Edgar Filing: MICROPAC INDUSTRIES INC

U. S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-KSB
Dated February 9, 2009

(Mark One)

(X) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 (Fee Required)

For the fiscal year ended November 30, 2008.

( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (No Fee Required)

For the transition period from ________ to ________
Commission file number 0-5109

MICROPAC INDUSTRIES, INC.

DELAWARE 75-1225149
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

905 E. WALNUT STREET 75040
GARLAND, TEXAS (Zip Code)

Issuer's telephone number (972) 272-3571

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

Title of each class Name of each exchange on which registered

_____________________ _____________________________________
_____________________ _____________________________________

Securities to be registered under Section 12 (g) of the Act:

COMMON STOCK $.10 par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. []

Revenues for its most recent fiscal year: $20,060,000

On November 30, 2008, the aggregate market value of the voting common stock held
by non-affiliates of the registrant (based on the closing price reported on the
Over-the-Counter ("OTC") Bulletin Board system on November 30, 2008 was
approximately $2,586,000. For purposes of such calculation shares of Common
Stock held by each executive officer and director and by each person who owns
more than 5% of the outstanding Common Stock has been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of shares outstanding of the issuer's only class of common equity, as
of the latest practicable date was 2,578,315 as of November 30, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement dated January 26, 2009
for the Annual Meeting of Shareholders to be held on March 6, 2009 (the "Proxy
Statement") are incorporated by reference into Part III of this Form 10-KSB.

PART I

Item 1. Description of Business

INTRODUCTION
------------

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

The Company's facilities are certified and qualified by Defense Supply Center
Columbus (DSCC) to MIL-PRF-38534 (class K-space level); MIL-PRF-19500 JANS
(space level), MIL-PRF-28750 (class K space level) and is certified to ISO
9001-2002. Micropac is a NASA core supplier, and is registered to
AS9100-Aerospace Industry standard for supplier certification.

The business 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 504 shareholders on November
30, 2008.

PRODUCTS AND TECHNOLOGIES
-------------------------

The Company's products are either custom (being application specific circuits
designed and manufactured to meet the particular requirements of a single
customer) or standard, proprietary components such as catalog items.
Custom-designed components are estimated to account for approximately 27% of the
Company's sales for the fiscal year ended November 30, 2008, and 38% in fiscal
2007; standard components are estimated to account for approximately 73% of the
Company's sales for the fiscal year ended November 30, 2008, and 62% for fiscal
2007.

Micropac Industries, Inc. provides microelectronic and optoelectronic components
and assemblies along with contract electronic manufacturing services and offers
a wide range of products sold to the industrial, medical, military, aerospace
and space markets.

The Company's core technology is the packaging and interconnect of miniature
electronic components, utilizing thick film and thin film substrates, forming
microelectronics circuits. Other technologies include light emitting and light
sensitive materials and products, including light emitting diodes and silicon
phototransistors used in the Company's optoelectronic components, and
assemblies. The Company's basic products and technologies include:

Custom design hybrid microelectronic circuits
Solid state relays and power controllers
Custom optoelectronic assemblies and components
Optocouplers
Light-emitting diodes
Hall-Effect devices
Displays
Power operational amplifiers
Fiber optic components and assemblies
High temperature (200 C) products

Micropac's products are primarily sold to original equipment manufacturers (OEM)
who serve the following major markets:

Military/Aerospace - aircraft instrumentation, guidance and navigations
systems, control circuitry, power supplies, laser positioning
Space - control circuitry, power monitoring and sensing
Industrial - power control equipment, robotics
Medical

The Company has no patents, licenses, franchises, concessions, royalty
agreements or labor contracts. The Company's trademark "Mii" is registered with
the U.S. Patent and Trademark Office.

Sales of our products internationally are subject to government regulations,
including export control regulations of the U.S. Department of State and
Department of Commerce. Violation of these regulations by the company could
result in monetary penalties and denial of export privileges. We are not aware
of any violations of export control regulations.

The Company is not currently impacted by export restrictions on sensitive
technology. Five (5) of the Company's principal product families require
government approval. Further, a significant portion of our business is military

and is dependent on maintaining our facility certifications to MIL-PRF-38534,
MIL-PRF-19500 and MIL-PRF-28750. We expect to maintain these certifications and
qualifications; however, the loss of any of these certifications would have a
significant impact on our business.

Government regulations impose certain controls on chemicals used in electronics
and semiconductor manufacturing. Micropac has obtained all the necessary
environmental permits, and routinely monitors and reports the wastewater stream
results to the local governing agency. Micropac is classified as a small
generator of hazardous waste, and the annual cost of complying with the
regulations is minimal.

In 2008, the Company's investment in technology through research and
development, which was expensed, totals approximately $530,000 ($301,000 in
2007). The Company's research and development expenditures were directed
primarily toward long-term specific customer requirements, some of which have
future potential as Micropac proprietary products, and product development and
improvement associated with the Company's space level and other high reliability
programs.

In addition to the Company's investment in research and development, various
customers paid the Company approximately $241,000 in non-recurring engineering
costs associated with the development of custom products for specific
applications.

The Company provides a one year warranty from the date of shipment to the
original purchaser. The Company is obligated under this warranty to either
replace or repair defective goods or refund the purchase price paid by the
buyer.

CUSTOMERS
---------

The Company's products are marketed throughout the United States and in Western
Europe, through a direct technical sales staff, independent representatives and
independent stocking distributors. Approximately 23% of the sales for fiscal
year 2008 (17% in 2007) were to international customers. Sales to Western
European customers are made by independent representatives under the
coordination of the Company's office in Bremen, Germany.

Sales through the Company's distribution channels were $4,008,000 in 2008
compared to $4,474,000 in 2007 or 20% and 24% of sales, respectively.

The Company's major customers include contractors to the United States
government with fixed price contracts. Sales to these customers for Department
of Defense (DOD) and National Aeronautics and Space Administration (NASA)
contracts accounted for approximately 68% of the Company's fiscal net sales in
2008 compared to 71% in 2007.

The Company's major customers are Lockheed Martin, Northrop Grumman, Boeing,
Raytheon, BAE, Schlumberger, Honeywell, Rockwell Int'l and NASA.

At any time a single customer may have a disproportionate and material impact on
the company's operations and profit and loss.

BACKLOG
-------

At November 30, 2008, the Company had a backlog of unfilled orders totaling
approximately $9,723,000 compared to approximately $7,918,000 at November 30,
2007. The Company expects to complete and ship most of its November 30, 2008
backlog during fiscal 2009.

EMPLOYEES
---------

At November 30, 2008, the Company had 138 full-time employees (compared to 136
at November 30, 2007), of which 22 were executive and managerial employees, 33
were engineers and quality-control personnel, 14 were clerical and
administrative employees, and 69 were production personnel. None of the
Company's employees were covered by collective bargaining agreements.

The Company is an Equal Opportunity Employer. It is the Company's policy to
recruit, hire, train and promote personnel in all job classifications, without
regard to race, religion, color, national origin, sex or age. Above and beyond
non-discrimination, we are committed to an Affirmative Action Program, dedicated
to the hiring, training, and advancement within the Company of minority group
members, women, veterans, and handicapped individuals.

