SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended August 26, 2017February 24, 2018

OR

Commission File Number 0-5109

MICROPAC INDUSTRIES, INC.

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 ☒Yes☒ No ☐

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 ☒ No ☐

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):

(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 oYes☐ No x☒

On October 10, 2017April 9, 2018 there were 2,578,315 shares of Common Stock, $0.10 par value outstanding.

MICROPAC INDUSTRIES, INC.

FORM 10-Q

August 26, 2017February 24, 2018

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

MICROPAC INDUSTRIES, INC.

CONDENSED BALANCE SHEETS

(Dollars in thousands, except share data)thousands) 

ASSETS

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Dollars in thousands except share data)

(Unaudited)

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

Supplemental Non Cash Flow Disclosure:

See accompanying notes to financial statements.

MICROPAC INDUSTRIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1 BASIS OF PRESENTATION

Business Description

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

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

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

The business of the Company was started in 1963 as a sole proprietorship. On March 3, 1969, the Company was incorporated under the name of “Micropac Industries, Inc.” in the state of Delaware. The stock was publicly held by 452 shareholders on February 24, 2018.

In the opinion of management, the unaudited condensed financial statements include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position as of August 26, 2017,February 24, 2018, the results of operations and cash flows for the three months ended February 24, 2018 and nine months ended August 26, 2017 and August 27, 2016, and the cash flows for the nine months ended August 26, 2017 and August 27, 2016. The unaudited condensedFebruary 25, 2017. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2016.2017. 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, 20162017 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

SalesRevenues 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 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) collectability is reasonably assured.

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

Short-Term Investments

The Company has $2,025,000 in short term investments at August 26, 2017. 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.

Income Taxes

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

The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 740, Accounting for Uncertainty in Income Taxes. ASC Topic 740 prescribes a more-likely-than-not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return.

Income tax expense attributable to income from operations for 2017 differed from the amount computed by applying the U.S. federal income tax rate of 34% to income before income taxes primarily as a result of federal R&D tax credits.

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:

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 modified 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. The standard will be effective for the Company for fiscal year ending November 30, 2019.2019 and the interim periods within the year.

Short-Term Investments

In November 2015,The Company has $2,038,000 in short-term investments at February 24, 2018. Short-term investments consist of certificates of deposits with maturities greater than 90 days. These investments are reported at historical cost, which approximates fair value. All highly liquid investments with maturities of 90 days or less are classified as cash equivalents. All short-term investments are securities which the FASB issued ASU No. 2015-17,Income Taxes (Topic 740): Balance Sheet ClassificationCompany has the ability and intent to hold to maturity and mature within one year.

Inventories

Inventories are stated at lower of Deferred Taxes.cost or net realizable value and include material, labor and manufacturing overhead. All inventories are valued using the FIFO (first-in, first-out) method of inventory valuation. The ASU requires entitiesCompany determines the need to classify deferred tax liabilitieswrite inventory down to the lower of cost or net realizable value via an analysis based on the usage of inventory over a three year period and assets as noncurrent in a classified statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. We early adopted this guidance as of December 1, 2016. Our adoption of this guidance did not have a material impactprojected usage based on our consolidated financial statements. We reclassified $417 thousand of noncurrent deferred tax liability from noncurrent liability to reduce the carrying value of deferred tax assets as of November 30, 2016 to conform to current financial statement presentation.backlog.

In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of InventoryInventory.. This ASU does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU eliminates from GAAP the requirement to measure inventory at the lower of cost or market. Market under the previous requirement could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. Entities within scope of this update will now be required to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory using LIFO or the retail inventory method. The amendments in this update are effective for fiscal years beginning after December 15, 2016, with early adoption permitted, and should be applied prospectively. The Company does not expectadopted this guidance on December 1, 2017 and the adoption of this guidance todid not have a material impact on its consolidated financial statements.

