10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended August 27, 2011

OR

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

Commission File Number 0-5109

MICROPAC INDUSTRIES, INC.

Delaware	75-1225149
(State of Incorporation)	(IRS Employer Identification No.)
905 E. Walnut, Garland, Texas	75040
(Address of Principal Executive Office)	(Zip Code)
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 accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

On October 10, 2011 there were 2,578,315 shares of Common Stock, $.10 par value outstanding.

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MICROPAC INDUSTRIES, INC.

FORM 10-Q

August 27, 2011

INDEX

PART I  - FINANCIAL INFORMATION
		ITEM 1 - FINANCIAL STATEMENTS
		Condensed Balance Sheets as of August 27, 2011 (unaudited) and November 30, 2010
		Condensed Statements of Operations for the three and nine months endedAugust 27, 2011 and August 28, 2010 (unaudited)
		Condensed Statements of Cash Flows for the nine months ended August 27, 2011 andAugust 28, 2010 (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 - RESERVED
	ITEM 5 - OTHER INFORMATION
	ITEM 6 - EXHIBITS

SIGNATURES

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

MICROPAC INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(Dollars in thousands, except per share data)

ASSETS

CURRENT ASSETS	08/27/11			11/30/10
	(Unaudited)
Cash and cash equivalents	$	8,067		$	9,085
Short-term investment		2,000			1,000
Accounts receivable		2,381			2,893
Inventories:
Raw materials		2,883			2,302
Work-in process		2,417			2,819
Total inventories		5,300			5,121
Prepaid expenses and other current assets		343			239
Deferred income tax		913			913
Total current assets		19,004			19,251
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land		80			80
Buildings		498			498
Facility improvements		1,059			882
Machinery and equipment		7,446			6,936
Furniture and fixtures		672			632
Total property, plant, and equipment		9,755			9,028
Less accumulated depreciation		(7,816	)		(7,582	)
Net property, plant, and equipment		1,939			1,446
Total assets	$	20,943		$	20,697
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	780		$	700
Accrued compensation		571			766
Other accrued liabilities		441			573
Deferred revenue		99			834
Income taxes payable		107			75
Total current liabilities		1,998			2,948
DEFERRED INCOME TAXES		277			277
SHAREHOLDERS’ EQUITY
Common stock, ($.10 par value), authorized 10,000,000 shares,    3,078,315 issued and 2,578,315 outstanding at August 27,            2011 and November 30, 2010.		308			308
Paid-in capital		885			885
Treasury stock, 500,000 shares, at cost		(1,250	)		(1,250	)
Retained earnings		18,725			17,529
Total shareholders’ equity		18,668			17,472
Total liabilities and shareholders’ equity	$	20,943		$	20,697

See accompanying notes to financial statements.

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MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share data)

(Unaudited)

	Three months ended						Nine months ended
	08/27/11			08/28/10			08/27/11			08/28/10
NET SALES	$	4,624		$	7,142		$	15,651		$	17,506
COST AND EXPENSES:
Cost of goods sold		(3,083	)		(4,639	)		(10,014	)		(11,074	)
Research and development		(89	)		(93	)		(484	)		(356	)
Selling, general & administrative expenses		(937	)		(1,036	)		(2,895	)		(2,975	)
Total cost and expenses		(4,109	)		(5,768	)		(13,393	)		(14,405	)
OPERATING INCOME BEFORE INTEREST AND INCOME TAXES		515			1,374			2,258			3,101
Interest and other income		7			14			14			102
INCOME BEFORE TAXES	$	522		$	1,388		$	2,272		$	3,203
Provision for taxes		(188	)		(500	)		(818	)		(1,153	)
NET INCOME	$	334		$	888		$	1,454		$	2,050
NET INCOME PER SHARE, BASIC AND DILUTED	$	.13		$	.34		$	.56		$	.80
DIVIDENDS PER SHARE	$	-		$	-		$	.10		$	.10
WEIGHTED AVERAGE OF SHARES, Basic and diluted		2,578,315			2,578,315			2,578,315			2,578,315

See accompanying notes to financial statements.