COMPETITION
-----------

The Company competes with two or more companies with respect to each of its
major products, including custom hybrid microcircuits, solid state relays and
power controllers, optocouplers, light-emitting diodes, light sensitive silicon
phototransistors and diodes, hall-effect devices, displays, power operational
amplifier, custom optoelectronic components and assemblies. These products and
technologies are sold into various markets, including military/aerospace, space,
industrial and medical. Some of these competitors are larger and have greater

capital resources than the Company. Management believes the Company's
competitive position is favorable with regard to our product reliability and
integrity, past performance, customer service and responsiveness, timely
delivery and pricing; however, no assurance can be given that the Company can
compete successfully in the future.

The microcircuits product line, including custom microcircuits, solid state
relays, power operational amplifiers and regulators accounted for 44% of the
Company's business in 2008, and the Optoelectronics product line accounted for
56% of the Company's business in 2008, compared to 48% and 52% in 2007.

There are approximately 38 independent hybrid microcircuit manufacturing
companies who are certified to supply microcircuits to MIL-PRF-38534, in
addition to OEM's, who manufacture hybrid microcircuits for their internal
needs. Micropac may compete with all of these for hybrid microcircuit business.
Some of the Company's primary competitors are Teledyne Industries, Inc.,
Advanced Photonix, Honeywell, Avago, and International Rectifier.

SUPPLY CHAIN
------------

The parts and raw materials for the Company's products are generally available
from more than one source. Except for certain optoelectronic products, the
Company does not manufacture the basic parts or materials used in production of
its products. From time to time, the Company has experienced difficulty in
obtaining certain materials when needed. The Company's inability to secure
materials for any reason could have adverse effects on the Company's ability to
deliver products on a timely basis. The Company uses capacitors, active
semiconductor devices (primarily in chip form), hermetic packages, ceramic
substrates, resistor inks, conductor pastes, precious metals and other materials
in its manufacturing operations. However, the Company has not been materially
affected by such shortages. The Company's delivery commitments to customers
allow for adequate lead times for production of the products including lead time
for order and receipt from the supply chain.

Some of the Company's primary suppliers are International Rectifier, NTK
Technologies, Electrovac, Schott Glass, Micross Components, Kyocera, Microsemi
and Aborn Electronics.

CAUTIONARY STATEMENTS - RISK FACTORS
------------------------------------

This Form 10-KSB 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, 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.

Such risks and uncertainties include, but are not limited to historical
volatility and cyclicality of the semiconductor and semiconductor capital
equipment markets that are subject to significant and often rapid increases and
decreases in demand. In addition, the Company produces silicon phototransistors
and light emitting diode die for use in certain military, standard and custom
products. Fabrication efforts sometimes may not result in successful results,
limiting the availability of these components. Competitors offer commercial
level alternatives and our customers may purchase our competitors' products if
the Company is not able to manufacture the products using these technologies to
meet the customer demands.

The Company disclaims any responsibility to update the forward-looking
statements contained herein, except as may be required by law.

Majority shareholder ability to control the election of the Board of Directors

The majority shareholder has the ability to control the election of the
Company's Board of Directors and elect individuals who may be more sympathetic
to such majority shareholders' desires and not necessarily sympathetic to the
desires of minority shareholders as to the policies and directions of the
Company. However, the ability to control the election of the Board of Directors
does not modify the fiduciary duties of the Board of Directors to represent the
interests of all shareholders

Availability of public share for purchase and sale

A small number of shares is available for public purchase and sale. As a result
the company's reported share price may be subject to extreme fluctuations due in
part to the small number of shares traded at any time.

Pricing pressures from customers for reduction in selling prices

The Company continues to experience pricing pressures from some of its original
equipment manufacturer (OEM) customers. In some cases, the Company's customers
request the review of pricing for possible reduction in selling price on future
orders. This requires the Company to improve its productivity and to request
similar price reductions from its supplier chain. If one or both of the
approaches by the Company does not succeed, the Company could be required to
reduce the selling price on future orders reducing the product gross margins and

affecting the Company's net earnings in order to receive future orders from the
customer. However, the Company has no agreement that requires a reduction in the
selling price on any current customer order. All contracts are firm fixed
pricing.

Insurance coverage and exposure to substantial claims or liabilities

The Company operates manufacturing facilities in Garland, Texas and subcontracts
portions of the Company manufacturing to a contract manufacturer in Juarez,
Mexico. These facilities use industrial machines and chemicals that could
provide risks of personal injury and/or property damage. There is no assurance
that accidents will not occur. If accidents do occur, the Company could be
exposed to substantial liability. The Company has no liability for the Mexico
operations. The Company maintains worker's compensation insurance and general
liability insurance for protection of its employees and for protection of the
Company's assets in Garland, Texas. In addition to the basic policies mentioned,
the Company maintains an umbrella insurance policy. The Company reviews all
insurance coverage on an annual basis, and makes any necessary adjustments based
on risk assessment and changes in its business. In the opinion of the Company's
management, and its' insurance advisors, the Company is adequately insured;
however, the Company's financial position could be materially affected by claims
not covered or exceeding coverage currently carried by the Company.

The Company is subject to numerous environmental regulations or changes in
government policy

The Company is subject to governmental regulations pertaining to the use,
storage, handling and disposal of hazardous substances used in connection with
its manufacturing activities. Failure of the Company to control all activities
dealing with hazardous chemicals could subject the Company to significant
liabilities or could cause the Company to cease its manufacturing activities.

The Company could be adversely affected by changes in laws and regulations made
by U.S. and non U.S. governments and agencies dealing with foreign shipments.
Changes by regulatory agencies dealing with environmental issues could affect
the cost of the Company's products and make it hard for a small company to be
competitive with larger companies.

Product liability claims

The use of the Company's products in commercial or government applications may
subject the Company to product liability claims. Although the Company has not
experienced any product liability claims, the sale of any product may provide
risk of such claims. Product liability claims brought against the Company could
have a material adverse effect on the Company's operating results and financial
condition.

Component shortages or obsolescence from suppliers could affect ability to
manufacture or delay shipments of products

The Company relies on suppliers to deliver quality raw materials in a timely and
cost effective manner. Most of the materials and components are generally
available from multiple sources; however, from time to time vendors do not
deliver the product as needed due to manufacturing problems or possibly a
decision not to furnish that product in the future. Such interruption of supply
or price increases could have a material adverse effect on the Company's
operation; however, the Company is not currently materially impacted by
materials shortages.

The ability to develop new products and technologies used in the military, space
or aerospace markets

The Company's base products and technologies generally have long life cycles.
The Company's products are primarily used in military, space or aerospace
applications, which also have long life cycles. There can be no assurance that
the Company will be able to define, develop and market new products and
technologies on a timely and cost effective basis. Failure to respond to
customer's requirements and to competitors' progress in technological changes
could have a material adverse effect on the Company's business.

