SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549D.C.20549

FORM 10-Q


(Mark One)
   
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended February 27,May 28, 2016
OR
   
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 0-5109

MICROPAC INDUSTRIES, INC.

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x☒ No o☐

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

Large accelerated filer  o☐
Accelerated filer  o☐
Non-accelerated filero☐
Smaller reporting company x☒
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒
On AprilJuly 11, 2016 there were 2,578,315 shares of Common Stock, $0.10 par value outstanding.
 
 
1

MICROPAC INDUSTRIES, INC.

FORM 10-Q

February 27,May 28, 2016

INDEX

PART I -FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Balance Sheets as of February 27,May 28, 2016 (unaudited) and November 30, 2015
Condensed Statements of Operations for the three and six months ended February 27,May 28, 2016 and February 28,May 30, 2015 (unaudited)
Condensed Statements of Cash Flows for the threesix months ended February 27,May 28, 2016 and February 28,May 30, 2015 (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 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

 
2

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

MICROPAC INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)thousands, except share data)

ASSETS

CURRENT ASSETS 
02/27/16
  
11/30/15
  05/28/16  11/30/15 
 (Unaudited)    
                   (Unaudited) 
            
Cash and cash equivalents $12,090  $12,651  $12,285  $12,651 
Short-term investments  2,006   2,004   2,009   2,004 
Receivables, net of allowance for doubtful accounts of
$0 at February 27, 2016 and November 30, 2015
  2,365   2,360 
Receivables, net of allowance for doubtful accounts of
$0 at May 28, 2016 and November 30, 2015
  1,827   2,360 
Inventories:                
Raw materials and supplies  3,889   4,255   3,682   4,255 
Work-in process  2,874   2,613   2,846   2,613 
Total inventories  6,763   
6,868
   6,528   
6,868
 
Deferred income taxes  693   693   693   693 
Prepaid income tax  43   - 
Prepaid expenses and other assets  143   161   175   161 
Total current assets  24,060   24,737   23,560   24,737 
                
PROPERTY, PLANT AND EQUIPMENT, at cost:                
Land  80   80   80   80 
Buildings  498   498   498   498 
Facility improvements  1,109   1,109   1,109   1,109 
Furniture and fixtures  719   719   719   719 
Construction in process equipment  349   347   423   347 
Machinery and equipment  8,430   8,432   8,481   8,432 
Total property, plant, and equipment  11,185   11,185   11,310   11,185 
Less accumulated depreciation  (9,003)  (8,929)  (9,075)  (8,929)
Net property, plant, and equipment  2,182   2,256   2,235   2,256 
Total assets
 $26,242  $26,993  $25,795  $26,993 
                
LIABILITIES AND SHAREHOLDERS' EQUITY                
                
CURRENT LIABILITIES:                
Accounts payable $452  $404  $515  $404 
Accrued compensation  410   666   498   666 
Deferred revenue  2,720   2,855   1,705   2,855 
Property Taxes  23   90 
Property taxes  46   90 
Income taxes payable  1   109   -   109 
Other accrued liabilities  93   74   84   74 
Total current liabilities  3,699   4,198   2,848   4,198 
                
DEFERRED INCOME TAXES  360   360   360   360 
                
SHAREHOLDERS' EQUITY                
Common stock, ($.10 par value), authorized 10,000,000
shares, 3,078,315 issued and 2,578,315 outstanding at
February 27, 2016 and November 30, 2015
  308   308 
Common stock, ($.10 par value), authorized 10,000,000
shares, 3,078,315 issued and 2,578,315 outstanding at
May 28, 2016 and November 30, 2015
  308   308 
Additional paid-in capital  885   885   885   885 
Treasury stock, 500,000 shares, at cost  (1,250)  (1,250)  (1,250)  (1,250)
Retained earnings  22,240   22,492   22,644   22,492 
                
Total shareholders' equity  22,183   22,435   22,587   22,435 
                
Total liabilities and shareholders' equity $26,242  $26,993  $25,795  $26,993 
        

See accompanying notes to financial statements.
 
