidity and Capital Resources.”

Issuer Repurchases

No purchases of any of our outstanding shares were made by or on behalf of the company or any affiliated purchaser during 2007 and 2006.

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Item 6. Selected Financial Data

The following selected financial data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein:

Consolidated Statements of Operations Data

(in thousands except per share amounts)

	Years Ended December 31,
	2007		2006		2005		2004		2003
Revenues	$	136,416	$	116,031	$	61,005	$	53,582	$	36,187
Net income		2,362		2,863		947		2,342		1,106
Earnings per share	$	0.37	$	0.44	$	0.15	$	0.36	$	0.17

Consolidated Balance Sheet Data

(in thousands)

	December 31,
	2007		2006		2005		2004		2003
Working capital	$	10,702	$	14,236	$	4,470	$	12,137	$	11,804
Total assets		66,246		63,864		37,710		32,580		25,674
Total debt		13,524		20,565		4,200		6,700		6,500
Total liabilities		45,941		45,942		22,650		18,462		13,913
Stockholders’ equity		20,306		17,922		15,060		14,119		11,761

The 2006 financial data reflects the acquisition of the Litton backplane assembly assets, 2005 financial data reflects the acquisition of Simclar (North America), Inc., and the 2003 financial data reflects the acquisition of AG Technologies, Inc. (Simclar (Mexico), Inc.).

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Simclar, Inc. continued to demonstrate strong revenue growth of existing products and customers through 2007 as well as adding new products and customers. Our strategy remains to (1) leverage our relationship with Simclar Group to expand our reach globally, (2) depend upon our long-term relationships with major OEM’s to increase our business with our existing customer base and to grow our customer base with other OEM’s, and (3) seek strategic acquisitions and alliances.

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Some of the key highlights to be discussed further through this discussion and analysis include:

· 2007 revenues were approximately $136 million; this is 18% above 2006.

· 2007 fourth quarter sales were approximately $34.7 million compared to approximately $33.2 million for the fourth quarter in 2006

· net income for 2007 was approximately $2,362,000 and earnings per share was $0.37

· as previously announced, management has decided to transfer the North Carolina operations to Mexico; in 2007 losses of approximately $2.1million arose in North Carolina

· bank term loan repayments of $6.2 million included $3.0 million of voluntary payments

Our operations have continued to depend upon a relatively small number of customers for a significant percentage of our net revenue. Significant reductions in sales to any of our large customers would have a material adverse effect on our results of operations. The level and timing of orders placed by a customer vary due to the customer’s attempts to balance its inventory, design modifications, changes in a customer’s manufacturing strategy, acquisitions of or consolidations among customers, and variation in demand for a customer’s products due to, among other things, product life cycles, competitive conditions and general economic conditions. Termination of manufacturing relationships or changes, reductions or delays in orders could have an adverse effect on our results of operations and financial condition, as has occurred in the past. Our results also depend to a substantial extent on the success of our OEM customers in marketing their products. We continue to seek to diversify our customer base to reduce our reliance on our few major customers. See “Business Strategy” and “Customers” under Item 1, “Business.”

The industry segments we serve, and the electronics industry as a whole, are subject to rapid technological change and product obsolescence. Discontinuance or modification of products containing components manufactured by our company could adversely affect our results of operations. The electronics industry is also subject to economic cycles and has in the past experienced, and is likely in the future to experience, recessionary periods. A prolonged worldwide recession in the electronics industry, as we experienced from 2001 through 2003, could have a material adverse effect on our business, financial condition and results of operations. During periods of recession in the electronics industry, our competitive advantages in the areas of quick-turnaround manufacturing and responsive customer service may be of reduced importance to electronic OEMs, who may become more price sensitive.

We typically do not obtain long-term volume purchase contracts from our customers, but rather we work with our customers to anticipate future volumes of orders. Based upon such anticipated future orders, we will make commitments regarding the level of business we want and can accomplish given the current timing of production schedules and the levels of and utilization of facilities and personnel. Occasionally, we purchase raw materials without a customer order or commitment. Customers may cancel, delay or reduce orders, usually without penalty, for a variety of reasons, whether relating to the customer or the industry in general, which orders are already made or anticipated. Any significant cancellations, reductions or order delays could adversely affect our results of operations.

We use Electronic Data Interchange(“EDI”) with both our customers and our suppliers in our efforts to continuously develop accurate forecasts of customer volume requirements, as well as sharing our future requirements with our suppliers. We depend on the timely availability of many components. Component shortages could result in manufacturing and shipping delays or increased component prices, which could have a material adverse effect on our results of operations. It is important for us to efficiently manage inventory, proper timing of expenditures and allocations of physical and personnel resources in anticipation of future sales, the evaluation of economic conditions in the electronics industry and the mix of products, whether PCBs, wire harnesses, cables, or turnkey products, for manufacture. See “Electronic Manufacturing Industry” and “Supplies and Materials Management” under Item 1, “Business” and “Results of Operations” below.

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We must continuously develop improved manufacturing procedures to accommodate our customers’ needs for increasingly complex products. To continue to grow and be a successful competitor, we must be able to maintain and enhance our 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. Although we believe that our operations utilize the assembly and testing technologies and equipment currently required by our customers, there can be no assurance that our process development efforts will be successful or that the emergence of new technologies, industry standards or customer requirements will not render our technology, equipment or processes obsolete or noncompetitive. In addition, to the extent that we determine that new assembly and testing technologies and equipment are required to remain competitive, the acquisition and implementation of such technologies and equipment are likely to require significant capital investment.

Our results of operations are also affected by other factors, including price competition, the level and timing of customer orders, fluctuations in material costs (due to availability), the overhead efficiencies achieved by management in managing the costs of our operations, our experience in manufacturing a particular product, the timing of expenditures in anticipation of increased orders, selling, and general and administrative expenses. Accordingly, gross margins and operating income margins have generally improved during periods of high volume and high capacity utilization. We generally have idle capacity and reduced operating margins during periods of lower-volume production.

Key Financial Performance Measures

We manage and assess the performance of our business primarily through the following performance metrics:

Orders booked and backlog– the ratio of orders booked to sales is reviewed on a monthly basis.

Sales– monthly sales are compared against budget and the same month in the previous year.

Gross margin– the gross margin achieved each month is compared against budget and the same month in the previous year.

Selling, general and administrative expenses – the ratio of these expenses as a percentage of sales each month is compared against budget.

Working capital– movements in the balance sheet amounts of inventory, accounts receivable and accounts payable are reviewed on a monthly basis.

Bank borrowings - movements in the company’s working capital facility with the bank are reviewed on a weekly basis.

Weekly business controlreviews– conference calls are conducted weekly by the president, CFO, and group controller to review key performance metrics and general business update with the general managers and financial controllers for each facility.

In the event that any of the above measures indicate unusual movements or trends, further review is undertaken by management to ensure that satisfactory explanations are obtained, and, where necessary, appropriate corrective action is taken.

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Results of Operations

The following is a discussion of the key factors that have affected our business over the last two years. This discussion should be read in conjunction with our consolidated financial statements and the related footnotes included herein.

Net Sales

(dollars in thousands)

	2007			2006
Net Sales	$	136,416		$	116,031
Change from prior year	$	20,385		$	55,026
% change from prior year		17.6	%		90.2	%

Revenues were up approximately $20 million for the year ended December 31, 2007 compared to the same period in 2006. This represents an approximate 18% growth. Approximately 7% of the growth is attributed to a full year’s revenues for the backplanes business acquired in February 2006 and approximately 11% came from growth in business from both existing and new customers.

Gross Profit Margin

(dollars in thousands)

	2007			2006
Gross profit margin	$	14,190		$	13,996
Change from prior year	$	194		$	6,858
% change from prior year		1.4	%		96.1	%
% of sales		10.4	%		12.1	%

Gross profit was up slightly due to the growth in revenues but was lower as a percentage of sales. We continued to experience escalating losses in our North Carolina operations which caused management to conclude that the operations are no longer financially viable and to begin a controlled transfer of the business to Mexico and discontinuance of the North Carolina operations. The transfer will be completed in the first quarter of 2008. With a few exceptions for certain employee guarantees and contract termination costs, current GAAP requires that costs associated with the closing of a facility must be recognized in the period incurred. Management estimates that the results for the first quarter of 2008 will be adversely affected by approximately $700,000 by the transfer, but the longer term benefits will be improved profits and cash flow. Reserves of approximately $310,000 were provided for inventory that was judged to be excess or obsolete as a result of the decision to transfer the operations to Mexico, and to reflect an additional write down on excess and obsolete inventories arising in the year at other company locations.

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Selling, General, and Administrative Expenses

(dollars in thousands)

	2007			2006
Selling, general, and administrative expenses	$	8,735		$	8,023
Change from prior year	$	712		$	3,038
% change from prior year		8.9	%		61.0	%
% of sales		6.4	%		6.9	%

Selling, general, and administrative costs (SG&A) increased approximately $712,000 but decreased as a percentage of sales. Approximately $226,000 of the increased SG&A was due to increased amortization of intangibles related to the Litton asset acquisition in 2006.

Interest Expense

(dollars in thousands)

	2007			2006
Interest expense	$	1,908		$	1,835
Change from prior year	$	73		$	1,358
% change from prior year		4.0	%		284.7	%
% of sales		1.4	%		1.6	%

Interest expense was slightly above last year, due to there being twelve months interest paid in 2007 on the Litton acquisition debt compared to only ten months interest paid in 2006. This additional interest expense, was however mitigated by the effect of voluntary payments of $3 million in addition to the scheduled payments of $3.2 million that reduced our debt with BoS by $6.2 million in 2007. The average interest rate for tranches A and B of our credit facilities was approximately 6.7% while the average interest rates for tranches C and D were approximately 7.6% and 8.7% respectively. These credit facilities are described in further detail below. Our weighted average interest rate for the year was approximately 7.6% compared to approximately 7.7% in 2006.

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Income Before Income Taxes

(dollars in thousands)

	2007			2006
Income before income taxes	$	3,713		$	4,202
Change from prior year	$	(489	)	$	2,457
% change from prior year		-11.6	%		140.8	%
% of sales		2.7	%		3.6	%

The losses from our North Carolina operations and the adjustments to inventory reserves contributed to lower income before income taxes in spite of higher sales. See the discussion under gross profit margin.

Income Tax Expense

(dollars in thousands)

	2007			2006
Income tax expense	$	1,351		$	1,339
Change from prior year	$	12		$	542
% change from prior year		0.9	%		67.9	%
% of Income before tax		36.4	%		31.9	%

Income taxes as a percentage of sales were approximately 4% points higher this year due to timing differences on the deductibility of certain cost for tax and book purposes.

Liquidity and Capital Resources

Cash and Cash Equivalents

(dollars in thousands)

	December 31, 2007		December 31, 2006
Cash and cash equivalents	$	429	$	82

We continue to prudently manage our cash flow as the business continues to grow. Excess liquid funds are invested in short-term interest-bearing accounts at financial institutions.

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Net Cash Provided from Operating Activities

(dollars in thousands)

	December 31, 2007		December 31, 2006
Net cash provided from operating activities	$	7,202	$	2,781

The largest contributor to the improvement in net cash provided from operating activities was approximately $2.5 million provided by working capital in 2007 compared to an approximately $1.9 million use of working capital in 2006. There was net income before depreciation of approximately $4.7 million in both 2007 and 2006.