General economic downturn or the current credit crisis

The Company cannot assure you that our business will not be adversely affected
as a result of an industry or general economic downturn or the current credit
crisis. If the Company's supply chain is adversely affected by the current
credit crisis or economic downturn, resulting in the Company's inability to
secure materials could have adverse effects on the Company's ability to deliver
products on a timely basis.

Item 2. Properties
------------------

The Company occupies approximately 36,000 square feet of manufacturing,
engineering and office space in Garland, Texas. The Company owns 31,200 square
feet of that space and leases an additional 4,800 square feet. The Company
considers its facilities adequate for its current level of operations.

The Company also subcontracts some manufacturing to Inmobiliaria San Jose De
Ciuddad Juarez S.A. DE C.V, a maquila contract manufacturer in Juarez, Mexico.
The Company owns all equipment and inventory with temporary importation into
Mexico under the maquila rules of Mexico. The Company does not lease or own any
real property in Mexico.

The Company employs an International Sales Manager in Bremen, Germany who
coordinates sales to Western European customers made by independent
representatives. The sales manager maintains an office in a private residence.
The Company does not lease or own any real property in Germany, or any other
foreign country.

Item 3. Legal Proceedings
-------------------------

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

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

No matters were submitted to vote of the Company's security holders through the
solicitation of proxies by the Company during the fourth quarter of the fiscal
year ended November 30, 2008.

PART II

Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters
--------------------------------------------------------------------------------

On November 30, 2008, there were approximately 504 shareholders of record of the
Company's common stock. The stock of the Company is closely held; and,
therefore, certain shareholders have the ability to significantly influence
decisions. Our common stock is quoted on the OTC Bulletin Board under the symbol
"MPAD.OB". The following sets forth the high and low bid prices for each quarter
during the last two fiscal years:

High Low
Fiscal Year Ended November 30, 2008
Fourth Quarter $7.30 $2.25
Third Quarter $8.00 $5.66
Second Quarter $7.05 $5.66
First Quarter $7.30 $6.30

Fiscal Year Ended November 30, 2007
Fourth Quarter $7.37 $6.55
Third Quarter $7.00 $5.75
Second Quarter $6.40 $5.75
First Quarter $6.10 $5.35

During the three (3) month period ended November 30, 2008, approximately 15,393
shares of the Company's common stock were reportedly traded in the
over-the-counter market at a reported price range of $4.20 to $7.30 per share.
For the two (2) year period ending November 30, 2008, approximately 198,156
shares of the Company's common stock were reportedly traded in the
over-the-counter market at prices ranging from a low of $4.20 to a high of
$7.37. Due to this average monthly volume of approximately 8,257 shares of
common stock being publicly bought and sold during this two year period, the
Company does not believe this share trading volume represents the market value
of the Company's common stock held by non-affiliates.

Our stock prices quoted on the OTC Bulletin Board represent over-the-counter
market quotations and reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

On December 19, 2007, the Board of Directors of Micropac Industries, Inc.
approved the payment of a $.10 per share dividend to all shareholders of record
on January 25, 2008. The dividend payment was paid to shareholders on February
8, 2008.

On January 12, 2009 the Board of Directors of Micropac Industries, Inc. approved
the payment of a special dividend of $0.10 per share for shareholders of record
as of January 26, 2009. It is anticipated that this dividend will be paid to the
Company's shareholders on or about February 09, 2009.

There are no plans to make the dividend permanent.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------

Liquidity and Capital Resources
-------------------------------

The Company currently has an existing line of credit with a Texas banking
institution. The line of credit agreement provides the Company with up to
$3,000,000 for normal operation of the Company. The interest rate on any
borrowings against this credit agreement is equal to the prime rate less 1/4%.
The line of credit requires the Company to maintain certain financial ratios,
including quick ratio of at least 1:1, maintain a tangible net worth of
$10,000,000 plus 75% of future net income, and maintain a total
liabilities-to-tangible-net-worth of less than 1.25:1. The Company is in
compliance with these covenants. To date, the Company has not used any of the
available line of credit. The Company expects to continue to generate adequate
amounts of cash to meet its liquidity needs from the sale of products and
services and the collection thereof.

The Company realized $775,000 net in cash flows from operations in 2008. Cash
influx came primarily from the combination of net income totaling $1,918,000,
recovery of depreciation totaling $251,000, increase in payroll related
liabilities of $87,000, decrease in net deferred tax assets of $8,000 and an
increase in accounts payables of $561,000. This was partially offset by an
increase of accounts receivables of $828,000, increase of inventories of
$1,021,000, decrease in income tax liabilities of $141,000, increase in prepaid
expenses of $54,000, gain on the sale of equipment of $3,000 and a decrease in
other accrued liabilities of $3,000.

The Company used $419,000 in cash for investment in additional manufacturing
equipment, computers and facility improvements in 2008 compared to $287,000 in
2007.

On December 22, 2006, the Board of Directors of Micropac Industries, Inc.
approved the payment of a $.10 per share dividend to all shareholders of record
on January 26, 2007. The dividend payment was paid to shareholders on February
9, 2007.

As of November 30, 2008, the Company had $6,552,000 in cash and cash equivalents
compared to $4,394,000 in cash and cash equivalents and $2,021,000 in short term
investments on November 30, 2007. The Company held no short term investments at
November 30, 2008.

Company management believes it will meet its 2009 capital requirements through
the use of cash derived from operations for the year and/or usage of the
Company's cash and cash equivelants. There were no significant outstanding
commitments for equipment purchases or improvements at November 30, 2008.

Results of Operations 2008 vs. 2007
-----------------------------------

Three Months Ended Twelve Months Ended
11/30/08 11/30/07 11/30/08 11/30/07

Net Sales 100.0% 100.0% 100.0% 100.0%

Cost of sales 64.8% 68.3% 66.6% 68.1%
R & D 3.4% 1.4% 2.6% 1.6%
S, G, & A 15.8% 17.4% 17.0% 17.7%
Total Cost & Expenses 84.0% 87.1% 86.2% 87.4%

Operating Income 16.0% 12.9% 13.8% 12.6%

Other and Interest Income .95% 1.7% .9% 1.2%

Income Before Income Taxes 16.9% 14.6% 14.7% 13.8%

Provision for taxes 5.9% 4.9% 5.1% 5.1%

Net Income 11.0% 9.6% 9.6% 8.7%

Sales in 2008 were approximately $20,060,000, an increase of 8.3% or $1,536,000
compared to 2007 sales. The increase in sales is primarily attributable to an
increase in space level product sales to various customers and optocouplers to
an international customer.

The Company's management expects sales and profits to be stable in 2009, based
on the current backlog of optoelectronics products, certain space product
contracts, and requirements for microcircuits.

New orders for fiscal year 2008 total $21,857,000 compared to $17,002,000 for
fiscal 2007. Approximately $12,768,000 of the new orders received in 2008 were
delivered to customers in 2008, along with approximately $7,284,000 of the
Company's $7,918,000 backlog of orders at November 30, 2007.

The Company's backlog as of November 30, 2008, was approximately $9,723,000,
compared to approximately $7,918,000 on November 30, 2007.

