0000724910
--03-31
false
2024
FY
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
0000724910
2023-04-01
2024-03-31
0000724910
2024-03-31
0000724910
2024-03-31
2024-03-31
0000724910
2023-03-31
2023-03-31
0000724910
2023-03-31
0000724910
2022-04-01
2023-03-31
0000724910
us-gaap:CommonStockMember
2023-04-01
2024-03-31
0000724910
us-gaap:AdditionalPaidInCapitalMember
2023-04-01
2024-03-31
0000724910
us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember
2023-04-01
2024-03-31
0000724910
us-gaap:RetainedEarningsMember
2023-04-01
2024-03-31
0000724910
2022-03-31
0000724910
us-gaap:CommonStockMember
2022-03-31
0000724910
us-gaap:AdditionalPaidInCapitalMember
2022-03-31
0000724910
us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember
2022-03-31
0000724910
us-gaap:RetainedEarningsMember
2022-03-31
0000724910
us-gaap:CommonStockMember
2022-04-01
2023-03-31
0000724910
us-gaap:AdditionalPaidInCapitalMember
2022-04-01
2023-03-31
0000724910
us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember
2022-04-01
2023-03-31
0000724910
us-gaap:RetainedEarningsMember
2022-04-01
2023-03-31
0000724910
us-gaap:CommonStockMember
2023-03-31
0000724910
us-gaap:AdditionalPaidInCapitalMember
2023-03-31
0000724910
us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember
2023-03-31
0000724910
us-gaap:RetainedEarningsMember
2023-03-31
0000724910
us-gaap:CommonStockMember
2024-03-31
0000724910
us-gaap:AdditionalPaidInCapitalMember
2024-03-31
0000724910
us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember
2024-03-31
0000724910
us-gaap:RetainedEarningsMember
2024-03-31
0000724910
us-gaap:MoneyMarketFundsMember
2024-03-31
0000724910
us-gaap:CorporateBondSecuritiesMember
2024-03-31
0000724910
srt:StandardPoorsAAARatingMember
2024-03-31
0000724910
srt:StandardPoorsAAPlusRatingMember
2024-03-31
0000724910
srt:StandardPoorsAARatingMember
2024-03-31
0000724910
srt:StandardPoorsAAMinusRatingMember
2024-03-31
0000724910
srt:StandardPoorsAPlusRatingMember
2024-03-31
0000724910
srt:StandardPoorsARatingMember
2024-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
us-gaap:MoneyMarketFundsMember
2024-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
us-gaap:MoneyMarketFundsMember
2024-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
us-gaap:MoneyMarketFundsMember
2023-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
us-gaap:MoneyMarketFundsMember
2023-03-31
0000724910
us-gaap:MoneyMarketFundsMember
2023-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
us-gaap:CorporateBondSecuritiesMember
2024-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
us-gaap:CorporateBondSecuritiesMember
2024-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
us-gaap:CorporateBondSecuritiesMember
2023-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
us-gaap:CorporateBondSecuritiesMember
2023-03-31
0000724910
us-gaap:CorporateBondSecuritiesMember
2023-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
2024-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
2024-03-31
0000724910
us-gaap:FairValueInputsLevel1Member
2023-03-31
0000724910
us-gaap:FairValueInputsLevel2Member
2023-03-31
0000724910
srt:MinimumMember
2024-03-31
2024-03-31
0000724910
srt:MaximumMember
2024-03-31
2024-03-31
0000724910
srt:MinimumMember
2023-03-31
2023-03-31
0000724910
srt:MaximumMember
2023-03-31
2023-03-31
0000724910
fil:CustomerAMember
2023-04-01
2024-03-31
0000724910
fil:CustomerAMember
2022-04-01
2023-03-31
0000724910
2009-01-21
0000724910
2024-05-01
2024-05-01
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended
March 31, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________________to____________________
Commission file number
000-12196
NVE CORP
ORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1424202
State or other jurisdiction of incorporation or organization (I.R.S. Employer Identification No.)
11409 Valley View Road 55344
,
Eden Prairie
,
Minnesota
( (Zip Code)
Address of principal executive offices
)
Registrant's telephone number, including area code
(
952
)
829-9217
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value NVEC The
NASDAQ
Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
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
No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was
required to submit such files).
Yes
No
-------------------------------------------------------------------------------
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and
attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by
check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial
statements.
Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by
any of the registrant's executive officers during the relevant recovery period
pursuant to (s)240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price on September 30, 2023, the last
business day of the Registrant's most recently completed second fiscal
quarter, as reported on the NASDAQ Stock Market, was approximately $
268
million.
The number of shares of the registrant's Common Stock (par value $
0.01
) outstanding as of March 31, 2024 was
4,833,676
.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our Proxy Statement for our 2023 Annual Meeting of Shareholders
are incorporated by reference into Items 10, 11, 12, 13, and 14 of Part III
hereof.
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
INDEX TO FORM 10-K
PART I
Item 1. Business.
Our Strategy
Our Products and Markets
Product Manufacturing
Sales and Product Distribution
New Product Status
Our Competition
Sources and Availability of Raw Materials
Intellectual Property
Dependence on Major Customers
Compliance With Government Regulations
Human Capital Resources
Available Information
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 1C. Cybersecurity
.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
Market Information and Dividends
Shareholders
Securities Authorized for Issuance Under Equity Compensation Plans
Stock Repurchase Program
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 8. Financial Statements and Supplementary Data.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Item 9C. Disclosure Regarding Foreign Jurisdiction That Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
Item 14. Principal Accounting Fees and Services.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
SIGNATURES
FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 542)
Balance Sheets
Statements of Income
Statements of Comprehensive Income
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
2
-------------------------------------------------------------------------------
Table of Contents
PART I
FORWARD-LOOKING STATEMENTS
Some of the statements made in this Report or the documents incorporated by
reference in this Report and in other materials filed or to be filed by us
with the Securities and Exchange Commission ("SEC") as well as information
included in verbal or written statements made by us constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to the safe harbor provisions of the
Reform Act. Forward-looking statements may be identified by the use of
terminology such as may, will, expect, anticipate, intend, believe, estimate,
should, or continue, or the negatives of these terms or other variations of
these words or comparable terminology. To the extent that this Report contains
forward-looking statements regarding the financial condition, operating
results, business prospects, or any other aspect of NVE, you should be aware
that our actual financial condition, operating results, and business
performance may differ materially from that projected or estimated by us in
the forward-looking statements. We have attempted to identify, in context,
some of the factors that we currently believe may cause actual future
experience and results to differ from their current expectations. These
differences may be caused by a variety of factors, including but not limited
to risks related to our reliance on several large customers for a significant
percentage of revenue, uncertainties related to the economic environments in
the industries we serve, uncertainties related to future sales and revenues,
risks and uncertainties related to future stock repurchases and dividend
payments, and other specific risks that may be alluded to in this Report or
the documents incorporated by reference in this Report. For more information
regarding our risks and uncertainties, see Item 1A "Risk Factors" of this
Report.
ITEM 1. BUSINESS.
In General
NVE Corporation, referred to as NVE, we, us, or our, develops and sells
devices that use spintronics, a nanotechnology that relies on electron spin
rather than electron charge to acquire, store, and transmit information. We
manufacture high-performance spintronic products including sensors and
couplers that are used to acquire and transmit data.
NVE History and Background
NVE is a Minnesota corporation headquartered in a suburb of Minneapolis. We
were founded in 1989 by James M. Daughton, Ph.D., a spintronics pioneer. Our
common stock became publicly traded in 2000 through a reverse merger and
became NASDAQ listed in 2003. Since our founding, we have been awarded more
than $50 million in government research contracts. These contracts have helped
us develop products and build our intellectual property portfolio. We have
adopted a March 31 fiscal year, so fiscal years referenced in this report end
March 31.
Industry Background
Much of the electronics industry is devoted to the acquisition, storage, and
transmission of information. We have focused on three applications for our
spintronic technology: magnetic sensors, couplers, and memories. Sensors
acquire information, couplers transmit information, and memories store
information. In that sense, our technology can provide the eyes, nerves, and
brains of electronic systems.
Magnetic sensors can be used for many purposes including detecting the
position or speed of robotics and mechanisms, or for communicating with
implantable medical devices. We believe our spintronic sensors are smaller,
more precise, and more reliable than competing devices.
Couplers are widely used in factory automation, providing reliable digital
communication between electronic subsystems in factories. For example,
couplers are used to send high-speed data between robots and central
controllers. As manufacturing automation expands, there is a need for
higher-speed data and more channel density. Because of their unique
properties, we believe our couplers transmit more data at higher speeds and
over longer distances than conventional devices.
Near-term potential MRAM applications include mission-critical storage such as
military, industrial, and antitamper applications. Long term, MRAM could
address the market for ubiquitous high-density memory.
Our Enabling Technology
Our designs are generally based on either giant magnetoresistance or tunneling
magnetoresistance. These structures produce a large change in electrical
resistance depending on the electron spin orientation in a free layer.
In giant magnetoresistance (GMR) devices, resistance changes due to conduction
electrons scattering at interfaces within the devices. The GMR effect is only
significant if the layer thicknesses are less than the mean free path of
conduction electrons, which is approximately five nanometers. Our critical GMR
conductor layers may be less than two nanometers, or five atomic layers, thick.
3
-------------------------------------------------------------------------------
Table of Contents
The second type of spintronic structure we use is based on tunneling
magnetoresistance (TMR). Such devices are known as Spin-Dependent Tunnel (SDT)
junctions or Magnetic Tunnel Junctions (MTJs). SDT junctions use tunnel
barriers that are so thin that electrons can "tunnel" through a normally
insulating material to cause a resistance change. SDT barrier thicknesses can
be in the range of one to four nanometers (less than ten molecular layers).
