SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~May~~August 2524, 2024

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

Commission File Number 0-5109

MICROPAC INDUSTRIES, INC.

Delaware		75-1225149
(State of Incorporation)		(IRS Employer Identification No.)
1655 State Hwy 66, Garland, Texas		75040
(Address of Principal Executive Office)		(Zip Code)


1655 State Hwy 66, Garland, Texas		75040
(Address of Principal Executive Office)		(Zip Code)

Registrant’s Telephone Number, including Area Code: (972) 272-3571

Securities Registered Pursuant to Section 12(g) of the Act: common stock, par value $0.10.

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

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

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

Large accelerated filer	o	Emerging growth company	o
Accelerated filer	o	Smaller reporting company	x
Non-accelerated filer	o

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

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

On ~~July~~October 98, 2024, there were 2,578,315 shares of Common Stock, $0.10 par value, outstanding.

MICROPAC INDUSTRIES, INC.

FORM 10-Q

~~May~~August 2524, 2024

INDEX

PART I - FINANCIAL INFORMATION
	ITEM 1 - FINANCIAL STATEMENTS		3
		Condensed Balance Sheets as of May 25, 2024 (unaudited) and November 30, 2023	3
		Condensed Balance Sheets as of August 24, 2024 (unaudited) and November 30, 2023	3
		Condensed Statements of Income for the three and six months ended May 25, 2024 and May 27, 2023 (unaudited)	4
		Condensed Statements of Operations for the three and nine months ended August 24, 2024 and August 26, 2023 (unaudited)	4
		Condensed Statements of Cash Flows for the six months ended May 25, 2024 and May 27, 2023 (unaudited)	5
		Condensed Statements of Cash Flows for the nine months ended August 24, 2024 and August 26, 2023 (unaudited)	5
		Statements of Shareholders’ Equity for the three and six months ended May 25, 2024 and May 27, 2023 (unaudited)	6
		Statements of Shareholders’ Equity for the three and nine months ended August 24, 2024 and August 26, 2023 (unaudited)	6
		Notes to Condensed Financial Statements (unaudited)	7
	ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		14
	ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		17
	ITEM 4 - CONTROLS AND PROCEDURES		17
PART II - OTHER INFORMATION
	ITEM 1 - LEGAL PROCEEDINGS		1817
	ITEM 1A -RISK FACTORS		1817
	ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		1817
	ITEM 3 - DEFAULTS UPON SENIOR SECURITIES		1817
	ITEM 4 - MINE SAFETY DISCLOSURE		1817
	ITEM 5 - OTHER INFORMATION		1817
	ITEM 6 - EXHIBITS		18
SIGNATURES			18

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MICROPAC INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(Dollars in thousands)

CURRENT ASSETS	~~May~~August 2524, 2024			November 30, 2023
	(Unaudited)
Cash and cash equivalents	$	11,~~017~~218		$	10,299
Receivables, net of allowance for credit losses of $0 at May 25, 2024 and November 30, 2023		4,602			8,021
Receivables, net of allowance for credit losses of $156 at August 24, 2024 and $0 at November 30 2023		9,643			8,021
Other receivable		121			139
Other receivables		195			139
Contract assets		~~580~~400			307
Inventories:
Raw materials and supplies		5,~~957~~998			7,367
Work in process		76,~~254~~240			4,113
Total inventories		1312,~~211~~238			11,480
Prepaid expenses and other assets		~~366~~482			487
Total current assets		2934,~~897~~176			30,733
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		1,518			1,518
Buildings		20,929			21,013
Facility improvements		766			1,126
Furniture and fixtures		2,~~068~~067			2,068
Construction in process		~~181~~371			181
Machinery and equipment		10,~~248~~348			10,175
Total property, plant, and equipment		35,~~710~~999			36,081
Less accumulated depreciation		(12,~~069~~332	)		(11,982	)
Net property, plant, and equipment		23,~~641~~667			24,099
Deferred income taxes, net		475			475
Total assets	$	5458,~~013~~318		$	55,307
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	~~696~~1,101		$	1,491
Accrued compensation		~~991~~1,461			958
Deferred revenue		~~308~~223			618
Property taxes		~~320~~515			746
Income tax		17314			444
Current portion of term debt		439			432
Current portion of long term debt		443			432
Other accrued liabilities		2524			34
Total current liabilities		24,~~796~~081			4,723
Long Term Debt, net of debt issuance costs and current portion		15,106			15,316
Long term debt, net of debt issuance costs		15,002			15,316
Total liabilities		1719,~~902~~083			20,039
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common stock, $.10 par value, authorized 10,000,000 shares, 3,078,315 issued and 2,578,315 outstanding at May 25, 2024 November 30, 2023		308			308
Common stock, $.10 par value, authorized 10,000,000 shares, 3,078,315 issued and 2,578,315 outstanding at August 24, 2024 and November 30, 2023		308			308
Additional paid-in-capital		1,~~061~~214			983
Treasury stock, 500,000 shares, at cost		(1,250	)		(1,250	)
Retained earnings		3538,~~992~~963			35,227
Total shareholders’ equity		3639,~~111~~235			35,268
Total liabilities and shareholders’ equity	$	5458,~~013~~318		$	55,307

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF ~~INCOME~~OPERATIONS

(Dollars in thousands except share data)

(Unaudited)