Accounts Receivable

(dollars in thousands)

	December 31, 2007		December 31, 2006
Accounts receivable	$	20,805	$	20,802
Average days sales outstanding		54.9		64.5

Accounts receivable remained relatively unchanged in spite of the approximately 18% growth in sales. The major factor in the lower days sales outstanding at December 31, 2007 is attributed to the impact of our improved receivables collections procedures.

Inventory

(dollars in thousands)

	December 31, 2007		December 31, 2006
Inventory	$	21,664	$	20,259
Average inventory turnover		5.6		5.0

Inventories have grown in relationship to the increased sales volumes. We continue to focus on improving our inventory utilization through improved systems, expanding our use of consigned inventories, reducing order quantities, and shortening lead times.

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Cash Used in Investing Activities

(dollars in thousands)

	December 31, 2007		December 31, 2006
Net cash used in investing activities	$	1,572	$	17,074

The most significant difference in investing activity between 2007 and 2006 was approximately $16.1 million related to the Litton asset acquisition in 2006. Additions to property and equipment were approximately $2.1 million in 2007 compared to approximately $1.1 million in 2006.

Cash (Used In) Provided by Financing Activities

(dollars in thousands)

	December 31, 2007			December 31, 2006
Cash (used in) provided by financing activities	$	(5,305	)	$	13,543

The most significant contributor to financing activities in 2007 was the reduction of term debt of approximately $7.1 million and repayment of a note payable to Simclar Group of approximately $1.3 million. Term loan repayments were $6.2 million to BoS of which $3.2 million were scheduled payments and $3.0 million were voluntary additional payments. Payments on other long-term borrowings totaled $850,000 in 2007. This was offset by an increase in use our working capital line of approximately $3 million. The major activity in 2006 was the increase of $16 million in our long-term credit facility with BoS to fund the Litton asset acquisition.

Our near-term cash requirements are primarily related to funding our operations, investing in acquisitions, and meeting the company’s required bank debt obligations.  We believe that the combination of internally-generated funds, available cash reserves, and our existing credit facility is sufficient to fund our operating, investing and financing activities.

In December 2005, we entered into two amended and one new credit facilities with Bank of Scotland, plc in Edinburgh, Scotland consisting of:

Borrower	Type of facility	Original amount		Balance at December 31,2007
Simclar, Inc.	Working capital	$	7,500,000	$	7,494,408
Simclar, Inc.	Term loan – four tranches (see detail of tranches below)	$	21,650,000	$	12,300,000
Simclar Interconnect Technologies, Inc.	Working Capital	$	1,000,000	$	651,579

Effective March 27, 2008, we entered into amendments of the two working capital facilities. The term of the $1 million working capital facility of Simclar IT, originally entered into in December 2005, and amended in January 2007, was extended to March 17, 2009. The maturity date of the Simclar, Inc. $7.5 million working capital facility, last amended in January 2006, was extended to March 17, 2009. No other material changes were made to either facility by the amendments, except that the default interest rate under both facilities was increased from 1.5% to 2.0% and the interest rate under the $7.5 million facility was increased from 1.5% over LIBOR to 1.75% over LIBOR.

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Interest on the Simclar, Inc. working capital facility accrues at an annual rate equal to LIBOR plus 1.5% (increasing to 1.75% after March 2008), plus an amount, rounded to the nearest eighth of a percent, to cover any increases in certain regulatory costs incurred by the bank. The company may elect to pay interest on advances every one, three or six months, with LIBOR adjusted to correspond to the interest payment period selected by the company. The interest rate for the working capital facility at December 31, 2007 was 6.0% based on the one month election.

Interest on the Simclar Interconnect Technologies, Inc. working capital facility will be a margin over LIBOR determined by a ratio of net borrowings to EBITDA for any given test period. The margin percentage can range from 1.75% to 2.5%. The interest rate for this working capital facility at December 31, 2007 was 7.0%.

The term loan interest is also determined by a margin over LIBOR related to the ratio of net borrowings to EBITDA for any given test period. The margin percentage varies from 1.5% to 3.5%. The term debt interest rate was 6.732% for tranches A and B, 7.355% for tranche C, and 8.37% for tranche D at December 31, 2007 based on the one month election. The term loan is divided into four tranches each with its own specific purpose and repayment schedule as shown in the following table:

Tranche	Principal Amount		Purpose	Payments
A	$	4,250,000	Refinance existing facilities	Seventeen quarterly payments of $250,000 beginning October 2004 through October 2008
B	$	1,400,000	Dayton property acquisition	Twenty-eight quarterly payments of $50,000 beginning January 2005 through October 2011
C	$	13,000,000	Acquisition of certain assets of the Litton Interconnect Technologies assembly operations	Thirteen quarterly payments of $500,000 beginning December 2006 through December 2009, four quarterly payments of $250,000 from March 2010 through December 2010, four quarterly payments of $750,000 from March 2011 through December 2011 and four quarterly payments of $625,000 from March 2012 through December 2012
D	$	3,000,000	Acquisition of certain assets of the Litton Interconnect Technologies assembly operations	Single payment due December 31, 2010

The weighted average interest rate for 2007 was approximately 7.6%.

Our credit facilities with BoS, which include an Amended Term Loan Facility Letter, an Amended Working Capital Facility Letter, a Working Capital Facility Letter, and related security agreements, guaranties and a mortgage, in addition to subjecting all our assets as security for the bank financing, include substantial covenants that impose significant restrictions on us, including, among others, requirements that:

· the facilities take priority over all our other obligations;

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· we must maintain sufficient and appropriate insurance for our business and assets;

· we must maintain all necessary licenses and authorizations for the conduct of our business;

· we indemnify the bank against all costs and expenses incurred by it which arise as a result of any actual or threatened (i) breach of environmental laws; (ii) release or exposure to a dangerous substance at or from our premises; or (iii) claim for an alleged breach of environmental law or remedial action or liability under such environmental law which could have an adverse material effect;

· if environmental harm has occurred to our property securing the credit facility, we have to ensure we were not responsible for the harm, and we have to be aware of the person responsible and its financial condition; and

· we must notify the bank of a variety of pension and benefit plans and ERISA issues, including, among others, (i) material adverse changes in the financial condition of any such plan; (ii) increase in benefits; (iii) establishment of any new plan; (iv) grounds for termination of any plan; and (v) our affiliation with or acquisition of any new ERISA affiliate that has an obligation to contribute to a plan that has an accumulated funding deficiency.

In addition, our credit facilities require us to maintain:

· consolidated adjusted net worth greater than $15,000,000 with effect from March 31, 2006 (tested on a quarterly basis);

· a ratio of consolidated current assets to consolidated net borrowing prior to December 31, 2007 of not less than 1:1 and thereafter not to be less than 1.5:1 (tested on a quarterly basis);

· a ratio of consolidated trade receivables to consolidated net borrowing of not less than 0.5:1 prior to December 31, 2007 and not less than 0.75:1 thereafter (tested on a quarterly basis); and

· a ratio of EBIT to total interest not less than 3:1 until March 31, 2006; not less than 3.5:1 from April 1, 2006 to December 31, 2007; and not less than 4:1 thereafter (tested on a quarterly basis beginning December 31,2005);

· a ratio of net borrowings to EBITDA not to exceed 5:1 through December 31, 2006; not to exceed 4.5:1 from January 1, 2007 to December 31, 2007; not to exceed 4:1 from January 1, 2008 to December 31, 2008; not to exceed 3.5:1 from January 1, 2009 to December 31, 2009; and not to exceed 3:1 thereafter (tested on a quarterly basis beginning December 31, 2006).

Finally, without the prior written consent of BoS, our credit facilities prohibit us from:

· granting or permitting a security agreement against our consolidated assets except for permitted security agreements;

· declaring or paying any dividends or making any other payments on our capital stock;

· consolidating or merging with any other entity or acquiring or purchasing any equity interest in any other entity, or assuming any obligations of any other entity, except for notes and receivables acquired in the ordinary course of business;

· incurring, assuming, guaranteeing, or remaining liable with respect to any indebtedness, except for certain existing indebtedness disclosed in our financial statements;

· undertaking any capital expenditures in excess of $1,000,000 of the relevant estimates in the aggregate budget approved by BoS;

· effecting any changes in ownership of our company;

· making any material change in any of our business objectives, purposes, operation or taxes; and

· incurring any material adverse event in business conditions as defined by the Bank.

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The company did not satisfy the EBIT to total interest coverage covenant contained in the credit facilities at December 31, 2006. Bank of Scotland nonetheless agreed to suspend the effectiveness of this covenant and instead agreed that total interest coverage must exceed 3:1 on a quarterly basis and the other financial covenants must be complied with. The company successfully maintained compliance with the 3:1 interest coverage ratio.

Our indebtedness requires us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which could reduce amounts for working capital and other general corporate purposes. The restrictions in our credit facility could also limit our flexibility in reacting to changes in our business and increases our vulnerability to general adverse economic and industry conditions.

We have no off-balance sheet financing arrangements with related or unrelated parties and no unconsolidated subsidiaries. In the normal course of business, we enter into various contractual and other commercial commitments that impact or can impact the liquidity of our operations.

Effect of Recently Issued Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” (SFAS 160). SFAS 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a noncontrolling interest, sometimes called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS 160 requires, among other items, that a noncontrolling interest be included in the consolidated statement of financial position within equity separate from the parent’s equity; consolidated net income to be reported at amounts inclusive of both the parent’s and noncontrolling interest’s shares and, separately, the amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated statement of income; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. SFAS 160 becomes effective for the company on January 1, 2009. Management is currently evaluating the potential impact of SFAS 160 on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” (SFAS 159). SFAS No. 159 permits companies to choose to measure certain financial instruments and other items at fair value. The Company’s preliminary conclusion is that it will not choose the fair value measurement options permitted by SFAS 159 for any of its assets and liabilities. Therefore, this statement will not impact the company’s future financial statements.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” (SFAS 141R). SFAS 141R replaces SFAS No. 141, “Business Combinations,” (SFAS 141) and retains the fundamental requirements in SFAS 141, including that the purchase method be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R does change many aspects of SFAS 141, especially with respect the treatment of direct acquisition costs and recognition of contingent consideration. This standard defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control instead of the date that the consideration is transferred. SFAS 141R requires an acquirer in a business combination, including business combinations achieved in stages (step acquisition), to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values of that date, with limited exceptions. It also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. SFAS 141R becomes effective for the company for any business combination with an acquisition date on or after January 1, 2009. Management is currently evaluating the potential impact of SFAS 141R on the consolidated financial statements.

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In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”) to clarify the definition of fair value, establish a framework for measuring fair value and expand the disclosures on fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 becomes effective for the company in its fiscal year ending December 31, 2008. The company is currently evaluating the impact of the provisions of SFAS No. 157 on its consolidated financial statements.

Critical Accounting Policies

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements :

Provision for Inventory Obsolescence

The company reviews its inventories on a regular basis to identify parts that have not been used in the manufacturing process during the previous two year period and are not believed to be required for use in the manufacturing process. The carrying value of these identified parts is reduced to estimated realizable value with a charge to the allowance for obsolescence. Additional write-downs, if required, are recorded in the period identified.

Long-Lived Asset Impairment

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets to be held and used are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value of these assets is determined based upon estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. In analyzing the fair value and recoverability using future cash flows, the company makes projections based on a number of assumptions and estimates of growth rates, future economic conditions, assignment of discount rates and estimates of terminal values. An impairment loss is recognized if the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows. The measurement of impairment loss is the difference between the carrying amount and fair value of the asset. Long-lived assets to be disposed of and/or held for sale are reported at the lower of carrying amount or fair value less cost to sell. The company determines the fair value of these assets in the same manner as described for assets held and used.