In our products, the spintronic elements are connected to integrated circuitry
and encapsulated ("packaged") in much the same way as conventional integrated
circuits.
Our Strategy
Our vision is to become the leading developer of practical spintronics
technology and devices. Our spintronic technology provides eyes, nerves, and
brains for electronic systems, breathing life and intelligence into inanimate
objects. Our unique products support global trends of efficient energy
conversion and smart, low-power end nodes for the "Internet of Things." To
grow product sales, we plan to broaden our sensor and coupler product lines
and enhance our product benefits in target markets.
Our Products and Markets
Sensor Products and Markets
Our sensor products detect the strength or gradient of magnetic fields and are
often used to determine position or speed. GMR or TMR elements change
electrical resistance depending on the magnetic field. In many of our devices,
sensor elements are combined with foundry integrated circuitry or digital
cores, and packaged in much the same way as conventional integrated circuits.
Our sensors are small, highly sensitive to magnetic fields, precise, and
reliable. We sell standard ("catalog") sensors, and custom sensors designed to
meet customers' exact requirements.
Standard sensors
Our standard, or catalog sensors are generally used to detect the presence of
a magnetic or metallic material to determine position, rotation, or speed. We
believe our spintronic sensors are smaller, more precise, more reliable, and
lower power than competing devices. Our major market for standard sensors is
the Industrial Internet of Things (IIoT) for factory automation.
Custom and medical sensors
Our primary custom products are sensors for medical devices, which are
customized to our customers' requirements and manufactured under stringent
medical device quality standards. Many are used to replace electromechanical
magnetic switches. We believe our sensors have important advantages in medical
devices compared to electromechanical switches, including no moving parts for
inherent reliability, and being smaller, more sensitive, and more precise. Our
sensors can be customized for size, range, and sensitivity to magnetic fields,
electrical resistance, and embedded software.
Coupler Products and Markets
Our spintronic couplers combine a GMR sensor element and an integrated
microscopic coil. The coil creates a small magnetic field that is detected by
the spintronic sensor, transmitting data almost instantly. Couplers are also
known as "isolators" because they electrically isolate the coupled systems.
Our major coupler markets are power conversion and the IIoT. Our couplers
enable more efficient power conversion and interconnections to implement the
IIoT for advanced factory automation.
DC-to-DC Convertor Products and Markets
Our isolated DC-to-DC convertors transfer energy between systems without
direct electrical connections. These components are used in power conversion
systems and industrial networks for the IIoT. We also make products that
combine couplers and DC-to-DC convertors to transmit power as well as data.
MRAM Products and Markets
MRAM uses spintronics to store data. Unlike electrical charge, the spin of an
electron is inherently permanent. We have invented several types of memory
cells including inventions related to advanced MRAM designs and MRAM for
tamper prevention or detection. Our MRAM strategy has been focused on low bit
density for applications such as tamper prevention and detection.
Product Manufacturing
Our product manufacturing includes "front-end" wafer production and "back-end"
product testing. Wafer production is a cleanroom area with specialized
equipment to deposit, pattern, etch, and process spintronic materials. Most of
our products are fabricated in our facility using either raw silicon wafers or
foundry wafers. Foundry wafers contain conventional electronics that perform
housekeeping functions such as voltage regulation and signal conditioning in
our products.
Each wafer may include thousands of devices. We build spintronics structures
on wafers in our fabrication facility. We either saw wafers to be sold in die
form or send wafers to Asia for dicing and packaging. Other production
operations include wafer-level inspection and testing. Packaged parts are
returned to us to be tested, inventoried, and shipped.
4
-------------------------------------------------------------------------------
Table of Contents
Our facility has been certified under the ISO 9001:2015 quality management
standard and is an Approved Place of Manufacture under ECS/CIG 021-024: 2014.
We believe having our own U.S. wafer production and test capabilities is an
advantage over competitors that outsource such operations. We significantly
increased our product testing capacity in the two most recent fiscal years in
response to increased demand for our products.
Sales and Product Distribution
We rely on distributors who stock and resell our products in more than 75
countries. Distributors of our products include America II Electronics, Inc.,
Angst+Pfister Sensors and Power, Avnet companies, and Digi-Key Corporation.
Our distributor agreements generally renew annually. In addition, we
distribute versions of some of our products under private-brand partnerships
with large integrated device manufacturers. These private-brand partnerships
broaden our distribution and enhance our sales support, technical support, and
product awareness.
New Product Status
In the past year, we began marketing several new and improved products,
including:
.
more products combining data couplers with isolated DC-to-DC convertors to
transmit power as well as data;
.
ultra-high isolation data couplers;
.
extended temperature isolated network transceivers
.
new MRAM products for antitamper applications; and
.
new product evaluation boards.
Long-term product development programs in fiscal 2024 included:
.
extremely sensitive TMR sensors;
.
next-generation sensors for hearing aids and implanted medical devices;
.
wafer-level chip-scale devices; and
.
next-generation MRAM for antitamper applications.
Our Competition
Industrial Sensor Competition
Several other companies either make or may have the capability to make GMR or
TMR sensors. Also, several competitors make solid-state industrial magnetic
sensors including silicon Hall-effect sensors and anisotropic magnetoresistive
(AMR) sensors. We believe those types of sensors are not as sensitive or
power-efficient as our GMR or TMR sensors.
Medical Sensor Competition
Our sensors for medical devices face competition from electromechanical
magnetic sensors and other solid-state magnetic sensors. Electromechanical
magnetic sensors such as reed and micro-electromechanical system (MEMS)
switches have been in use for several decades. Because our sensors have no
moving parts, we believe they are inherently more reliable than electromechanica
l magnetic sensors. We also believe our sensors are smaller than the smallest
electromechanical magnetic sensors, more precise in their magnetic switch
points, and more sensitive. Compared to other solid-state sensors, our medical
sensors may have advantages in size, sensitivity to small magnetic fields, or
electrical interface simplicity.
Coupler Competition
Competing coupler technologies include optical couplers, inductive couplers
(transformers), capacitive couplers, and radio-frequency modulation couplers.
Our strategy is to compete based on product features rather than to compete
solely on price. Our couplers are smaller and therefore require less circuit
board space per channel than most competing couplers. Our other advantages
over competing technologies may include smaller size, higher immunity to
transients, and longer product life.
MRAM Competition
Several emerging technologies could compete with MRAM.
Sources and Availability of Raw Materials
Our principal sources of raw materials include suppliers of raw silicon and
semiconductor foundry wafers that are incorporated into our products, and
suppliers of device packaging services. Our wafer sources are based around the
world; most of our packaging services take place in Asia.
5
-------------------------------------------------------------------------------
Table of Contents
Intellectual Property
Patents
As of March 31, 2024, we had more than 50 issued U.S. patents assigned to us.
We also have a number of foreign patents, several U.S. and foreign patents
pending, and we have licensed patents from others. There are no patents we
regard as critical to our current business owned by us or licensed to us that
expire in the next 12 months.
We have patents on advanced MRAM designs that we believe are important,
including patents that relate to magnetothermal MRAM, spin-momentum MRAM, and
synthetic antiferromagnetic storage.
Some of our intellectual property has been developed with U.S. Government
support. Under federal legislation, companies normally may retain the
principal worldwide patent rights to any invention developed with U.S.
Government support.
Trademarks
"NVE" and "IsoLoop" are our registered trademarks. Other trademarks we claim
include "GMR Switch" and "GT Sensor."
Dependence on Major Customers
We rely on several large customers for a significant percentage of our
revenue, including Abbott Laboratories, Sonova AG, certain distributors, and
certain other customers. The loss of one or more of these customers could have
a material adverse effect on us.
Government Regulations
We are subject to government regulations including, but not limited to,
regulations related to environmental matters, tax matters, securities
regulations, conflict minerals, ethics and foreign corrupt practices, import
and export controls, product safety and liability, workplace health and
safety, labor and employment, and data privacy. We incur and expect to
continue to incur costs and expenses to comply with these regulations and may
incur penalties for any failure to do so.
Additionally, certain contracts require us to maintain facilities and
personnel security clearances to protect classified information. Such
clearances are subject to Government audits and investigations, and any
deficiencies or illegal activities identified during the audits or
investigations could result in the forfeiture or suspension of payments and
civil or criminal penalties.
Environmental Matters
We are subject to environmental laws and regulations particularly state and
local laws and regulations relating to industrial waste and emissions.
Compliance with these laws and regulations has not had a material impact on
our capital expenditures, earnings, or competitive position to date. Existing
and future environmental laws and regulations could result in expenses related
to emission abatement or remediation, but we are currently unable to estimate
such expenses.
6
-------------------------------------------------------------------------------
Table of Contents
Human Capital Resources
Employee
Headcount
We had 54 employees as of March 31, 2024, 46 of whom were full-time. We had no
contingent workers.
Workforce Demographics
We assessed our demographics using the data collection
procedures for U.S. Equal Employment Opportunity Commission form EEO-1.
Specifically, we conducted a voluntary survey for self-identification and
supplemented those data with personnel data and observer identification.
Minnesota data are from U.S. Census Bureau data for the latest quarter
available.
Gender
Demographics
The gender
demographics of our workforce compared to those of all Minnesota workers were
as follows as of March 31, 2024:
Gender NVE Minnesota
Male 67% 50%
Female 33% 50%
As is the case with many technology companies, female employees are
underrepresented in our workforce, particularly in engineer and technician
jobs. We provide opportunities for equipment operators (a job where female
employees are well represented) to advance to technician and engineer
positions, including internal equipment training, tuition reimbursement, and
scheduling flexibility to attend classes.
