SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended February 23, 201929, 2020

OR

Commission File Number 0-5109

MICROPAC INDUSTRIES, INC.

905 E. Walnut, Garland, Texas75040

(Address of Principal Executive Office) (Zip Code)

Registrant’s Telephone Number, including Area CodeCode:(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. Yesx [X] Noo [  ]

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). Yesx [X] Noo [  ]

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

(Do

If an emerging growth company, indicate by check mark if the registrant has elected not check if a smaller reporting company)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. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso [  ] Nox [X]

On April 8, 201914, 2020 there were 2,578,315 shares of Common Stock, $0.10 par value, outstanding.

MICROPAC INDUSTRIES, INC.

FORM 10-Q

February 23, 201929, 2020

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1 -FINANCIAL STATEMENTS

Condensed Balance Sheets as of February 23, 201929, 2020 (unaudited) and November 30, 20182019

Condensed Statements of Operations for the three months ended February 29, 2020 and February 23, 2019 and(unaudited)

February 24, 2018 (unaudited)

Condensed Statements of Cash Flows for the three months ended February 29, 2020 and February 23, 2019 and(unaudited)

February 24, 2018 (unaudited)

Statements of Shareholders’ Equity for the three months ended February 29, 2020 and February 23, 2019 and(unaudited)

February 24, 2018 (unaudited)

Notes to Condensed Financial Statements (unaudited)

ITEM 2 -MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

ITEM 3 -QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4 -CONTROLS AND PROCEDURES

PART II - OTHER INFORMATION

ITEM 1 -LEGAL PROCEEDINGS

ITEM 1A - RISK-RISK FACTORS

ITEM 2 -UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 3 -DEFAULTS UPON SENIOR SECURITIES

ITEM 4 -MINE SAFETY DISCLOSURE

ITEM 5 -OTHER INFORMATION

ITEM 6 -EXHIBITS

SIGNATURES

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

MICROPAC INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(Dollars in thousands)

ASSETS

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands except share data)

(Unaudited)

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE QUARTERS ENDED FEBRUARY 23, 201929, 2020 AND FEBRUARY 24, 201823, 2019

(Dollars in thousands)

(Unaudited)

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 optoelectronicsensor 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 9100C.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 is 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 445440 shareholders on February 23, 2019.29, 2020.

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 February 23, 2019,29, 2020, the results of operations and cash flows for the three months ended February 23, 201929, 2020 and February 24, 2018.23, 2019. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2018.2019. 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. 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, 20182019 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto.

Impact of COVID-19 on our Business

The impact of the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Note 2 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2014-09,Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The ASU replaces most existing revenue recognition guidance in the United States. The standard permits the use of either the full retrospective or modified retrospective transition method.

Based on a review of its customer contracts, the Company has determined that revenue on the majority of its customer contracts will continue to be recognized at a point in time, generally upon shipment of products, consistent with the Company’s historical revenue recognition model. 

The core principle of the guidance in Topic 606revenue recognition under GAAP is that an entitythe 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.

To achieve that core principle, the Company applied 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 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 contractspurchase orders and/or purchase orderscontracts with customers associated with manufacture of products with customers.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 saleshipment of products. 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. This performance obligation is satisfied when control of the product is transferred to the customer, which occurs upon shipment or delivery.The Company accounting policy treats shipping and handling activities as a fulfillment cost.

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 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.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, ASU No. 2014-09 will require the Company to recognizerecognizes revenue using an over-time recognition model as opposed to recognizing revenue atfor the timecost incurred of shipment. The Company recognizes this revenue at work in process cost 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 customer. customer and the contract 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 werecognize revenue at the point in time in which each performance obligation is determined and revenue recognized upon terms and conditions of the contract from the customer.fully satisfied.

Effective as of the beginning of the first quarter of fiscal 2019, we adopted ASU No. 2014-09 using the modified retrospective method and recognized a cumulative effect adjustment to retained earnings based on any open contracts at that time for which revenue recognition has changed from a point-in-time recognition model to an over-time recognition model. While the impact to net sales and net income was not material to our results of operations, the future impact of ASU No. 2014-09 is dependent on the mix and nature of specific customer contracts.

Upon adoption, we recognized an increase in retained earnings of $55,000. The details of the adjustment to retained earnings upon adoption as well as the effects of the balance sheet are as follows:

The following table summarize the effects of the new standard on selected unaudited line items within the Company’s Condensed Statement of Operations for the 13-week period ended February 23, 2019.

Disaggregation of Revenue

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

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

Deferred

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 (contract liabilities) on the Consolidated Balance Sheets. 

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

Revenue represents advance payments from customers and will be recognized asin 2020 that was included in the deferred revenue whenliability balance at the performance obligations are met per the termsbeginning of the contract.year was $147,000.

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 lessless.

Short-Term Investments

The Company has $2,065,000 inno short-term investments at February 23, 201929, 2020. Short-term investments consist of certificates of deposits with maturities greater than 90 days. These investments are reported at historical cost, which approximates fair value. All highly liquid investments with maturities of 90 days or less are classified as cash equivalents. All short-term investments are securities which the Company has the ability and intent to hold to maturity and mature within one year.