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MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine months ended
	8/27/11			8/28/10
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,454		$	2,050
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		234			199
Changes in certain current assets and liabilities
(Increase) decrease in accounts receivable		512			(1,408	)
(Increase) decrease in inventories		(179	)		306
Increase in prepaid expense and other current assets		(104	)		(132	)
Decrease in deferred revenue		(735	)		(947	)
Increase in accounts payable		80			356
Increase (decrease) in accrued compensation		(195	)		161
Increase (decrease) in other accrued liabilities		(132	)		271
Increase in income taxes payable		32			354
Net cash provided by operating activities		967			1,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short term investments		(1,000	)		-
Additions to property, plant and equipment		(727	)		(355	)
Net cash used in investing activities		(1,727	)		(355	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend		(258	)		(258	)
Net cash used in financing activities		(258	)		(258	)
Net change in cash and cash equivalents		(1,018	)		597
Cash and cash equivalents at beginning of period		9,085			6,802
Cash and cash equivalents at end of period	$	8,067		$	7,399
Supplemental Cash Flow Disclosure:
Cash paid for income taxes	$	978		$	799

See accompanying notes to financial statements.

5

MICROPAC INDUSTRIES, INC.

NOTES TO 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 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 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’s core technology is the packaging and interconnecting of miniature electronic components, utilizing thick film and thin film substrates, and 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.

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 August 27, 2011, the results of operations for the three months and nine months ended August 27, 2011 and August 28, 2010, and the cash flows for the nine months ended August 27, 2011 and August 28, 2010. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission.  However, management believes that the disclosures contained are adequate to make the information presented not misleading.

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

Revenues 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 revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 605-10-S99, Revenue Recognition, which requires that four basic criteria must be met before revenues can be recognized: (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 revenue when the products are shipped per the terms of the contract.

Short-Term Investments

The Company has $2,000,000 in short term investments at August 27, 2011. Short-term investments consist of certificates of deposits with maturities greater than 90 days.  These investments are reported at historical cost, which approximates fair value. All highly liquid investments with maturities of 90 days or less at date of purchase 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 from the balance sheet date.

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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 writes down obsolete and overstocked inventory based on the usage of inventory over a three-year period and projected usage based on current backlog.

Income Taxes

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

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 ASC 360-10-35, Property, Plant and Equipment – Subsequent Measurement.  When events or circumstances indicate that an asset may be impaired, an assessment is performed.  The estimated future undiscounted cash flows associated with the asset are compared to the asset’s net book value to determine if a write down to fair 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 are expensed as incurred.

Note 3 RELATED PARTY TRANSACTIONS

Mr. Eugene Robinson, a director of the Company and member of the Company’s audit committee, provides advisory services to the Company.  Mr. Robinson received $1,800 in advisory fees for the first nine months of 2011 and received $1,800 for the first nine months of 2010.  No advisory fees were paid to Mr. Robinson during the third quarter of 2011 or 2010.

Note 4 STOCK-BASED COMPENSATION

On March 1, 2001, the Company’s shareholders approved the 2001 Employee Stock Option Plan (the “Stock Plan”) with 500,000 options available to be granted.  No options have been granted to date.

Note 5 COMMITMENTS

On June 1, 2011, the Company renewed a $6,000,000 revolving line of credit agreement with a bank for a term of two years.  The interest rate is equal to the prime rate. The line of credit requires that the Company maintain certain financial ratios. The financial covenants require the Company to maintain a quick ratio of at least 1:1, maintain a tangible net worth of $10,000,000 and maintain a total liabilities to tangible net worth of less than 1.25:1. The Company has not, to date, used any of the available line of credit.

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 give effect to all dilutive potential common shares. For the nine months ended August 27, 2011 and August 28, 2010, the Company had no dilutive potential common stock.

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Note 7 SHAREHOLDERS’ EQUITY

On January 11, 2010, the Board of Directors of Micropac Industries, Inc. approved the payment of a special dividend of $0.10 per share for all shareholders of record on January 25, 2010.  The dividend was paid to shareholders on February 17, 2010.

On December 16, 2010, 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 18, 2011.  The dividend was paid to the shareholders on February 10, 2011.

Note 8 SUBSEQUENT EVENTS

Management has evaluated subsequent events after the balance sheet date, through the issuance of the financial statements, for appropriate accounting and disclosure.