	Three months ended						~~Six~~Nine Months Ended
	May 25, 2024			May 27, 2023			May 25, 2024			May 27, 2023
		August 24, 2024			August 26, 2023			August 24, 2024			August 26, 2023
NET SALES	$	812,~~063~~633		$	76,~~443~~458		$	1426,~~181~~815		$	1320,~~632~~091
COST AND EXPENSES:
Cost of goods sold		(45,~~972~~542	)		(4,~~583~~576	)		(814,~~476~~018	)		(813,~~521~~098	)
Research and development		(~~549~~716	)		(~~625~~454	)		(1,~~043~~759	)		(1,~~277~~731	)
Selling, general and administrative expenses		(2,~~219~~792	)		(2,~~010~~017	)		(46,~~131~~923	)		(35,~~817~~833	)
Total cost and expenses		(79,~~740~~050	)		(7,~~218~~047	)		(1322,~~650~~700	)		(1320,~~615~~662	)
OPERATING INCOME		323			225			531			17
OPERATING INCOME (LOSS)		3,583			(589	)		4,115			(571	)
Interest income(expense)		(10	)		(3	)		(10	)		136
Other income, net		85			44			786			218
Other income		706			36			711			37
INCOME (LOSS) BEFORE TAXES		3,668			(545	)		4,901			(353	)
INCOME BEFORE TAXES		1,019			258			1,232			190
Provision (benefit) for taxes		697			(15	)		907			18
Provision for taxes		173			44			209			32
NET INCOME (LOSS)	$	2,971		$	(530	)	$	3,994		$	(371	)
NET INCOME	$	846		$	214		$	1,023		$	158
DIVIDENDS PER SHARE	$	-		$	-		$	0.10		$	0.10
NET INCOME PER SHARE, BASIC	$	01.3315		$	(0.0821	)	$	01.4055		$	(0.0614	)
WEIGHTED AVERAGE OF SHARES, BASIC		2,578,315			2,578,315			2,578,315			2,578,315
WEIGHTED AVERAGE OF SHARES OUTSTANDING, BASIC		2,578,315			2,578,315			2,578,315			2,578,315
NET INCOME PER SHARE, DILUTED	$	01.3212		$	(0.0820	)	$	01.3951		$	(0.0614	)
WEIGHTED AVERAGE OF SHARES, DILUTED		2,609,509			2,613,965			2,609,509			2,613,965
WEIGHTED AVERAGE OF SHARES OUTSTANDING, DILUTED		2,651,902			2,613,965			2,651,902			2,613,965

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six months ended
	Nine months ended
CASH FLOWS FROM OPERATING ACTIVITIES:	~~May~~August 2524, 2024			~~May~~August 2726, 2023
Net income	$	1,023		$	158
Net income (loss)	$	3,994		$	(371	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		~~531~~794			~~376~~650
Stock-based compensation		78231			3959
Amortization of right-of-use asset		-			14
Provision for credit losses		156			-
Amortization of debt issuance costs		8			33
Amortization of debt issuance cost		13			38
Deferred tax expense		-			(16	)
Amortization of right-of-use assets		-			14
Gain on sale of building		(706	)		-
Changes in certain current assets and liabilities:
Decrease in accounts receivable		3,437			391
Decrease (increase) in accounts receivable		(1,833	)		265
Increase in contract assets		(273	)		(458	)
Decrease in contract assets		(93	)		(215	)
Increase in inventories		(1,730	)		(1,658	)
Decrease in inventories		(758	)		(1,831	)
Decrease in prepaid expenses		120			196
Increase in prepaid expenses		4			157
Decrease in deferred revenue		(310	)		(463	)
Increase in prepaid income taxes		-			-
Decrease in accounts payable		(796	)		(346	)
Decrease in deferred revenue		(395	)		(632	)
Increase (decrease) in accrued compensation		33			(215	)
Decrease (increase) in accounts payable		(390	)		29
Decrease in income taxes payable		(427	)		(111	)
Increase (decrease) in accrued compensation		502			(159	)
Decrease in lease liability		-			(14)
Increase (decrease in income taxes payable		(130	)		(138	)
Decrease in property taxes		(427	)		(234	)
Decrease in lease liabilities		-			(14	)
Decrease in all other accrued liabilities		(7	)		(5	)
Decrease in property taxes		(231	)		(39	)
Net cash provided by (used in) operating activities		554			(2,297	)
Decrease in all other accrued liabilities		(7	)		(8	)
Net cash provided (used in) operating activities		1,151			(2,211	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(73363	)		(2,~~381~~506	)
Proceeds from the sale of property, plant and equipment		706			-
Proceeds from sale of building		706			-
Net cash used in investing activities		633			(2,381	)
Net cash provided by (used in) investing activities		343			(2,506	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend		(258	)		(258	)
Proceeds from long term debt		-			1,222
Payments on long term debt		(211	)		-
Payment on long term debt		(317	)		(173	)
Net cash (used in) provided by financing activities		(469	)		964
Net cash used in (provided by) financing activities		(575	)		791
Net increase (decrease) in cash and cash equivalents		~~718~~919			(3,~~714~~926	)
Cash and cash equivalents at beginning of period		10,299			15,375
Cash and cash equivalents at end of period	$	11,~~017~~218		$	11,~~661~~449
Supplemental Cash Flow Disclosure:
Cash paid for income taxes	$	~~637~~1,037		$	~~143~~177
Cash paid for interest	$	407		$	405
Supplemental Non-Cash Flow Disclosure:
Changes in accrued property, plant, and equipment	$	-		$	1022

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE ~~SIX~~QUARTERS ~~MONTHS~~ ENDED ~~MAY~~AUGUST 2524, 2024 AND ~~MAY~~AUGUST 2726, 2023

(Dollars in thousands)

(Unaudited)

	Common		Additional		Treasury			Retained
	Stock		paid-in-capital		Stock			Earnings			Total
BALANCE, November 30, 2022	$	308	$	885	$	(1,250	)	$	34,853		$	34,796
Dividend		-		-		-			(258	)		(258	)
Net loss		-		-		-			(56	)		(56	)
BALANCE, February 26, 2023	$	308	$	885	$	(1,250	)	$	34,539		$	3432,482
Stock-based compensation		-		39		-			-			39
Net income		-		-		-			~~214~~215			~~214~~215
BALANCE, May 27, 2023	$	308	$	924	$	(1,250	)	$	34,~~753~~754		$	34,~~735~~736
Stock-based compensation		-		20		-			-			20
Net loss		-		-		-			(530	)		(530	)
BALANCE, August 26, 2023	$	308	$	944	$	(1,250	)	$	34,224		$	34,226