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 February 23, 2018.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into United States tax law, which among other provisions lowered the corporate tax rate to 21%.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 118 to provide guidance for companies that allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts under ASC 740. In accordance with SAB 118, a company must reflect the income tax effect of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, the company must record a provisional estimate in the financial statements.

ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the twelve months ended November 30, 2018, we revalued all deferred tax assets and liabilities at the newly enacted Federal corporate US income tax rate.  This revaluation as of enactment resulted in a non-cash provisional estimate of $52,000 to income tax expense and a corresponding reduction in the net deferred tax asset.2019.

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

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.

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

Research and Development Costs

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

Leases

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02,Leases (Topic 842). Under the new standard, lessees will be required to recognize lease assets and liabilities for all leases, with certain exceptions, on their balance sheets. Public business entities are required to adopt the standard for reporting periods beginning after December 15, 2018. The Company adopted in the first quarter of 2020 and had no material impact on its consolidated financial statements. The Company adopted ASC 842 using the modified retrospective transition method; and therefore, the comparative information has not been adjusted for the three months ended February 23, 2019 or as of November 30, 2019. Upon transition to the new standard, the Company elected the package of practical expedients, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs.

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 operating lease liabilities and right-of-use assets upon adoption of ASC 842. The Company had an operating lease expense of $12,000 in the first quarter of 2020. 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 remaining lease term is three years.

The undiscounted future minimum lease payments consist of the following at:

Note 3 NEW ACCOUNTING PRONOUNCEMENTS

In FebruaryJune 2016, the FASB issued Accounting Standards Update (ASU) 2016-02,ASU 2016-13, LeasesFinancial Instruments-Credit Losses (Topic 842)326): Measurement of Credit Losses on Financial Instruments. Under, which changes the new standard, lesseesimpairment 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 recognize lease assetsestimate the lifetime expected credit loss and liabilities 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 effectivefor all leases, with certain exceptions, on their balance sheets. Public business entities are required to adopt the standard for reporting periodsfiscal years beginning after December 15, 2018.2022 for Smaller Reporting Companies, including interim periods within those fiscal years and requires a modified-retrospective approach to adoption. The Company does not expect the adoption of this guidance tobelieves that adopting ASU 2016-13 will have ano material impact on its consolidatedthe financial statements.statements and related disclosures.

Note 4 FAIR VALUE MEASUREMENT

The Company had no financial assets or liabilities measured at fair value on a recurring basis as of February 23, 201929, 2020 and November 30, 2018.  The fair value of financial instruments such as cash and cash equivalents, short term investments, accounts receivable, and accounts payable approximate their carrying amount based on the short maturity of these instruments.  There were no nonfinancial assets measured at fair value on a nonrecurring basis at February 23, 201929, 2020 and November 30, 2018.

Note 5 COMMITMENTS

On April 23, 2018,May 30, 2019, the Company renewed the Loan Agreement with a Texas banking institution. The Loan Agreement provides for revolving credit loans, in amounts not to exceed a total principal balance of $6,000,000.$6,000,000 with a rate equal to prime rate. The Loan Agreement also contains financial covenants to maintain at all times including (i) minimum working capital of not less than $4,000,000, (ii) a ratio of senior funded debt, minus the Company’s balance sheet cash on hand to the extent in excess of $2,000,000 to EBITDA of not more than 3.0 to 1.0, and (iii) a ratio of free cash flow to debt service of not less than 1.2 to 1.0. The Company has not, to date, drawn any amounts under the revolving line of credit and is currently in compliance with the financial covenants. The agreement termination date is April 23, 2021.

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 respective periods. Diluted earnings per share gives effect to all dilutive potential common shares. For the three months ended February 23, 201929, 2020 and February 24, 2018,23, 2019, the Company had no dilutive potential common stock instruments.

Note 7 SHAREHOLDERS’ EQUITY

On December 12, 2017, 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, 2018. The dividend was paid to shareholders on February 8, 2018.

On December 11, 2018, 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 9, 2019. The dividend was paid to shareholders on February 8, 2019.

On December 10, 2019, 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 8, 2020. The dividend was paid to shareholders on February 14, 2020.

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MICROPAC INDUSTRIES, INC.

(Unaudited)

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 optoelectronicsensor 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 9100C.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 is 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.

Results of Operations

Sales for the first quarter ended February 23, 201929, 2020 totaled $3,805,000.$5,957,000. Sales for the first quarter decreased 1.2%increased 57% or $46,000 below$2,152,000 above sales for the first quarter of 2018.2019. The increase in sales were across all product lines with a stronger backlog at the end of 2019.

ThreeTwo customers accounted for 27% and 11% of the Company’s sales for the first quarter of 2020 and three customers accounted for 17%, 11% and 10% of the Company’s sales for the first quarter of 2019 and one customer accounted for 16%2019. Two of the Company’s sales for the first quarter of 2018.customers are distributors that sell to multiple customers.