 
3
 
MICROPAC INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands except share data)
(Unaudited)



 
Three months ended
  
Three months ended
  
Six months ended
 
 
02/27/16
  
02/28/15
  05/28/16  05/30/15  05/28/16  05/30/15 
                  
                  
NET SALES $4,205  $4,786  $5,111  $5,265  $9,316  $10,050 
                        
COST AND EXPENSES:                        
                        
Cost of goods sold  (2,894)  (2,850)  (3,188)  (3,167)  (6,082)  (6,017)
                        
Research and development  (307)  (568)  (241)  (416)  (549)  (984)
                        
Selling, general & administrative expenses  (1,003)  (1,040)  (1,088)  (1,018)  (2,090)  (2,057)
                        
Total cost and expenses  (4,204)  (4,458)  (4,517)  (4,601)  (8,721)  (9,058)
                        
OPERATING INCOME  1   328   594   664   595   992 
                        
                
Other income  7   2   -   10   7   12 
Expense, net  -   (2)  -   (3)  -   (4)
                        
INCOME BEFORE TAXES  8   328  $594  $671  $602  $1,000 
                        
Provision for taxes  (3)  (118)  (190)  (213)  (192)  (331)
                        
NET INCOME $5  $210  $404  $458  $410  $669 
NET INCOME PER SHARE, BASIC AND DILUTED $0.00  $0.08  $0.16  $0.18  $0.16  $0.26 
                        
DIVIDENDS PER SHARE $0.10  $0.10  $-  $-  $0.10  $0.10 
                        
WEIGHTED AVERAGE OF SHARES, basic and diluted  2,578,315   2,578,315   2,578,315   2,578,315   2,578,315   2,578,315 




 
See accompanying notes to financial statements.




4

MICROPAC INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)


  
Three months ended
 
  
2/27/16
  
2/28/15
 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $5  $210 
Adjustments to reconcile net income to        
 net cash provided by (used in) operating activities:
        
  Depreciation and amortization  74   77 
  Deferred taxes  -   19 
         Changes in certain current assets and liabilities:        
     Accounts receivable  (5)  (1,003)
     Inventories  105   151 
                   Prepaid expenses and other current assets  18   72 
     Accounts payable  48   (53)
     Accrued compensation  (256)  (175)
     Deferred revenue  (135)  3,159 
     Other accrued liabilities  (48)  (7)
     Income taxes payable  (108)  55 
         
                                 Net cash provided by (used in) operating activities  (302)  2,505 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
        Sale of short term investments  2,004   2,009 
        Purchase of short term investments  (2,006)  (2,001)
        Additions to property, plant and equipment  1   (37)
         
                         Net cash used in investing activities  (1)  (29)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
         Cash dividend  (258)  (258)
         
                                  Net cash used in financing activities  (258)  (258)
         
Net change in cash and cash equivalents  (561)  2,218 
         
Cash and cash equivalents at beginning of period  12,651   9,994 
         
Cash and cash equivalents at end of period $12,090  $12,212 
         
Supplemental Cash Flow Disclosure:
Cash paid for income taxes$110$-
  Six months ended 
  5/28/16  5/30/15 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $410  $669 
Adjustments to reconcile net income to        
net cash provided by (used in) operating activities:        
    Depreciation  146   154 
                  Deferred tax expense  -   58 
    Changes in certain current assets and liabilities        
       Accounts receivable  534   637 
       Inventories  341   (702)
       Prepaid expense and other current assets  (14)  (4)
       Prepaid income taxes  (43)  37 
       Deferred revenue  (1,150)  2,449 
       Accounts payable  82   (2)
       Accrued compensation  (167)  (88)
       Other accrued liabilities  (36)  (71)
       Income taxes payable  (109)  92 
         