	Common	~~Common~~	Additional	~~Additional~~	Treasury	~~Treasury~~		Retained	~~Retained~~
	Stock	~~Stock~~	paid-in-capital	~~paid-in-capital~~	Stock	~~Stock~~		Earnings	~~Earnings~~		Total	~~Total~~
BALANCE, November 30, 2023	$	308	$	983	$	(1,250	)	$	35,227		$	35,268
Stock-based compensation		-		39		-			-			39
Dividend		-		-		-			(258	)		(258	)
Net income		-		-		-			177			177
BALANCE, February 24, 2024	$	308	$	1,022	$	(1,250	)	$	35,146		$	35,226
Stock-based compensation		-		39		-			-			39
Net income		-		-		-			846			846
BALANCE, May 25, 2024	$	308	$	1,061	$	(1,250	)	$	35,992		$	36,111
Stock-based compensation		-		153		-			-			153
Net income		-		-		-			2,971			2,971
BALANCE, August 24, 2024	$	308	$	1,214	$	(1,250	)	$	38,963		$	39,235

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1 BASIS OF PRESENTATION

Business Description

Micropac Industries, Inc. (the “Company”), a Delaware corporation, designs, manufactures and distributes various types of microelectronic circuits including solid state relays and power controllers, optoelectronic components, and sensor and display components and assemblies. The Company’s products are used as components and assemblies in a broad range of military, space, medical and commercial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200^o C) products.

The Company’s facilities are certified and qualified by the Defense Logistics Agency (DLA) to MIL-PRF-38534 (class K-space level) and MIL-PRF-19500 JANS (space level) and are certified to ISO 9001:2015 and AS 9100D. Micropac is a National Aeronautics and Space Administration (NASA) core supplier and is registered to AS9100-Aerospace Industry standard for supplier certification. The Company has Underwriters Laboratories (UL) approval on our industrial power controllers.

The Company’s core ~~technology~~technologies are microelectronic and optoelectronic designs to include the packaging and interconnecting of multi-chip microelectronics modules. Other technologies include light emitting and light sensitive materials and products, including light emitting diodes and silicon phototransistors, and electronic integration used in the Company’s optoelectronic components and assemblies.

The ~~business of the~~ Company was started in 1963 as a sole proprietorship. On March 3, 1969, the Company was incorporated under the name of “Micropac Industries, Inc.” in the state of Delaware. The stock was publicly held by 434 shareholders on ~~May~~August 2524, 2024.

In the opinion of management, the unaudited financial statements include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position as of ~~May~~August 252, 2024, the results of operations for the three and ~~six~~nine months ended ~~May~~August 2524, 2024 and ~~May~~August 2726, 2023 and the cash flows ~~for~~ for the ~~six~~nine months ended ~~May~~August 2524, 2024 and ~~May~~August 2726, 2023, including the statement of shareholders equity. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ~~(GAAP)~~ have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission ~~(SEC)~~. The Company’s fiscal year ends on the last day of November. The quarterly results end on the last Saturday of the quarter.

It is suggested that these financial statements be read in conjunction with the November 30, 2023 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto.

Note 2 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The core principle of revenue recognition under accounting principles generally accepted in the Unites States of America (GAAP) is that the Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company's revenue on the majority of its customer contracts ~~are~~is recognized at a point in time, generally upon shipment of products.

To achieve that core principle, the Company applies the following steps:

1.	Identify the contract(s) with a customer.

The Company designs, manufactures and distributes various types of microelectronic circuits, optoelectronics, and sensors and displays. The Company’s products are used as components and assemblies in a broad range of military, space, medical and industrial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200^o C) products.

The Company’s revenues are from purchase orders and/or contracts with customers associated with manufacture of products. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

2.	Identify the performance obligations in the contract.

The majority of the Company’s purchase orders or contracts with customers contain a single performance obligation, the shipment of products.

3.	Determine the transaction price.

The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer at a fixed price per unit shipped based on the terms of the contract or purchase order with the customer. To the extent our actual costs vary from the fixed price that was negotiated, we will generate more or less profit or could incur a loss.

4.	Allocate the transaction price to the performance obligations in the contract.

The Company’s transaction price is the fixed price per unit per each delivery upon shipment.

5.	Recognize revenue when (or as) the Company satisfies a performance obligation.

This performance obligation is satisfied when control of the product is transferred to the customer, which occurs upon shipment or delivery. The Company receives purchase orders for products to be delivered over multiple dates that may extend across reporting periods. The Company accounting policy treats shipping and handling activities as a fulfillment cost. The Company invoices for each delivery upon shipment and recognizes revenues at the fixed price for each distinct product delivered when transfer of control has occurred, which is generally upon shipment.

For certain contracts under which the Company produces products with no alternative use and for which the Company has an enforceable right to payment during the production cycle, the Company recognizes revenue for the cost incurred of work in process plus a margin at the end of each period and records a contract asset (unbilled receivable). The majority of these products are shipped weekly and monthly to the customers and the contracts require us to manage and limit the level of work in process to meet the scheduled delivery dates.

In addition, the Company may have a contract or purchase order to provide a non-recurring engineering service to a customer. These contracts are reviewed, and performance obligations are determined and we recognize revenue at the point in time in which each performance obligation is fully satisfied.

Disaggregation of Revenue

The following table summarizes the Company’s net sales by product line.

Schedule of net sales by product line

Three months ended

~~Six~~Nine months ended

25-May-24

27-May-23

25-May-24

27-May-23

24-Aug-24

26-Aug-23

24-Aug-24

26-Aug-23

Microcircuits

38,~~340~~995

12,~~574~~334

514,~~829~~825

24,~~650~~985

Optoeletronics

1,~~759~~501

21,~~147~~530

34,~~259~~759

45,~~008~~432

Sensors and Displays

2,~~964~~137

32,~~722~~594

57,~~093~~231

69,~~974~~674

812,~~063~~633

76,~~443~~458

1426,~~181~~815

1320,~~632~~091

Timing of revenue recognition

Transferred at a point in time

711,~~235~~742

65,~~054~~630

1223,~~164~~906

1116,~~221~~521

Transferred over time

~~828~~891

~~1,389~~828

2,~~017~~909

23,~~411~~570

Total Revenue

812,~~063~~633

76,~~443~~458

1426,~~181~~815

1320,~~632~~091

The following table summarizes the Company’s net sales by major market.