Employee Racial Diversity
Our workforce
demographics by race as of March 31, 2024, were as follows:
Race NVE Minnesota
African American or Black 13% 8%
American Indian or Alaska Native 2% 1%
Asian 17% 6%
White or Caucasian 69% 83%
Black or African American and Asian employees are overrepresented in our
workforce. We believe this is because we are close to immigrant population
clusters, have a multilingual workforce, provide equal pay, and equal
opportunity for advancement, and have a culture of acceptance.
Educational Demographics
We have a highly educated workforce. Thirty-nine percent of our employees have
bachelor's or advanced degrees compared to 26% of all Minnesota workers.
Employee Diversity, Equity, Inclusion, and Accessibility
Our goal is to promote diversity, equity, inclusion, and accessibility in our
recruitment of directors, managers, and other employees. We have policies to
prevent discrimination based on gender, race, disability, ethnicity,
nationality, religion, sexual orientation, gender identity, or gender
expression. We take affirmative action to ensure that applicants are employed,
and that employees are treated during employment, without regard to their
gender, race, disability, ethnicity, nationality, religion, sexual
orientation, gender identity, or gender expression. We also take affirmative
action to employ and advance veterans in employment.
We have a number of initiatives to maintain and increase our diversity. For
example, we participate in Dunwoody College of Technology's Pathways to
Careers (P2C) program and the Minnesota Technology Association's SciTech
internship program as a qualified employer. P2C is focused on preparing
underserved and underrepresented individuals for college success and immediate
jobs. The SciTech internship program has an objective of increasing the
participation of women and students of color in science, technology,
engineering, and mathematics.
Women and Families
We have family-friendly policies and fully comply with the Minnesota Women's
Economic Security Act (WESA) by providing reasonable accommodations to
employees for health conditions related to pregnancy or childbirth and up to
12 weeks of pregnancy and parental leave. Additionally, Minnesota's paid
family and medical leave law, which provides paid time off during or following
a pregnancy, goes into effect on January 1, 2026. NVE is committed to the
timely implementation of such paid leave.
7
-------------------------------------------------------------------------------
Table of Contents
Executive Diversity
We have three Named Executive
Officers
.
All are male; one is
racially diverse.
Board of Directors Diversity
We meet and are committed to continuing to meet the board diversity goals of
NASDAQ Listing Rule 5605(f)(1), including at least two Diverse directors by
December 31, 2026. Additionally, we plan to nominate an ethnically diverse
director in the Proxy Statement for our 2024 Annual Meeting of Shareholders.
An ethnically diverse director would meet the racial/ethnic diversity
recommendations of Institutional Shareholder Services for Russell 3000
companies.
Employee
Benefits
We offer employees excellent fringe benefits, including medical insurance
coverage paid for mostly by the Company, dental insurance, Company-paid life
and accidental death and dismemberment insurance, Company-paid long-term
disability insurance, generous 401(k) matches, Company-funded Health Savings
Accounts, Dependent Care Flexible Spending Accounts, ample holidays and Paid
Time Off, tuition reimbursement, and free coffee.
Employee Health and Safety
NVE is committed to providing a safe and healthy work environment. We offer
employees a variety of health and fitness resources in conjunction with our
medical insurance.
Employee Development and Training
NVE provides paid training including paid on-the-job training, specialized
online training, 100% tuition reimbursement, and paid internships. We are
committed to hiring and promoting employees based on their acquired skills.
Employee Relations
None of our employees are represented by a labor union or are subject to a
collective bargaining agreement. Based on periodic employee surveys, we
believe we have good relations with our employees.
Available Information
All reports we file with the SEC, including our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy
statements and additional proxy materials on Schedule 14A, as well as any
amendments to those reports and schedules, are accessible at no cost through
the "Investors" section of our Website (www.nve.com). These filings are also
accessible through the SEC's Website (
www.sec.gov
).
8
-------------------------------------------------------------------------------
Table of Contents
ITEM 1A. RISK FACTORS.
We caution readers that the following important factors, among others, could
affect our financial condition, operating results, business prospects, or any
other aspect of NVE, and could cause our actual results to differ materially
from that projected or estimated by us in the forward-looking statements made
by us or on our behalf. Although we have attempted to list below the important
factors that do or may affect our financial condition, operating results,
business prospects, or any other aspect of NVE, other factors may in the
future prove to be more important. New factors emerge from time to time and it
is not possible for us to predict all of such factors. Similarly, we cannot
necessarily assess or quantify the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in forward-looking
statements.
Risks Related to Our Business
We face a tight labor market, competition for employees, and wage inflation.
In the past two fiscal years, we have experienced increased competition for
employees, increased employee turnover, and increased wage inflation. The
labor market has been especially tight in Minnesota. We have significantly
increased the wages we pay to remain competitive and attract new workers,
especially production workers.
Labor shortages could
impact our revenue and profitability, and
increases in labor costs could adversely affect our profit margins and results
of operations.
The loss of supply from any of our key single-source wafer suppliers could
substantially impact our ability to produce and deliver products and seriously
harm our business and financial condition.
Our critical suppliers include suppliers of certain raw silicon and
semiconductor foundry wafers that are incorporated in our products. We
maintain inventory of some critical wafers, but we have not identified or
qualified alternate suppliers for many of the wafers now being obtained from
single sources. In the past fiscal year, there were industry-wide
semiconductor wafer shortages. We purchase some wafers from manufacturers in
China, which have been subject to tariffs and could be subject to further
tariffs or restrictions in the future. Wafer supply could be affected by acts
of God such as floods, typhoons, cyclones, earthquakes, or pandemics, and
risks related to extreme weather may be exacerbated by the effects of climate
change. Wafer supply interruptions for any reason could seriously jeopardize
our ability to provide products that are critical to our business and
operations and may cause us to lose revenue.
Shortages of any critical chemicals or supplies could impact our ability to
produce and deliver products and cause loss of revenue.
There are a number of critical chemicals and supplies that we require to make
products. These include certain gases, photoresists, polymers, metals, and
specialized alloys. We maintain inventory of critical chemicals and materials,
but in many cases, we are dependent on single sources, and some of the
materials could be subject to shortages or be discontinued by their suppliers
at any time. The Russia-Ukraine crisis could cause or exacerbate shortages.
Sanctions against Russia could affect supplies or prices of materials supplied
by Russia, including materials we use such as aluminum, copper, helium,
magnesium, manganese, nickel, palladium, platinum, and titanium. Materials
supplied by Ukraine include neon, which may be used to produce some of our
foundry wafers. Supply interruptions or shortages for any reason could
seriously jeopardize our ability to provide products that are critical to our
business and operations and may cause us to lose revenue.
A loss of supply from any of our packaging vendors could impact our ability to
deliver products and cause loss of revenue.
We are dependent on our packaging vendors. Because of the unique materials our
products use, the complexity of some of our products, unique magnetic
requirements, and high isolation voltage specifications, many of our products
are more challenging to package than conventional integrated circuits. We have
alternate vendors or potential alternate vendors for the majority of our
products, but it could be expensive, time-consuming, or impractical to convert
to another vendor in the event of a supply interruption due to vendors'
business decisions, business conditions, or acts of God, including floods,
typhoons, earthquakes, or pandemics. Furthermore, we may not be able to
recover work in process or finished goods at a packaging vendor in the event
of a disruption. Additionally, certain of our packaging vendors are in
flood-susceptible areas. Flooding risks to such vendors may increase in the
future due to possible higher ocean levels, extreme weather, and other
potential effects of climate change. Supply delays, interruptions, or loss of
inventory could seriously jeopardize our ability to provide products that are
critical to our business and operations and may cause us to lose revenue.
We risk losing business to our competitors.
We have a number of competitors and potential competitors, many of whom have
significantly greater financial, technical, and marketing resources than us.
We believe that our competition is increasing as technology and markets
mature. This has meant more competitors and more severe pricing pressure. In
addition, our competitors may be narrowing or eliminating our performance
advantages. We expect these trends to continue, and we may lose business to
competitors or it may be necessary to significantly reduce our prices to
acquire or retain business. These factors could have a material adverse impact
on our financial condition, revenue, gross profit margins, or income.
9
-------------------------------------------------------------------------------
Table of Contents
Failure to meet stringent customer requirements could result in the loss of
key customers and reduce our sales.
Some of our customers, including certain medical device manufacturers, have
stringent technical and quality requirements that require our products to meet
certain test and qualification criteria or to adopt and comply with specific
quality standards. Certain customers also periodically audit our performance.
Failure to meet technical or quality requirements or a negative customer audit
could result in the loss of current sales revenue, customers, and future sales.
We may lose revenue if we are unable to renew customer agreements.
We have agreements with certain customers, including a Supplier Partnering
Agreement, as amended, with Abbott Laboratories, which expires December 31,
2024. We cannot predict if these agreements will be renewed, or if renewed,
under what terms. Although in the past we have continued to sell products to
these customers without formal agreements, an inability to agree on mutually
acceptable terms could have a significant adverse impact on our revenue or
profitability.
Changes in tax law, in our tax rates, or in exposure to additional income tax
liabilities may materially and adversely affect our financial condition,
results of operations, and cash flows.
Changes in law and policy relating to Federal or state corporate taxes,
changes in tax rates, or changes in our eligibility for tax credits could
materially and adversely affect our financial condition, results of
operations, and cash flows.
Some of our products are incorporated into medical devices, which could expose
us to a risk of product liability claims and such claims could seriously harm
our business and financial condition.