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Goodwill and Intangible Assets

Goodwill is the excess of the purchase price paid over the fair value of the businesses acquired and is not amortized.  Intangible assets with determinable lives are amortized over the estimated useful life in a manner reflective of the pattern in which the economic benefits of the intangible assets are used up. Goodwill and indefinite-lived intangibles are evaluated for impairment on an annual basis, or more frequently if impairment indicators arise, using fair-value-based tests. For the year ended December 31, 2007, the company changed the reporting unit for goodwill impairment testing purposes and changed the date of its annual goodwill impairment test from various dates throughout the year to the first day following the end of their 3rd quarter. Management believes that the accounting change is preferable in the circumstances because it better aligns management’s consideration of the operations of the company and also better aligns the timing of the company’s long-range planning with this test, as the impairment test is dependent on the results of the company’s long-range planning process. Management requested a review of this accounting change from our independent registered public accounting firm to which they concurred.  During 2007 and 2006, the company evaluated goodwill and other intangible assets in accordance with SFAS No. 142 and determined there was no impairment related to the carrying value of such assets.

Income Taxes

Deferred income taxes at the end of each period are determined by applying enacted tax rates applicable to future periods in which the taxes are expected to be paid or recovered on differences between the financial accounting and tax basis of assets and liabilities. Effective January 1, 2007, the company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, Accounting for Income Taxes.”  FIN 48 requires that the financial statement effects of a tax position taken or expected to be taken in a tax return to be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination.  The adoption of FIN 48 had no impact on the company’s consolidated financial statements.

Revenue Recognition and Accounts Receivable

The company’s sales are primarily derived from product manufacturing including, but not limited to, finished molded and non-molded cables, wiring harnesses, printed circuit board assemblies, electro-mechanical and electronic assemblies. Revenue is recognized upon shipment of the product to the customer which, under contractual terms, is generally FOB shipping point. Upon shipment, title transfers and the customer assumes the risks and rewards of ownership of the product. The selling price of the product is fixed and the ability to collect for the sale to the customer is reasonably assured when the product is shipped. Revenue from contract manufacturing, rework and refurbishing is recognized upon shipment of the product to the customer which, under contractual terms, is generally FOB shipping point. Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date.

The company’s estimate of the allowance for doubtful accounts for trade receivables is primarily determined based upon the length of time that the receivables are past due. In addition, management estimates are used to determine probable losses based upon an analysis of prior collection experience, specific account risks, and economic conditions.The company undertakes a series of actions based upon the aging of past due trade receivables, including letters and direct customer contact. Accounts are deemed uncollectible based on a customer’s payment experience and current financial condition.

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Cautionary Statement Concerning Forward-Looking Statements

This Report includes certain forward-looking statements with respect to our company and our business that involve risks and uncertainties. These statements are influenced by our financial position, business strategy, budgets, projected costs and the plans and objectives of management for future operations. They use words such as anticipate, believe, plan, estimate, expect, intend, project, and other similar expressions. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, we cannot assure you that our expectations will prove correct. Actual results and developments may differ materially from those conveyed in the forward-looking statements. For these statements, we claim the protections for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Important factors include changes in general economic, business and market conditions, as well as changes in such conditions that may affect industries or the markets in which we operate, including, in particular, the impact of our nation’s current war on terrorism could cause actual results to differ materially from the expectations reflected in the forward-looking statements made in this Report. Further, information on other factors that could affect the financial results of Simclar, Inc. is included in the company’s other filings with the Securities and Exchange Commission. These documents are available free of charge at the Commission’s website at http://www.sec.gov and/or from the company. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report.

Item 8. Financial Statements and Supplementary Data

Our financial statements, and the related notes, together with the report of Grant Thornton LLP dated March 31, 2008 are set forth at pages F-1 through F-22 attached hereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the specified time periods. As a part of these controls, our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. The company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

· pertain to the maintenance of records that, in reasonable detail accurately reflect the transactions and dispositions of the assets of the company;

· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and, that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the company; and

· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

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Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of December 31, 2007, our disclosure controls and procedures are adequately designed and effective to provide reasonable assurance that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control systems are met. Further, a design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments and decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons, or by management override of the control. Further, the design of any system of controls is also based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations and a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Management's Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to management and the board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation

The company's management has assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2007. In making this assessment, the company used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on the company's processes and assessment, management has concluded that, as of December 31, 2007, the company's internal control over financial reporting was effective.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Changes in Control Over Financial Reporting

Except for the efforts to strengthen our internal controls described above, during the year ended December 31, 2007, there were no changes in our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

On March 31, 2008, the company issued a press release announcing its 2007 earnings (see Exhibit 99.1).

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Part III

Item 10. Directors and Executive Officers of the Registrant and Corporate Governance

The information required by this item is included under the caption, “Information About Directors, Executive Officers, and Corporate Governance” in our Information Statement relating to our 2008 Annual Meeting of Shareholders (the “Information Statement”) to be held on June 9, 2008, to be filed with the Securities and Exchange Commission pursuant to Regulation 14C under the Securities Exchange Act of 1934, is incorporated herein by reference.

We have adopted a code of conduct and ethics that applies to our directors, officers and all employees. The code of business conduct and ethics is posted on our website at www.simclar.com, and may be obtained free of charge by writing to Simclar, Inc., Attn: Chief Financial Officer, 1784 Stanley Avenue, Dayton, Ohio 45404.

Item 11. Executive Compensation

The information required by this item is included under the caption, “Executive Compensation” in the Information Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is included under the caption, “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Information Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactionsand Director Independence

The information required by this item is included under the caption, “Certain Relationships and Related Transactions, and Director Independence” in the Information Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item is included under the caption“Report of the Audit Committee” in the Information Statement, and is incorporated herein by reference.

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Part IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Report.

(1)The following financial statements are filed as part of this Annual Report on Form 10-K:

Reports of Independent Registered Public Accountants.

Consolidated Balance Sheets as of December 31, 2007 and 2006.

Consolidated Statements of Operations for the Years Ended December 31, 2007 and 2006.

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2007 and 2006.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2007 and 2006.

Notes to the Consolidated Financial Statements.

(3)Exhibits:

Exhibit Number	Exhibit Description
3.1	Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed November 14, 2003).
3.2	Amended By-Laws of Simclar, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
4.1	Form of Common Stock Certificate (incorporated by reference to Exhibit 4(i) to the Company’s Annual Report on Form 10-K filed March 30, 2004).
10.1	Stock Purchase Agreement, dated May 19, 2005 but effective May 1, 2005, between Simclar, Inc. and Simclar Group Limited (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report of Form 10-Q filed August 12, 2005).
10.2	Share and Asset Purchase and Sale Agreement, dated as of December 21, 2005, by and among Litton Systems, Inc., Litton Systems International, Inc. and Litton U.K., Inc. as Sellers, and Simclar Group Limited, Simclar, Inc., Simclar Interconnect Technologies, Inc., and Simclar Interconnect Technologies Limited. (incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.3	First Amendment to Share and Asset Purchase and Sale Agreement, dated as of February 24, 2006 by and among Litton Systems, Inc., Litton Systems International, Inc. and Litton U.K., Inc. as Sellers, and Simclar Group Limited, Simclar, Inc., Simclar Interconnect Technologies, Inc., and Simclar Interconnect Technologies Limited. (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed March 31, 2006).

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10.4	Lease Agreement, dated August 29, 2000, between the Company and Medicore, Inc. (incorporated by reference to Exhibit 10(i) to Medicore Inc.’s Current Report on Form 8-K filed December 19, 2000).
10.5	Lease Agreement, dated March 25, 1997, between the Company and Route 495 Commerce Park Limited Partnership(incorporated by reference to Exhibit 10(i) to the Company’s Quarterly Report on Form 10-Q filed May 9, 1997).
10.6	Lease Agreement, dated April 30, 1997, between the Company and PruCrow Industrial Properties, L.P., (incorporated by reference to Exhibit 10(i) to the Company’s Current Report on Form 8-K dated June 4, 1997).
10.7	Lease Agreement, dated July 16, 2001, between Simclar de Mexico, SA de CV and Consorcio Inmobiliario Del Noreste, S.A. de C.V. (incorporated by reference to Exhibit 10(x) to the Company’s Annual Report on Form 10-K filed March 30, 2004 ).
10.8	Lease Agreement, dated as of November 1, 2004, between Simclar de Mexico, SA de CV and Consorcio Inmobiliario Del Noreste, S.A. de C.V., (incorporated by reference to Exhibit 10(xviii) to the Company’s Annual Report on Form 10-K filed March 31, 2005).
10.9	Commercial Lease, dated October 1, 1999, between Simclar (Mexico) and Fleet Management Co. (incorporated by reference to Exhibit 10(xi) to the Company’s Annual Report on Form 10-K filed March 30, 2004).
10.10	Sublease, dated August 23, 1999, between the Company and United Consulting Group (incorporated by reference to Exhibit (10)(xiv) of the Company’s Annual Report on Form 10-K filed March 30, 2000).
10.11	Amendment to Sublease and Consent to Sublease among the Company, United Consulting Group, Inc., and United Computing Group, Inc. (incorporated by reference to Exhibit 10(xxv) to the Company’s Annual Report on Form 10-K filed March 30, 2001).
10.12	License Agreement, dated February 24, 2006, between the Company and Litton Systems, Inc. (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.13	Transition Services Agreement, dated February 24, 2006, between the Company and Litton Systems, Inc. (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.14	Lease Agreement, dated as of December 28, 2006, between Simclar Interconnect Technologies, Inc. and Phillip A. Wiland and Linda S. Wiland. (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed April 6, 2007).
10.15	Facility Letter, dated October 2, 2001, between the Company and the Bank of Scotland (incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q filed November 14, 2001).

38

10.16	Working Capital Facility Letter, dated October 2, 2001, between the Company and the Bank of Scotland (incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q filed November 14, 2001).
10.17	Letter Agreement, dated November 10, 2003, between the Company and the Bank of Scotland (incorporated by reference to Exhibit 10(xviii) to the Company’s Annual Report on Form 10-K filed March 30, 2004).
10.18	Letter Agreement dated January 17, 2003 with the Bank of Scotland (incorporated by reference to Exhibit 10(xvii) to the Company’s Annual Report on Form 10-K filed March 30, 2004).
10.19	Amendment Letter, dated October 14, 2004, to Term Loan Facility Letter between the Company and Bank of Scotland, (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed October 20, 2004).
10.20	Amendment Letter, dated October 14, 2004, to Working Capital Facility Letter between the Company and Bank of Scotland (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed October 20, 2004).
10.21	Amendment Letter 4, dated December 21, 2005, to Term Loan Facility Letter between the Company and Bank of Scotland. (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.22	Working Capital Facility Letter, dated December 21, 2005, between the Company and Bank of Scotland. (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.23	Amendment Letter 1, dated January 26, 2007, to Working Capital Facility Letter between the Company and Simclar Interconnect Technologies, Inc., as borrowers, and Bank of Scotland , (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed February 19, 2007).
10.24	Amendment Letter 5, dated January 26, 2007, to Working Capital Facility Letter between the Company and Bank of Scotland, (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed February 19, 2007).
10.25	Third Amended and Restated General Security Agreement, dated February 28, 2007, among the Company, Simclar (Mexico) Inc, Simclar Interconnect Technologies, Inc., Simclar De Mexico, S.A. de C.V. and Bank of Scotland. (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed April 6, 2007).
10.26	Third Amended and Restated Pledge Agreement, dated February 23, 2006, among the Company, Simclar (Mexico) Inc, and Bank of Scotland. (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.27	Management Services Agreement, effective July 17, 2005, between Simclar, Inc. and Simclar Group Limited (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 12, 2005).
10.28	Amendment, dated July 17, 2007, to Management Services Agreement, effective July 17, 2005, between Simclar, Inc. and Simclar Group Limited. (incorporated by reference to Exhibit 99.1 to the Company’s Quarterly Report on Form 10-Q filed August 14, 2007).