Custom-designed components are estimated to account for approximately 27% of the
Company's sales for the fiscal year ended November 30, 2008, and 38% in fiscal
2007; standard components are estimated to account for approximately 73% of the
Company's sales for the fiscal year ended November 30, 2008, and 62% for fiscal
2007.

Approximately 23% of the sales for fiscal year 2008 (17% in 2007) were to
international customers. Sales to Western European customers are made by
independent representatives under the coordination of the Company's office in
Bremen, Germany.

Sales through the Company's distribution channels were $4,008,000 in 2008
compared to $4,474,000 in 2007 or 20% and 24% of sales, respectively.

Cost of sales, as a percentage of net sales, was 66.6% in 2008 compared to 68.1%
in 2007. The decrease of 1.5% is attributable to higher material cost for the
space level products offset by stable fixed operating expense on higher sales
volume. In actual dollars, cost of sales increased $744,000 for 2008 versus 2007

Expenses for research and development total $530,000 in 2008 compared to
$301,000 in 2007. Most of the research and development expenses were
concentrated on expanding the company's line of solid state power controllers,
multi segment displays; and continued investments in enhancing manufacturing
processes to improve the Company's competitive position.

Selling, general, and administrative expenses total 17.0% of net sales in 2008,
compared to 17.7% in 2007, based on higher sales. In dollars expensed, selling,
general and administrative expenses totaled $3,410,000 in 2008 compared to
$3,278,000 in 2007, an increase of $132,000.

Interest and other income for fiscal 2008 totaled $182,000 compared to $226,000
for fiscal 2007. The decrease is related to lower interest rates on the
Company's investments and cash and cash equivalents.

Income before taxes for fiscal 2008 was approximately $2,948,000 or 14.7% of net
sales, compared to $2,561,000 or 13.8% of net sales in fiscal 2007.

Provisions for income tax for fiscal 2008 total $1,030,000 compared to $942,000
for fiscal 2007. The Company's effective income tax rate is 35% for the year
ended November 30, 2008, compared to 38% for the year ended November 30, 2007.
Our effective income tax rate in 2008 was decreased compared to 2007 primarily
due to the changes in the Texas Franchise Tax and the Section 199 domestic
federal tax deduction. Management believes it will meet its future tax payments
through the use of cash derived from and/or usage of the Company's cash and cash
equivalents.

Net income after taxes totaled approximately $1,918,000 or $.74 per share in
2008 versus 2007 net income of $1,619,000 or $.63 per share. Net income after
taxes increased $299,000 in 2008 compared to 2007.

New Accounting Standards
------------------------

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value measurements. SFAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS No. 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. The
adoption of this statement did not have a material effect on the Company's
future reported financial position or results of operations.

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115". This statement permits
entities to choose to measure many financial instruments and certain other items
at fair value. Most of the provisions of SFAS No. 159 apply only to entities
that elect the fair value option. However, the amendment to SFAS No. 115
"Accounting for Certain Investments in Debt and Equity Securities" applies to
all entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity's first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, "Fair Value Measurements". The adoption
of this statement did not have a material effect on the Company's financial
statements.

In June 2007, the Emerging Issues Task Force of the FASB issued EITF Issue No.
07-3, Accounting for Nonrefundable Advance Payments for Goods or Services to be
Used in Future Research and Development Activities, ("EITF 07-3") which is
effective for fiscal years beginning after December 15, 2007. EITF 07-3 requires
that nonrefundable advance payments for future research and development
activities be deferred and capitalized. Such amounts will be recognized as an
expense as the goods are delivered or the related services are performed. The
Company does not expect the adoption of EITF 07-3 to have a material impact on
the financial results of the Company.

the non-controlling interest, and is effective for periods beginning on or after
December 15, 2008. Management does not expect this pronouncement to have a
significant impact on the financial statements of the Company.

The Financial Accounting Standards Board has issued Statement No. 141 (R),
Business Combinations. This statement retains the fundamental requirements in
Statement No. 141 that the acquisition method of accounting (which Statement No.
141 called the purchase method) be used, and applies to the all business
entities, including mutual entities that previously used the pooling of interest
method of accounting for some business combinations. The statement is effective
for transactions within the annual reporting period beginning on or after
December 15, 2008. Management does not expect this pronouncement to have a
significant impact on the financial statements of the Company.

Item 7. Financial Statements
----------------------------

The financial statements listed below appear on pages 18 through 26 of this
Report. The Company is not required to furnish the Supplementary Data required
by Item 302 of Regulation S-K.

Page No.

17 Report of Independent Registered Public Accounting Firm

18 Balance Sheets as of
November 30, 2008 and 2007

19 Statements of Income for the years ended
November 30, 2008 and 2007

20 Statements of Shareholders' Equity for the years
ended November 30, 2008 and 2007

21 Statements of Cash Flows for the years ended
November 30, 2008 and 2007

22-26 Notes to Financial Statements for the years ended
November 30, 2008 and 2007

Item 8. Changes in and Disagreements with Accountants on Accounting and
--------------------------------------------------------------------------------
Financial Disclosure
--------------------

None

Item 8A. Controls and Procedures
--------------------------------

The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time periods. Disclosure controls are also
designed with the objective of ensuring that this information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. As of the end of the period covered by this report, the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the Company's disclosure controls and procedures.
Based on the evaluation, which disclosed no significant deficiencies or material
weaknesses, the Chief Executive Officer and Chief Financial Officer each
concluded that the Company's disclosure controls and procedures are effective.

PART III

In accordance with General Instruction G(3) of Form 10-KSB, the information
required by this Part III is incorporated by reference to Micropac Industries,
Inc.'s definitive proxy statement relating to its 2009 Annual Meeting of
Stockholders, as set forth below. The 2009 Proxy Statement will be filed with
the Securities and Exchange Commission on or about February 9, 2009.

Item 9. Directors & Executive Officers of The Registrant

The information set forth in the 2009 Proxy Statement under the headings
"Election of Directors", and "Principal Stockholders and Stockholdings of
Management", is incorporated herein by reference.

Position(s) With
Name Age the Company Director Since
----- --- ----------- ----------------

H. Kent Hearn 72 Director and Member of Audit
Committee February 1983

Heinz-Werner Hempel 80 Director and Member of Audit
Committee February 1997

Mark King 54 CEO, President and
Member of Audit Committee
And Board of Directors November 2005

James K. Murphey 66 Member of Audit Committee
And Board of Directors and Secretary March 1990

Eugene Robinson 69 Director, and
Member of Audit Committee October 2008

Connie Wood 69 Director, and
Member of Audit Committee February 2002

Mr. Hearn is retired. Mr. Hearn was formerly employed as a stockbroker by
Milkie/Ferguson Investments, Inc.

Mr. Hempel is the Chief Operating Officer of Hanseatische Waren-Gesellschaft MBH
& Co, KG, Bremen Germany.

Mr. King is the current President and Chief Executive of the Company. Prior to
November 2002, Mr. King was the President and Chief Operating Officer of Lucas
Benning Power Electronics. Mr. King jointed the Company in November of 2002, and
was elected Chief Executive Officer, President and Director in October 2005.

