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.
                  Employerincorporation
                  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 o     Accelerated
      filer o





Non-accelerated
      filer o      Smaller
      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
                
                2Item
                    1A.
                Risk
                    Factors
                
                12Item
                    1B.
                Unresolved
                    Staff Comments
                
                18Item
                    2.
                Properties
                
                18Item
                    3.
                Legal
                    Proceedings
                
                19Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                
                19**Part
                    II**Item
                    5.
                Market
                    for Registrant’s Common Equity and RelatedStockholder
                    Matters
                
                20Item
                    6.
                Selected
                    Financial Data
                
                21Item
                    7.
                Management’s
                    Discussion and Analysis of Financial Condition andResults
                    of Operations
                
                21Item
                    8.
                Financial
                    Statements and Supplementary Data
                
                34Item
                    9.
                Changes
                    in and Disagreements with Accountants on Accounting andFinancial
                    Disclosure
                
                34Item
                    9A
                Controls
                    and Procedures
                
                34Item
                    9B
                Other
                    Information
                
                35**Part
                    III**Item
                    10.
                Directors
                    and Executive Officers of the Registrant
                
                36Item
                    11.
                Executive
                    Compensation
                
                36Item
                    12.
                Security
                    Ownership of Certain Beneficial Owners and ManagementAnd
                    Related Stockholder Matters
                
                36Item
                    13.
                Certain
                    Relationships and Related Transactions
                
                36Item
                    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
                
                37Signatures
                
                
                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.





2




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.





3


**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.





4


**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.





5




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.





6





**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.




7




**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.




8




**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
              
              2006Telecommunications
              
              
              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.




9


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
            
            2006Customer
                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.





10


**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.




11




**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.





13




*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.





14




*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
      Grou* *p
      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.





15




*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 listing **** requirements.
      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.





16




*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.





17




**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, 201012,000
                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, 200837,919
                sq. ft.
              (mfg.,
                office, warehouse)
            
            Parque
                Industrial CYLSA
              Matamoros,
                Mexico
            
            5
                yrs. to July 15, 201155,524
                sq. ft.
              (mfg.,
                office, warehouse)
            
            Parque
                Industrial CYLSA
              Matamoros,
                Mexico
            
            13
                yrs. to October 31, 201790,000
                sq. ft.
              (mfg.,
                office, warehouse)
            
            176
                Laurie Ellis Road
              Winterville,
                NC
            
            5
                yrs. to May 31, 201152,826
                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.




18




**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.




19




**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.





2007High
              
              Low1stQuarter
              
              $
              6.67
              
              $
              5.312ndQuarter
              
              $
              7.25
              
              $
              5.783rdQuarter
              
              $
              12.19
              
              $
              5.454thQuarter
              
              $
              13.74
              
              $
              3.79
  2006High
              
              
              Low1stQuarter
              
              $
              3.83
              
              $
              3.152ndQuarter
              
              $
              11.33
              
              $
              3.703rdQuarter
              
              $
              13.18
              
              $
              4.364thQuarter
              
              $
              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.





20




**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
            
            2003Revenues
            
            $
            136,416
            
            $
            116,031
            
            $
            61,005
            
            $
            53,582
            
            $
            36,187Net
                income
            
            
            2,362
            
            
            2,863
            
            
            947
            
            
            2,342
            
            
            1,106Earnings
                per share
            
            $
            0.37
            
            $
            0.44
            
            $
            0.15
            
            $
            0.36
            
            $
            0.17





**Consolidated
      Balance Sheet Data**


**(in
      thousands)**




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





21




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.




22




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 control*  *reviews* –
      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.




23




**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
            
            2006Net
                Sales
            
            $
            136,416
            
            $
            116,031Change
                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
            
            2006Gross
                profit margin
            
            $
            14,190
            
            $
            13,996Change
                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.