39

10.29		Employment Agreement between the Company and Barry Pardon dated February 22, 2006. (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed March 31, 2006).
10.30	*	Amendment Letter 2, dated March 25, 2008, to Working Capital Facility Letter between the Company and Simclar Interconnect Technologies, Inc., as borrowers, and Bank of Scotland.
10.31	*	Amendment Letter 6, dated March 25, 2008, to Working Capital Facility Letter between the Company and Bank of Scotland.
18.1	*	Letter Regarding Change in Accounting Principles.
21	*	Subsidiaries of the registrant.
24	*	Powers of Attorney.
31.1	*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	*	Certification of Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
32.2	*	Certification of Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
99.1	*	Press release dated March 31, 2008 entitled “Simclar Announces 2007 Earnings.”

* Filed with this Report.

(b) Exhibits.

The exhibits to this report follow the Signature Page.

(c) Financial Statement Schedules.

The financial statement schedule follows the exhibits to this report.

40

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.

	SIMCLAR, INC.
Date: March 31, 2008	By:	/s/ Barry J. Pardon
		Barry J. Pardon, President and Director

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.

Name	Title	Date
Samuel J. Russell*	Chairman of the Board of Directors	March 31, 2008
Samuel J. Russell	and Chief Executive Officer
/s/ Barry J. Pardon	President and Director	March 31, 2008
Barry J. Pardon	(principal executive officer)
John Ian Durie*	Vice-President (Finance) and	March 31, 2008
John Ian Durie	Director
/s/ Stephen Donnelly	Chief Financial Officer and	March 31, 2008
Stephen Donnelly	Secretary
	(principal financial and principal
	accounting officer)
A. Graeme Manson *	Director	March 31, 2008
A. Graeme Manson
Kenneth M. MacKay, M. D.*	Director	March 31, 2008
Kenneth M. MacKay, M. D.
Christina M. J. Russell*	Director	March 31, 2008
Christina M. J. Russell
William J. Sim*	Director	March 31, 2008
William J. Sim

*By:	/s/ Barry J. Pardon
	Barry J. Pardon, Attorney-in-Fact

41

FORM 10-K—ITEM 8

LIST OF FINANCIAL STATEMENTS

The following reports of independent registered public accounting firms and consolidated financial statements of Simclar, Inc. and subsidiaries are included in Item 8:

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets – December 31, 2007 and 2006.	F-3
Consolidated Statements of Operations – Years ended December 31, 2007 and 2006	F-5
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2007 and 2006.	F-6
Consolidated Statements of Cash Flows – Years ended December 31, 2007 and 2006.	F-7
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Simclar, Inc. and subsidiaries:

We have audited the accompanying consolidated balance sheets of Simclar, Inc. and subsidiaries (the “Company”) (a Florida corporation) as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2007. 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Simclar, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

Cincinnati, Ohio

March 31 , 2008

F-2

SIMCLAR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	428,538	$	82,154
Accounts receivable, less allowances of $236,000 and $294,000 at December 31, 2007 and 2006 respectively		20,804,552		20,801,668
Amounts receivable from major stockholder, net		904,627		-
Inventories, less allowances for obsolescence of $2,3640,000 and $1552,000 at December 31, 2007 and 2006 respectively		21,664,442		20,259,037
Prepaid expenses and other current assets		654,509		637,856
Prepaid income taxes		107,091		15,405
Deferred income taxes		1,214,160		1,034,532
Total current assets		45,777,919		42,830,652
Property and equipment:
Land and improvements		547,512		547,511
Buildings and building improvements		1,235,904		1,235,904
Machinery, computer and office equipment		15,342,401		15,563,042
Tools and dies		366,347		363,992
Leasehold improvements		1,957,170		660,949
Construction in progress		259,829		537,879
Total property and equipment		19,709,163		18,909,277
Less accumulated depreciation and amortization		9,922,589		8,984,948
Net property and equipment		9,786,574		9,924,329
Deferred expenses and other assets, net		366,265		367,122
Goodwill		9,410,704		9,410,704
Intangible assets, net		904,841		1,331,000
Total assets	$	66,246,303	$	63,863,807

See notes to consolidated financial statements

F-3

SIMCLAR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2007		2006
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	8,145,987	$	5,065,771
Accounts payable		21,447,560		16,396,407
Accrued expenses		1,907,472		1,740,799
Amounts payable to major stockholder, net		-		1,344,139
Current portion of long-term debt		3,575,148		4,047,408
Total current liabilities		35,076,167		28,594,524
Long-term debt		9,600,000		15,300,000
Long-term debt, subordinated		349,257		1,217,986
Deferred income taxes		515,283		429,031
Other long term liabilities		400,000		400,000
Total liabilities		45,940,707		45,941,541
Stockholders' equity:
Common stock, $.01 par value, authorized 10,000,000 shares; issued and outstanding 6,465,345 shares at December 31, 2007 and 2006		64,653		64,653
Capital in excess of par value		11,446,087		11,446,087
Retained earnings		8,747,959		6,385,732
Accumulated other comprehensive income		46,897		25,794
Total stockholders' equity		20,305,596		17,922,266
	$	66,246,303	$	63,863,807

See notes to consolidated financial statements

F-4

SIMCLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2007			2006
Sales	$	136,416,278		$	116,031,435
Cost of goods sold Gross Profit		122,226,381			102,034,927
		14,189,897			13,996,508
Selling, general and administrative expenses		8,735,459			8,023,333
Income from operations		5,454,438			5,973,175
Interest expense		1,907,540			1,834,736
Interest and other income		(165,912	)		(63,679	)
Income before income taxes		3,712,810			4,202,118
Income tax provision		1,350,583			1,339,378
Net income	$	2,362,227		$	2,862,740
Earnings per share:	$	0.37		$	0.44

See notes to consolidated financial statements

F-5

SIMCLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2007 AND 2006

								Retained		Accumulated			Notes
			Capital in					Earnings		Other			Receivable
	Common		Excess of		Comprehensive			(Accumulated)		Comprehensive			Stock
	Stock		Par Value		Income			(Deficit)		Income (Loss)			Options		Total
Balance at December 31, 2005	$	64,653	$	11,446,087				$	3,522,992	$	26,564		$	-	$	15,060,296
Comprehensive income:
Net income						2,862,740			2,862,740
Other comprehensive income:
Foreign currency translation adjustments						(770	)				(770	)
Comprehensive income					$	2,861,970									$	2,861,970
Balance at December 31, 2006	$	64,653	$	11,446,087					6,385,732	$	25,794		$	-	$	17,922,266
Comprehensive income:
Net income						2,362,227			2,362,227
Other comprehensive income:
Foreign currency translation adjustments						21,103					21,103
					$	2,383,330										2,383,330
Comprehensive income Balance at December 31, 2007	$	64,653	$	11,446,087				$	8,747,959	$	46,897		$	-	$	20,305,596

See notes to consolidated financial statements

F-6

SIMCLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
		December 31,
		2007			2006
Operating activities:
Net income	$	2,362,227		$	2,862,740
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization		2,132,354			1,807,917
Loss / (Gain) on disposal of property & equipment		3,725			(26,961	)
Other liabilities		-			400,000
Deferred income tax benefit		(93,376	)		(139,371	)
Changes relating to operating activities from:
Accounts receivable, net		(2,883	)		(3,363,108	)
Amounts payable to major stockholder, net		(904,627	)		(529,324	)
Inventories, net		(1,405,406	)		(3,268,144	)
Prepaid expenses and other current assets		(16,653	)		(181,017	)
Accounts payable		5,051,153			5,414,486
Accrued expenses		167,530			190,683
Income taxes refundable		(91,686	)		(387,275	)
Net cash provided by operating activities		7,202,358			2,780,626
Investing activities:
Additions to property and equipment		(2,093,153	)		(1,131,369	)
Proceeds from sale of property and equipment		520,988			234,367
Acquisition of subsidiaries, net of cash acquired
Simclar (Mexico), Inc.		-			(54,896	)
Simclar Interconnect Technologies, Inc. (Litton)		-			(16,122,149	)
Net cash used in investing activities		(1,572,165	)		(17,074,047	)
Financing activities:
Borrowing on bank line of credit		10,455,269			2,498,907
Repayments on bank line of credit		(7,375,053	)		(2,423,531	)
Payments on note payable to major stockholder		(1,344,139	)		-
Proceeds from long-term borrowings		-			16,000,000
Debt issuance costs		-			(403,042	)
Payments on long-term borrowings		(7,040,989	)		(2,129,692	)
Net cash (used in) / provided by financing activities		(5,304,912	)		13,542,642
Effect of exchange rate fluctuations on cash		21,103			(770	)
Net change in cash and cash equivalents		346,384			(751,549	)
Cash and cash equivalents at beginning of year		82,154			833,703
Cash and cash equivalents at end of year Cash paid for Interest expense	$	428,538		$	82,154
Cash paid for Interest expense	$	1,810,490		$	1,719,762

See notes to consolidated financial statements

F-7

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of Simclar, Inc. (“Simclar ”) and its subsidiaries, including Simclar (Mexico), Inc. (“Simclar (Mexico)”), Simclar de Mexico, S.A. de C.V. (“Simclar de Mexico”), Techdyne (Europe) Limited (“Techdyne (Europe)”), Simclar (North America), Inc. (“SNAI”), and Simclar Interconnect Technologies, Inc. (“SIT”), collectively referred to as the “company.” During 2003, the company changed its name to Simclar, Inc. from Techdyne, Inc. following a merger with its wholly owned subsidiary, Lytton Inc. SIT was acquired during the first quarter of 2006 (refer to Note 11). All material intercompany accounts and transactions have been eliminated in consolidation. The company is a 73.4% owned subsidiary of Simclar Group Limited (“Simclar Group”), a privately owned company incorporated in the United Kingdom.

Business

The company operates in one business segment, manufacturing electronic and electro-mechanical products in the data processing, telecommunication, instrumentation and food preparation equipment industries.

Cash and Cash Equivalents

The company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The carrying amounts reported in the balance sheets for cash and cash equivalents approximate fair values. The credit risk associated with cash and cash equivalents is considered low due to the high quality of the financial institutions in which the assets are invested.

Inventories

Inventories, which consist primarily of raw materials used in the production of electronic components, are valued at the lower of cost (first-in, first-out and/or weighted average cost method) or market value. The cost of finished goods and work in process consists of direct materials, direct labor and a portion of fixed and variable-manufacturing overhead. The company reviews its inventories on a regular basis to identify parts that have not been used in the manufacturing process during the previous two year period and are not believed to be required for use in the manufacturing process. The carrying value of these identified parts is reduced to estimated realizable value with a charge to the allowance for obsolescence. Additional write-downs, if required, are recorded in the period identified.