Schedule of net sales by major market

2024 Second Quarter Sales by Major Market

2024 Third Quarter Sales by Major Market

Military

Space

Medical

Commercial

Total

Domestic Direct

32,~~992~~883

~~110~~236

~~487~~839

~~420~~340

54,~~009~~298

Domestic Distribution

27,~~117~~165

33454

~~352~~374

27,~~502~~993

International

~~177~~75

~~278~~157

97110

~~552~~342

610,~~286~~123

~~421~~847

~~487~~839

~~869~~824

812,~~063~~633

2023 Second Quarter Sales by Major Market
	Military		Space		Medical		Commercial		Total
Domestic Direct	$	3,006	$	827	$	826	$	609	$	5,268
Domestic Distribution		1,143		239		4		268		1,654
International		71		162		-		288		521
	$	4,220	$	1,228	$	830	$	1,165	$	7,443

2024 Six Months Sales by Major Market

2023 Third Quarter Sales by Major Market

Military

Space

Medical

Commercial

Total

Domestic Direct

63,~~831~~312

~~307~~254

~~855~~489

~~1,021~~294

94,~~014~~349

Domestic Distribution

31,~~342~~444

~~180~~81

-7

~~729~~313

41,~~251~~845

International

~~274~~139

~~381~~20

~~261~~105

~~916~~264

104,~~447~~895

~~868~~355

~~855~~496

~~2,011~~712

146,~~181~~458

2023 Six Months Sales by Major Market

2024 Nine Months Sales by Major Market

Military

Space

Medical

Commercial

Total

Domestic Direct

47,~~315~~962

~~727~~2,295

1,~~780~~694

1,~~915~~361

813,~~737~~312

Domestic Distribution

210,~~879~~507

~~800~~634

~~419~~1,103

412,~~098~~244

International

99348

~~164~~539

~~534~~372

~~797~~1,259

718,~~293~~817

13,~~691~~468

1,~~780~~694

2,~~868~~836

1326,~~632~~815

2023 Nine Months Sales by Major Market
	Military		Space		Medical		Commercial		Total
Domestic Direct	$	7,618	$	952	$	2,275	$	2,220	$	13,065
Domestic Distribution		4,318		910		-		737		5,965
International		238		185		-		638		1,061
	$	12,174	$	2,047	$	2,275	$	3,595	$	20,091

Receivables, net, Contract Assets and Contract Liabilities

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (deferred revenue) on the Condensed Balance ~~Sheet~~Sheets.

Receivables, net, contract assets and contract liabilities were as follows:

Schedule of receivables, net, contract assets and contract liabilities
	Receivables, net, Contract Assets and Contract Liabilities (Dollars in thousands)
	May 25, 2024		November 30, 2023		December 1, 2022
Receivables, net	$	4,602	$	8,021	$	3,644
Contract assets	$	580	$	307	$	408
Deferred revenue	$	308	$	618	$	1,192

Receivables, net, Contract Assets and Contract Liabilities

~~There~~(Dollars ~~was $398,331 of revenue recognized~~ in ~~fiscal year 2024 that was included in the deferred revenue liability balance at the beginning of the fiscal year.~~thousands)


	August 24, 2024		November 30, 2023		December 1, 2022
Receivables, net	$	9,643	$	8,021	$	3,644
Contract assets	$	400	$	307	$	408
Deferred revenue	$	223	$	618	$	1,192

There was $601,305 of revenue recognized in fiscal year 2024 that was included in the deferred revenue liability balance at the beginning of the fiscal year.

Contract costs

The Company does not have material incremental costs to obtain a contract in the form of sales commissions or bonuses. The Company incurs other immaterial costs to obtain and fulfill a contract; however, the Company has elected the practical expedient under ASC 340-40-24-4 to recognize all incremental costs to obtain a contract as an expense when incurred if the amortization period is one year or less.

Leases

In the first quarter of 2020, the Company entered into a three (3) year lease extension on the property that has been leased on a year to year basis. As a result, we recognized $ 165,000 for an operating lease liabilities and right-of-use assets in accordance with ASC 842. The Company had an operating lease expense of $0 for the first nine months of 2024 and $14,000 for the first nine months of 2023. The Company used an estimated incremental borrowing rate of 3.25% representative of the rate of interest that the company would have to pay to borrow on the Company’s line of credit. The lease expired in March 2023 and was not renewed.

Inventories

Inventories are stated at lower of cost or net realizable value and include material, labor and manufacturing overhead. All inventories are valued using the FIFO (first-in, first-out) method of inventory valuation. The Company determines the need to write inventory down to the lower of cost or net realizable value via an analysis based on the usage of inventory over a three year period and projected usage based on current backlog.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under this method the Company records deferred income taxes for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The resulting deferred tax liabilities and assets are adjusted to reflect changes in tax law or rates in the period that includes the enactment date.

The Company records a liability for an unrecognized tax benefit for a tax position that is not “more-likely-than-not” to be sustained. The Company did not record any liability for uncertain tax positions as of ~~May~~August 2524, 2024 or November 30, 2023.

Property, Plant, and Equipment

Property, plant, and equipment are carried at cost, and depreciation is provided using the straight-line method at rates based upon the following estimated useful lives (in years) of the assets:


Buildings	15-30
Facility improvements	8-15
Machinery and equipment	5-10
Furniture and fixtures	5-8

The Company assesses long-lived assets for impairment in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) ASC 360-10-35, Property, Plant and Equipment – Subsequent Measurement. When events or circumstances indicate that an asset may be impaired, an assessment is performed. The estimated future undiscounted cash flows associated with the asset are compared to the asset’s net book value to determine if a write down to market value less cost to sell is required.

Construction in progress relates to multiple capital projects ongoing during the year ended November 30, 2023 and the ~~six~~nine months ended ~~May~~August 2524, 2024.