Mr. Murphey is an attorney and member of the law firm Glast, Phillips & Murray,
P.C. in Dallas, Texas. Glast, Phillips & Murray, P.C. serves as legal counsel to
the Company.

Mr. Robinson has 35 years of experience in the electronics industry, including
26 years with Texas Instruments, Inc. and later Raytheon through acquisition.
During the past 10 years, Mr. Robinson has been actively engaged consulting with
numerous high technology organizations. He has served on several advisory boards
for high technology companies and universities.

Mrs. Wood served as the Company's Chief Executive Officer and President of the
Company until her retirement in January 2006.

The Board of Directors held four (4) board meetings during the year ended
November 2008. Directors received a fee of $1,500.00 for each meeting attended
during the year ended November 2008. Beginning on December 1, 2005, the Board
agreed to pay an annual retainer of $10,000 to Mr. Hearn and Mrs. Wood. Mr.
Eugene Robinson will be paid the annual retainer of $10,000. Mr. King did not
receive any payments for attending meetings of the Board of Directors. Ms. Wood,
Mr. Hearn and Mr. Murphey attended all of the meetings. Mr. Hempel attended two
(2) of the meetings.

The Audit Committee held four (4) meetings during the year ended November 30,
2008. Members of the Audit Committee received a fee of $750.00 for each meeting
attended during the year ended November 2008. Mr. King did not receive any
payments for attending meetings of the Audit Committee. Mrs. Wood and Messrs
Murphey and Hearn attended all of the meetings. Mr. Hempel attended one (1) of
the meetings.

With the exception of Mr. Hearn and Mr. Robinson, members of the Audit Committee
are not considered as independent members under applicable United States
statutes.

The Board of Directors does not have nominating or compensation committee or
committees performing similar functions. The Board of Directors formed an audit
committee on May 13, 2002. The members of the Audit Committee have a Charter.

The Audit Committee has discussed with management and the independent auditors
the quality and adequacy of the Company's internal controls. The Audit Committee
has considered and reviewed with the independent auditors their audit plans, the
scope of the audit, and the identification of audit risks. The Audit Committee
has reviewed and discussed the audited financial statements with management and
has discussed such financial statements with the independent auditors.

The Audit Committee has received the written disclosures and the report from the
independent accountants required by the applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountants'
communications with the Audit Committee concerning independence and has
discussed with the independent accountant the independent accounts'
independence. Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's annual report on Form 10-K for the
fiscal year ended November 30, 2008, for filing with the Securities and Exchange
Commission.

Management has the responsibility for the preparation and integrity of the
Company's financial statements and the independent auditors have the
responsibility for the examination of those statements. It is not the duty of
the Audit Committee to conduct audits to determine that the Company's financial
statements are complete and accurate and are in accordance with accounting
principles generally accepted in the United States. Those responsibilities
belong to management of the Company. In giving its recommendations, the Audit
Committee considered (a) management's representation that such financial
statements have been prepared with integrity and objectivity and in conformity
with accounting principles generally accepted in the United States, and (b) the
report of the Company's independent auditors with respect to such financial
statements.

The Company has adopted a code of ethics that applies to the Company's chief
executive officer and principal financial officer.

Item 10. Executive Compensation

The information set forth in the 2009 Proxy Statement under the heading
"Management Remuneration and Transactions", is incorporated herein by reference.

The following table shows as of November 30, 2008, all cash compensation paid
to, or accrued and vested for the account of Mr. Mark King, President and Chief
Executive Officer and Mr. Patrick Cefalu, Vice President and Chief Financial
Officer. Mr. King and Mr. Cefalu received no non-cash compensation during 2008.

The company does not have any equity compensation plans.

Annual Compensation
-------------------
Other
Name and Annual Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
(a)
==============================================================================================================

Mark King, 2008 $239,250 $21,800 -0- $15,031
President and 2007 $232,641 $20,000 -0- $25,452
Chief Executive Officer (1) 2006 $220,318 $29,500 -0- $15,981

Patrick Cefalu, 2008 $133,208 $21,800 -0- $ 6,118
Vice President and 2007 $123,161 $20,000 -0- $11,978
Chief Financial Officer 2006 $114,468 $29,500 -0- $ 6,736

(a) Reflects amounts contributed by Micropac Industries, Inc., under Micropac's
401(k) profit sharing plan; unused vacation pay; and reimbursement for medical
expenses under Micropac's Family Medical Reimbursement Plan.

-------------

(1) Effective November 2005, Mr. King's existing employment agreement was
revised to provide: (1) that Mr. King would serve as the Company's
President and Chief Executive Officer, and a member on the Board of
Directors and Audit Committee at a base salary of $186,400 for a term of
three (3) years. In December 2005, the Company and Mr. King amended his
employment agreement to increase his annual base salary to $225,000.

Amount included in all other compensation relating to employee benefit plans
----------------------------------------------------------------------------

The Company maintains a Family Medical Reimbursement Plan for the benefit of its
executive officers and their dependents. The Plan is funded through a group
insurance policy issued by an independent carrier and provides for reimbursement
of 100% of all bona fide medical and dental expenses that are not covered by
other medical insurance plans. During the fiscal year ended November 30, 2008,
Mr. King received $1,530.99 and Mr. Cefalu received $6,118.67 which amounts are
included in the "All Other Compensation" column shown in the preceding
remuneration table.

In July 1984, the Company adopted a Salary Reduction Plan pursuant to Section
401(k) of the Internal Revenue Code. The Plan's benefits are available to all
Company employees who are at least 18 years of age and have completed at least
six months of service to the Company as of the beginning of a Plan year. Plan
participants may elect to defer up to 15% of their total compensation as their
contributions, subject to the maximum allowed by the Internal Revenue code
401(k), and the Company matches their contributions up to a maximum of 6% of
their total compensation. A participant's benefits vest to the extent of 20%
after two years of eligible service and become fully vested at the end of six
years. During the fiscal year ended November 30, 2008, the Company made
contributions to the Plan for Mr. King in the amount of $13,449.98 which amounts
are included in the "All Other Compensation" column shown in the preceding
remuneration table.

Employment agreements of the Company's officers provide that they may elect to
carry over any unused vacation time to subsequent periods or elect to be paid
for such unused vacation time. In 2008, Mr. King and Mr. Cefalu did not receive
any unused vacation which is included in the "All Other Compensation" column
shown in the preceding remuneration table

On January 15, 2001, the Board of Directors adopted the Micropac Industries,
Inc. 2001 Employee Stock Option Plan. To date, no options have been granted
under the Plan.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The information set forth in the 2009 Proxy Statement under the heading
"Principal Stockholders and Stockholdings of Management" is incorporated herein
by reference.

The following table shows the number and percentage of shares of the Company's
common stock beneficially owned (a) by each person known by the Company to own
5% or more of the outstanding common stock, (b) by each director and nominee,
and (c) by all present officers and directors as a group.

Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Class(1)
------------------- ------------------ -----------
Patrick Cefalu 0 0%
8706 Arborside
Richardson, Texas 75089

Heinz-Werner Hempel (2) (3) (4) 1,952,577 75.7%
Hanseatische Waren-Gesellschaft
MBH & Co., KG
Am Wall 127
28195 Bremen 1 Germany

H. Kent Hearn (3) 3,500 Less than .2%
1409 Briar Hollow
Garland, Texas 75043

Mark King (3) 500 Less than .1%
2905 Wyndham Ln.
Richardson, TX 75082

James K. Murphey (3) 0 0%
2290 One Galleria Tower
13355 Noel Road, L.B.75
Dallas, Texas 75240

Eugene Robinson (3) 0 0%
1200 Lake Pointe Circle
McKinney, Texas 75070

Connie Wood (3) 6,000 Less than .2%
877 FM 2948
Como, Texas 75431

All officers and directors 1,962,077 76.1%
as a group (7 Persons)
-----------------------

(1) Calculated on the basis of the 2,578,315 outstanding shares. There are no
options, warrants, or convertible securities outstanding.

(2) The Company and Mr. Heinz-Werner Hempel are parties to an Ancillary
Agreement entered into in March 1987. The Ancillary Agreement primarily
obligates the Company to register Mr. Hempel's stock and allows Mr. Hempel
to participate in any sale of stock by the Company.

(3) A director of the Company. Each incumbent director has been nominated for
reelection at the Annual Meeting.

((4)) Effective October 10, 2007, Mr. Hempel transferred all of the shares of
the Company's common stock owned by him and consisting of 1,952,577 shares,
to a partnership organized under the laws of Germany. This partnership is
composed of Mr. Hempel, his son and his daughter. As the consideration for
this transfer, Mr. Hempel received a 99.98% share in this partnership and
received the sole voting and management control. His son and daughter each
own a 0.01% ownership interest in this partnership.

Item 12. Certain Relationships and Related Transactions
-------------------------------------------------------

The information set forth in the 2008 Proxy Statement under the heading
"Management Remuneration and Transactions" is incorporated herein by reference.

The Company leases a building from the Company's former Chairman of the Board of
Directors. Since 1980, the Company has leased a 4,800 square-foot building from
Mr. Nadolsky which is used primarily for manufacturing. The lease originally
provided for a monthly rental of $1,900 (an amount based upon a January 1984,
independent appraisal of the building's value) and was to have expired on
January 1, 1987. Since 1987, the Company has extended the term of this lease
from time to time. The rental paid to Mr. Nadolsky pursuant to this lease was
$44,034 for the fiscal year ended November 30, 2008. The lease was renewed for
three (3) years, July 2007 to June 2010 at the same rental rate provided for in
the previous lease subject to increase based upon increases in the Consumer
Price Index.

Item 13. Principal Accountant Fees and Services
-----------------------------------------------

The information set forth in the 2009 Proxy Statement under the heading
"Independent Public Accountants" and "Audit Fees" is incorporated herein by
reference.

KPMG LLP was selected as the independent accountants in 2002 and has been
responsible for the Company's financial audit for the fiscal years ended
November 30, 2002 through November 30, 2008.

Management anticipates that a representative from KPMG LLP will be present at
the Annual Meeting and will be given the opportunity to make a statement if he
or she desires to do so. It is also anticipated that such representative will be
available to respond to appropriate questions from stockholders.

AUDIT FEES

KPMG LLP fees for professional services for the audit of the Company's financial
statements for 2008 and the review of the interim financial statements included
in the Quarterly Reports was $108,500.

TAX FEES

In addition to the audit fees, KPMG LLP fees for tax advisory and 2007 tax
return preparation services were $32,500.

ALL OTHER FEES

KPMG LLP did not provide any other services.

The Audit Committee requests that KPMG, LLP provide the committee with the
anticipated charges of all accounting and tax related services to be performed
by KPMG, LLP in advance of performing such services. The Audit Committee
approves all KPMG, LLP tax return preparation in advance of the performance of
such services.

Item 14. Exhibits and Reports on Form 8-K
-----------------------------------------

(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.

(b) Form 8K -

On December 22, 2006, the Board of Directors of Micropac Industries,
Inc. approved the payment of a $.10 per share dividend to all
shareholders of record on January 26, 2007. The dividend payment was
paid to shareholders on February 9, 2007.

Effective October 10, 2007, the Company's majority shareholder, Mr.
Heinz-Werner Hempel, transferred all of the shares of the Company's
common stock, $.10 par value and consisting of 1,952.577 shares to
Micropac Industries, Inc. Vermoegensverwaltungsgesellschaft
buergerlichen Rechts. This Partnership is composed of Mr. Hempel, his
son and his daughter. As the consideration for this transfer, Mr.
Hempel received a 99.98% share in this partnership and retains the
sole voting and management control. His son and daughter each own
0.01% in this Partnership.

On December 19, 2007, the Board of Directors of Micropac Industries,
Inc. approved the payment of a $.10 per share dividend to all
shareholders of record on January 25, 2008. The dividend payment was
paid to shareholders on February 8, 2008.

On January 23, 2008, Mr. Nadolsky announced his plan not to run for
re-election as a Director and Chairman of the Board of Micropac
Industries, Inc. (the "Company") due to health reasons. Mr. Nadolsky
continued to serve in such positions until the Company's Annual
Shareholder Meeting held on March 7, 2008.

On October 15, 2008, the Board of Directors elected Mr. Eugene A.
Robinson, 69, as a director to the board.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

MICROPAC INDUSTRIES, INC.

By: /s/ Mark King
--------------------------------
Mark King, President
and Chief Executive Officer
(Principal Executive Officer)

By: /s/ Patrick Cefalu
--------------------------------
Patrick Cefalu, CFO and
Principal Accounting Officer

Dated: 02/06/2009

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on 02/06/2009.

/s/ Connie Wood /s/ Kent Hearn
----------------------------------- ------------------------------------
Connie Wood, Director H. Kent Hearn, Director

/s/ James Murphey /s/ Heinz Werner Hempel
----------------------------------- ------------------------------------
James K. Murphey, Director Heinz-Werner Hempel, Director

/s/ Eugene Robinson /s/ Mark King
----------------------------------- ------------------------------------
Eugene Robinson, Director Mark King, Director

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Micropac Industries, Inc.:

We have audited the accompanying balance sheets of Micropac Industries, Inc. as
of November 30, 2008 and 2007, and the related statements of income,
shareholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Micropac Industries, Inc. as of
November 30, 2008 and 2007, and the results of its operations and its cash flows
for the years then ended in conformity with U.S. generally accepted accounting
principles.