                                 Net cash provided by operating activities  (6)  3,229 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
         
        Sale of short term investments  2,004   2,009 
        Purchase of short term investments  (2,009)  (2,002)
        Additions to property, plant and equipment  (97)  (98)
         
                         Net cash used in investing activities  (102)  (91)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
         Cash dividend  (258)  (258)
         
                                  Net cash used in financing activities  (258)  (258)
         
Net change in cash and cash equivalents  (366)  2,880 
         
Cash and cash equivalents at beginning of period  12,651   9,994 
         
Cash and cash equivalents at end of period $12,285  $12,874 
         


Supplemental Cash Flow Disclosure:     
               Cash paid for income taxes $344  $490 
Supplemental Non-Cash Investing Activity:     
              Accrued additions to equipment $29  $83 


See accompanying notes to financial statements.




5
 
MICROPAC INDUSTRIES, iNC.INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Note 1 BASIS OF PRESENTATION

Business Description

Micropac Industries, Inc. (the "Company"), a Delaware corporation, manufactures and distributes various types of hybrid microelectronic circuits, solid state relays, power controllers, 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.

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 27,May 28, 2016, the results of operations for the three months and six months ended February 27,May 28, 2016 and February 28,May 30, 2015, and the cash flows for the threesix months ended February 27,May 28, 2016 and February 28,May 30, 2015. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States 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, 2015 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto.

Note 2 SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 sales and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue Recognition

Sales are recorded as shipments 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.

The Company recognizes sales when four basic criteria must are met: (1) persuasive evidence of an arrangement exists; (2) shipment has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured.

Deferred revenue represents prepayments from customers and will be recognized as sales when the products are shipped per the terms of the contract.


Short-Term Investments

The Company has $2,006,000$2,009,000 in short term investments at February 27,May 28, 2016. Short-term investments consist of certificates of deposits with initial maturities greater than 90 days.  These investments are reported at historical cost, which approximates fair value. All highly liquid investments with initial 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 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 determines the need to write inventory down below its cost via an analysis based on the usage of inventory over a three year period and projected usage based on current backlog.


6
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:
 
Buildings15
Facility improvements8-15
Machinery and equipment5-10
Furniture and fixtures5-8

The Company assesses long-lived assets for when events or circumstances indicate that an asset may be impaired. 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 life of property, plant, and equipment are capitalized.

Research and Development Costs

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

Note 3 NEW ACCOUNTING PRONOUNCEMENTS

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, 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 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. On July 9, 2015 the FASB agreed to defer the effective date to annual reporting periods beginning after December 15, 2017 and the interim periods within that year. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

Note 4 FAIR VALUE MEASUREMENT

The Company had no financial assets or liabilities measured at fair value on a recurring basis as of February 27,May 28, 2016 and November 30, 2015.  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 27,May 28, 2016 and November 30, 2015.

Note 5 COMMITMENTS

On JanuaryApril 23, 2015,2016, 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, and specific advance loans for acquisitions with an aggregate amount not to exceed $7,500,000 in a single advance or in multiple advances. 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 loan agreement or the revolving line of credit and is currently in compliance with the financial covenants.


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 27,May 28, 2016 and February 28,May 30, 2015, the Company had no dilutive potential common stock.
 
 
7

Note 7 SHAREHOLDERS' EQUITY

On December 16, 2014, 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 12, 2015.  The dividend was paid to  shareholders on February 10, 2015.

On December 15, 2015, 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 12, 2016.  The dividend was paid to shareholders on February 11, 2016.









8

MICROPAC INDUSTRIES, INC.
(Unaudited)


ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Business

Micropac Industries, Inc. (the "Company"), a Delaware corporation, manufactures and distributes various types of hybrid microelectronic circuits, solid state relays, power management products,controllers, 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 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.