Property, Plant and Equipment

Property, plant and equipment is stated on the basis of cost. Depreciation is computed by the straight-line method over the useful lives of the assets, generally estimated to be 25 years for buildings and improvements; 3 to 10 years for machinery, computer and office equipment; 3 to 10 years for tools and dies; and 5 to 15 years or the expected life of the related lease which ever is shorter for leasehold improvements. Replacements and betterments that extend the lives of assets are capitalized. Maintenance and repairs are expensed as incurred. Upon the sale or retirement of assets, the related cost and accumulated depreciation are removed and any gain or loss is recognized. Depreciation expense totaled approximately $1,700,000 and $1,608,000 for the years ended December 31, 2007 and 2006 respectively.

F-8

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Long-Lived Asset Impairment

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets to be held and used are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value of these assets is determined based upon estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. In analyzing the fair value and recoverability using future cash flows, the company makes projections based on a number of assumptions and estimates of growth rates, future economic conditions, assignment of discount rates and estimates of terminal values. An impairment loss is recognized if the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows. The measurement of impairment loss is the difference between the carrying amount and fair value of the asset. Long-lived assets to be disposed of and/or held for sale are reported at the lower of carrying amount or fair value less cost to sell. The company determines the fair value of these assets in the same manner as described for assets held and used.

Deferred Expenses

Deferred expenses, except for deferred loan costs, are amortized on the straight-line method, over their estimated benefit period ranging to 60 months. Deferred loan costs are amortized over the lives of the respective loans. Amortization expense for the years ended December 31, 2007 and 2006 was approximately $529,000 and $282,000 respectively.

Goodwill and Intangible Assets

Goodwill is the excess of the purchase price paid over the fair value of the businesses acquired and is not amortized.  Intangible assets with determinable lives are amortized over the estimated useful life in a manner reflective of the pattern in which the economic benefits of the intangible assets are used up. Goodwill and indefinite-lived intangibles are evaluated for impairment on an annual basis, or more frequently if impairment indicators arise, using fair-value-based tests.For the year ended December 31, 2007, the company changed the reporting unit for goodwill impairment testing purposes and changed the date of its annual goodwill impairment test from various dates throughout the year to the first day following the end of the 3^rd quarter. Management believes that the accounting change is preferable in the circumstances because it better aligns management’s consideration of the operations of the company and also better aligns the timing of the company’s long-range planning with this test, as the impairment test is dependent on the results of the company’s long-range planning process. During 2007 and 2006, the company evaluated goodwill and other intangible assets in accordance with SFAS No. 142 and determined there was no impairment related to the carrying value of such assets. The goodwill recognized from acquisitions is:

Balance at January 1, 2006	$	5,917,938
Goodwill arising from acquisitions in 2006		3,492,766
Balance at December 31, 2006 and 2007	$	9,410,704

F-9

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Identifiable intangible assets consist of the following:

	December 31, 2007					December 31, 2006
	Gross carrying amount		Accumulated amortization			Gross carrying amount		Accumulated amortization
Non-compete agreement	$	70,880		($51,436	)	$	70,880		($26,939	)
Customer List	$	1,472,207		($586,810	)	$	1,472,207		($185,148	)
	$	1,543,087		($638,246	)	$	1,543,087		($212,087	)

Amortization expense for intangible assets was approximately $426,000 for 2007 and $202,000 for 2006. Estimated amortization expense for the next five years is as follows:   2008-$372,000; 2009-$280,000; 2010-$138,000; and 2011 $114,000. At December 31, 2007, the weighted average amortization period for intangible assets was 3.9 years.  

Income Taxes

Deferred income taxes at the end of each period are determined by applying enacted tax rates applicable to future periods in which the taxes are expected to be paid or recovered on differences between the financial accounting and tax basis of assets and liabilities.

Effective January 1, 2007, the company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, Accounting for Income Taxes.”  FIN 48 requires that the financial statement effects of a tax position taken or expected to be taken in a tax return to be recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination.  The adoption of FIN 48 had no impact on the company’s consolidated financial statements.

F-10

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Earnings per Share

Diluted earnings per share gives effect to potential common shares that were dilutive and outstanding during the period, such as stock options and warrants using the treasury stock method. The company had no stock options or warrants outstanding during the reported periods. Accordingly, for the years presented, there is no dilutive effect.

Following is a reconciliation of amounts used in the computations:

	Year Ended December 31,
	2007		2006
Net income - numerator basic computation	$	2,362,227	$	2,862,740
Weighted average shares - denominator basic computation		6,465,345		6,465,345
Earnings per share	$	0.37	$	0.44

Estimated Fair Value of Financial Instruments

The carrying value of cash, accounts receivable and debt in the accompanying financial statements approximate their fair value because of the short-term maturity of these instruments, or in the case of debt, because such instruments bear variable interest rates which approximate market rates.

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 consolidated financial statements and accompanying notes. The accounting estimates and assumptions that place the most significant demands on management’s judgment include, but are not limited to, doubtful accounts receivable, income taxes, impairment of goodwill and long-lived assets, business combinations, and inventory obsolescence. These estimates and assumptions are based on information presently available and actual results could differ from those estimates.

F-11

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Revenue Recognition and Accounts Receivable

The company’s sales are primarily derived from product manufacturing including, but not limited to, finished molded and non-molded cables, wiring harnesses, printed circuit board assemblies, electro-mechanical and electronic assemblies. Revenue is recognized upon shipment of the product to the customer which, under contractual terms, is generally FOB shipping point. Upon shipment, title transfers and the customer assumes the risks and rewards of ownership of the product. The selling price of the product is fixed and the ability to collect for the sale to the customer is reasonably assured when the product is shipped.

Revenue from contract manufacturing, rework and refurbishing is recognized upon shipment of the product to the customer which, under contractual terms, is generally FOB shipping point.

Trade receivables are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days from the invoice date.

The company’s estimate of the allowance for doubtful accounts for trade receivables is primarily determined based upon the length of time that the receivables are past due. In addition, management estimates are used to determine probable losses based upon an analysis of prior collection experience, specific account risks, and economic conditions.

The company undertakes a series of actions based upon the aging of past due trade receivables, including letters and direct customer contact. Accounts are deemed uncollectible based on a customer’s payment experience and current financial condition.

Shipping Costs

Shipping costs related to the transportation of products sold to customers are charged to cost of goods sold.

Warranty Costs

The company warrants that products used in its manufacturing process are free from defects in material and workmanship for a period of one year from shipment to the customer. If the manufactured product fails in this period due to defect, the company will rework the product until it functions per the customer’s specifications. The costs associated with the rework of any return of defective products are treated as a period expense when the products are reshipped to the customer. The company estimates the cost or reworking defective products is historically less than 1% of its annual sales.

F-12

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Foreign Operations

The financial statements of the foreign subsidiaries have been translated into U.S. dollars in accordance with SFAS No. 52. All balance sheet accounts have been translated using the current exchange rates at the balance sheet date. Income statement accounts have been translated using the average exchange rate for the period. The translation adjustments resulting from the change in exchange rates from period to period have been reported separately as a component of accumulated other comprehensive income in stockholders’ equity. Foreign currency transaction gains and losses, which are not material, are included in the results of operations. These gains and losses result from exchange rate changes between the time transactions are recorded and settled, and for unsettled transactions, exchange rate changes between the time the transactions are recorded and the balance sheet date.

Comprehensive Income

The company follows SFAS No. 130, “Reporting Comprehensive Income” which contains rules for the reporting of comprehensive income and its components. Comprehensive income consists of net income and foreign currency translation adjustments and is presented in the consolidated statement of stockholders’ equity.

Reclassifications

Certain expense categories within the prior-year amounts for cost of goods sold and selling, general, and administrative expenses have been reclassified to conform to the current-year presentation.

New Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” (SFAS 160). SFAS 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a noncontrolling interest, sometimes called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS 160 requires, among other items, that a noncontrolling interest be included in the consolidated statement of financial position within equity separate from the parent’s equity; consolidated net income to be reported at amounts inclusive of both the parent’s and noncontrolling interest’s shares and, separately, the amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated statement of income; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. SFAS 160 becomes effective for the company on January 1, 2009. The company is currently evaluating the potential impact of SFAS 160 on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (SFAS 141(R)). SFAS 141(R) replaces SFAS No. 141, “Business Combinations,” (SFAS 141) and retains the fundamental requirements in SFAS 141, including that the purchase method be used for all business combinations and for an acquirer to be identified for each business combination. This standard defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control instead of the date that the consideration is transferred. SFAS 141(R) requires an acquirer in a business combination, including business combinations achieved in stages (step acquisition), to

F-13

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values of that date, with limited exceptions. It also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as of the acquisition date, measured at their acquisition-date fair values. SFAS 141(R) becomes effective for the company for any business combination with an acquisition date on or after January 1, 2009 and will only impact the company’s financial statements for acquisitions completed subsequent to that date.

In June 2006, the Financial Accounting Standards Board issued Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The provisions of FIN 48 prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, the provisions of FIN 48 provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, or January 1, 2007 as to the company. The company adopted FIN 48 in the first quarter of 2007 as required with no material adverse effect on the company’s consolidated financial position or results of operations.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”) to clarify the definition of fair value, establish a framework for measuring fair value and expand the disclosures on fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). SFAS No. 157 also stipulates that, as a market-based measurement, fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability, and establishes a fair value hierarchy that distinguishes between (a) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (b) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). SFAS No. 157 becomes effective for the company in its fiscal year ending December 31, 2008. The company is currently evaluating the impact of the provisions of SFAS No. 157 on its consolidated financial statements.

NOTE 2—INVENTORIES

Inventories are comprised of the following:

	December 31,
	2007			2006
Raw materials and supplies	$	19,285,200		$	16,992,310
Work in process		2,841,656			2,829,592
Finished goods		1,902,052			1,988,934
Allowance for obsolescence		(2,364,466	)		(1,551,799	)
	$	21,664,442		$	20,259,037

F-14

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3—ACCRUED EXPENSES

Accrued expenses are comprised of the following:

	December 31,
	2007		2006
Accrued compensation	$	894,358	$	975,130
Accrued property taxes		141,756		160,338
Accrued commissions		95,692		166,640
Other		775,666		438,691
	$	1,907,472	$	1,740,799

NOTE 4—LONG-TERM DEBT

In December 2005, we entered into two amended credit facilities and one new credit facility with Bank of Scotland in Edinburgh, Scotland (“BoS”) consisting of:

Borrower	Type of facility	Original amount		Balance at December 31, 2007
Simclar, Inc.	Working capital	$	7,500,000	$	7,494,408
Simclar, Inc.	Term loan -four tranches (see
	detail of tranches below)	$	21,650,000	$	12,300,000
Simclar Interconnect
Technologies, Inc.	Working capital	$	1,000,000	$	651,579

Effective January 26, 2007, we entered into amendments of the two working capital facilities. The term of the $1 million working capital facility of Simclar IT, originally entered into in December 2005, was extended to January 28, 2008. The Simclar, Inc. $5 million working capital facility, last amended in December 2005, was increased to $7.5 million, and its maturity date was extended to January 28, 2008. No other material changes were made to either facility by the amendments. Effective March 27 2008, the facilities were further amended to extend the maturity dates of each to March 17, 2009. No other material changes were made to either facility by the 2008 amendments, except that the default interest rate under both facilities was increased from 1.5% to 2.0% and the interest rate under the $7.5 million facility was increased from 1.5% over LIBOR to 1.75% over LIBOR.