Cost of goods sold for the first quarter of 2020 and 2019 totaled 55.8% and 2018 totaled 61.7% and 61.0% of net sales, respectively. Cost of goods sold decreased $3,000 insales increased $978,000 or 42% for the first quarter of 20192020, as compared to 2018.the first quarter of 2019.

resulting in higher margins from the increase in sales and an overall improvement of cost of goods sold as a percent of sales.

Research and development cost increased $93,000$88,000 for the first quarter of 20192020 compared to the same period of 2018.2019. The research and development expenditures were associated with the continued development of power management products, optoelectronicsensor products and process automation improvements.

Selling, general and administrative expenses for the first quarter of 20192020 totaled 34.6%23.1% of net sales, compared to 29.5%34.6% for the same period in 2018.2019. Selling, general and administrative expenses increased $183,000$59,000 in the first quarter of 20192020 as compared to 2018.2019. The majority of the dollar increase was associated with the implementation of a new Enterprise Resource Planning system.an increase in outside sales engineering support.

Provisions for taxes decreased $126,000increased $144,000 for the first quarter of 20192020 compared to the same period in 2018. The decrease was associated with the enactment of the Tax Act on December 22, 2017. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 24, 2018, we revalued all deferred tax assets and liabilities at the newly enacted Federal corporate US income tax rate.  This revaluation as of enactment resulted in a non-cash provisional estimate of $77,000 to income tax expense and a corresponding reduction in the net deferred tax asset.2019. The estimated effective tax rate was 14% for the first quarter of 20192020 and 20% for the first quarter of 2018 excluding the $77,000 impact of the Tax Act.2019.

Income for the first quarter of 20192020 was a net loss of $194,000$692,000 compared to a net loss of $12,000$194,000 in the first quarter of 2018.2019.

Liquidity and Capital Resources

Cash and cash equivalents totaled $10,763,000$14,706,000 as of February 23, 201929, 2020 compared to $10,483,000$13,890,000 on November 30, 2018,2019, an increase of $280,000.$816,000. The increase in cash and cash equivalents is attributable to $593,000$998,000 cash provided byused in operations, a payment of a cash dividend of $258,000, $48,000$17,000 invested in equipment, and net purchases for short-term investmentcoupled with proceeds from the maturity of $7,000.short term investments of $2,090,000.

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.

Outlook

New orders for the first quarter of 20192020 totaled $6,958,000$5,597,000 compared to $3,652,000$6,958,000 for the comparable period of 2018.2019. Backlog totaled $21,889,000 on February 29, 2020 compared to $20,325,000 onas of February 23, 2019 compared to $12,679,000 as of February 24, 2018 and $17,132,000$22,021,000 on November 30, 2018. The major increase in new orders were an increase in standard solid state relays to various customers. The majority of the backlog is expected to be completed and shipped in the next twelve months.2019.

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

The spread of the COVID-19 virus during the first quarter of 2020 has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. In March 2020 the World Health Organization declared the spread of the COVID-19 virus a pandemic. As of April 14, 2020, the Company’s operations have been impacted due to the practices described below, but the Company has not experienced significant financial impact directly related to the pandemic. The Company cannot at this time predict the impact that the COVID-19 pandemic will have on its financial condition and operations, although we are continuing to monitor our supply chain and orders from customers for COVID-19 pandemic related changes. In this time of uncertainty as a result of the COVID-19 pandemic, we are continuing to serve our customers while taking every precaution 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 such as social distancing. We have established and implemented a work from home provision where possible. We may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities.

The impact of the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.

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, 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.

Not applicable

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 February 23, 201929, 2020 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.

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 three month period ended February 23, 2019.29, 2020.

PART II - OTHER INFORMATION

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

Information aboutThe following risk factors for the three months ended February 23, 2019 does not differ materially from thatis in addition to those risks set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended November 30, 2018.2019.

Impact of COVID-19 pandemic on our Business

The COVID-19 pandemic presents increased risk to Micropac, its suppliers, and its customers. We are not able to predict the impact of this risk at this time, as the COVID-19 pandemic continues to unfold. The extent of the pandemic’s effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any confidence the likely impact of the COVID-19 pandemic on our future operations.

None

None

Not Applicable

NoneOn March 12, 2020, Micropac Industries, Inc. held its Annual Meeting. Of the 2,578,315 shares of common stock outstanding and entitled to vote, 2,226,113 shares, or 86.3%, were represented at the meeting in person or by proxy, and therefore a quorum was present. The final results for each of the matters submitted to a vote of stockholders at the Annual Meeting are as follows:

Proposal One: To elect seven directors to serve until the next annual meeting of stockholders or until their respective successors are elected and qualified;

Proposal Two: The “Say on Pay” non-binding advisory vote on the compensation of the named executive officers of the Company received the following votes:

The advisory vote approved the compensation of the named executive officers.

Proposal Three: The non-binding advisory vote on the frequency of the advisory vote on Say on Pay in future years received the following votes:

The Company considered the outcome of this advisory vote and determined that the Company will hold an advisory vote every three years on the compensation of the named executive officers.

(a)        Exhibits

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.

April 9, 2019

Date

April 9, 2019

Date