Certain of our products are used in medical devices, including devices that
help sustain human life. We are also marketing our technology to other
manufacturers of cardiac pacemakers and ICDs. Although we have indemnification
agreements with certain customers including provisions designed to limit our
exposure to product liability claims, there can be no assurance that we will
not be subject to losses, claims, damages, liabilities, or expenses resulting
from bodily injury or property damage arising from the incorporation of our
products in devices sold by our customers. Our indemnifying customers may not
have the financial resources to cover all liability. Existing or future laws
or unfavorable judicial decisions could limit or invalidate the provisions of
our indemnification agreements, or the agreements may not be enforceable in
all instances. A successful product liability claim could require us to pay,
or contribute to payment of, substantial damage awards, which would have a
significant negative effect on our business and financial condition.
We may lose revenue if we are unable to maintain important certifications.
Our quality management system is certified to the ISO 9001 standard, and some
of our products are also subject to independent certification and listings
including by the VDE Institute and UL LLC. These certifications are subject to
rigorous conditions. Failure to achieve or maintain any of our certifications
or listings could cause us to be disqualified by one or more of our customers
and could have a material adverse impact on our business and revenue.
Federal legislation may not protect us against liability for the use of our
products in medical devices and a successful liability claim could seriously
harm our business and financial condition.
Although the Biomaterials Access Assurance Act of 1998 may provide us some
protection against potential liability claims, that Act includes significant
exceptions to supplier immunity provisions, including limitations relating to
negligence or willful misconduct. A successful product liability claim could
require us to pay, or contribute to payment of, substantial damage awards,
which would have a significant negative effect on our business and financial
condition. Any product liability claim against us, with or without merit,
could result in costly litigation, divert the time, attention, and resources
of our management, and have a material adverse impact on our business.
The malfunction of our products in medical devices could lead to the need to
recall devices incorporating our products from the market, which may be
harmful to our reputation and cause a significant loss of revenue.
The malfunction of our products that are incorporated in medical devices could
lead to the recall of existing medical devices incorporating our products.
Even if assertions that our products caused or contributed to device failure
do not lead to product liability or contract claims, such assertions could
harm our reputation and customer relationships. Any damage to our reputation
and/or the reputation of our products, or the reputation of our customers or
their products could limit the market for our and our customers' products and
harm our results of operations.
We may lose business and revenue if our critical production equipment fails.
Our production process relies on certain critical pieces of equipment for
defining, depositing, and modifying the magnetic properties of thin films.
Some of this equipment was designed or customized by us, and some is no longer
in production. While we have an in-house maintenance staff, maintenance
agreements for certain equipment, some critical spare parts, and back-ups for
some of the equipment, we cannot be sure we could repair or replace critical
manufacturing equipment were it to fail.
10
-------------------------------------------------------------------------------
Table of Contents
We are subject to risks inherent in doing business in foreign countries that
could impair our results of operations.
Foreign sales are a significant portion of our revenue and we rely on
suppliers in China, India, Malaysia, Taiwan, Thailand, and other foreign
countries. Risks relating to operating in foreign markets that could impair
our results of operations include economic and political instability; acts of
God, including floods, typhoons, cyclones, and earthquakes; public health
crises including, but not limited to, difficulties in enforcement of
contractual obligations and intellectual property rights; changes in
regulatory requirements; changes in import/export regulations and tariffs;
transportation delays; and other uncertainties relating to the administration
of, or changes in, or new interpretations of, the laws, regulations, and
policies of jurisdictions where we do business.
Public health crises could have an adverse effect on our operations and
financial results.
The COVID-19 pandemic disrupted our supply chains and caused employee
absences. Future public health crises could have a material adverse effect on
our results of operations or our financial condition.
We are subject to risks associated with the availability of natural resources
and energy.
We use significant resources such as electricity, natural gas, and water in
our operations. New or increased climate change regulation could increase our
energy costs, for example, due to carbon pricing impacts on natural gas or
electrical utilities. Furthermore, environmental regulations or the impacts of
climate change could curtail the availability of electricity we need for
production or increase the incidence of power outages. Increased natural
resource or energy costs, or decreased availability, could have adverse
effects on our results of operations by increasing our costs and expenses or
requiring us to change our production processes.
Our business could be negatively impacted by cybersecurity events or
information technology disruptions.
We face various cyber security threats, including threats to our information
technology infrastructure and attempts to gain access to our proprietary or
classified information, and denial-of-service attacks. Additionally, there is
a risk of disruptions due to failures of our information technology
infrastructure or service provider outages. We maintain policies and
procedures for the mitigation of information technology risks, and we maintain
data backups, backup hardware, and some redundant systems. Our risk mitigation
measures may not be effective in all scenarios, however. We have experienced
cyber security events and disruptions such as viruses, ransomware, hacker
attacks, and limited server, Website, and e-mail outages. Although these
events did not materially impact our business, future events could disrupt our
operations, harm our reputation, expose us to liability, compromise our
eligibility for research and development contracts involving sensitive or
classified information, or have other effects.
We face the risk of credit losses
Financial Accounting Standards Board Accounting Standards Update No. 2016-13,
Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses
on Financial Statements
requires us to measure our allowance for credit losses based on the expected
credit losses over the life of our receivables. In the past fiscal year, we
recorded significant expenses under this standard, although most of these
expenses were later reversed. Any future increases in our allowance for credit
losses would have a negative impact on our financial results, including
reducing our net income and net income per share.
We could incur losses on our marketable securities.
As of March 31, 2024, we held $52,548,876
in short-term and long-term marketable securities, representing approximately
79% of our total assets. Business conditions, bond-market conditions, and
interest rate increases beyond our control or ability to anticipate can cause
credit-rating downgrades, increased default risk, or unrealized losses.
Additionally, the assignment of a high credit rating does not preclude the
risk of default on any marketable security. Any impairments of our marketable
securities could impact our financial condition, income, or cash flows, or our
ability to pay dividends.
We may not be able to enforce our intellectual property rights.
We protect our proprietary technology and intellectual property by seeking
patents, trademarks, and copyrights, and by maintaining trade secrets by
entering into confidentiality agreements with employees, suppliers, customers,
and prospective customers depending on the circumstances. We hold patents or
are the licensee of others owning patented technology covering certain aspects
of our products and technology. These patent rights may be challenged,
rendered unenforceable, invalidated, or circumvented. Efforts to enforce
patent rights can involve substantial expense and may not be successful.
Furthermore, others may independently develop similar, superior, or parallel
technologies to any technology developed by us, or our technology may prove to
infringe on patents or rights owned by others. Thus the patents held by or
licensed to us may not afford us any meaningful competitive advantage. Also,
our confidentiality agreements may not provide meaningful protection of our
proprietary information. Our inability to maintain our proprietary rights
could have a material adverse effect on our business, financial condition, and
results of operations.
11
-------------------------------------------------------------------------------
Table of Contents
Risks Related to Our Industry
We face an uncertain economic environment in the industries we serve, which
could adversely affect our business.
We sell our products in the semiconductor market, which has been highly
cyclical. We cannot predict the timing, strength, or duration of any economic
slowdown, recession, semiconductor-industry slowdown, or subsequent recovery.
The economic environment could have a material adverse impact on our business
and revenue.
Our business and our reliance on intellectual property exposes us to
litigation risks.
If patent infringement claims or actions are asserted against us, we may be
required to obtain a license or cross-license, modify our existing technology,
or design a new noninfringing technology. Such licenses or design
modifications can be costly or could increase the cost of our products. In
addition, we may decide to settle a claim or action against us, which
settlement could be costly. We may also be liable for any past infringement,
and we may be required to indemnify our customers against expenses relating to
possible infringement. If there is an adverse ruling against us in an
infringement lawsuit, an injunction could be issued barring production or sale
of any infringing product. It could also result in a damage award equal to a
reasonable royalty or lost profits or, if there is a finding of willful
infringement, treble damages. Any of these results would increase our costs or
harm our operating results.
Risks Related to Our Stock
Any decisions to reduce or discontinue paying cash dividends to our
shareholders could cause the market price of our common stock to decline.
Future dividends will be subject to Board approval and will consider factors
including our results of operations, cash and marketable security balances,
the timing of securities maturations, estimates of future cash requirements,
fixed asset requirements, and other factors our Board may deem relevant.
Because they are generally more than our current cash flow from operations,
recent and declared dividend amounts may be unsustainable. Any reduction or
discontinuance by us of cash dividends could cause the market price of our
common stock to decline.
The price of our common stock may be adversely affected by significant price
fluctuations due to a number of factors, many of which are beyond our control.
From time to time our stock price has decreased sharply and could decline in
the future. The market price of our common stock may be significantly affected
by many factors, some of which are beyond our control, including:
.
the announcement of new products or product enhancements by us or our
competitors;
.
delays in our introduction of new products or technologies or market
acceptance of these products or technologies;
.
loss of customers, decreases in customers' purchases, or decreases in
customers' purchase prices;
.
changes in demand for our customers' products;
.
quarterly variations in our financial results, revenue, or revenue growth rates;
.
speculation in the press or elsewhere about our business, potential revenue,
or potential earnings;
.
general economic conditions or market conditions specific to industries we or
our customers serve or may serve;
.
legal proceedings involving us, including intellectual property litigation or
class action litigation;
.
changes in Federal or state corporate income tax rates, tax credits, or other
changes in tax policies;
.
changes in tariffs, customs, duties, or other trade barriers in foreign
jurisdictions where we purchase raw materials or sell our products; and
.
our stock repurchase and dividend policies and decisions.
12
-------------------------------------------------------------------------------
Table of Contents
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
We recognize the increasing importance of cybersecurity and its potential
impact on our business operations, financial condition, and reputation. We are
committed to protecting our information assets and have implemented a
comprehensive cybersecurity risk management program to identify, assess, and
mitigate cybersecurity risks. We have not experienced any material
cybersecurity incidents in the last three years.