Repairs and maintenance are expensed as incurred. Improvements which extend the useful lives of property, plant, and equipment are capitalized.

During the second quarter of fiscal 2024, the ~~company~~ company recognized a gain of approximately $706,000 from the completion of the sale of one manufacturing facility, which resulted in a disposal of approximately $444,000 of fully depreciated assets.

Research and Development Costs

Costs for the design and development of new products are expensed as incurred.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 3 NEW ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The ASU requires the use of an “expected loss” model for instruments measured at amortized cost, in which companies will be required to estimate the lifetime expected credit loss and record an allowance to offset the amortized cost basis, resulting in a net presentation of the amount expected to be collected on the financial asset. The new guidance is effective for fiscal years beginning after December 15, 2022 for Smaller Reporting Companies, including interim periods within those fiscal years and requires a modified-retrospective approach to adoption. The Company adopted ASU 2016-13 oneffective December 1, 2023, and it had no material impact on the financial statements and related disclosures.

The Company’s receivables are recorded net of allowance for credit losses, which consists of one-time expected credit loss of $156,000 for accounts receivable.

The following is a rollforward of the allowance for credit loses for the nine months ended August 24,2024.

Schedule of accounts receivable
ACCOUNTS RECEIVABLE -	Nine Month Ended August 24, 2024 (in thousands)
Rollforward of the Allowance for	Aug. 24, 2024
Credit Losses

Beginning balance	$	0
Provisions for expected credit losses		156
Ending balance	$	156

Note 4 FAIR VALUE MEASUREMENT

The Company had no financial assets or liabilities measured at fair value on a recurring basis as of ~~May~~August 2524, 2024 or November 30, 2023. The fair value of financial instruments ~~such~~ such as cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying amount based on the short maturity of these instruments.

The Company measures its long-term debt at fair value, which approximates book value as the long-term debt bears market rates of interest

There were no nonfinancial assets measured at fair value on a nonrecurring basis ~~May~~August 2524, 2024 and November 30, 2023.

Note 5 COMMITMENTS

The Company obtained a commercial real estate construction loan for the construction of a new 76,000 square foot manufacturing center on the 9.2 acres of land in Garland, Texas that the Company has purchased. On March 26, 2021, the Company (acting as borrower) entered into a Construction Loan Agreement (the “loan agreement”) with Frost Bank (“Frost”) (acting as lender). The Construction Loan Agreement provides for a construction loan, in amounts not to exceed a total principal balance of $16,160,000 with an interest rate of (3.40%) per annum.

On May 16, 2023, the Company renewed the Revolving Loan Agreement with Frost through the “~~Seventh~~Sixth Amendment to Loan Agreement.” ~~(See Exhibit 10.15).~~ The Revolving Loan Agreement provides for revolving credit loans, in amounts not to exceed a total principal balance of $6,000,000 with a rate equal to prime rate with a floor of 3.25%. The Revolving Loan Agreement was originally entered into on January 23, 2013, between the Company as borrower and Frost as lender.

Construction Loans. Subject to the terms of the Loan Agreement, Frost will lend to the Company an aggregate amount not to exceed $16,160,000.

Principal and interest shall be due and payable monthly in an amounts determined by Lender required to fully amortize the outstanding principal balance of this Note over a period of twenty-five (25) years, payable on the twenty-sixth (26th) day of each and every calendar month, beginning April 26, 2023, and continuing regularly thereafter until March 26, 2031, when the entire amount hereof, principal and accrued interest then remaining unpaid, shall be then due and payable; interest being calculated on the unpaid principal each day principal is outstanding and all payments made credited to any collection costs and late charges, to the discharge of the interest accrued and to the reduction of the principal, in such order as Lender shall determine.

The interest rate of (3.40%) per annum including an Interest-Only Period. Interest only shall be due and payable monthly as it accrues on the twenty-sixth (26th) day of each and every calendar month, beginning April 26, 2021, and continuing regularly and monthly thereafter until March 26, 2023; interest being calculated on the unpaid principal each day principal is outstanding and all payments made credited to any collection costs and late charges, to the discharge of the interest accrued and to the reduction of the principal, in such order as Lender shall determine.

The loan shall be secured by a “Deed of Trust, Security Agreement – Financing Statement” covering the 9.2-acre tract in Garland, Texas and the improvements made on it.

Revolving Credit Loans. Subject to the terms of the, Loan Agreement, Frost will lend to the Company, on a revolving basis, amounts not to exceed a total principal balance of $6,000,000, minus amounts available and amounts previously disbursed under outstanding Frost letters of credit. Subject to certain terms and conditions, the Company may borrow, repay and reborrow under the Loan Agreement. There are no borrowings outstanding as of May 27, 2023. The loan has a maturity date of April 23, 2025.

The interest on the outstanding and unpaid principal balance shall be computed at a per annum rate equal to the lesser of (a) a rate equal to the Prime Rate per annum; provided, however, in no event shall the resulting rate be less than three and one-quarter percent (3.25%).

The ~~Company~~loan ~~has~~shall ~~borrowed~~be secured ~~$16~~by a “Deed of Trust,~~160,000~~ ~~against~~Security ~~the~~Agreement ~~construction~~– ~~loan~~Financing asStatement” ofcovering ~~May~~the 259.2 acre tract in Garland, ~~2024~~Texas and the improvements made on it.

Schedule of long-term debt
Debt May 25, 2024
Notes payable	$	15,673,000
Less unamortized debt issuance costs		128,000
Net Debt		15,545,000
Less—Current portion		439,000
Total long-term debt	$	15,106,000

Revolving Credit Loans. Subject to the terms of the, Loan Agreement, Frost will lend to the Company, on a revolving basis, amounts not to exceed a total principal balance of $6,000,000, minus amounts available and amounts previously disbursed under outstanding Frost letters of credit. Subject to certain terms and conditions, the Company may borrow, repay and reborrow under the Loan Agreement. There are no borrowings outstanding as of August 24, 2024. The loan has a maturity date of April 23, 2025.