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MICROPAC INDUSTRIES, INC.

(Unaudited)

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business

Micropac Industries, Inc. (the “Company”), a Delaware corporation, 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 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’s core technology is the packaging and interconnecting of miniature electronic components, utilizing thick film and thin film substrates, and 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						Nine months ended
	8/27/2011			8/28/2010			8/27/2011			8/28/2010
NET SALES		100.0	%		100.0	%		100.0	%		100.0	%
COST AND EXPENSES:
Cost of goods sold		66.7	%		65.0	%		64.0	%		63.3	%
Research and development		1.9	%		1.3	%		3.1	%		2.0	%
Selling, general & administrative expenses		20.3	%		14.5	%		18.5	%		17.0	%
Total cost and expenses		88.9	%		80.8	%		85.6	%		82.3	%
OPERATING INCOME BEFORE INTEREST		11.1	%		19.2	%		14.4	%		17.7	%
AND INCOME TAXES
Interest income		.2	%		.2	%		.1	%		.6	%
INCOME BEFORE TAXES		11.3	%		19.4	%		14.5	%		18.3	%
Provision for taxes		4.1	%		7.0	%		5.2	%		6.6	%
NET INCOME		7.2	%		12.4	%		9.3	%		11.7	%

Sales for the three and nine month periods ended August 27, 2011 totaled $4,624,000 and $15,651,000, respectively.  Sales for the third quarter decreased 35.3% or $2,518,000 below sales for the same period of 2010, while sales for the first nine months of 2011 decreased 10.6% or $1,855,000 below the first nine months of 2010. Sales were 21% in the commercial market, 46% in the military market, and 33% in the space market for the nine months ended August 27, 2011 compared to 12% in the commercial market, 50% in the military market, and 38% in the space market for the nine months ended August 28, 2010. The majority of the decrease in sales for the third quarter and year to date was space level solid state power controller products sold to various customers.

9

The Company's management anticipates a continued decrease in new orders for space level products in the fourth quarter of 2011 resulting in lower sales and operating margins in the fourth quarter 2011 and year to date as compared to 2010. The current economic downturn and government funding is resulting in delayed or cancelled satellite programs resulting in lower sales and new orders for space level solid state power controllers.

One customer accounted for 18% and 10% of the Company’s sales for the three and nine months ended August 27, 2011 and one customer accounted for 33% and 23% of the Company’s sales for the three and nine months ended August 28, 2010, respectively.

Cost of goods sold for the third quarters of 2011 and 2010 totaled 66.7% and 65.0% of net sales, respectively, while cost of goods sold for the nine months ended August 27, 2011 and August 28, 2010 totaled 64.0% and 63.3% of net sales, respectively.  The increase in cost of goods sold as a percentage of sales is attributable to changes in product mix and lower sales. Indirect overhead cost has not decreased proportionally to sales decreases.

Research and development expense decreased $4,000 for the third quarter of 2011 versus 2010 and increased $128,000 for the first nine months of 2011 compared to the same period of 2010. The research and development expenditures were associated with continued development of power management products, high voltage isolators, and high temperature products for new applications to be sold to various existing or new customers.

Selling, general and administrative expense for the third quarter and first nine months of 2011 totaled 20.3% and 18.5% of net sales, respectively, compared to 14.5% and 17.0% for the same periods in 2010. In actual dollars, selling, general and administrative expense decreased $99,000 for the third quarter and decreased $80,000 for the first nine months of 2011 compared to the same periods in 2010. The dollar decrease resulted from lower health insurance expense due to a change in health care providers, as well as decreased incentive compensation as a result of decreased sales.

For the first nine months of 2010 other income included a $79,000 gain from the sale of obsolete inventory.

Provisions for taxes decreased $312,000 for the third quarter and $335,000 for the first nine months of 2011 compared to the same periods in 2010. The estimated effective tax rate was 36% for all periods presented during 2011 and 2010.

Accounts receivable, net, totaled $2,381,000 as of August 27, 2011 and represents a decrease of $512,000 since November 30, 2010, due to lower third quarter sales.

Property, plant, and equipment investments totaled $727,000 since November 30, 2010. The Company invested $550,000 in new test and x-ray equipment, and $177,000 in facility improvements.