Board of Directors Oversight of Cybersecurity
Our Board of Directors Audit Committee has ultimate oversight of cybersecurity
risks. The Committee is composed of independent directors with cybersecurity
expertise. Management briefs the Committee on cybersecurity and information
security at least annually.
Cybersecurity Risk Management
We operate under written cybersecurity policies and procedures, and we use a
risk-based approach to information security and periodically assess our
cybersecurity risks. Our risk management strategy is based on the following
principles:
.
Our business does not require us to collect personal customer information. We
minimize other cybersecurity risks by using specialist service providers for
sensitive operations such as payroll processing, credit card transactions,
email, and remote data backup. We verify our information service providers
'
cybersecurity policies.
.
Identify and assess cybersecurity risks through a variety of methods, including
audits to information security standards,
threat testing, and vulnerability scanning.
.
Prioritize risks based on their potential severity, likelihood, and
detectability.
.
Controls to mitigate risks, including access controls, data protection, data
backups,
redundant systems,
and incident response plans. We keep our controls up-to-date.
.
Actions to correct deficiencies and reduce or eliminate vulnerabilities.
.
Written cybersecurity contingency plans.
.
Training and testing for all employees on cybersecurity risks, mitigation, and
best practices. New employees are required to complete cybersecurity training
and testing, and all employees must complete annual training and testing
.
Cybersecurity Governance
Our cybersecurity governance is designed to ensure that risks are managed
consistently and effectively. Key elements are:
.
Written policies and procedures that govern the use of information technology
and the handling of sensitive information.
.
Written incident response plans.
.
Regular cybersecurity reporting to the Audit Committee.
ITEM 2. PROPERTIES.
Our principal executive offices and manufacturing facility are located at
11409 Valley View Road, Eden Prairie, Minnesota, 55344, and leased under an
agreement expiring March 31, 2026. The space consists of 21,362 square feet of
offices, laboratories, and production areas. We have expanded the facility's
production space in recent years and have limited options to further expand
production in the current facility. We are exploring options for future
expansion if necessary. We hold no investments in real estate.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, we may become involved in litigation. At
this time, we are not aware of any material pending or threatened legal
proceedings or other proceedings contemplated by governmental authorities that
we expect would have a material adverse impact on our future results of
operation and financial condition.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
13
-------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT
'
S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
SECURITIES.
Market Information and Dividends
Our Common Stock trades on the Capital Market tier of the NASDAQ Stock Market
under the symbol NVEC.
Dividends have been funded from net cash provided by operating activities and
proceeds from maturities of marketable securities. Our dividend policy is
subject to change at any time, and future dividends will be subject to Board
approval and subject to the company's results of operations, cash and
marketable security balances, our forecasts of future cash requirements, and
other factors our Board may deem relevant.
Shareholders
We had 52 shareholders of record as of March 31, 2024. There are also several
thousand beneficial holders of our common stock in "street name," whose shares
of record are held by banks, brokers, and other financial institutions.
Securities Authorized for Issuance Under Equity Compensation Plans
Information regarding our securities authorized for issuance under equity
compensation plans will be included in the section "Equity Compensation Plan
Information" of our Proxy Statement for our 2024 Annual Meeting of
Shareholders and is incorporated by reference into Item 12 of this Report.
Stock Repurchase Program
We did not repurchase any shares in fiscal 2024. We repurchased 264 shares in
fiscal 2023. The Stock Repurchase Program may be modified or discontinued at
any time without notice.
14
-------------------------------------------------------------------------------
Table of Contents
ITEM 7. MANAGEMENT
'
S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read this discussion together with our financial statements and
notes included elsewhere in this Report. In addition to historical
information, the following discussion contains forward-looking information
that involves risks and uncertainties. Our actual future results could differ
materially from those presently anticipated due to a variety of factors,
including those discussed in Item 1A of this Report.
General
We develop and sell devices that use "spintronics," a nanotechnology that
relies on electron spin rather than electron charge to acquire, store, and
transmit information. We manufacture high-performance spintronic products
including sensors and couplers to revolutionize data sensing and transmission.
We also receive contracts for research and development and are a licensor of
spintronic magnetoresistive random access memory technology, commonly known as
MRAM.
Application of Critical Accounting Policies and Estimates
In accordance with SEC guidance, those material accounting policies that we
believe are the most critical to an investor's understanding of our financial
results and condition and require complex management judgment are discussed
below.
Investment Valuation
Our investments consist primarily of corporate obligations. We have generally
invested excess cash in high-quality investment-grade long-term marketable
securities with less than five years to maturity. We classify all of our
marketable securities as available-for-sale, thus securities are recorded at
fair value and any associated unrealized gain or loss, net of tax, is included
as a separate component of shareholders' equity, "Accumulated other
comprehensive income." If we judged a decline in fair value for any security
to be other than temporary, the cost basis of the individual security would be
written down and a charge recognized to net income. The fair values for our
securities are determined based on quoted market prices as of the valuation
date and observable prices for similar assets. We consider a number of factors
in determining whether other-than-temporary impairment exists, including
credit market conditions; the credit ratings of the securities; historical
default rates for securities of comparable credit rating; the presence of
insurance of the securities and, if insured, the credit rating and financial
condition of the insurer; the effect of market interest rates on the value of
the securities; and the duration and extent of any unrealized losses. We also
consider the likelihood that we will be required to sell the securities prior
to maturity based on our financial condition and anticipated cash flows. If
any of these conditions and estimates change in the future, or, if different
estimates are used, the fair value of the investments may change significantly
and could result in an other-than-temporary decline in value, which could have
an adverse impact on our results of operations.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value. Cost is
determined by the first in, first out method. Where there is evidence that
inventory could be disposed of at less than carrying value, the inventory is
written down to the net realizable value in the current period. Additionally,
we periodically examine our inventory in the context of inventory turnover,
sales trends, competition, and other market factors, and we record provisions
to inventory reserve when we determine certain inventory is unlikely to be
sold. If reserved inventory is subsequently sold, corresponding reductions in
inventory and inventory reserves are made. Our inventory reserve was $215,000
as of March 31, 2024 and March 31, 2023.
Deferred Tax Assets Estimation
In determining the carrying value of our net deferred tax assets, we must
assess the likelihood of sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions to realize the benefit of
these assets. We evaluate the realizability of the deferred assets quarterly
and assess the need for valuation allowances or reduction of existing
allowances quarterly. No valuation allowance was recorded as we believe it is
more likely than not that all of the deferred tax assets will be realized.
We had $1,453,704 of net deferred tax assets as of March 31, 2024, and
$572,038 as of March 31, 2023. Net deferred tax assets included $101,668 in
deferred tax assets for stock-based compensation deductions as of March 31,
2024, and $71,734 as of March 31, 2023.
15
-------------------------------------------------------------------------------
Table of Contents
Results of Operations
The following table summarizes the percentage of revenue and year-to-year
changes for various items for the last two fiscal years:
Percentage of Revenue Year-
Year Ended March 31, to-Year
2024 2023 Change
Revenue
Product sales 98.0 % 97.2 % (21.4 )%
Contract research and development 2.0 % 2.8 % (44.5 )%
Total revenue 100.0 % 100.0 % (22.1 )%
Cost of sales 22.7 % 21.1 % (16.0 )%
Gross profit 77.3 % 78.9 % (23.7 )%
Expenses
Research and development 9.2 % 6.8 % 5.7 %
Selling, general, and administrative 5.9 % 5.1 % (9.7 )%
Credit loss expense 0.0 % - -
Total expenses 15.1 % 11.9 % (0.8 )%
Income from operations 62.2 % 67.0 % (27.8 )%
Interest income 6.5 % 3.8 % 34.5 %
Income before taxes 68.7 % 70.8 % (24.5 )%
Provision for income taxes 11.2 % 11.5 % (24.0 )%
Net income 57.5 % 59.3 % (24.5 )%
Total revenue for fiscal 2024 decreased 22% compared to fiscal 2023 due to a
21% decrease in product sales and a 45% decrease in contract research and
development revenue. The decrease in product sales was primarily due to
decreased purchases by existing customers due to the downturn in the
semiconductor industry. The decrease in contract research and development
revenue was due to fewer research and development contracts in fiscal 2024
compared to the prior year.
Gross profit as a percentage of revenue decreased to 77% for fiscal 2024 from
79% for fiscal 2023. The decrease was due to increases in material, labor, and
production overhead costs.
Total expenses decreased 1% for fiscal 2024 compared to fiscal 2023
due to a 10% decrease in selling, general, and administrative expense,
partially offset by a 6% increase in research and development expense. The
increase in research and development expense was due to increased new product
development activities. The decrease in selling, general, and administrative
expense was primarily due to decreased performance-based accruals.
Interest income for fiscal 2024 increased 35% due to increased yields on
marketable securities purchased in fiscal 2024.
Our effective tax rate was 16% for fiscal 2024 and fiscal 2023 compared to the
statutory tax rate of 21%. Our lower effective tax rate was primarily due to
Federal tax credits and deductions.
The 25% decrease in net income for fiscal 2024 compared to the prior year was
primarily due to decreased revenue, partially offset by decreased expenses and
increased interest income.
Liquidity and Capital Resources
Overview
Our liquidity and operating capital requirements are primarily for purchases
of raw materials such as foundry wafers, purchases of packaging services, and
the maintenance of work-in-process inventories. We maintain most of our
marketable securities as long-term to maximize yield and fund future dividends.