Interest on the Simclar, Inc. working capital facility accrues at an annual rate equal to LIBOR plus 1.5% (increasing to 1.75% after March 2008), plus an amount, rounded to the nearest eighth of a percent, to cover any increases in certain regulatory costs incurred by the bank. The company may elect to pay interest on advances every one, three or six months, with LIBOR adjusted to correspond to the interest payment period selected by the company. The interest rate for the working capital facility at December 31, 2007 was 6.0% based on the one month election.

Interest on the Simclar Interconnect Technologies, Inc. working capital facility is a margin over LIBOR determined by a ratio of net borrowings to EBITDA for any given test period. The margin percentage can range from 1.75% to 2.5%. The interest rate for this working capital facility at December 31, 2007 was 7.0%.

The term loan interest is also determined by a margin over LIBOR related to the ratio of net borrowings to EBITDA for any given test period. The margin percentage can range from 1.5% to 2.5%. The term debt interest rate was 6.732% for tranches A and B, 7.355% for tranche C, and 8.37% for tranche D at December 31, 2007

F-15

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4—LONG-TERM DEBT – Continued

Tranche	Principal Amount		Purpose		Payments
A	$	4,250,000		Refinance existing facilities		Seventeen quarterly payments of $250,000 beginning October 2004 through October 2008
B	$	1,400,000		Dayton property acquisition		Twenty-eight quarterly payments of $50,000 beginning January 2005 through October 2011
C	$	13,000,000		Acquisition of certain assets of the Litton Interconnect Technologies assembly operations		Thirteen quarterly payments of $500,000 beginning December 2006 through December 2009, four quarterly payments of $250,000 from March 2010 through December 2010, four quarterly payments of $750,000 from March 2011 through December 2011 and four quarterly payments of $625,000 from March 2012 through December 2012
D	$	3,000,000		Acquisition of certain assets of the Litton Interconnect Technologies assembly operations		Single payment due December 31, 2010

The weighted average interest rate on long-term debt for 2007 and 2006 was 7.6% and 7.7% respectively.

All of the assets of the company collateralize the credit facilities. The credit facilities contain affirmative and negative covenants. In addition, our credit facilities require us to maintain:

· consolidated adjusted net worth greater than $15,000,000 from March 31, 2006 (tested on a quarterly basis);

· a ratio of consolidated current assets to consolidated net borrowing prior to December 31, 2007 of not less than 1:1 and thereafter not to be less than 1.5:1 (tested on a quarterly basis);

· a ratio of consolidated trade receivables to consolidated net borrowing of not less than 0.5:1 prior to December 31, 2007 and not less than 0.75:1 thereafter (tested on a quarterly basis); and

· a ratio of EBIT to total interest not less than 3:1 until March 31, 2006; not less than 3.5:1 from April 1, 2006 to December, 2007; and not less than 4:1 thereafter (tested on a quarterly basis beginning December 31,^, 2005)

F-16

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4—LONG-TERM DEBT – Continued

· a ratio of net borrowings to EBITDA not to exceed 5:1 through December 31, 2006; not to exceed 4.5:1 from January 1, 2007 to December 31, 2007; not to exceed 4:1 from January 1, 2008 to December 31, 2008; not to exceed 3.5:1 from January 1, 2009 to December 31, 2009; and not to exceed 3:1 thereafter (tested on a quarterly basis beginning December 31, 2006).

The company did not satisfy the EBIT to total interest coverage covenant contained in the credit facilities at December 31, 2006. Bank of Scotland agreed to suspend the effectiveness of this covenant until the earlier of December 31, 2007 or the negotiation of revised financial covenants. In this regard, the company was asked to submit by April 30, 2007 a financial projection for the remainder of 2007 showing relevant measurements against the financial covenants. The company submitted the requested projections as required. EBIT to total interest coverage pending renegotiation of the covenant must exceed 3:1 on a quarterly basis and the other financial covenants must be complied with. The company is in compliance with the 3:1 interest coverage ratio and management is of the opinion that such compliance will be maintained during such period.

In connection with the credit facilities, the company and its subsidiaries entered into an amended security agreement, pursuant to which BoS was granted a security interest in substantially all of their respective assets to secure the company's borrowings under its credit facilities, and guarantees pursuant to which SIT and SNAI guaranteed the obligations of the company to BoS under the credit facilities. Additionally, the company and Simclar (Mexico) entered into an amended pledge agreement, pursuant to which all of the shares owned by the company in its subsidiaries, other than Simclar de Mexico were pledged as security for the company's obligations to BoS under the credit facilities. Simclar Group Limited has provided a guarantee to BoS in respect of loans advanced to Simclar, Inc. up to a maximum amount of $10,000,000; likewise, Simclar, Inc. has guaranteed certain Simclar Group Limited’s loans from BoS also up to a maximum amount of $10,000,000. In both cases, this maximum amount reduces, subject to certain ratios of borrowings to EBITDA being achieved.

Long-term debt outstanding:

	December 31,
	2007		2006
Term loan	$	12,300,000	$	18,500,000
Less current portion	$	2,700,000		3,200,000
		9,600,000	$	15,300,000

Scheduled maturities of long-term debt outstanding at December 31, 2007 are approximately: 2008 - $2,700,000; 2009 - $2,200,000; 2010 - $4,200,000; and 2011 - $3,200,000. Interest payments on all of the above debt amounted to approximately $1,233,000 and $1,061,000 in 2007 and 2006 respectively.

On August 17, 2006, Simclar (Mexico) and Simclar entered into an agreement with Winsson Enterprises Co., Ltd. (“Winsson”) and its affiliate, Computronics International Corp. This agreement replaces a deferred trade payables agreement that expired on July 14, 2006. The agreement is a non-cash refinance of approximately $2,495,000 of trade accounts payable to long-term debt to be repaid within a three year period with an interest rate of 3% per annum. The agreement calls for quarterly payments of principal and interest of $225,000 commencing August 15, 2006, with a final payment of approximately $123,400 payable on May 15, 2009. The debt is subordinated to the BoS debt. The balance at December 31, 2007 was approximately $1,224,000 and is reflected as subordinated long-term debt on the face of the financial statements, net of $875,000 reflected in current portion of long-term debt.

F-17

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5—INCOME TAXES

For financial reporting purposes, income before income taxes includes the following components:

	Year Ended December 31,
	2007		2006
United States income	$	3,305,626	$	3,841,168
Foreign income		407,184		360,950
	$	3,712,810	$	4,202,118

Income tax payments were approximately $1,300,000 and $ 1,356,000 in 2007 and 2006 respectively.

The components of the current net deferred tax asset and long-term net deferred tax liability are as follows:

	December 31,
	2007			2006
Deferred tax asset:
Inventory obsolescence	$	922,142		$	605,201
Costs captialized in ending inventory		142,338			129,880
Accrued expenses		68,901			185,039
Other		80,779			114,412
Total current asset		1,214,160			1,034,532
Deferred tax asset (liability)
NOL carryforwards		8,368,698			8,286,335
Depreciation and amortization		(500,310	)		(414,062	)
Other		(14,973	)		(14,969	)
Total long-term asset		7,853,415			7,857,304
Less: valuation allowance		(8,368,698	)		(8,286,335	)
Net long-term liabilty		(515,283	)		(429,031	)
Net deferred tax asset	$	698,877		$	605,501

During 2005, the company acquired SNAI and the related net operating loss (NOL) carryforwards. At December 31, 2007, SNAI had unused U.S. federal and state net operating loss carryforwards of approximately $22,200,000 and $8,800,000, respectively, generally expiring from 2022 through 2025.  Based on the available evidence at the date of the acquisition and as of December 31, 2007 regarding the likelihood of utilizing these loss carryforwards before the expiration date, a valuation allowance has been provided for the full amount of possible

tax benefit. The company has not provided a valuation allowance for the remainder of the deferred tax asset based on taxes paid in the current year and available carryback years.  

During 2007 the company’s 2005 federal income tax return was examined by the Internal Revenue Service. The examination resulted in a tax refund of $158,739.

F-18

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5—INCOME TAXES – Continued

Significant components of the provision for income taxes are as follows:

	Year Ended December 31,
	2007			2006
Current:
Federal		1,273,689			1,276,535
State and Local		112,944			124,616
Foreign		57,326			77,597
		1,443,959			1,478,748
Deferred:
Federal		(83,799	)		(149,272	)
State		(9,577	)		9,901
		(93,376	)		(139,371	)
		1,350,583			1,339,377

Simclar de Mexico files a separate income tax return in Mexico.

The reconciliation of income tax rates attributable to income before income taxes computed at the U.S. federal statutory rates to income tax expense is:

	Year Ended December 31,
	2007			2006
Statutory tax rate (34%) applied to income before income taxes		34.0	%		34	%
Increases (reduction) in taxes resulting from :
State income taxes expense net of federal
income tax effect		2.0	%		1.9	%
Tax rate differential relating to tax benefit of foreign operating income		-2.2	%		-1.1	%
Nondeductible items		1.3	%		1.2	%
Refund of prior U.S. income taxes		0.1	%		-0.6	%
Settlement of U.S. income taxes		0.0	%		-2.2	%
Other		1.2	%		-1.3	%
		36.4	%		31.9	%

The earnings of the company’s Mexican subsidiary are expected to be permanently reinvested in the operations of that subsidiary.  As such, the company has historically not recorded a deferred tax liability based on the subsidiary’s accumulated undistributed earnings.  As of December 31, 2007 undistributed earnings were approximately $768,000.

F-19

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6—TRANSACTIONS WITH SIMCLAR GROUP

The company’s parent, Simclar Group, provides certain financial and administrative services to the company under a service agreement. The amount of expenses incurred under the service agreement totaled $480,000 per year in 2007 and 2006.

The company has a net receivable due from Simclar Group and related parties of approximately $905,000 at December 31, 2007 compared to a net payable due to Simclar Group and related parties of $1,344,000 at December 31, 2006. The net receivable due from Simclar Group incurs interest of LIBOR + 1.5%. For additional information related to pledge agreements and guarantees with BoS refer to Note 4.

NOTE 7—RELATED PARTY TRANSACTIONS

For 2007 and 2006 the company had sales with Simclar Corp., a related party of Simclar Group, totaling approximately $720,000 and $1,521,000 respectively, and sales to Simclar Group of approximately $210,000 and $94,000 respectively. The company had net receivables from related parties as of December 31, 2007 of approximately $166,000 from Simclar Corp. and approximately $109,000 from Simclar China.

NOTE 8—COMMITMENTS AND CONTINGENCIES

Commitments

The company has leases for several facilities which expire at various dates through 2017 with renewal options for a period of five years at the then fair market rental value. The company’s aggregate lease commitments at December 31, 2007, are approximately: 2008—$1,088,000, 2009—$1,092,000, 2010 —$1,095,000, 2011—$664,000, 2012 — $320,000 and thereafter —$1,546,000. Total rent expense was approximately $1,132,000 and $1,040,000 for the years ended December 31, 2007 and 2006 respectively.

Retirement Plan

The company sponsors a 401(k) Profit Sharing Plans covering substantially all of its employees, excluding Techdyne (Europe) and Simclar (Mexico). The plan offers a 50% corporate match based on the first 4% of each employee’s annual earnings contributed to the plan. The matching expense amounted to approximately $105,000 and $95,000 for the years ended December 31, 2007, and 2006 respectively.

Contingencies

The company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate liability, if any, resulting from these matters will not have a material effect on the company’s financial position, results of operations, or cash flow.