Notes payable as of August 24, 2024 is as follows:

Schedule of long-term debt
Debt May 25, 2024
Notes payable	$	15,567,000
Less unamortized debt issuance costs		122,000
Net Debt		15,445,000
Less—Current portion		443,000
Total long-term debt	$	15,002,000

Estimated maturities of our long-term debt over the next 5 years are as follows (in thousands):

Estimated maturities of long-term debt
	2024 Remaining		2025		2026		2027		2028		Thereafter		Total
Notes payable	$	~~218~~109	$	~~463~~447	$	463	$	~~479~~478	$	495	$	13,~~555~~575	$	15,~~673~~567

Note 6 EARNINGS PER COMMON SHARE

Basic and diluted earnings per share are computed based upon the weighted average number of shares outstanding during the year. Diluted earnings per share gives effect to all dilutive potential common shares.

The following is a reconciliation of the number of shares used in the calculation of the basic and diluted earnings per share for the three and ~~six~~nine months ended ~~May~~August 2524, 2024 and ~~May~~ 27August 26, 2023:

Schedule of the basic and diluted earnings per share

Three months ended

~~Six~~Nine Months Ended

May 25, 2024

May 27, 2023

May 25, 2024

May 27, 2023

Aug 24, 2024

Aug 26, 2023

Aug 24, 2024

Aug 26, 2023

Weighted average of shares, basic

2,578,315

Restricted stock units

3173,~~194~~587

35,650

3173,~~194~~587

35,650

Weighted average of shares, diluted

2,~~609~~651,~~509~~902

2,613,965

2,~~609~~651,~~509~~902

2,613,965

Note 7 SHAREHOLDERS’ EQUITY

On December 5, 2023, the Board of Directors of Micropac Industries, Inc. approved the payment of a $0.10 per share special dividend to all shareholders of record as of January 10, 2024. The dividend was paid to shareholders on February 9, 2024.

On December 7, 2022, the Board of Directors of Micropac Industries, Inc. approved the payment of a $0.10 per share special dividend to all shareholders of record as of January 11, 2023. The dividend was paid to shareholders on February 10, 2023.

NOTE 8 STOCK-BASED COMPENSATION

We have one restricted stock units ("RSUs") stock-based compensation award as part of Micropac Industries Inc.’s 2023 Equity Incentive Plan. The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ("SG&A") expense (in thousands):

The following is a summary of our RSUs activity for six months ended May 25, 2024 and May 27, 2023:

Schedule of restricted stock units activity
	2024				2023
(shares in thousands)	Number		Weighted-		Number		Weighted-
	of		Average		of		Average
	Shares		Grant Date Fair Value		Shares		Grant Date Fair Value
Unvested at beginning of period		31.2	$	13.13		-		-
Granted		-		-		35.7	$	13.13
Vested		7.4	$	13.13		-		-
Cancelled		-		-		-		-
Unvested at end of the period		23.8	$	13.13		35.7	$	13.13

~~The~~NOTE ~~following~~8 ~~table sets forth the stock~~STOCK-~~based~~BASED ~~compensation expense recorded in selling, general and administrative ("SG&A") expense (in thousands):~~COMPENSATION

Schedule of stock-based compensation
	May 25, 2024 and May 27, 2023
	Three Months Ended				Six Months Ended
	2024		2023		2024		2023
Stock-based compensation expense	$	39.00	$	39.0	$	78.00	$	39.0

We have restricted stock units ("RSUs") stock-based compensation awards as part of Micropac Industries Inc.’s 2023 Equity Incentive Plan. The following table sets forth the stock-based compensation expense recorded in selling, general and administrative ("SG&A") expense (in thousands):

The following is a summary of our RSUs activity for nine months ended August 24, 2024 and August 26, 2023:


	2024				2023
(shares in thousands)	Number		Weighted-		Number		Weighted-
	of		Average		of		Average
	Shares		Grant Date Fair Value		Shares		Grant Date Fair Value
Unvested at beginning of period		31.2		13.13		-		-
Granted		42.4		10.81		35.7	$	13.13
Vested		7.4		13.13		-		-
Cancelled		-		-		-		-
Unvested at end of the period		66.2	$	11.64		35.7	$	13.13

The following table sets forth the stock-based compensation expense recorded in "SG&A" expense (in thousands):

Schedule of stock-based compensation
	August 24, 2024 and August 26, 2023
	Three Months Ended				Nine Months Ended
	2024		2023		2024		2023
Stock-based compensation expense	$	153	$	20	$	231	$	59

The following table sets forth the stock-based unvested compensation expense by year to be recognized (in thousands):

Schedule of stock-based unvested compensation expense
	2024		2025		~~Total~~2026		Total
Stock-based unvested compensation expense	$	~~156~~78	$	~~156~~309	$	~~312~~153	$	540

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MICROPAC INDUSTRIES, INC.

(Unaudited)

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business

Micropac Industries, Inc. (the “Company”), a Delaware corporation, designs, manufactures and distributes various types of microelectronic circuits including solid state relays and power controllers, optoelectronic components, and sensor and display components and assemblies. The Company’s products are used as components and assemblies in a broad range of military, space and industrial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200^o C) products.

The Company’s facilities are certified and qualified by the Defense Logistics Agency (DLA) to MIL-PRF-38534 (class K-space level) and MIL-PRF-19500 JANS (space level) and are certified to ISO 9001:2008 and AS 9100D. Micropac is a National Aeronautics and Space Administration (NASA) core supplier, and is registered to AS9100-Aerospace Industry standard for supplier certification. The Company has Underwriters Laboratories (UL) approval on our industrial power controllers.

The Company’s core technology are microelectronic and optoelectronic designs to include the packaging and interconnecting of multi-chip microelectronics modules. Other technologies include light emitting and light sensitive materials and products, including light emitting diodes and silicon phototransistors, and electronic integration used in the Company’s optoelectronic components and assemblies.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under the ~~circumstances~~circustances. Note 2 to the Financial Statements in the Quarterly Report Form 10-Q for the quarter ended ~~May~~August 2524, 2024, describes the significant accounting policies and methods used in in the preparation of the Financial Statements. ~~liabilities.~~ Actual results could differ from these estimates.