The Company's facilities are certified and qualified by Defense Logistics Agency (DLA) to MIL-PRF-38534 (class K-space level), MIL-PRF-19500 JANS (space level), and 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 Company has UL approval on the new isolated solid state industrial power controllers.

The Company's core technology is the packaging and interconnecting of miniature electronic components, utilizing thick 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

Results of Operations
  
Three months ended
 
  
2/27/2016
  
2/28/2015
 
NET SALES  100.0%  100.0%
         
COST AND EXPENSES:        
    Cost of Goods Sold  68.9%  59.5%
    Research and development  7.3%  11.9%
    Selling, general & administrative expenses  
23.8
%
  
21.7
%
                                    Total cost and expenses  100.0%  93.1%
         
OPERATING INCOME  0.0%  6.9%
         
    Other income  0.2%  - 
         
INCOME BEFORE TAXES  0.2%  6.9%
         
    Provision for taxes  0.1%  2.5%
         
NET INCOME  0.1%  4.4%


     Three months endedSix months ended
 5/28/20165/30/20155/28/20165/30/2015
NET SALES100.0%100.0%100.0%100.0%
     
COST AND EXPENSES:    
    Cost of Goods Sold62.4%60.2%65.3%59.8%
    Research and development4.7%7.9%5.9%9.8%
    Selling, general & administrative expenses21.3%19.3%22.4%20.5%
                                    Total cost and expenses88.4%87.4%93.6%90.1%
     
OPERATING INCOME BEFORE INTEREST11.6%12.6%6.4%9.9%
           AND INCOME TAXES    
     
    Interest and other income0.0%0.1% 0.1% 0.1%
     
INCOME BEFORE TAXES11.6%12.7%6.5%10.0%
     
    Provision for taxes3.7%4.0%2.1%3.3%
     
NET INCOME7.9%8.7%4.4%6.7%
     
Sales for the first quarterthree and six month periods ended February 27,May 28, 2016 totaled $4,205,000.$5,111,000 and $9,316,000, respectively.  Sales for the firstsecond quarter decreased 12.1%3% or $581,000$154,000 below sales for the same period of 2015, while sales for the first quartersix months of 2016 decreased $734,000 below the first six months of 2015 with a decrease in various standard optocouplers products. Sales were 18%14% in the commercial market, 67%53% in the military market, and 15% in the space market in the first quarter of 2016 compared to 15% in the commercial market, 72% in the military market, and 13%33% in the space market for the same period of 2015.

Two customers accounted for 11%six months ended May 28, 2016 compared to 14% in the commercial market, 61% in the military market, and 10% of25% in the Company's salesspace market for the first quarter of 2016 while one customer accounted for 17% of the Company's sales for the first quarter ofsix months ended May 30, 2015.
 
 
9

One customer accounted for 40% of the Company's sales for the three months ended May 28, 2016 and two customers accounted for 25% and 11% each of the Company's sales for the six months ended May 28, 2016, while one customer accounted for 18% Company's sales for the three months ended May 30, 2015, and two customers accounted for 12% and 10% each of the Company's sales for the six months ended May 30, 2015.

Cost of goods sold for the first quartersecond quarters of 2016 and 2015 totaled 68.9%62.4% and 59.5%60.2% of net sales, respectively, while cost of goods sold for the six months ended May 28, 2016 and May 30, 2015 totaled 65.3% and 59.8% of net sales, respectively. CostIn actual dollars, cost of goods sold increased $44,000$21,000 in the first quarter of 2016 as compared to 2015 due to product mix and the decrease in various standard optocoupler product sales.

Research and development cost decreased $261,000 for the firstsecond quarter of 2016 compared to the same period of 2015. Year to date cost of goods sold increased $65,000 for the first six months of 2016 as compared to the same periods in 2015.