NOTE 9—QUARTERLY FINANCIAL INFORMATION (Unaudited)

The following summarizes certain quarterly operating data:

	2007									2006
	Mar 31		Jun 30		Sep 30		Dec 31			Mar 31		Jun 30		Sep 30		Dec 31
	(In thousands except per share data)
Net Sales	$	31,408	$	37,119	$	33,150	$	34,740		$	21,823	$	30,399	$	30,654	$	33,156
Gross Profit		3,826		4,964		3,224		2,176			2,791		3,774		3,912		3,520
Net Income		639		1,372		415		(64)			506		790		618		949
Earnings Per Share	$	0.10	$	0.21	$	0.07	$	(0.01	)	$	0.08	$	0.12	$	0.10	$	0.14

F-20

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10— MAJOR CUSTOMERS

Sales to major customers are as follows:

	Year Ended December 31,
Major Customers		2007		2006
Customer 1		21	%	20	%
Customer 2		12	%	8	%
Customer 3		12	%	6	%

The loss of or substantially reduced sales to these customers would have an adverse effect on the company’s operations if such sales were not replaced. A significant customer would be any customer with annual sales volume from the company of 10% or more. Customers 1 & 3 make up approximately 20% and 11% respectively of the accounts receivable balance at the year end.

NOTE 11—ACQUISTION OF CERTAIN U.S. ASSETS OF LITTON SYSTEMS, INC.

In 2006, the company and Simclar Interconnect Technologies, Inc., its newly-formed wholly owned subsidiary ("Simclar IT") purchased certain U.S. assets associated with the backplane assembly business of the Interconnect Technologies Division of Litton Systems, Inc. ("Litton"), a subsidiary of Northrop Grumman Corporation, for $16 million in cash (subject to certain purchase price adjustments) and the assumption of certain liabilities (the "Acquisition"). At the same time, Simclar Group Limited also acquired from Litton Systems International, Inc. and Litton U.K. Ltd. all of the share equity of Litton Electronics (Suzhou) Co. Ltd., a subsidiary organized in China, and certain assets of the Interconnect Technologies Division assembly business in the U.K., respectively, through its subsidiary Simclar Interconnect Technologies Limited.

In connection with the Acquisition, the company and Simclar IT entered into an occupancy agreement pursuant to which Simclar IT occupied space in Litton's Springfield, Missouri facility until April 2007, and a transition services agreement pursuant to which Litton provided certain administrative services to the company and Simclar IT to support its operations during the occupancy period.

The company financed the purchase of the assets under its amended term loan facility with the BoS.

In connection with the loan, the company, Simclar IT and other subsidiaries entered into an amended security agreement, pursuant to which BoS was granted a security interest in substantially all of their respective assets to secure the company's borrowings under its credit facilities, and a guaranty pursuant to which Simclar IT guarantied the obligations of the company to BoS under the credit facilities. Additionally, the company and Simclar (Mexico), Inc. entered into an amended pledge agreement, pursuant to which all of the shares owned by the company in its subsidiaries other than Simclar de Mexico were pledged as security for the company's obligations to BoS under the credit facilities.

F-21

SIMCLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11—ACQUISTION OF CERTAIN U.S. ASSETS OF LITTON SYSTEMS, INC. - Continued

The finalized purchase price allocation related to this acquisition is as follows:

Current assets	$	13,149,821
Equipment		2,539,195
Goodwill		3,373,397
Intangibles Total assets acquired		1,470,000
	$	20,532,413
Current liabilities		4,410,264
Total liabilities assumed	$	4,410,264
Net assets acquired	$	16,122,149

The recorded intangible and goodwill arising from the acquisition are expected to be tax deductible.

NOTE 12— PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following table summarizes selected unaudited pro forma financial information for year ended December 31, 2006 as if Litton had been acquired as of January 1, 2006. The unaudited pro forma financial information includes adjustments for intercompany transactions.

	Year Ended December 31, 2006
Pro forma sales	$	125,600,000
Pro forma net income	$	3,600,000
Pro forma earnings per share:	$	0.56

The pro forma financial information does not necessarily reflect the results that would have occurred if the acquisition had been in effect for the periods presented. In addition, they are not intended to be a projection of future results and do not reflect any synergies that might ultimately be achieved from combining the operations.

NOTE 13—SUBSEQUENT EVENTS

In the fourth quarter of 2007, management of Simclar, Inc. decided to transfer customers and operations at Simclar North America (“SNAI”) to Simclar de Mexico. This transaction was the result of our on-going strategic review of our operations. As a result of the transaction, the company will realize losses to be recorded in fiscal year 2008 of approximately $700,000.

F-22

EX-10.30

EXHIBIT 10.30

AMENDMENT LETTER 2

BANK OF SCOTLAND

funding of

$1,000,000

to

SIMCLAR, INC

and

SIMCLAR INTERCONNECT TECHNOLOGIES, INC

Edinburgh

	1st Floor New Uberior House 11 Earl Grey Street Edinburgh EH3 9BN For the attention of: Douglas Archibald
Simclar, Inc. (formerly known as Techdyne, Inc.) Commission File No. 0-14659 2230 West 77th Street Hialeah Florida 33016 United States of America (the "Parent")	Telephone:0131 659 1204 Fax:0131 659 1144
Simclar Interconnect Technologies, Inc 1624 West Jackson Ozark MO 65721 United States of America (a "Subsidiary")

25^th March 2008

Dear Sirs

BANKING FACILITIES

We refer to the agreement between ourselves, Simclar Inc. and Simclar Interconnect Technologies, Inc. (each a "Borrower" and together the "Borrowers") constituted by our offer of facilities dated 21 December 2005 and accepted by you on 22 December 2005 as amended by an amendment letter dated 26 January 2007 (the "Facility Letter") in terms of which we made available to you working capital facilities (the "Facilities") subject to the terms and conditions set out in the Facility Letter. We are writing to you to set out the terms on which the Facility Letter is to be amended.

1. Definitions

Words and expressions used in this letter shall, except where the context otherwise requires, bear the same meaning as in the Facility Letter.

2. Facilities

The parties agree and acknowledge that on the date referred to above the Facilities are a working capital facility with a limit of $1,000,000.

3. Amendments

3.1. Subject to the terms of clause 4 below, the Facility Letter shall be amended as follows:-

(a) the following additional clause shall be inserted in the Facility Letter following the existing clause 2.1.3:

"2.1.4 Currency Borrowings up to $1,000,000 (the "Currency Borrowings Limit")";

(b) the following additional clause 2.2.4(d) shall be inserted in the Facility Letter following the existing clause 2.2.4(c):

"(d) the Dollar equivalent of all currency borrowings calculated in accordance with this letter";

(c) clause 3.1 shall be amended by the deletion of the words "BoS base rate as that rate fluctuates." and its replacement with the words "the costs of funds to BoS.";

(d) the following additional clause 5A shall be inserted in the Facility Letter following the existing clause 5:

"5ACurrencyBorrowings

5A.1 A Borrower may borrow such part of the Working Capital Facility (up to in aggregate the Currency Borrowings Limit) in any optional currency (which means, for the purpose of this letter, any currency which is freely transferable and convertible into Dollars and is approved by BoS) on giving BoS two days prior written notice.

5A.2 Currency borrowings shall be repayable on demand.

5A.3 Each Borrower shall pay interest on outstanding currency borrowings borrowed by it at a rate equal to the cost of funds incurred by BoS for purchasing such currencies plus the Applicable Margin, such interest payable in arrears. The relevant cost of funds will be set by BoS on a weekly basis and calculated and accrued daily. Interest will be debited to the relevant Borrower's currency current account with BoS monthly on such dates as BoS shall notify to the Borrowers.

5A.4 All sums payable under this letter shall be paid in the currency in which they are due and owing.

5A.5 If the Borrowers fail to pay any amount due under the currency borrowings on demand BoS may at any time purchase so much of an optional currency as BoS considers necessary or desirable to cover the currency borrowings at the then prevailing BoS spot rate of exchange and the Borrowers shall indemnify BoS against the full cost to BoS (including all costs, charges and expenses) incurred by it in purchasing the relevant optional currency.

5A.6 Whenever the "Dollar equivalent" of any currency borrowings require to be calculated, it shall be calculated at the BoS spot rate of exchange for such currency on the applicable day at such time as BoS may select.";

(e) the words "or 5A.2" shall be inserted in clause 6 following the existing reference to "clause 2.3.2";

(f) clause 10.4 of the Facility Letter shall be amended by the insertion of the words "365 days (in the case of any amount in Sterling) or" after the words "All sums of interest or commission will accrue on a daily basis and be calculated on the basis of a year of";

(g) paragraph (a) of the definition of "Applicable Margin" included in the Schedule to the Facility Letter shall be amended as follows:

(i) by the deletion of the words "Greater than or equal to 1.5:1 but less" where they appear in Column (1) of the table included therein and the substitution therefor of the word "Less";

(ii) by the deletion of the words "Less than 1.5:1" where they appear in Column (1) of the table included therein; and

(iii) by the deletion of the amount "1.5" where it appears in Column (2) of the table included therein;

(h) the definition of "BoS" included in the Schedule to the Facility Letter shall be deleted and replaced as follows:

""BoS" means Bank of Scotland plc (Company number SC327000) having its registered office at the Mound, Edinburgh, EH1 1YZ and its successors, assignees and transferees.";

(i) the definition of "Default Rate" included in the Schedule to the Facility Letter shall be amended by the deletion of the amount "one and a half per cent (1.5%)" and its replacement with the amount "two per cent (2%)";

(j) the following additional definition shall be inserted following the definition of "Default Rate" in the Schedule to the Facility Letter:

""Dollar" and the symbol "$" mean the lawful currency of America.";

(k) the deletion of the date "28 January 2008" where it appears in the definition of "Review Date" in the Schedule to the Facility Letter and the substitution therefor of the date "17 March 2009 "; and

(l) the following additional definition shall be inserted following the definition of "Security Documents" in the Schedule to the Facility Letter:

""Sterling" and the symbol "£" mean the lawful currency of the UK.".

3.2. Except as herein expressly amended, the terms and conditions of the Facility Letter are hereby confirmed and any reference in the Facility Letter to "this letter" (or similar phrases) shall, unless the context otherwise requires, be read and construed as a reference to the Facility Letter as amended by this letter and all Security Documents shall continue to secure all sums due to BoS by the Borrowers under the Facility Letter as hereby amended.

4. Conditions Precedent

4.1. Subject to Clause 4.2, Clause 3 shall not come into effect unless BoS has confirmed in writing to the Borrowers that:-

(a) BoS is satisfied that no Event of Default (as defined in the Committed Facility Letter) has occurred and is continuing unwaived; and

(b) BoS has received a certificate in the form set out in the Schedule to this letter executed by a director of each of the Borrowers.

4.2. If BoS does not confirm to the Borrowers in terms of Clause 4.1 on or prior to 28 March 2008 (or such other date as may be agreed in writing by BoS from time to time) then this letter will lapse and the amendments to be made in terms hereof will be of no effect.

5. Conditions Subsequent

5.1. The Borrowers shall procure that on or prior to 28 April 2008 the following documents shall be provided to BoS in a form and substance satisfactory to BoS:

(a) a reaffirmation agreement by the Borrowers (the "Reaffirmation Agreement");

(b) a legal opinion by Porter Wright or such other reputable firm of US lawyers as may be acceptable to BoS, addressed to BoS in relation to the Reaffirmation Agreement; and

(c) certified copies of good standing certificates in relation to each of the Borrowers.