Deferred revenue decreased $735,000 since November 30, 2010 with the completion and shipment of certain customer contracts in which the company received advanced payments for long-lead materials.

Liquidity and Capital Resources

Cash and cash equivalents totaled $8,067,000 as of August 27, 2011 compared to $9,085,000 on November 30, 2010, a decrease of $1,018,000.  The decrease in cash and cash equivalents is attributable to $967,000 cash flow from operations, offset by the payment of a cash dividend of $258,000, $1,000,000 invested in certificates of deposit and the investment of $727,000 in equipment and facility improvements.

On June 1, 2011, the Company renewed a $6,000,000 revolving line of credit agreement with a bank for a term of two years.  The interest rate is equal to the prime rate. The line of credit requires that the Company maintain certain financial ratios. The financial covenants require the Company to maintain a quick ratio of at least 1:1, maintain a tangible net worth of $10,000,000 and maintain a total liabilities to tangible net worth of less than 1.25:1. The Company has not, to date, 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 for at least the next twelve months.

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Outlook

New orders for the third quarter and year-to-date 2011 totaled $4,040,000 and $11,893,000, respectively, compared to $4,636,000 and $14,635,000 for the comparable periods of 2010. The fluctuation resulted from a decrease in new orders on various space level microcircuits products, and management anticipates continued softening of new orders for the remainder of 2011. The current economic downturn and government funding is resulting in delayed or cancelled satellite programs resulting in lower sales and new orders for space level solid state power controllers.

The Company's management expects sales and operating income to decrease in the fourth quarter of 2011 as compared to the fourth quarter of 2010, based on the current backlog of space level product. The backlog of space level products was approximately $1,703,000 on August 27, 2011 compared to approximately $3,700,000 at November 30, 2010 and $3,418,000 on August 28, 2010.

Backlog totaled $7,494,000 on August 27, 2011 compared to $11,143,000 on November 30, 2010 and $11,154,000 as of August 28, 2010. The majority of the backlog is expected to be shipped in the next twelve  months and represents a well-distributed mix of the company’s products and technologies with 26% in the commercial market, 51% in the military market, and 23% in the space market compared to 5% in the commercial market, 62% in the military market, and 33% in the space market at August 28, 2010.

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.

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 Rules 13a-15 (e)) as of August 27, 2011 and, based on this evaluation, concluded that the Company’s disclosure controls and procedures are functioning in an effective manner to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

(b)   Changes in internal controls.

There has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting during the three month period ended August 27, 2011.

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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 1A   RISK FACTORS

Information about risk factors for the three months ended August 27, 2011 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 November 30, 2010.

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

None

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.     RESERVED

None

ITEM 5.     OTHER INFORMATION

None

ITEM 6.     EXHIBITS

(a) Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2	Certification of Chief Accounting Officer pursuant to Section 302 of the  Sarbanes- Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.
32.2	Certification of Chief Accounting Officer pursuant to 18 U. S. C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.
101	Interactive data files pursuant to Rule 405 of Regulation S-T.

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.

October 11, 2011	/s/ Mark King
Date	Mark King
	Chief Executive Officer

October 11, 2011	/s/ Patrick Cefalu
Date	Patrick Cefalu
	Chief Financial Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark King, certify that:

1.   I have reviewed this quarterly report of Micropac Industries, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 11, 2011	/s/ Mark King
	Mark King
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick S. Cefalu, certify that:

1.   I have reviewed this quarterly report of Micropac Industries, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: October 11, 2011	/s/ Patrick Cefalu
	Patrick S. Cefalu
		Executive Vice President and Chief Financial Officer
		(Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Micropac Industries, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

1.   The Quarterly Report on Form 10-Q for the period ended August 27, 2011 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 11, 2011	/s/ Mark King
	Mark King
	Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Micropac Industries, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

1.   The Quarterly Report on Form 10-Q for the period ended August 27, 2011 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 11, 2011	/s/ Patrick Cefalu
	Patrick S. Cefalu
	Executive Vice President and Chief Financial Officer
	(Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CONDENSED BALANCE SHEETS (Parentheticals) (USD $)	Aug. 27, 2011	Nov. 30, 2010
Common Stock, par or stated value	$ 0.100	$ 0.100
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	3,078,315	3,078,315
Common Stock, shares outstanding	2,578,315	2,578,315