Income Taxes

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

The Company records a liability for an unrecognized tax benefit for a tax position that is not “more-likely-than-not” to be sustained.  The Company did not record any liability for uncertain tax positions as of February 24, 2018 and November 30, 2017.

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

Our effective tax rate decreased from 32% for the three months ended February 25, 2017 to 20% for the three months ended February 24, 2018 due primarily to the enactment of the Tax Act on December 22, 2017.

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

ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 24, 2018, we revalued all deferred tax assets and liabilities at the newly enacted Federal corporate US income tax rate.  This revaluation as of enactment resulted in a non-cash provisional estimate of $77,000 to income tax expense and a corresponding reduction in the net deferred tax asset. 

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:

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

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

Research and Development Costs

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

Note 3 OTHER NEW ACCOUNTING PRONOUNCEMENTS

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02,Leases (Topic 842). Under the new standard, lessees will be required to recognize lease assets and liabilities for all leases, with certain exceptions, on their balance sheets. Public business entities are required to adopt the standard for reporting periods beginning after December 15, 2018. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

Note 4 FAIR VALUE MEASUREMENT

The Company had no financial assets or liabilities measured at fair value on a recurring basis as of February 24, 2018 and November 30, 2017.  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 other financial assets and nonfinancial assets measured at fair value on a nonrecurring basis at August 26, 2017February 24, 2018 and November 30, 2016.2017.

Note 5 COMMITMENTS

On April 23, 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. The Loan Agreement also contains financial covenants to maintain at all times including (i) minimum working capital of not less than $4,000,000, (ii) a ratio of senior funded debt, minus the Company’s balance sheet cash on hand to the extent in excess of $2,000,000 to EBITDA of not more than 3.0 to 1.0, and (iii) a ratio of free cash flow to debt service of not less than 1.2 to 1.0. The Company has not, to date, drawn any amounts under the revolving line of credit and is currently in compliance with the financial covenants.

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 and nine months ended August 26,February 24, 2018 and February 25, 2017, and August 27, 2016, the Company had no dilutive potential common stock.

Note 7 SHAREHOLDERS’ EQUITY

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.

On December 13, 2016, the Board of Directors of Micropac Industries, Inc. approved the payment of a special dividend of $0.10 per share forspecial dividend to all shareholders of record as of January 10, 2017. The dividend was paid to shareholders on February 9,8, 2017.

Note 7 SUBSEQUENT EVENT

On August 30,December 12, 2017, the Board of Directors of Micropac Industries, Inc., announced that approved the Company has purchased land in Garland, Texas for approximately $1.4 million.payment of a $0.10 per share special dividend to all shareholders of record as of January, 10 2018. The dividend was paid to shareholders on February 8, 2018.

Micropac Industries, Inc. has been a long-standing business located in Garland, Texas for over 50 years and is located in three existing buildings. With the purchase of this tract of land, it is the intent of the Company to consolidate the three existing buildings into a new manufacturing center in the future.

MICROPAC INDUSTRIES, INC.

(Unaudited)

Business

Micropac Industries, Inc. (the “Company”), a Delaware corporation, designs, 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 and assemblies in a broad range of military, space and industrial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200^o C) products. The Company’s 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 the Defense Logistics Agency (DLA) to MIL-PRF-38534 (class K-space level), and MIL-PRF-19500 JANS (space level), and MIL-PRF-28750 (class K-space level) and is certified to ISO 9001-2002.9001:2008 and AS 9100C. Micropac is a NASANational Aeronautics and Space Administration (NASA) core supplier, and is registered to AS9100-Aerospace Industry standard for supplier certification. The Company has ULUnderwriters Laboratories (UL) approval on the new isolated solid stateour industrial power controllers.

The Company’s core technology is microelectronic and optoelectronic designs to include the packaging and interconnecting of miniature electronic components, utilizing thick film substrates, formingmulti-chip microelectronics circuits.modules. Other technologies include light emitting and light sensitive materials and products, including light emitting diodes and silicon phototransistors, and electronic integration used in the Company’s optoelectronic components and assembliesassemblies.