The core principle of revenue recognition under accounting principles generally accepted in the ~~United~~Unites States of America (GAAP) is that the Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company’s revenue on the majority of its customer contracts are recognized at a point in time, generally upon shipment of products. The application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, the determination of whether revenues related to our revenue contracts should be recognized over time or at a point in time, as these determinations impact the timing and amount of our reported revenues and net income. Other significant judgments include the estimation of the point in the manufacturing process at which we are entitled to receive payment, as well as the progress of the job order to completion in order to determine the amount of consideration earned for contractual revenue recognized over time.

The allowance for credit losses ~~accounts~~ is based on our assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of of a major customer’s credit worthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected.

Inventory purchases and commitments are based upon future demand. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of changing customer requirements, we may be required to increase our inventory allowances and our gross margin could be adversely affected.

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. If we were to determine we would not be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset would be necessary which would reduce our net income for that period.

Depreciable and useful lives estimated for property and equipment are based on initial expectations of the period of time these assets will provide benefit. Changes in circumstances related to a change in our business or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.

Results of Operations

	Three months ended					~~Six~~Nine months ended
		5/25/2024		5/27/2023			5/25/2024		5/27/2023
		8/24/2024		8/26/2023			8/24/2024		8/26/2023
NET SALES		100.0	%	100.0	%		100.0	%	100.0	%
COST AND EXPENSES:
Cost of goods sold		61.7	%	61.6	%		59.8	%	62.5	%
Cost of Goods Sold		43.9	%	70.8	%		52.3	%	65.2	%
Research and development		65.87	%	87.40	%		76.46	%	98.46	%
Selling, general & administrative expenses		2722.51	%	2731.02	%		2925.18	%	2829.0	%
Total cost and expenses		9671.07	%	97109.0	%		9684.37	%	99102.98	%
OPERATING INCOME BEFORE INTEREST AND INCOME TAXES		4.0	%	3.0	%		3.7	%	0.1	%
OPERATING INCOME (LOSS) BEFORE INTEREST AND INCOME TAXES		28.3	%	(9.0	%)		15.3	%	(2.8	%)
Interest		(0.1	)%	-			(0.1	)%	1.0	%
Other income		0.7	%	0.7	%		2.9	%	1.0	%
Other income		8.7	%	0.5	%		5.1	%	0.3	%
INCOME (LOSS) BEFORE TAXES		29.0	%	(8.3	)%		18.2	%	(1.8	%)
INCOME BEFORE TAXES		12.6	%	3.5	%		8.7	%	1.4	%
Provision for taxes		5.5	%	(0.2	%)		3.4	%	0	%
Provision for taxes		2.1	%	0.6	%		1.5	%	0.2	%
NET INCOME		23.5	%	(8.1	%)		14.8	%	(1.8	%)
NET INCOME		10.5	%	2.9	%		7.2	%	1.2	%

Sales for the three and ~~six~~nine month periods ended ~~May~~August 2524, 2024 totaled $812,~~063~~633,000 and $1426,~~181~~815,000, respectively. Sales for the ~~second~~third quarter increased $~~620~~6,175,000 from the same period of of 2023 while sales for the first ~~six~~nine months of 2024 increased $~~549~~6,724,000 from the first ~~six~~nine months of 2023. The majority of the increase for the three months ended August 24, 2024 is related to timing of shipments of customer orders of standard ~~microelectronic~~solid state relays products. Sales were 1411% in the commercial market, 6% in the medical market, 7470% in the military market, and 613% in the space market for the ~~six~~ nine months ended ~~May~~August 2524, 2024 compared to 2118% in the commercial market, 1311% in the medical market, 5461% in the military market, and 1210% in the space market for the ~~six~~nine months ended ~~May~~August 2726, 2023.

~~Three~~Two customers accounted for 2034%~~,18%,~~ and 1716% of the Company’s sales for the three months ended ~~May~~August 2524, 2024, and ~~three customers accounted~~ for ~~19%, 16%, and 12% for~~ the ~~six~~ nine months ended ~~May~~August 2524, 2024, while three customers accounted for 1213%, 11%, and 1110% and 7two customers accounted for 12% and 10% of the Company’s sales for the three months ended ~~May~~ 27August 26, 2023, and ~~one customer accounted~~ for ~~13% and two customers accounted for 8% for~~ the ~~six~~nine months ended ~~May~~August 2726, 2023.

Cost of goods sold for the ~~second~~third quarters of 2024 and 2023 totaled 61 43.79% and 6170.68% of net sales, respectively, while cost of goods sold for the ~~six~~nine months ended ~~May~~August 2524, 2024 and ~~May 27~~August 26, 2023 totaled 5952.83% and 6265.52% of net sales, respectively. In actual dollars, cost of goods sold increased $~~389~~966,000 in the ~~second~~third quarter of 2024 compared to the same period of 2023. Year to date cost of goods sold ~~decreased~~increased $45920,000 for the first ~~six~~nine months of 2024 as compared to the same period in 2023.

Research and development expense ~~decreased~~increased $76262,000 for the ~~second~~third quarter of 2024 versus 2023 and ~~decreased~~increased $~~234~~28,000 for the first ~~six~~nine months of 2024 compared to the same period of 2023. The research and development expenditures were associated with continued development of several power management products, ~~sensor~~fiber ~~products,~~optic transceivers and ~~process~~high ~~automation~~voltage ~~improvements~~optocouplers. The Company will continue to invest in research and development of these products and other new opportunities.

Selling, general and administrative expense for the ~~second~~third quarter and first ~~six~~nine months of 2024 totaled 2722.51% and 2925.18% respectively of net sales compared to 2731.02% and 2829.0% for the same periods in 2023. In actual dollars, selling, general and administrative expense increased $~~209~~775,000 for the ~~second~~third quarter and increased $~~313~~1,090,000 for the first ~~six~~nine months of 2024 compared to the same periods in 2023. ~~The majority of the increase for the first six months resulted from an increase in consulting and depreciation on the new building.~~

Provisions for taxes increased $~~129~~712,000 for the ~~second~~third quarter of 2024 and increased $~~177~~889,000 for the first ~~six~~nine months of 2024 compared to the same period in 2023. The estimated effective tax rate was 1718.5% for 2024 and 17% for 2023 due to the increase in operating income and other income from the sale of a building.