Cash and cash equivalents were $10,283,550 as of March 31, 2024, compared to
$1,669,896 as of March 31, 2023. The $8,613,654 increase in cash and cash
equivalents was due to $18,247,411 of net cash provided by operating
activities and $9,580,084 of net cash provided by investing activities,
partially offset by $19,213,841 of net cash used in financing activities.
16
-------------------------------------------------------------------------------
Table of Contents
Operating Activities
Net cash provided by operating activities related to product sales and
research and development contract revenue was our primary source of working
capital for fiscal 2024 and 2023. Net cash provided by operating activities
was $18,247,411 for fiscal 2024 compared to $19,091,498 for fiscal 2023.
Accounts receivable decreased $3,368,997 during fiscal 2024 due to decreased
revenue and the timing of customer payments.
Inventory increased $741,575 during fiscal 2024 primarily due to our decision
to increase raw material and finished goods inventories in anticipation of a
semiconductor industry recovery. This will enable us to quickly respond to
sales opportunities and to mitigate supply-chain risks.
Accounts payables and accrued expenses decreased $964,152 during fiscal 2024
due to decreased performance-based accrual and the timing of purchases and
vendor payments.
Investing Activities
Net cash provided by investing activities in fiscal 2024 consisted of
$15,700,000 in proceeds from maturities of marketable securities, partially
offset by $16,731 of fixed asset purchases and $6,103,185 of marketable
securities purchases.
Our capital expenditures can vary significantly from year to year depending on
our needs, strategic goals, and equipment purchasing opportunities. We are
currently planning $4,000,000 to $5,000,000 of investments during fiscal years
2025 and 2026 to increase our production capacity and capabilities. These
plans are subject to change. We expect to finance future capital equipment
purchases with a combination of cash provided by operating activities and
marketable security maturities.
Financing Activities
Net cash used in financing activities in fiscal 2024 consisted of $19,331,304
of cash dividends paid to shareholders, partially offset by $117,463 in
proceeds from the exercise of stock options.
In addition to cash dividends to shareholders paid in fiscal 2024, on May 1,
2024, we announced that our Board had declared a cash dividend of $1.00 per
share of Common Stock, or $4,833,676
based on shares outstanding as of April 26, 2024, to be paid May 31, 2024. We
plan to fund dividends through cash provided by operating activities and
proceeds from maturities of marketable securities. All future dividends will
be subject to Board approval and subject to the company's results of
operations, cash and marketable security balances, estimates of future cash
requirements, the impacts of supply-chain shortages, the impacts of cost
inflation, and other factors the Board may deem relevant. Furthermore,
dividends may be modified or discontinued at any time without notice.
Labor Practices
In the past fiscal year, we significantly increased average pay to attract,
retain, and motivate top-performing employees despite a tight labor market.
These increased compensation costs are allocated to cost of sales and expenses
in our income statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and accompanying notes are included in this Report
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Management, with the participation of the Chief Executive Officer and
Principal Financial Officer, has performed an evaluation of our disclosure
controls and procedures that are defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act of 1934 (the "Exchange Act") as of the end of the
period covered by this Report. This evaluation included consideration of the
controls, processes, and procedures that are designed to ensure that
information required to be disclosed by us in the reports we file under the
Exchange Act is recorded, processed, summarized, and reported within the times
specified in the SEC's rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Principal Financial Officer, as appropriate to allow timely
decisions regarding required disclosure. Based on such evaluation, although
there have been changes in personnel involved in our controls, processes, and
procedures, our Chief Executive Officer and Principal Financial Officer
concluded that, as of March 31, 2024, our disclosure controls and procedures
were effective.
17
-------------------------------------------------------------------------------
Table of Contents
Management
'
s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) under the Exchange Act. Our management, including our Chief
Executive Officer and Principal Financial Officer, assessed the effectiveness
of our internal control over financial reporting as of March 31, 2024. In
making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the
2013
Internal Control
-
Integrated Framework
. Based on our assessment using the criteria set forth by COSO in the 2013
Internal Control
-
Integrated Framework
, management concluded that our internal control over financial reporting was
effective as of March 31, 2024.
Our management, including our Chief Executive Officer and Principal Financial
Officer, does not expect that our internal control over financial reporting
will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within NVE have been detected. Our internal controls over financial
reporting, however, are designed to provide reasonable assurance that the
objectives of internal control over financial reporting are met.
Changes in Internal Controls
During the year ended March 31, 2024, there was no change in our internal
control over financial reporting that materially affected or is reasonably
likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Clawback Policy
We have adopted a policy for recovery of erroneously awarded incentive
compensation (a "Clawback Policy"), which is filed as Exhibit 97 to this
Report.
Rule 10b5-1 Plan Disclosures for Section 16 Officers and Directors
During the quarter ended March 31, 2024, no director or officer (as defined in
Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any
Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in
each case, as defined in Item 408(a) of Regulation S-K). There are no such
plans currently in effect.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
18
-------------------------------------------------------------------------------
Table of Contents
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
A section titled "Delinquent Section 16(a) Reports" to be included in our
Proxy Statement for our 2024 Annual Meeting of Shareholders will set forth
information regarding delinquent Section 16(a) reports required by Item 10.
The section titled "Proposal 1. Election of Board of Directors" will set forth
certain information regarding our directors and executive officers required by
Item 10, the section titled "Information About Our Executive Officers" will
set forth information regarding our executive officers required by Item 10,
and the section titled "Corporate Governance" will set forth information
regarding our corporate governance and code of ethics required by Item 10. The
information in these sections to be included in the Proxy Statement for our
2024 Annual Meeting of Shareholders is incorporated by reference into this
section.
ITEM 11. EXECUTIVE COMPENSATION.
The information in the sections "Executive Compensation," "Compensation
Discussion and Analysis," "Corporate Governance - Board Committees -
Compensation Committee Interlocks and Insider Participation," and "Director
Compensation" to be included in the Proxy Statement for our 2024 Annual
Meeting of Shareholders is incorporated by reference into this section.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information in the sections "Equity Compensation Plan Information" and
"Security Ownership" to be included in the Proxy Statement for our 2024 Annual
Meeting of Shareholders is incorporated by reference into this section.
Information regarding the material features of our 2000 Stock Option Plan, as
amended, is contained in Note 5 to the Financial Statements included elsewhere
in this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information in the sections "Security Ownership - Transactions With
Related Persons, Promoters, and Certain Control Persons" and "Corporate
Governance - Board Composition and Independence" to be included in our Proxy
Statement for our 2024 Annual Meeting of Shareholders is incorporated by
reference into this section.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information in the sections "Audit Committee Disclosure - Fees Billed to
Us by Our Independent Registered Public Accounting Firm During Fiscal 2024 and
2023" and "Audit Committee Disclosure - Audit Committee Pre-Approval Policy"
to be included in the Proxy Statement for our 2024 Annual Meeting of
Shareholders is incorporated by reference into this section.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements and Schedules
Financial statements are provided pursuant to Item 8 of this Report. Certain
financial statement schedules have been omitted because they are not required,
not applicable, or the required information is provided in other financial
statements or the notes to the financial statements.
(b) Exhibits
A list of exhibits is on the following page.
19
-------------------------------------------------------------------------------
Table of Contents
Exhibit Description
#
3.1 Amended and Restated Articles of Incorporation of the company as amended by the Board of Directors
effective August 3, 2003 (incorporated by reference to the Form 8-K filed August 7, 2023).
3.2 Bylaws of the company as amended by the
Board of Directors effective May 6, 2020.
4 Description of the registrant's securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934.
10.1 Lease dated October 1, 1998, with Glenborough Properties, LP (incorporated
by reference to the Form 10-QSB for the period ended September 30, 2002).
10.2 First amendment to lease with Glenborough dated September 18, 2002 (incorporated
by reference to the Form 10-QSB for the period ended September 30, 2002).
10.3 Second amendment to lease with Glenborough dated December 1, 2003 (incorporated
by reference to the Form 10-QSB for the period ended December 31, 2003).
10.4 Third amendment to lease with Carlson Real Estate (incorporated
by reference to the Form 8-K/A filed December 20, 2007).
10.5 Fourth amendment to lease with the Barbara C. Gage Revocable Trust (incorporated
by reference to our Current Report on Form 8-K/A filed August 3, 2011).
10.6 Fifth amendment to lease with GRE - Bryant Lake, LLC (incorporated by
reference to our Current Report on Form 8-K/A filed March 3, 2020).
10.7 Employment Agreement with Daniel A. Baker dated January 29, 2001 (incorporated
by reference to the Form 10-KSB for the year ended March 31, 2001).
10.8 NVE Corporation 2000 Stock Option Plan as Amended July 19, 2001, by the shareholders
(incorporated by reference to our Registration Statement on Form S-8 filed July 20, 2001).
10.9 Indemnification Agreement by and between Pacesetter, Inc., a St. Jude Medical Company,
and the company (incorporated by reference to the Form 8-K filed September 27, 2005).
10.10+ Supplier Partnering Agreement by and between St. Jude and the company
(incorporated by reference to the Form 8-K filed January 4, 2006).
10.11 Amendment No. 4 to St. Jude Supplier Partnering Agreement
(incorporated by reference to the Form 8-K/A filed February 7, 2011).
10.12 Supplier Quality Agreement between St. Jude and the company
(incorporated by reference to the Form 8-K filed February 10, 2016).
10.13 Amendment No. 5 to St. Jude Supplier Partnering Agreement
(incorporated by reference to the Form 8-K/A filed April 21, 2016).
10.14* Amendment No. 8 to Abbott Supplier Partnering Agreement (incorporated
by reference to the Form 8-K/A filed February 2, 2022).
10.15* Amendment No.