Results of Operations

Sales for the three and nine month periodsfirst quarter ended August 26, 2017February 24, 2018 totaled $4,717,000 and $13,591,000, respectively.$3,851,000. Sales for the thirdfirst quarter increased 24%decreased 1.5% or $913,000 above sales for the same period of 2016, while$57,000 below sales for the first nine monthsquarter of 2017 increased $471,000 above the first nine months of 2016 with an increase in various power management products and a reduction in one custom sensor product.2018. Sales were 10%15% in the commercial market, 65%60% in the military market, and 25% in the space market forin the nine months ended August 26, 2017first quarter of 2018 compared to 16%12% in the commercial market, 56%62% in the military market, and 28%26% in the space market for the nine months ended August 27, 2016.same period of 2017.

One customer accounted for 16% of the Company’s sales for the first quarter of 2018 and two customers accounted for 11% and 10% of the Company’s sales for the first quarter of 2017.

Cost of goods sold for the first quarter of 2018 and 2017 totaled 61.0% and 64.0% of net sales, respectively. Cost of goods sold decreased $152,000 in the first quarter of 2018 as compared to 2017 due to product mix. Material cost of goods decreased by $128,000 and labor cost of goods sold decreased by $33,000.

Research and development cost decreased $143,000 for the first quarter of 2018 compared to the same period of 2017. The decrease was due to lower material and outside service cost. The research and development expenditures were associated with the continued development of power management products, optoelectronic products and process automation improvements.

Selling, general and administrative expenses for the first quarter of 2018 totaled 29.5% of net sales, compared to 25.3% for the same period in 2017. Selling, general and administrative expenses increased $145,000 in the first quarter of 2018 as compared to 2017. The majority of the increase was associated with the implementation of a new Enterprise Resource Planning system.

Three customers accounted for 17%, 15% and 13% of the Company’s sales for the three months ended August 26, 2017 and three customers accounted for 17%, 13% and 12% of the Company’s sales for the nine months ended August 26, 2017, while one customer accounted for 15% of the Company’s sales for the three months ended August 27, 2016, and two customers accounted for 20% and 12% of the Company’s sales for the nine months ended August 27, 2016.

Cost of goods sold for the third quarters of 2017 and 2016 totaled 62.6% and 70.9% of net sales, respectively, while cost of goods sold for the nine months ended August 26, 2017 and August 27, 2016 totaled 62.7% and 66.9% of net sales, respectively. In actual dollars, cost of goods sold increased $255,000 in the third quarter of 2017 compared to the same period of 2016. Year to date cost of goods sold decreased $253,000Income before taxes for the first nine months of 2017 as compared to the same periods in 2016. The decrease is associated with a reduction in non-recurring engineering cost supporting a customer funded project.

Research and development expense increased $54,000 for the thirdfiscal quarter of 2017 versus 2016 and increased $399,000 for the first nine months of 2017 compared to the same period of 2016. The increase in research and development expense is associated with an increase in internal development cost with a reduction in non-recurring engineering customer funded projects from 2016. The research and development expenditures were associated with continued development of several power management products, fiber optic transceivers and high voltage optocouplers. The Company will continue to invest in research and development of these products and other new opportunities.

Selling, general and administrative expense for the third quarter and first nine months of 2017 totaled 21.9% and 22.1% respectively2018 was $82,000, or 2.1% of net sales, compared to 25.5% and 23.3% for the same periodsa loss of $20,000 in 2016. In actual dollars, selling, general and administrative expense increased $64,000 for the third quarter and decreased $54,000 for the first nine monthsfiscal quarter of 2017 compared to the same periods in 2016.2017.