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CONDENSED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Aug. 27, 2011	Aug. 28, 2010	Aug. 27, 2011	Aug. 28, 2010
NET SALES	$ 4,624	$ 7,142	$ 15,651	$ 17,506
Cost of goods sold	(3,083)	(4,639)	(10,014)	(11,074)
Research and development	(89)	(93)	(484)	(356)
Selling, general & administrative expenses	(937)	(1,036)	(2,895)	(2,975)
Total cost and expenses	(4,109)	(5,768)	(13,393)	(14,405)
OPERATING INCOME BEFORE INTEREST AND INCOME TAXES	515	1,374	2,258	3,101
Interest and other income	7	14	14	102
INCOME BEFORE TAXES	522	1,388	2,272	3,203
Provision for taxes	(188)	(500)	(818)	(1,153)
Net income	$ 334	$ 888	$ 1,454	$ 2,050
NET INCOME PER SHARE, BASIC AND DILUTED	$ 0.13	$ 0.34	$ 0.56	$ 0.80
DIVIDENDS PER SHARE	$ 0.00	$ 0.00	$ 0.10	$ 0.10
WEIGHTED AVERAGE OF SHARES, Basic and diluted	2,578,315	2,578,315	2,578,315	2,578,315

XML



Document and Entity Information	9 Months Ended
	Aug. 27, 2011	Oct. 10, 2011
Document and Entity Information
Entity Registrant Name	MICROPAC INDUSTRIES INC
Document Type	10-Q
Document Period End Date	Aug. 27, 2011
Amendment Flag	false
Entity Central Index Key	0000065759
Current Fiscal Year End Date	--11-30
Entity Common Stock, Shares Outstanding		2,578,315
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

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SHAREHOLDERS’ EQUITY

9 Months Ended

Aug. 27, 2011

SHAREHOLDERS' EQUITY {1}

SHAREHOLDERS' EQUITY

Note 7 SHAREHOLDERS’ EQUITY

On January 11, 2010, the Board of Directors of Micropac Industries, Inc. approved the payment of a special dividend of $0.10 per share for all shareholders of record on January 25, 2010.  The dividend was paid to shareholders on February 17, 2010.

On December 16, 2010, 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 18, 2011.  The dividend was paid to the shareholders on February 10, 2011.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Aug. 27, 2011

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Note 3 RELATED PARTY TRANSACTIONS

Mr. Eugene Robinson, a director of the Company and member of the Company’s audit committee, provides advisory services to the Company.  Mr. Robinson received $1,800 in advisory fees for the first nine months of 2011 and received $1,800 for the first nine months of 2010.  No advisory fees were paid to Mr. Robinson during the third quarter of 2011 or 2010.

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SUBSEQUENT EVENTS

9 Months Ended

Aug. 27, 2011

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Note 8 SUBSEQUENT EVENTS

Management has evaluated subsequent events after the balance sheet date, through the issuance of the financial statements, for appropriate accounting and disclosure.

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BASIS OF PRESENTATION

9 Months Ended

Aug. 27, 2011

BASIS OF PRESENTATION

BASIS OF PRESENTATION

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 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 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’s core technology is the packaging and interconnecting of miniature electronic components, utilizing thick film and thin film substrates, and 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.

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 August 27, 2011, the results of operations for the three months and nine months ended August 27, 2011 and August 28, 2010, and the cash flows for the nine months ended August 27, 2011 and August 28, 2010. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission.  However, management believes that the disclosures contained are adequate to make the information presented not misleading.

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STOCK-BASED COMPENSATION

9 Months Ended

Aug. 27, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Note 4 STOCK-BASED COMPENSATION

On March 1, 2001, the Company’s shareholders approved the 2001 Employee Stock Option Plan (the “Stock Plan”) with 500,000 options available to be granted.  No options have been granted to date.