Net income increased $3,501,000 for the third quarter of 2024 versus 2023 and increased $4,365,000 for the first nine months of 2024 compared to the same period of 2023.

Net income increased $632,000 for the second quarter of 2024 versus 2023 and increased $865,000 for the first six months of 2024 compared to the same period of 2023.

Liquidity and Capital Resources

The Company ~~used~~will use a combination of cash and a commercial real estate construction loan for the construction of a new 76,000 square foot manufacturing center on the 9.2 acres of land in Garland, Texas the Company purchased. On March 26, 2021, the Company (acting as borrower) entered into a Construction Loan Agreement with Frost Bank (“Frost”), (acting as lender). The Construction Loan Agreement provides for a construction loan as discussed in Note 5 to the condensed financial statements.

As of ~~May~~August 2524, 2024, the Company has $15,~~673~~567,000 in notes payable on the construction loan. In addition, the Company has unamortized loan fees on the construction loan in the amount of $~~127~~123,000.

In addition, the Company continues on-going investigations for the use of cumulative cash for business expansion and improvements, such as operational improvements and new product expansion.

Cash and cash equivalents totaled $11,~~017~~218,000 as of ~~May~~August 2524, 2024 compared to $10,299,000 on November 30, 2023, an increase of $~~718~~919,000. The increase in cash and cash equivalents is is attributable to $1,~~252~~151,000 cash provided by operations, and $~~203~~706,000 ~~payments~~of oncash ~~long~~proceeds ~~term~~from ~~debt,~~the ~~payment~~sale of a building offset by the payment of a cash dividend of $258,000, ~~and~~ $73363,000 in cash for additional manufacturing equipment and $317,000 in payments on the long term debt.

In addition to cash on hand, the Company also has the ability to borrow under a loan agreement as discussed in Note 5 to the condensed financial statements.

The Company has no significant off-balance sheet arrangements.

Outlook

New orders for year-to-date 2024 totaled $1419,~~175~~230,000 compared to $1929,~~362~~349,000 for 2023. The decrease resulted from timing of new orders ~~for~~in ~~several~~space ~~custom~~level ~~products~~solid ~~booked~~state ~~in 2023~~relays.

Backlog totaled $3729,~~006~~456,000 on ~~May~~August 2524, 2024 ~~compared~~ compared to $3942,~~203~~718,000 as of ~~May~~August 2726, 2023 and $36,370,000 on November 30, 2023 and represents a good mix of the company’s products and technologies.

2024 Current Backlog by Major Market

Military

Space

Medical

Commercial

Total

Domestic Direct

148,~~306~~060

~~161~~4,245

21,~~687~~982

4,~~665~~027

2118,~~819~~314

Domestic Distribution

117,~~595~~248

2,~~019~~126

~~850~~996

1410,~~476~~382

International

824

~~453~~350

~~176~~406

~~711~~760

2515,~~983~~312

26,~~633~~721

21,~~699~~994

5,~~691~~429

3729,~~006~~456

2024 Current Backlog by Product Line
Microelectronics	$	1810,~~119~~547
Optoelectronics		45,~~835~~590
Sensors and Displays		1413,~~052~~319
	$	3729,~~006~~456

The Company cannot assure that the results of operations for the interim period presented are indicative of total results for the entire year due to fluctuations in customer delivery schedules, or other factors over which the Company has no control.

Impact of COVID-19 on our Business

In March 2020 the World Health Organization declared the spread of the COVID-19 virus a pandemic.

The Company continues to monitor our supply chain and orders from customers for COVID-19 pandemic related changes. We are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers. We have been staggering some shifts and otherwise adjusting work schedules to maximize our capacity while adhering to recommended precautions. We have established and implemented a work from home provision where possible.

To date, we have not experienced significant raw material shortages; however, supply-chain disruptions could potentially delay or prevent us from fulfilling customer orders.

Cautionary Statement

This Form 10-Q contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially. Investors are warned that forward-looking statements involve risks and unknown factors including, but not limited to: our expectations regarding the potential impacts on our operations of the COVID-19 pandemic; our expectations regarding the potential impacts on our supply chain and on our customers of the COVID-19 pandemic; overall changes in governmental spending for military and space programs; customer cancellation or rescheduling of orders, problems affecting delivery of vendor-supplied raw materials and components, unanticipated manufacturing problems and availability of direct labor resources.

The Company does not intend to update the forward-looking statements contained herein, except as may be required by law.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4.

CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures.

The Chief Executive Officer and Chief Financial Officer of the Company evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of ~~May~~August 2524, 2024 and, based on this evaluation, concluded that the Company’s disclosure controls and procedures are functioning in an effective manner to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

(b)

Changes in internal controls.

There has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting during the ~~six~~nine month period ended ~~May~~August 2524, 2024.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The Company is not involved in any material current or pending legal proceedings.

ITEM 1A

RISK FACTORS

Information about risk factors for the three and ~~six~~nine months ended ~~May~~August 2524, 2024 does not differ materially from that set forth in Part I, Item 1A, of of our Annual Report on Form 10-K for the year ended November 30, 2023

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURE

Not Applicable

ITEM 5.

OTHER INFORMATION

None

ITEM 6.

EXHIBITS

(a)		Exhibits

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.
32.2		Certification of Chief Accounting Officer pursuant to 18 U. S. C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.

MICROPAC INDUSTRIES, INC.

July 9, 2024		/s/ Mark King
October 8, 2024		/s/ Mark King
Date		Mark King
		Chief Executive Officer
July 9, 2024		/s/ Patrick Cefalu
October 8, 2024		/s/ Patrick Cefalu
Date		Patrick Cefalu
		Chief Financial Officer

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