24


Selling,
      General, and Administrative Expenses


(dollars
      in thousands)





2007
            
            2006Selling,
                general, and administrative expenses
            
            $
            8,735
            
            $
            8,023Change
                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
            
            2006Interest
                expense
            
            $
            1,908
            
            $
            1,835Change
                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.





25




Income
      Before Income Taxes


(dollars
      in thousands)





2007
            
            2006Income
                before income taxes
            
            $
            3,713
            
            $
            4,202Change
                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
            
            2006Income
                tax expense
            
            $
            1,351
            
            $
            1,339Change
                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,
              2006Cash
                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.





26





Net
      Cash
      Provided from Operating Activities


(dollars
      in thousands)





December 31,
              2007
            
            December 31,
              2006Net
                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,
              2006Accounts
                receivable
            
            $
            20,805
            
            $
            20,802Average
                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,
              2006Inventory
            
            $
            21,664
            
            $
            20,259Average
                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.




27


Cash
      Used
      in Investing Activities


(dollars
      in thousands)




December 31,
              2007
            
            December 31,
              2006Net
                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,
              2006Cash
                (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
            
            $
            7,494,408Simclar,
                Inc.
            
            Term
              loan – four tranches (see detail of tranches below)
            
            $
            21,650,000
            
            $
            12,300,000Simclar 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.




28




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
            
            PaymentsA
            
            $
            4,250,000
            
            Refinance
                existing facilities
            
            Seventeen
                quarterly payments of $250,000 beginning October 2004 through October
                2008B
            
            $
            1,400,000
            
            Dayton
                property acquisition
            
            Twenty-eight
                quarterly payments of $50,000 beginning January 2005 through October
                2011C
            
            $
            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 2012D
            
            $
            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;






29




·
            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.





30





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.




31




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.




32





***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.




33




**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.




34




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).




35




**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 Transactions**  **and
      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.




36




**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).




37




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





*By:
            /s/
                Barry J. PardonBarry
                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:





PageReport
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheets – December 31, 2007 and 2006.
            F-3Consolidated
                Statements of Operations – Years ended December 31, 2007 and
                2006
            F-5Consolidated
                Statements of Stockholders’ Equity – Years ended December 31, 2007 and
                2006.
            F-6Consolidated
                Statements of Cash Flows – Years ended December 31, 2007 and
                2006.
            F-7Notes
                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
            
            $
            82,154Accounts
                receivable, less allowances of $236,000 and $294,000 at December
                31, 2007
                and 2006 respectively
            
            
            20,804,552
            
            
            20,801,668Amounts
                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
            
            
            20,259,037Prepaid
                expenses and other current assets
            
            
            654,509
            
            
            637,856Prepaid
                income taxes
            
            
            107,091
            
            
            15,405Deferred
                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
            
            
            547,511Buildings
                and building improvements
            
            
            1,235,904
            
            
            1,235,904Machinery,
                computer and office equipment
            
            
            15,342,401
            
            
            15,563,042Tools
                and dies
            
            
            366,347
            
            
            363,992Leasehold
                improvements
            
            
            1,957,170
            
            
            660,949Construction
                in progress
            
            
            259,829
            
            
            537,879**Total
                property and equipment**
            
            
            19,709,163
            
            
            18,909,277Less
                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
            
            $
            5,065,771Accounts
                payable
            
            
            21,447,560
            
            
            16,396,407Accrued
                expenses
            
            
            1,907,472
            
            
            1,740,799Amounts
                payable to major stockholder, net
            
            
            -
            
            
            1,344,139Current
                portion of long-term debt
            
            
            3,575,148
            
            
            4,047,408**Total
                current liabilities**
            
            
            35,076,167
            
            
            28,594,524Long-term
                debt
            
            
            9,600,000
            
            
            15,300,000Long-term
                debt, subordinated
            
            
            349,257
            
            
            1,217,986Deferred
                income taxes
            
            
            515,283
            
            
            429,031Other
                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
            