KPMG LLP

Dallas, Texas,
February 9, 2009

MICROPAC INDUSTRIES, INC.
-------------------------
BALANCE SHEETS
--------------
NOVEMBER 30, 2008 AND 2007
--------------------------
(Dollars in thousands except share data)

ASSETS 2008 2007
------ -------- --------

CURRENT ASSETS:
Cash and cash equivalents $ 6,522 $ 4,394
Short-term investments 0 2,021
Receivables, net of allowance for doubtful accounts
of $89 for 2008 and 2007 respectively 3,243 2,415
Inventories
Raw materials and supplies 2,368 1,588
Work-in-process 2,696 2,455
-------- --------
Total inventories 5,064 4,043

Deferred income taxes 632 659
Prepaid expenses and other assets 123 69
-------- --------
Total current assets 15,584 13,601

PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land 80 80
Buildings 498 498
Facility improvements 796 796
Machinery and equipment 6,488 6,119
Furniture and fixtures 603 584
-------- --------
Total property, plant, and equipment 8,465 8,077
Less- accumulated depreciation (7,069) (6,843)
-------- --------
Net property, plant, and equipment 1,396 1,234
-------- --------

Total assets $ 16,980 $ 14,835
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
Accounts payable $ 1,169 $ 608
Accrued compensation 631 544
Accrued professional fees 42 51
Income taxes payable 94 235
Property taxes 77 69
Commissions payable 68 49
Deferred revenue 204 323
Other accrued liabilities 123 25
-------- --------
Total current liabilities 2,408 1,904

DEFERRED INCOME TAXES 97 116
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value, authorized 10,000,000 shares
3,078,315 issued 2,578,315 outstanding at November 30, 2008
and November 30, 2007 308 308
Paid-in capital 885 885
Treasury stock, at cost, 500,000 shares (1,250) (1,250)
Retained earnings 14,532 12,872
-------- --------
Total shareholders' equity 14,475 12,815
-------- --------

Total liabilities and shareholders' equity $ 16,980 $ 14,835
======== ========

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.
-------------------------
STATEMENTS OF INCOME
--------------------
FOR THE YEARS ENDED NOVEMBER 30, 2008 AND 2007
----------------------------------------------
(Dollars in thousands except share data)

2008 2007
------------ ------------

NET SALES $ 20,060 $ 18,524

COSTS AND EXPENSES:
Cost of sales 13,354 12,610
Research and development 530 301
Selling, general, and administrative expenses
3,410 3,278
------------ ------------

Total costs and expenses 17,294 16,189
------------ ------------

OPERATING INCOME BEFORE INTEREST AND INCOME TAXES 2,766 2,335

Other income 37 40
Interest income 145 186
------------ ------------

INCOME BEFORE INCOME TAXES 2,948 2,561

PROVISION (BENEFIT) FOR INCOME TAXES:
Current 1,022 939
Deferred 8 3
------------ ------------

Total provision for current and deferred taxes 1,030 942
------------ ------------

NET INCOME $ 1,918 $ 1,619
============ ============

BASIC AND DILUTED EARNINGS PER SHARE $ 0.74 $ 0.63
============ ============

WEIGHTED AVERAGE NUMBER OF SHARES, basic and diluted 2,578,315 2,578,315

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.
-------------------------
STATEMENTS OF SHAREHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED NOVEMBER 30, 2008 AND 2007
----------------------------------------------
(Dollars in thousands)

Common Paid-in Treasury Retained
Stock Capital Stock Earnings Total
-------- -------- -------- -------- --------

BALANCE, November 30, 2006 308 885 (1,250) 11,511 11,454

Dividend -- -- -- (258) (258)
Net income -- -- -- 1,619 1,619
-------- -------- -------- -------- --------

BALANCE, November 30, 2007 $ 308 $ 885 $ (1,250) $ 12,872 $ 12,815

Dividend -- -- -- (258) (258)
Net income -- -- -- 1,918 1,918
-------- -------- -------- -------- --------

BALANCE, November 30, 2008 $ 308 $ 885 $ (1,250) $ 14,532 $ 14,475
======== ======== ======== ======== ========

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 2008 AND 2007
(Dollars in thousands)

2008 2007
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,918 $ 1,619
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 251 262
Deferred tax expense 8 3
Gain on sale of equipment (3) (1)
Changes in certain current assets and liabilities-
Increase in receivables, net (828) (367)
(Increase) decrease in inventories (1,021) 477
(Increase) decrease in prepaid expenses and other assets (54) 8
Increase in accounts payable 561 26
Increase in accrued compensation 87 50
(Decrease) increase in income taxes payable (141) 207
(Decrease) increase in all other accrued liabilities (3) 86
------- -------

Net cash provided by operating activities 775 2,370
------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of short term investment, net 2,021 4
Proceeds from sale of equipment 9 7
Additions to property, plant, and equipment (419) (287)
------- -------

Net cash provided by (used in) in investing activities 1,611 (276)
------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (258) (258)
------- -------

Net cash used in financing activities (258) (258)
------- -------

NET INCREASE IN CASH AND CASH EQUIVALENTS 2,128 1,836

CASH AND CASH EQUIVALENTS, beginning of year 4,394 2,558
------- -------

CASH AND CASH EQUIVALENTS, end of year $ 6,522 $ 4,394
======= =======

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes, net of refunds received $ 1,232 $ 730
======= =======

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2008 AND 2007

1. BUSINESS DESCRIPTION:
---------------------

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------

Revenue Recognition
-------------------

Revenues are recorded as deliveries are made based upon contract prices. Any
losses anticipated on fixed price contracts are provided for currently. Sales
are recorded net of sales returns, allowances and discounts.

Short-Term Investments
----------------------

Short-term investments include certificates of deposits with maturities greater
than 90 days. These investments are reported at historical cost, which
approximates fair value as of November 30, 2008 and 2007. 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. All held-to maturity securities mature
within one year.

Inventories
-----------

Inventories are stated at lower of cost or market 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 provides an
allowance for obsolete and overstocked inventory.

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.

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 under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. 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 or discounted cash flow value is required.

Repairs and maintenance are charged against income when incurred. Improvements,
which extend the useful life of property, plant, and equipment are capitalized.

Research and Development Costs
------------------------------

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

Comprehensive Income
--------------------

Comprehensive income includes net income and other comprehensive income which is
generally comprised of changes in the fair value of available-for-sale
marketable securities, foreign currency translation adjustments and adjustments
to recognize additional minimum pension liabilities. For each period presented
in the accompanying statement of income, comprehensive income and net income are
the same amount.

Basic and Diluted Earnings Per 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. During 2008 and 2007, the
Company had no dilutive potential common stock.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.

3. NOTES PAYABLE TO BANKS:
-----------------------

The Company currently has an existing line of credit with a Texas banking
institution. The line of credit agreement provides the Company with up to
$3,000,000 for normal operation of the Company. The interest rate on any
borrowings against this credit agreement is equal to the prime rate less 1/4%.
The line of credit requires the Company to maintain certain financial ratios,
including quick ratio of at least 1:1, maintain a tangible net worth of
$10,000,000 plus 75% of future net income, and maintain a total
liabilities-to-tangible-net-worth of less than 1.25:1. The Company is in
compliance with these covenants. The Company has not, to date, used any of the
available line of credit.