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COMMITMENTS

9 Months Ended

Aug. 27, 2011

COMMITMENTS

COMMITMENTS

Note 5 COMMITMENTS

On June 1, 2011, the Company renewed a $6,000,000 revolving line of credit agreement with a bank for a term of two years.  The interest rate is equal to the prime rate. The line of credit requires that the Company maintain certain financial ratios. The financial covenants require the Company to maintain a quick ratio of at least 1:1, maintain a tangible net worth of $10,000,000 and maintain a total liabilities to tangible net worth of less than 1.25:1. The Company has not, to date, used any of the available line of credit.

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EARNINGS PER COMMON SHARE

9 Months Ended

Aug. 27, 2011

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE

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 give effect to all dilutive potential common shares. For the nine months ended August 27, 2011 and August 28, 2010, the Company had no dilutive potential common stock.

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CONDENSED STATEMENTS OF CASH FLOWS (USD $)	9 Months Ended
	Aug. 27, 2011	Aug. 28, 2010
Net income	$ 1,454	$ 2,050
Depreciation and amortization	234	199
(Increase) decrease in accounts receivable	512	(1,408)
(Increase) decrease in inventories	(179)	306
Increase in prepaid expense and other current assets	(104)	(132)
Decrease in deferred revenue	(735)	(947)
Increase in accounts payable	80	356
Increase (decrease) in accrued compensation	(195)	161
Increase (decrease) in other accrued liabilities	(132)	271
Increase in income taxes payable	32	354
Net cash provided by operating activities	967	1,210
Purchase of short term investments	(1,000)	0
Additions to property, plant and equipment	(727)	(355)
Net cash used in investing activities	(1,727)	(355)
Cash dividend	(258)	(258)
Net cash used in financing activities	(258)	(258)
Net change in cash and cash equivalents	(1,018)	597
Cash and cash equivalents at beginning of period	9,085	6,802
Cash and cash equivalents at end of period	8,067	7,399
Cash paid for income taxes	$ 978	$ 799

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SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Aug. 27, 2011

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

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

Revenues 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 revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 605-10-S99, Revenue Recognition, which requires that four basic criteria must be met before revenues can be recognized: (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 revenue when the products are shipped per the terms of the contract.

Short-Term Investments

The Company has $2,000,000 in short term investments at August 27, 2011. Short-term investments consist of certificates of deposits with maturities greater than 90 days.  These investments are reported at historical cost, which approximates fair value. All highly liquid investments with maturities of 90 days or less at date of purchase 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 from the balance sheet date.

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 writes down obsolete and overstocked inventory based on the usage of inventory over a three-year period and projected usage based on current backlog.

Income Taxes

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

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 ASC 360-10-35, Property, Plant and Equipment – Subsequent Measurement.  When events or circumstances indicate that an asset may be impaired, an assessment is performed.  The estimated future undiscounted cash flows associated with the asset are compared to the asset’s net book value to determine if a write down to fair 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 are expensed as incurred.

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CONDENSED BALANCE SHEETS (USD $)	Aug. 27, 2011	Nov. 30, 2010
Cash and cash equivalents	$ 8,067	$ 9,085
Short-term investment	2,000	1,000
Accounts receivable	2,381	2,893
Raw materials	2,883	2,302
Work-in process	2,417	2,819
Total inventories	5,300	5,121
Prepaid expenses and other current assets	343	239
Deferred income tax	913	913
Total current assets	19,004	19,251
Land	80	80
Buildings	498	498
Facility improvements	1,059	882
Machinery and equipment	7,446	6,936
Furniture and fixtures	672	632
Total property, plant, and equipment	9,755	9,028
Less accumulated depreciation	(7,816)	(7,582)
Net property, plant, and equipment	1,939	1,446
Total assets	20,943	20,697
Accounts payable	780	700
Accrued compensation	571	766
Other accrued liabilities	441	573
Deferred revenue	99	834
Income taxes payable	107	75
Total current liabilities	1,998	2,948
DEFERRED INCOME TAXES	277	277
Common stock, ($.10 par value), authorized 10,000,000 shares, 3,078,315 issued and 2,578,315 outstanding at August 27, 2011 and November 30, 2010.	308	308
Paid-in capital	885	885
Treasury stock, 500,000 shares, at cost	(1,250)	(1,250)
Retained earnings	18,725	17,529
Total shareholders' equity	18,668	17,472
Total liabilities and shareholders' equity	$ 20,943	$ 20,697