            
            64,653Capital
                in excess of par value
            
            
            11,446,087
            
            
            11,446,087Retained
                earnings
            
            
            8,747,959
            
            
            6,385,732Accumulated
                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
            
            2006Sales
            
            $
            136,416,278
            
            $
            116,031,435Cost
                of goods sold Gross Profit
            
            
            122,226,381
            
            
            102,034,92714,189,897
            
            
            13,996,508Selling,
                general and administrative expenses
            
            
            8,735,459
            
            
            8,023,333Income
                from operations
            
            
            5,454,438
            
            
            5,973,175Interest
                expense
            
            
            1,907,540
            
            
            1,834,736Interest
                and other income
            
            
            (165,912
            )
            
            (63,679
            )Income
                before income taxes
            
            
            3,712,810
            
            
            4,202,118Income
                tax provision
            
            
            1,350,583
            
            
            1,339,378Net
              income
            
            $
            2,362,227
            
            $
            2,862,740Earnings
                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
              
              
              2,862,740Other
                  comprehensive income:Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              (770
              )
              
              
              
              
              (770
              )Comprehensive
                  income
              
              
              
              
              
              
              
              $
              2,861,970
              
              
              
              
              
              
              
              
              
              
              $
              2,861,970Balance
                  at December 31, 2006
              
              $
              64,653
              
              $
              11,446,087
              
              
              
              
              
              6,385,732
              
              $
              25,794
              
              $
              -
              
              $
              17,922,266Comprehensive
                  income:Net
                  income
              
              
              
              
              
              
              
              
              2,362,227
              
              
              2,362,227Other
                  comprehensive income:Foreign
                  currency translation adjustments
              
              
              
              
              
              
              
              
              21,103
              
              
              
              
              
              21,103$
              2,383,330
              
              
              
              
              
              
              
              
              
              
              
              2,383,330Comprehensive
                  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
                  EndedDecember
                  31,2007
              
              
              2006Operating
                  activities:Net
                  income
              
              $
              2,362,227
              
              $
              2,862,740Adjustments
                    to reconcile net income to net cash provided by operating
                    activities:Depreciation
                  & amortization
              
              
              2,132,354
              
              
              1,807,917Loss
                  / (Gain) on disposal of property & equipment
              
              
              3,725
              
              
              (26,961
              )Other
                  liabilities
              
              
              -
              
              
              400,000Deferred
                  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
              
              
              5,414,486Accrued
                  expenses
              
              
              167,530
              
              
              190,683Income
                  taxes refundable
              
              
              (91,686
              )
              
              (387,275
              )Net
                  cash provided by operating activities
              
              
              7,202,358
              
              
              2,780,626Investing
                  activities:Additions
                  to property and equipment
              
              
              (2,093,153
              )
              
              (1,131,369
              )Proceeds
                  from sale of property and equipment
              
              
              520,988
              
              
              234,367Acquisition
                  of subsidiaries, net of cash acquiredSimclar
                  (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
              
              
              2,498,907Repayments
                  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
              
              
              -
              
              
              16,000,000Debt
                  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
              )
              
              13,542,642Effect
                  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
              
              
              833,703Cash
                  and cash equivalents at end of year Cash paid for Interest
                  expense
              
              $
              428,538
              
              $
              82,154Cash
                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
              
              $
              5,917,938Goodwill
                  arising from acquisitions in 2006
              
              
              3,492,766Balance
                  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, 2006Gross
                carrying
                amount
              
              Accumulated
                amortization
              
              Gross
                carrying
                amount
              
              Accumulated
                amortizationNon-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
              
              2006Net
                  income - numerator basic computation
              
              $
              2,362,227
              
              $
              2,862,740Weighted
                  average shares - denominator basic computation
              
              
              6,465,345
              
              
              6,465,345Earnings
                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 t he
        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
              
              2006Raw
                  materials and supplies
              
              $
              19,285,200
              
              $
              16,992,310Work
                  in process
              
              
              2,841,656
              
              
              2,829,592Finished
                  goods
              
              
              1,902,052
              
              
              1,988,934Allowance
                  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
              
              2006Accrued
                  compensation
              
              $
              894,358
              
              $
              975,130Accrued
                  property taxes
              
              
              141,756
              
              
              160,338Accrued
                  commissions
              
              
              95,692
              
              
              166,640Other
              
              
              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, 2007Simclar,
                  Inc.
              