Provisions for taxes benefit decreased $34,000 for the third quarter of 2017 and the provision for tax expense decreased $18,000increased $101,000 for the first nine monthsquarter of 20172018 compared to the same period in 2016.2017. The increase was associated with the enactment of the Tax Act on December 22, 2017. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 24, 2018, we revalued all deferred tax assets and liabilities at the newly enacted Federal corporate US income tax rate.  This revaluation as of enactment resulted in a non-cash provisional estimate of $77,000 to income tax expense and a corresponding reduction in the net deferred tax asset. The estimated effective tax rate was 14%20% for 2017the first quarter of 2018 and 32% for 2016. During 2017, the Company had a Research and Development tax credit study performed for fiscal 2013, 2014, 2015, and 2016 by a third party with tax year 2012 and 2015 completed in the thirdfirst quarter of 2017. The Company filed an amended tax return for 2012 reflecting a R&D tax credits of approximately $77,000. In addition, the Company had a $66,000 R&D tax credit on the tax return for 2015 (fiscal year 2016) filed in 2017.

Net income increased $518,000 for the third quarter of 2017 versus 2016 and increased $410,000Income for the first nine monthsquarter of 20172018 was a net loss of $12,000 compared to a net loss of $13,000 in the same periodfirst quarter of 2016.2017.

Liquidity and Capital Resources

Cash and cash equivalents totaled $10,397,000$9,643,000 as of August 26, 2017February 24, 2018 compared to $10,012,000$9,388,000 on November 30, 2016, a2017, an increase of $385,000.$255,000. The increase in cash and cash equivalents is primarily attributable to a$648,000 cash flow fromprovided by operations, of $1,061,000 offset by thea payment of a cash dividend of $258,000, and the investment of $228,000$128,000 invested in equipment and $179,000 in a new ERP system.net payments for short-term investment of $7,000.

TheIn addition to cash on hand, the Company expectsalso has the ability to continueborrow under a loan agreement as discussed in Note 5 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.

The one year specific advance loan for acquisitions with an aggregate amount not to exceed $7,500,000 in a single advance or in multiple advances was not renewed on April 22, 2017. The revolving credit loan in amounts not to exceed a total principal balance of $6,000,000 was renewed on April 23, 2016 for a two year term.condensed financial statements.

Outlook

New orders for year-to-date 2017the first quarter of 2018 totaled $8,412,000$3,652,000 compared to $11,961,000$2,595,000 for 2016. The decrease resulted from lower orders on various standard solid state relay products and a delay in one custom sensor order. The decrease was primarily due to the de-bookingcomparable period of one large international order for solid state power products. This order was originally booked in November 2015 for $2,836,550. This order was removed from the backlog as a result of not receiving the down payment required to start the fabrication along with the uncertainties of the international market. As a result, no cost were incurred for this order.

2017. Backlog totaled $11,924,000$12,679,000 on August 26, 2017February 24, 2018 compared to $17,765,000$15,787,000 as of August 27, 2016February 25, 2017 and $17,102,000$12,864,000 on November 30, 2016.2017. The backlog represents a good mixmajority of the company’s productsbacklog is expected to be completed and technologies with 17%shipped in the commercial market, 54% in the military market, and 29% in the space market compared to 13% in the commercial market, 44% in the military market, and 43% in the space market on August 27, 2016.

next twelve months.

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 availabilityCompany’s ability to make timely delivery 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$1,700,000 of the Company’s backlog is dependent on these semiconductors.

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

Not applicable

The Chief Executive Officer and Chief Financial Officer of the Company evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of August 26, 2017February 24, 2018 and, based on this evaluation, concluded that the Company’s disclosure controls and procedures are functioning in an effective manner to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

There has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting during the three month period ended August 26, 2017.February 24, 2018. 

PART II - OTHER INFORMATION

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

Information about risk factors for the three months and nine months ended August 26, 2017February 24, 2018 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 NovemeberNovember 30, 2016.2017.

None

                None

                Not Applicable

                None

(a)        Exhibits

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.