4. RELATED PARTIES:
----------------

The Company leases a building from the Company's former Chairman of the Board of
Directors. Since 1980, the Company has leased a 4,800 square-foot building from
Mr. Nadolsky which is used primarily for manufacturing. The lease originally
provided for a monthly rental of $1,900 (an amount based upon a January 1984,
independent appraisal of the building's value) and was to have expired on
January 1, 1987. Since 1987, the Company has extended the term of this lease
from time to time. The rental paid to Mr. Nadolsky pursuant to this lease was
$44,034 for the fiscal year ended November 30, 2008 and $41,936 in 2007. The
lease was renewed for three (3) years, July 2007 to June 2010 at the same rental
rate provided for in the previous lease subject to increase based upon increases
in the Consumer Price Index.

Glast, Phillips & Murray, P.C. serves as the Company's legal counsel. Mr. James
K. Murphey, a director and member of the Company's audit committee, is a member
of Glast, Phillips & Murray, P.C.

Mr. Eugene Robinson, a director and member of the Company's audit committee,
provides advisory services to the Company and was paid $6,500 in 2008.

Effective May 13, 2003, the Company's Board of Directors approved the formation
of an audit committee composed of the members of the Board. It is possible that
the members of the audit committee may resign from the committee if future
Securities and Exchange Commission rules establish a criteria that such
individuals must be independent, due to their relationships with the Company.
The Board of Directors held four (4) board meetings during the year ended
November 30, 2008. Directors (excluding Mark King) receive a fee of $1,500 for
each meeting. The Audit Committee held four (4) meetings during the year ended
November 30, 2008. Members (excluding Mark King) of the Audit Committee received
a fee of $750 for each meeting.

5. PRODUCT WARRANTIES:
-------------------

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Currently, the only applicable item of
FIN 45 relates to the impact of paragraph 14, which refers to product
warranties.

Because the Company does not have extended warranties, the exposure is limited
to product returns for defective products. In general, the Company warrants that
the products, when delivered, will be free from defects in material workmanship

under normal use and service. The obligations are limited to replacing,
repairing or giving credit for, at the option of the Company, any products that
are returned within one year after the date of shipment.

The Company reserves for potential warranty expense based on historical warranty
experience claims. While management considers the process to be adequate to
effectively quantify its exposure to warranty claims based on historical
performance, changes in warranty claims on a specific or cumulative basis may
require management to adjust its reserve for potential warranty costs.

Warranty expense to repair or replace products in 2008 and 2007, was $62,700 and
$57,100 respectively.

6. LEASE COMMITMENTS:
------------------

Rent expenses for the years ended November 30, 2008 and 2007, was approximately
$44,034 and $41,936 respectively per year. The Company's future minimum lease
payments under non-cancellable operating leases (including the related party
lease described in note 4) for office and manufacturing space with remaining
terms in excess of one year are:

2009 $ 43,877
2010 $ 25,595

7. EMPLOYEE BENEFITS:
------------------

The Company sponsors an Employees' Profit Sharing Plan and Trust (the "Plan").
Pursuant to section 401(k) of the Internal Revenue Code, the Plan is available
to substantially all employees of the Company. Employee contributions to the
Plan are matched by the Company at amounts up to 6% of the participant's salary.
Contributions made by the Company and expensed were approximately $210,000 in
2008 and $204,000 in 2007. Employees become vested in Company contributions at
20% after two years, 40% after three years, 60% after four years, 80% after five
years and 100% after six years. If the employee leaves the Company prior to
being fully vested, the unvested portion of the Company's contributions are
forfeited and such forfeitures are used to lower future Company contributions.
The Company does not offer other post retirement benefits to its employees at
this time.

8. NEW ACCOUNTING STANDARDS
------------------------

The Financial Accounting Standards Board has issued statement No. 160,
Non-controlling Interests in Consolidated Financial Statements. This statement
changes the way the consolidated income statement is presented when
non-controlling interests are present. It requires consolidated net income to be
reported at amounts that include the amounts attributable to both the parent and
the non-controlling interest, and is effective for periods beginning on or after
December 15, 2008. Management does not expect this pronouncement to have a
significant impact on the financial statements of the Company.

9. INCOME TAXES:

The income tax provision consisted of the following for the years ended November
30:

2008 2007
---------- ----------
Current Provision:
Federal $ 950,000 $ 809,000
State 72,000 130,000
---------- ----------
1,022,000 939,000

Deferred tax expense 8,000 3,000
---------- ----------

Total $1,030,000 $ 942,000
========== ==========

The provision for income taxes differs from that computed at the federal
statutory corporate tax rate as follows:

2008 2007
----------- -----------
Tax at 34% statutory rate $ 1,002,000 $ 871,000
State income taxes, net of federal benefit 47,000 84,000
Section 199 Adjustment (60,000) (47,000)
Deferred tax impact of effective tax rate change 47,000 --
Permanent differences and other (6,000) 34,000
----------- -----------

Income tax provision $ 1,030,000 $ 942,000
=========== ===========

The components of deferred tax assets and liabilities were as follows:

November 30, November 30,
2008 2007
-------- --------
Current Deferred Taxes -
Allowance for doubtful accounts $ 30,000 $ 33,000
Inventory 416,000 414,000
Accrued liabilities and other 186,000 212,000
-------- --------
Net current deferred tax asset $632,000 $659,000
-------- --------

Non-current Deferred Taxes Liability
Depreciation and other $ 97,000 $116,000
-------- --------

Net deferred taxes $535,000 $543,000
======== ========

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax-planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods in which the deferred tax assets are deductible, management believes it
is more likely than not that the Company will realize the benefits of these
deductible differences. Accordingly no deferred tax asset valuation allowance
was necessary as of November 30, 2008 or 2007

10. SIGNIFICANT CUSTOMER INFORMATION:
---------------------------------

The Company's primary line of business relates to the design, manufacture, and
sale of hybrid microcircuits and optoelectronic components and assemblies. Sales
to primary contractors for defense and space related contracts accounted for 68%
of total sales in 2008 and 71% of total sales in 2007. No customer accounted for
10% of the Company's sales during 2008 and 2007.

11. SHAREHOLDERS' EQUITY:
---------------------

On March 1, 2001, the Company's shareholders approved the 2001 Employee Stock
Option Plan (the "Stock Plan"). As of November 30, 2006, there were 500,000
options available to be granted; however, no options had been granted at
year-end.

12. SUBSEQUENT EVENTS
-----------------

DIRECTORS AND OFFICERS
NOVEMBER 30, 2008

MARK KING
Chief Executive Officer
Chairman of the Board
Micropac Industries, Inc

CONNIE WOOD
Retired Chief Executive Officer
Micropac Industries, Inc.

HEINZ-WERNER HEMPEL
Chief Operating Officer
Hanseatishe Waren Handelsgesellschaft MBH & Co. KG, Bremen, Germany

H. KENT HEARN
Retired Stockbroker
Milkie-Ferguson, Dallas, Texas

JAMES K. MURPHEY
Corporate Attorney
Glast, Phillips and Murray, Dallas, Texas

EUGENE ROBINSON
Retired

PATRICK CEFALU
Chief Financial Officer
Micropac Industries, Inc.

LEGAL COUNSEL TRANSFER AGENT & REGISTRAR
Glast, Phillips and Murray Securities Transfer
Dallas, Texas Frisco, Texas