1
0
to Supplier Partnering Agreement between Abbott and the
company (incorporated by reference to the Form 8-K/A filed
J
anuary
3
, 202
4
).
10.16+ Supply Agreement by and with Sonova AG (incorporated by
reference to the Form 8-K/A filed November 16, 2015).
10.17* First Amendment to Sonova Supply Agreement (incorporated
by reference to the Form 8-K/A filed February 18, 2020).
10.18* Second Amendment to Sonova Supply Agreement (incorporated
by reference to the Form 8-K/A filed July 19, 2023).
23 Consent of Boulay PLLP.
31.1 Certification by Daniel A. Baker
pursuant to Rule 13a-14(a)/15d-14(a).
31.2 Certification by Daniel Nelson
pursuant to Rule 13a-14(a)/15d-14(a).
32 Certification by Daniel A. Baker and Daniel
Nelson pursuant to 18 U.S.C. Section 1350.
97 Clawback Policy.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101)
Indicates a management contract or compensatory plan or arrangement.
+Confidential portions deleted and filed separately with the SEC.
*Certain confidential portions redacted pursuant to Item 601(b)(10)(iv) of
Regulation S-K. The omitted information is (i) not material and (ii) would
likely cause us competitive harm if publicly disclosed. We agree to furnish
supplementally an unredacted copy of the exhibit to the Securities and
Exchange Commission on its request.
20
-------------------------------------------------------------------------------
Table of Contents
ITEM 16. FORM 10-K SUMMARY.
We have elected not to include an optional Form 10-K Summary.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NVE CORPORATION
(Registrant)
/s/Daniel A. Baker
by Daniel A. Baker
President and Chief Executive Officer
Date May 1, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
(1)
/s/Terrence W. Glarner Director and May 1, 2024
Terrence W. Glarner Chairman of the Board
/s/Daniel A. Baker Director, May 1, 2024
Daniel A. Baker President and Chief Executive Officer
(Principal Executive Officer)
/s/ Daniel Nelson Principal Financial Officer May 1, 2024
Daniel Nelson
/s/Patricia M. Hollister Director May 1, 2024
Patricia M. Hollister
/s/James W. Bracke Director May 1, 2024
James W. Bracke
(1) Richard W. Kramp was unable to sign this Report due to illness.
21
-------------------------------------------------------------------------------
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
NVE Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of NVE Corporation (the
Company) as of March 31, 2024 and 2023, and the related statements of income,
comprehensive income, shareholders' equity, and cash flows for each of the
years in the two-year period ended March 31, 2024, and the related notes
(collectively referred to as the financial statements). In our opinion, the
financial statements present fairly, in all material respects, the financial
position of the Company as of March 31, 2024 and 2023, and the results of its
operations and its cash flows for each of the years in the two-year period
ended March 31, 2024, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of
the financial statements that were communicated or required to be communicated
to the audit committee and that (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that there were
no critical audit matters.
/s/
Boulay PLLP
PCOAB ID:
542
We have served as the Company's auditor since 2019.
Minneapolis, Minnesota
May 1, 2024
F-1
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
BALANCE SHEETS
March 31, 2024 March 31, 2023
ASSETS
Current assets
Cash and cash equivalents $ 10,283,550 $ 1,669,896
Marketable securities, short-term (amortized cost of $ 11,917,779 15,513,095
12,283,630
as of March 31, 2024, and $
15,696,135
as of March 31, 2023)
Accounts receivable, net of allowance for credit losses of $ 3,144,833 6,523,344
15,000
Inventories 7,158,585 6,417,010
Prepaid expenses and other assets 689,349 663,459
Total current assets 33,194,096 30,786,804
Fixed assets
Machinery and equipment 10,501,096 10,484,365
Leasehold improvements 1,956,309 1,956,309
12,457,405 12,440,674
Less accumulated depreciation and amortization 11,403,383 11,095,236
Net fixed assets 1,054,022 1,345,438
Deferred tax assets 1,453,704 572,038
Marketable securities, long-term (amortized cost of $ 30,788,301 36,125,047
31,417,890
as of March 31, 2024, and $
37,495,846
as of March 31, 2023)
Right-of-use asset - operating lease 289,910 425,843
Total assets $ 66,780,033 $ 69,255,170
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 127,154 $ 281,712
Accrued payroll and other 729,215 1,375,250
Operating lease 179,372 175,798
Total current liabilities 1,035,741 1,832,760
Operating lease 175,775 342,908
Total liabilities 1,211,516 2,175,668
Shareholders' equity
Common stock, $ 48,337 48,308
0.01
par value,
6,000,000
shares authorized;
4,833,676
issued and outstanding as of March 31, 2024 and
4,830,826
as of March 31, 2023
Additional paid-in capital 19,554,812 19,295,442
Accumulated other comprehensive income (loss) ( ) ( )
777,637 1,213,858
Retained earnings 46,743,005 48,949,610
Total shareholders' equity 65,568,517 67,079,502
Total liabilities and shareholders' equity $ 66,780,033 $ 69,255,170
See accompanying notes.
F-2
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
STATEMENTS OF INCOME
Year Ended March 31,
2024 2023
Revenue
Product sales $ 29,218,063 $ 37,196,717
Contract research and development 586,116 1,056,875
Total revenue 29,804,179 38,253,592
Cost of sales 6,772,533 8,062,311
Gross profit 23,031,646 30,191,281
Expenses
Research and development 2,731,434 2,583,994
Selling, general, and administrative 1,771,833 1,963,105
Credit loss expense 9,514 -
Total expenses 4,512,781 4,547,099
Income from operations 18,518,865 25,644,182
Interest income 1,948,720 1,448,655
Income before taxes 20,467,585 27,092,837
Provision for income taxes 3,342,886 4,398,379
Net income $ 17,124,699 $ 22,694,458
Net income per share - basic $ 3.54 $ 4.70
Net income per share - diluted $ 3.54 $ 4.70
Cash dividends declared per common share $ 4.00 $ 4.00
Weighted average shares outstanding
Basic 4,833,146 4,830,826
Diluted 4,839,705 4,832,096
STATEMENTS OF COMPREHENSIVE INCOME
Year Ended March 31,
2024 2023
Net income $ 17,124,699 $ 22,694,458
Unrealized gain 436,221 ( )
(loss) from marketable securities, net of tax 895,738
Comprehensive income $ 17,560,920 $ 21,798,720
See accompanying notes.
F-3
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
STATEMENTS OF SHAREHOLDERS
'
EQUITY
Common Additional Accumulated Retained
Stock Paid-In Other
Comprehen-
sive
Income
Shares Amount Capital (Loss) Earnings Total
Balance as of 4,830,826 48,308 19,256,485 ( ) 45,578,456 64,565,129
March 31, 2022 318,120
Repurchase of ( ) ( ) ( ) ( )
common stock 264 3 20,697 20,700
Exercise of stock options, net of 264 3 ( ) -
shares withheld for exercise price 3
Comprehensive
income:
Unrealized loss on marketable ( ) ( )
securities, net of tax 895,738 895,738
Net 22,694,458 22,694,458
income
Total comprehensive 21,798,720
income
Stock-based 59,657 59,657
compensation
Cash dividends declared ($4.00 ( ) ( )
per share of common stock) 19,323,304 19,323,304
Balance as of 4,830,826 48,308 $ 19,295,442 $ ( ) $ 48,949,610 $ 67,079,502
March 31, 2023 1,213,858
Exercise of stock options, net of 2,850 29 117,434 117,463
shares withheld for exercise price
Comprehensive
income:
Unrealized gain on marketable 436,221 436,221
securities, net of tax
Net 17,124,699 17,124,699
income
Total comprehensive 17,560,920
income
Stock-based 141,936 141,936
compensation
Cash dividends declared ($4.00 ( ) ( )
per share of common stock) 19,331,304 19,331,304
Balance as of 4,833,676 48,337 $ 19,554,812 $ ( ) $ 46,743,005 $ 65,568,517
March 31, 2024 777,637
See accompanying notes.
F-4
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
STATEMENTS OF CASH FLOWS
Year Ended March 31,
2024 2023
OPERATING ACTIVITIES
Net income $ 17,124,699 $ 22,694,458
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 308,147 196,738
Bond premium (discount) amortization ( ) 60,868
106,354
Provision for current estimate of credit losses 9,514 -
Stock-based compensation 141,936 59,657
Deferred income taxes ( ) 161,894
1,003,844
Changes in operating assets and liabilities:
Accounts receivable 3,368,997 ( )
1,818,515
Inventories ( ) ( )
741,575 1,328,375
Prepaid expenses and other assets 110,043 ( )
208,532
Accounts payable and accrued expenses ( ) ( )
964,152 726,695
Net cash provided by operating activities 18,247,411 19,091,498
INVESTING ACTIVITIES
Purchases of fixed assets ( ) ( )
16,731 935,791
Purchases of marketable securities ( ) (
6,103,185 28,441,317
Proceeds from maturities of marketable securities 15,700,000 20,750,000
Receipt of tenant improvement allowance - 100,000
Net cash provided by (used in) investing activities 9,580,084 ( )
8,527,108
FINANCING ACTIVITIES
Exercise of stock options, net of shares withheld for exercise price 117,463 ( )
3
Repurchase of common stock - ( )
20,697
Payment of dividends to shareholders ( ) ( )
19,331,304 19,323,304
Net cash used in financing activities ( ) ( )
19,213,841 19,344,004
Increase (decrease) in cash and cash equivalents 8,613,654 ( )
8,779,614
Cash and cash equivalents at beginning of year 1,669,896 10,449,510
Cash and cash equivalents at end of year $ 10,283,550 $ 1,669,896
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 4,539,071 $ 4,501,656
See accompanying notes.