Research and development expense decreased $175,000 for the second quarter of 2016 versus 2015 and decreased $435,000 for the first six months of 2016 compared to the same period of 2015. The decrease in research and development expense is associated with $445,000 in non-recurring engineering cost supporting a customer funded project. The research and development expenditures were associated with the continued development of several power management products, fiber optic transceivers and high voltage optocouplersoptocouplers. The Company will continue to invest in research and process automation improvements.development of these products and other new opportunities.

Selling, general and administrative expensesexpense for the second quarter and first quartersix months of 2016 totaled 23.8%21.3% and 22.4% respectively of net sales compared to 21.7%19.3% and 20.5% for the same periodperiods in 2015. Selling,In actual dollars, selling, general and administrative expenses decreased $37,000 inexpense increased $69,000 for the second quarter and increased $34,000 for the first quartersix months of 2016 as compared to 2015.the same periods in 2016.

Provisions for taxes decreased $116,000$139,000 for the first quartersix months of 2016 compared to the same period in 2015. The estimated effective tax rate was 32% for 2016 and 33% for 2015.

Net income decreased $54,000 for the firstsecond quarter of 2016 versus 2015 and 36%decreased $259,000 for the first six months of 2016 compared to the same period of 2015.

Net income for the first quarter of 2016 was $5,000, a decrease of $205,000 from the first quarter of 2015.

Liquidity and Capital Resources

Cash and cash equivalents totaled $12,090,000$12,285,000 as of February 27,May 28, 2016 compared to $12,651,000 on November 30, 2015, a decrease of $561,000.$366,000.  The decrease in cash and cash equivalents is primarily attributable to $286,000 cash used in operations,  a payment of a cash dividend of $258,000, net payments for short-term investment of $2,000 and the investment of $14,000$126,000 in equipment.

In additionThe Company expects to continue to generate adequate amounts of cash on hand,to meet its liquidity needs from the Company also hassale of products and services and the ability to borrow under a loan agreement as discussed in note 5 tocollection thereof for at least the condensed financial statements.next twelve months.


Outlook

New orders for the first quarter ofyear-to-date 2016 totaled $2,837,000$8,363,000 compared to $6,642,000$8,154,000 for the comparable period of 2015.  The increase resulted from new orders on various custom products.

Backlog totaled $17,558,000$17,973,000 on February 27,May 28, 2016 compared to $22,949,000$19,279,000 as of February 28,May 30, 2015 and $18,925,000 on November 30, 2015. The majority backlog represents a good mix of the backlog is expected to be completedcompany's products and shippedtechnologies with 16% in the next twelve months.commercial market, 41% in the military market, and 43% in the space market compared to 23% in the commercial market, 32% in the military market, and 45% in the space market on May 30, 2015.

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.


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, 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 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. Approximately $1,800,000$1,500,000 of the Company's backlog is dependent on these semiconductors.
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The Company disclaims any responsibility to update the forward-looking statements contained herein, except as may be required by law.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not  applicable

ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures.

The Chief Executive Officer and Chief Financial Officer of the Company evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of February 27,May 28, 2016 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.
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(b)Changes in internal controls.

There has been no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting during the three month period ended February 27,May 28, 2016.












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PART II - OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

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

ITEM 1ARISK FACTORS

Information about risk factors for the three months and six months ended February 27,May 28, 2016 does not differ materially from that set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended NovemberNovemeber 30, 2015.

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

None

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.                 MINE SAFETY DISCLOSURE

Not Applicable

ITEM 5.                 OTHER INFORMATION

None


ITEM 6.EXHIBITS

(a)Exhibits

31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-OxleySarbanes- Oxley Act of 2002
31.2Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-OxleySarbanes- 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.
32.2Certification 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.
101 Interactive data files pursuant to Rule 405 of Regulation S-T. 



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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.


AprilJuly 12, 2016
/s/ Mark King
DateMark King
Chief Executive Officer
AprilJuly 12, 2016
/s/ Patrick Cefalu
DatePatrick Cefalu
Chief Financial Officer



 
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