6. Miscellaneous

6.1. No failure or delay by BoS in exercising any right or remedy under any BoS Document shall operate as a waiver, and no single or partial exercise shall prevent further exercise, of any right or remedy.

6.2. If at any time any provision of this letter is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability or such provision under the law of any other jurisdiction shall in any way be affected or impaired.

6.3. The Schedule referred to in this letter shall form part of this letter.

6.4. This letter is a BoS Document.

7. Costs and Expenses

The Borrowers will pay or reimburse to BoS (on a full indemnity basis) all reasonable legal, accountancy, valuation, due diligence and other fees, costs and expenses or tax charged to or incurred by BoS in connection with this letter (including the amendment, waiver, enforcement or preservation of the BoS rights) on demand. The Borrowers authorises BoS to debit any operating account it has with BoS with the amount of any such fees, costs, expenses or tax which is payable from time to time.

8. Law

This letter will be governed by and construed according to Scots law and the Borrower submits to the jurisdiction of the Scottish Courts.

Please indicate your acceptance of the terms of this letter by executing and returning the enclosed copy.

Yours faithfully

/s/ Douglas Archibald

for and on behalf of

BANK OF SCOTLAND PLC
 

Agreed and accepted for and on behalf of

SIMCLAR, INC. by

/s/ Samuel J. Russell
	Director
/s/ John Ian Durie	Director
Date March 27, 2008

Agreed and accepted for and on behalf of SIMCLAR INTERCONNECT TECHNOLOGIES, INC. by
/s/ Samuel J. Russell	Director
/s/ John Ian Durie	Director
Date March 27, 2008

This is the Schedule referred to in the preceding amendment letter between BoS, Simclar, Inc. and Simclar Interconnect Technologies, Inc. dated March 2008

THE SCHEDULE

DIRECTOR'S CERTIFICATE

l, INC. HEADED PAPER

I, [insert full name], a Director of [insert corporation's full name], a [Florida/Delaware] corporation (the “Corporation”), pursuant to that certain Facility Letter, dated as of 21 December 2005 (as may be amended, modified, extended or restated from time to time the “Facility Letter”; all capitalized terms which are used herein but not otherwise defined herein shall have the meanings respectively assigned to them under the Facility Letter), by and among Simclar, Inc. and Simclar Interconnect Technologies, Inc., as Borrowers and Bank of Scotland plc, do hereby certify the following:

1. Attached hereto as Exhibit A is a true, correct and complete copy of the Articles of Incorporation of the Corporation as filed with the [Florida/Delaware] Secretary of State, together with all amendments thereto adopted through the date hereof.

2. Attached hereto as Exhibit B is a true, correct; and complete copy of the Certificate of Good Standing of the Corporation dated ___ from the Secretary of State of the State of [Florida/Delaware].

3. Attached hereto as Exhibit C are true and complete copies of the resolutions adopted by the Board of Directors of the Corporation by written consent, which resolutions authorize and approve, among other things, the execution, delivery and performance of the Facility Letter, the amendment letter dated ___March 2008 amending the terms of the Facility Letter (the "Amendment Letter") and the other financing documents to which the Corporation is a party and all other instruments and documents to be executed and delivered on behalf of the Corporation pursuant to the Facility Letter, the Amendment Letter and such other financing documents, none of which resolutions have been amended, modified or revoked and all of which are in full force and effect on the date hereof.

4. Attached hereto as Exhibit D is a true, correct and complete copy of the By-laws of the Corporation. Such By-laws have not been amended, modified, supplemented or rescinded and are in full force and effect on and as of the date hereof.

5. The persons named below have been duly elected and have duly qualified as, and on this day are, officers of the Corporation and hold the offices set forth opposite their names below, and the signatures set forth opposite their names below are their genuine signatures:

Name	Title	Signature
		_________________________
		_________________________

IN WITNESS WHEREOF, I have signed this Certificate this ______ day of ______, 2008. [INSERT NAME OF CORPORATION]

By:

Name:

Title:

I, [insert full name], the ______ [insert title] of the Corporation, do hereby certify that [insert full name] has been duly elected and has duly qualified as, and on this day is, a Director of the Corporation and the signature above is his genuine signature.

IN WITNESS WHEREOF, I have signed this Certificate this ______ day of ______, 2008.

[INSERT NAME OF CORPORATION]

By:

Name:

EX-10.31

EXHIBIT 10.31

EX-18.1

Exhibit 18.1

March 31, 2008

Board of Directors

Simclar, Inc.

As stated in notes to the consolidated financial statements of Simclar, Inc. and subsidiaries (the "Company") for the year ended December 31, 2007, the Company changed the reporting unit for goodwill impairment testing purposes and changed the date of its annual goodwill impairment test from various dates throughout the year to the first day following the end of their 3^rd quarter. Management believes that the accounting change is preferable in the circumstances because it better aligns management’s consideration of the operations of the Company and also better aligns the timing of the Company’s long-range planning with this test, as the impairment test is dependent on the results of the Company’s long-range planning process. At your request, we have reviewed and discussed with management the circumstances, business judgment, and planning that formed the basis for making this change in accounting principle.

It should be recognized that professional standards have not been established for selecting among alternative principles that exist in this area or for evaluating the preferability of alternative accounting principles. Accordingly, we are furnishing this letter solely for purposes of the Company's compliance with the requirements of the Securities and Exchange Commission, and it should not be used or relied on for any other purpose.

Based on our review and discussion, we concur with management's judgment that the newly adopted accounting principle is preferable in the circumstances. In formulating this position, we are relying on management's business planning and judgment, which we do not find unreasonable.

Very truly yours,

/S/ GRANT THORNTON LLP

EX-21

Exhibit 21

Subsidiaries of Simclar, Inc.

Subsidiaries	Jurisdiction of Incorporation	Percentage Owned By Registrant
Simclar (Mexico) Inc.	Illinois	100%
Techdyne (Europe) Limited	Scotland	100%
Simclar Interconnect Technologies, Inc.	Delaware	100%
Simclar (North America), Inc.	North Carolina	100%
Simclar de Mexico, S.A. de C.V.	Mexico	100% owned by Simclar (Mexico) Inc.
Techdyne (Livingston) Limited	Scotland	100% owned by Techdyne (Europe) Limited

EX-24

Exhibit 24

POWER OF ATTORNEY

Each of the undersigned officers and directors of Simclar, Inc., a Florida corporation (the “Company”), hereby appoints Barry J. Pardon and Marshall W. Griffin, Jr. as his or her true and lawful attorneys-in-fact, or either one of them individually with power to act without the other, as his or her true and lawful attorney-in-fact, in his or her name and on his or her behalf, and in any and all capacities stated below, to sign and to cause to be filed with the United States Securities and Exchange Commission the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and any and all amendments thereto, hereby granting unto said attorneys, and to each of them, full power and authority to do and perform in the name and on behalf of the undersigned, in any and all such capacities, every act and thing whatsoever necessary to be done in and about the premises as fully as each of the undersigned could or might do in person, hereby granting to each such attorney full power of substitution and revocation, and hereby ratifying all that any such attorney or his substitute may do by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney, in counterparts if necessary, effective as of March 1, 2008.

Signature	Title
/s/ Samuel J. Russell Samuel J. Russell	Chairman of the Board of Directors and Chief Executive Officer
/s/ Barry J. Pardon Barry J. Pardon	President and Director (principal executive officer)
/s/ John Ian Durie John Ian Durie	Vice President (Finance) and Director
/s/ Marshall W. Griffin, Jr. Marshall W. Griffin, Jr.	Chief Financial Officer, Treasurer and Secretary (principal financial and principal accounting officer)
/s/ A. Graeme Manson A. Graeme Manson	Director
/s/ Kenneth M. MacKay, M.D. Kenneth M. MacKay, M.D.	Director
/s/ Christina M. J. Russell Christina M. J. Russell	Director
/s/ William J. Sim William J. Sim	Director

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Barry J. Pardon, certify that:

1. I have reviewed this Annual Report on Form 10-K of Simclar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 31, 2008

/s/ Barry J. Pardon

Barry J. Pardon

President

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Simclar, Inc, (the “Company”) on Form 10-K for the period ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barry J. Pardon, President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Barry J. Pardon
	Barry J. Pardon, President Simclar, Inc. March 31, 2008

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Stephen P. Donnelly, certify that:

1. I have reviewed this Annual Report on Form 10-K of Simclar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 31, 2008

/s/ Stephen P. Donnelly

Stephen P. Donnelly

Chief Financial Officer, Treasurer and Secretary

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Simclar, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen P. Donnelly, Chief Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Stephen P. Donnelly

Stephen P. Donnelly, Chief Financial Officer, Treasurer and Secretary

Simclar, Inc.

March 31, 2008

EX-99.1

Exhibit 99.1

Simclar Announces 2007 Results

HIALEAH, Florida--(BUSINESS WIRE)—Simclar, Inc. (NasdaqCM:SIMC) today announced financial results for the fourth quarter of 2007 and for the full year that ended December 31, 2007. Results for the fourth quarter and for the full year of 2007 include the consolidated operations of Simclar, Inc. and its subsidiaries. For the fourth quarter of 2007, Simclar had a net loss of $64,088 or ($0.01) per share, compared to net income of $949,000 or $0.15 per share for the fourth quarter of 2006. For the calendar year 2007, Simclar had net income of $2.4 million or $0.37 per share, compared to net income of $2.9 million or $0.44 per share for 2006.

For the year 2007, Simclar reported total revenues of $136.4 million compared to $116.0 million in 2006, an 18% increase. For the fourth quarter of 2007, revenues increased to $34.7 million compared to $33.2 million for the fourth quarter of 2006.

Net cash provided from operating activities was $7.2 million in 2007, compared to $2.8 million in 2006.

Sam Russell commented, “The overall performance of the Company in 2007 came in well below our expectations, and is highly disappointing. Sales increased 18%, but earnings decreased, mostly as a result of our underperforming operation in North Carolina which incurred losses of $2.1 million in 2007 and was discontinued fully during the first quarter of 2008. The closure of this facility will adversely affect earnings in the first quarter of 2008, but the longer term benefits of the transfer of this business to our facility in Mexico are expected to be improved profits and cash flow. Although the world economic outlook is currently unclear, we have worked on contingency plans to sustain profitability on diminished sales, should a further downturn in the economy occur. On the positive side, our cash management remained strong and allowed the Company to repay $6.2 million of its bank loans in the year, including $3.0 million of voluntary repayments. We are looking forward to the production release in the third quarter of 2008 of Simclar Group’s new TurboFabric product, which is a Scalable Advanced TCA Platform, and the impact this will have across all of our businesses.”

Simclar, Inc., with four North American manufacturing locations, and numerousregional sales locations, has been engaged in contract manufacturing of electronic and electro-mechanical products for OEMs for 32 years.

Statements in this news release, which relate to other than strictly historical facts, such as statements about the Company’s plans and strategies, expectations for future financial performance, and markets for the Company’s products and services are forward-looking statements. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” and similar expressions identify forward-looking statements that speak only as of the date hereof. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors including, but not limited to, the Company’s customer concentration, debt covenants, competition, the effectiveness of our internal controls, and other risks detailed in the Company’s most recent Annual Report on Form 10-K and other Securities and Exchange Commission filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

Visit Simclar, Inc at its website, www.simclar.com for more information about the Company.

Contact: Steph Donnelly , CFO (937) 220-9777