              Working
                  capital
              
              
              $
              7,500,000
              
              
              $
              7,494,408Simclar,
                  Inc.
              
              Term
                  loan -four tranches (seedetail
                  of tranches below)
              
              
              $
              21,650,000
              
              
              $
              12,300,000Simclar
                  InterconnectTechnologies,
                  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
            
            PrincipalAmount
            
            Purpose
            
            PaymentsA
            
            $
            4,250,000
            
            
            Refinance
                existing facilities
            
            
            Seventeen
                quarterly payments of $250,000 beginning October 2004 through October
                2008B
            
            $
            1,400,000
            
            
            Dayton
                property acquisition
            
            
            Twenty-eight
                quarterly payments of $50,000 beginning January 2005 through October
                2011C
            
            $
            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 2012D
            
            $
            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
              
              2006Term
                  loan
              
              $
              12,300,000
              
              $
              18,500,000Less
                  current portion
              
              $
              2,700,000
              
              
              3,200,0009,600,000
              
              $
              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
            
            2006United
              States income
            
            $
            3,305,626
            
            $
            3,841,168Foreign
                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
            
            2006Deferred
                tax asset:Inventory
                obsolescence
            
            $
            922,142
            
            $
            605,201Costs
                captialized in ending inventory
            
            
            142,338
            
            
            129,880Accrued
                expenses
            
            
            68,901
            
            
            185,039Other
            
            
            80,779
            
            
            114,412Total
                current asset
            
            
            1,214,160
            
            
            1,034,532Deferred
                tax asset (liability)NOL
                carryforwards
            
            
            8,368,698
            
            
            8,286,335Depreciation
                and amortization
            
            
            (500,310
            )
            
            (414,062
            )Other
            
            
            (14,973
            )
            
            (14,969
            )Total
                long-term asset
            
            
            7,853,415
            
            
            7,857,304Less:
                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
            
            2006Current:Federal
            
            
            1,273,689
            
            
            1,276,535State
                and Local
            
            
            112,944
            
            
            124,616Foreign
            
            
            57,326
            
            
            77,5971,443,959
            
            
            1,478,748Deferred: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
            
            2006Statutory
                tax rate (34%) applied to income before
                income
                taxes
            
            
            34.0
            %
            
            34
            %Increases
                (reduction) in taxes resulting from :State
                income taxes expense net of federalincome
                tax effect
            
            
            2.0
            %
            
            1.9
            %Tax
                  rate differential relating to tax benefit offoreign 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
            
            2006Mar
                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
            
            $
            33,156Gross
                Profit
            
            
            3,826
            
            
            4,964
            
            
            3,224
            
            
            2,176
            
            
            2,791
            
            
            3,774
            
            
            3,912
            
            
            3,520Net
                Income
            
            
            639
            
            
            1,372
            
            
            415
            
            
            (64)
            
            
            506
            
            
            790
            
            
            618
            
            
            949Earnings
                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
            
            
            2006Customer
                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
            
            $
            13,149,821Equipment
            
            
            2,539,195Goodwill
            
            
            3,373,397Intangibles
                Total assets acquired
            
            
            1,470,000$
            20,532,413Current
                liabilities
            
            
            4,410,264Total
                liabilities assumed
            
            $
            4,410,264Net
                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, 2006Pro
                forma sales
            
            $
            125,600,000Pro
                forma net income
            
            $
            3,600,000Pro
                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