F-5
-------------------------------------------------------------------------------
Table of Contents
NVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
We develop and sell devices that use spintronics, a nanotechnology that relies
on electron spin rather than electron charge to acquire, store, and transmit
information. We operate in one reportable segment.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
We consider all highly liquid investments with maturities of three months or
less when purchased to be cash equivalents.
Concentration of Risk and Financial Instruments
Financial instruments potentially subject to significant concentrations of
credit risk consist principally of cash equivalents, marketable securities,
and accounts receivable.
Cash and cash equivalents have been maintained in financial institutions we
believe have high credit quality, however, these accounts may not be federally
insured.
We have invested our excess cash in corporate-backed and municipal-backed
bonds and money market instruments. Our investment policy prescribes purchases
of only high-grade securities and limits the amount of credit exposure to any
one issuer.
Our customers are throughout the world. We generally do not require collateral
from our customers, but we perform ongoing credit evaluations of their
financial condition. More information on accounts receivable is contained in
the paragraph titled "Accounts Receivable and Allowance for Credit Losses" of
this note.
Additionally, we are dependent on critical suppliers including our packaging
vendors and suppliers of certain raw silicon and semiconductor wafers that are
incorporated in our products. Industry shortages and supply-chain disruptions
in the past several years have increased the risks of supply interruptions.
Marketable securities
Our marketable securities consist of corporate bonds and money market funds.
Marketable securities are initially recognized at cost. Marketable securities
considered to be "purchased financial assets with credit deterioration" are
initially recognized at cost, less any allowance for expected credit losses.
Unrealized holding gains and losses are reported in other comprehensive
income, net of applicable taxes, until realized. All marketable securities are
carried on the balance sheet at fair value. Fair value is defined as the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. We
use a three-level fair value hierarchy in estimating and reporting fair values
of our marketable securities:
Level 1 - Securities whose fair values are determined using quoted prices in
active markets for identical securities.
Level 2 - Securities whose fair values are determined using quoted prices for
similar securities in active markets or quoted prices for identical securities
in markets that are not active.
Level 3 - Securities whose fair values are determined using unobservable inputs.
Corporate bonds with remaining maturities of less than one year are classified
as short-term and those with remaining maturities of one year or more are
classified as long-term. We consider all highly liquid investments with
maturities of three months or less when purchased, including money market
funds, to be cash equivalents.
Accounts Receivable and Allowance for Credit Losses
We grant credit to customers in the normal course of business and at times may
require customers to prepay for orders prior to shipment. Accounts receivable
are recorded net of allowance for credit losses. We specifically analyze
accounts receivable, historical credit losses, and customer creditworthiness
when estimated allowance for credit losses.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is
determined by the first in, first out method. We record inventory reserves
when we determine certain inventory is unlikely to be sold based on sales
trends, turnover, competition, and other market factors.
F-6
-------------------------------------------------------------------------------
Table of Contents
Product Warranty
In general, we warranty our products to be free from defects in material and
workmanship for one year.
Fixed Assets
Fixed assets are stated at cost. Depreciation of machinery and equipment is
recorded over the estimated useful lives of the assets, generally five years,
using the straight-line method. Amortization of leasehold improvements is
recorded using the straight-line method over the lesser of the remaining term
of the lease or five-year useful life. We record losses on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. We did not identify any indicators of
impairment during fiscal 2024 or 2023. Depreciation expense related to fixed
assets was $
308,147
for fiscal 2024 and $
196,738
for fiscal 2023.
Revenue Recognition
We recognize revenue when we satisfy performance obligations by the transfer
of control of products or services to our customers, in an amount that
reflects the consideration we expect to be entitled to in exchange for those
products or services. Revenue is disaggregated into product sales and contract
research and development to depict the nature, amount, and timing of revenue
recognition and economic characteristics of our business, and is represented
within the financial statements.
We recognize revenue from product sales to customers and distributors when we
satisfy our performance obligation, at a point in time, on product shipment or
delivery to our customer or distributor as determined by agreed-on shipping
terms. Shipping charges billed to customers are included in product sales and
the related shipping costs are included in cost of sales. Under certain
limited circumstances, our distributors may earn commissions for activities
unrelated to their purchases of our products, such as for facilitating the
sale of custom products or research and development contracts with third
parties. We recognize any such commissions as selling, general, and
administrative expenses. We recognize discounts provided to our distributors
as reductions in revenue.
We recognize contract research and development revenue as the performance
obligations are satisfied. Contracts have specifications unique to each
customer and do not create an asset with an alternate use, and we have an
enforceable right to payment for performance completed to date. We use the
proportion of total contract consideration attributable to performance
milestones achieved as the measurement of progress toward completion.
Accounts receivable is recognized when we have transferred a good or service
to a customer and our right to receive consideration is unconditional through
the completion of our performance obligation. A contract asset is recognized
when we have a right to consideration from the transfer of goods or services
to a customer but have not completed our performance obligation. A contract
liability is recognized when we have been paid by a customer but have not yet
satisfied the performance obligation by transferring goods or services. We had
no material contract assets or contract liabilities as of March 31, 2024, or
March 31, 2023.
Our performance obligations related to product sales and contract research and
development contracts are satisfied in one year or less. Unsatisfied
performance obligations represent contracts with an original expected duration
of one year or less. As permitted under Accounting Standards Codification
("ASC") Topic 606,
Revenue from Contracts with Customers
, we are using the practical expedient not to disclose the value of these
unsatisfied performance obligations. We also use the practical expedient in
which we do not assess whether a contract has a significant financing
component if the expectation at contract inception is such that the period
between payment by the customer and the transfer of the promised goods or
services to the customer will be one year or less.
Income Taxes
We account for income taxes using the asset and liability method. Deferred
income taxes are provided for temporary differences between the financial
reporting and tax bases of assets and liabilities. We provide valuation
allowances against deferred tax assets if we determine that it is less likely
than not that we will be able to utilize the deferred tax assets.
Research and Development Expense Recognition
Research and development costs are expensed as they are incurred.
Customer-sponsored research and development costs are included in cost of
sales.
Stock-Based Compensation
We measure stock-based compensation cost at the grant date based on the fair
value of the award and recognize the compensation expense over the requisite
service period, which is generally the vesting period. We recognize any
forfeitures as they occur.
Net Income Per Share
Net income per basic share is computed based on the weighted average number of
common shares issued and outstanding during the year. Net income per diluted
share amounts assume the exercise of all stock options. The following table
shows the components of diluted shares:
F-7
-------------------------------------------------------------------------------
Table of Contents
Year Ended March 31,
2024 2023
Weighted average common shares outstanding - basic 4,833,146 4,830,826
Dilutive effect of stock options 6,559 1,270
Shares used in computing net income per share - diluted 4,839,705 4,832,096
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires us to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Recently Adopted Accounting Standard
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU
2016-13 requires a financial asset (or a group of financial assets) to be
presented at the net amount expected to be collected. The allowance for credit
losses is a valuation account that is deducted from the amortized cost basis
of the financial asset(s) to present the net carrying value at the amount
expected to be collected on the financial asset. In November 2018 the FASB
issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial
Instruments-Credit Losses, which clarifies codification and corrects
unintended application of the guidance, and in November 2019, the FASB issued
ASU No. 2019-11, Codification Improvements to Topic 326, Financial
Instruments-Credit Losses, which clarifies or addresses specific issues about
certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No.
2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and
Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in February
2020 the FASB issued ASU No. 2020-02, Financial Instruments-Credit Losses
(Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to
SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective
Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842),
both of which delay the effective date of ASU 2016-13 by three years for
certain Smaller Reporting Companies such as us. In March 2020, the FASB issued
ASU No. 2020-03, Codification Improvements to Financial Instruments; which
modifies the measurement of expected credit losses of certain financial
instruments. We adopted ASU No. 2016-13 beginning with the quarter ended June
30, 2023. The adoption resulted in disclosure changes and required us to
consider the likelihood of default and to measure our allowance for credit
losses over the contractual term of our receivables. The adoption did not have
a material impact on the financial statements as of March 31, 2024 or April 1,
2023.
New Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures.
ASU 2023-09 requires additional quantitative and qualitative income tax
disclosures to enable financial statements users to better assess how an
entity's operations and related tax risks and tax planning and operational
opportunities affect its tax rate and prospects for future cash flows. For
public business entities, ASU 2023-09 is effective for annual periods
beginning after December 15, 2024, which will be fiscal 2026 for us. The
adoption will result in disclosure changes only.
We do not expect the adoption of other accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not
require adoption until a future date to have a material impact on our
financial statements when they are adopted.
NOTE 3. MARKETABLE SECURITIES
The following table shows the major categories of our marketable securities
and their contractual maturities as of March 31, 2024:
Total <1 Year 1-3 Years 3-6 Years
Money market funds $ 9,842,796 $ 9,842,796 $ - $ -
Corporate bonds 42,706,080 11,917,779 22,425,929 8,362,372
Total $ 52,548,876 $ 21,760,575 $ 22,425,929 $ 8,362,372
Total marketable securities represent approximately 79% of our total assets as
of March 31, 2024. Marketable securities as of March 31, 2024, had remaining
maturities between six weeks and 61 months.
Money market funds are included on the balance sheets in "Cash and cash
equivalents." Corporate bonds are included on the balance sheets in
"Marketable securities, short term" and "Marketable securities, long term."
Accrued interest receivables were $
460,627
as of March 31, 2024, and $
425,372
as of March 31, 2023, and are included in the balance sheets in "Prepaid
expenses and other assets."
F-8
-------------------------------------------------------------------------------
Table of Contents
We monitor the credit ratings of our marketable securities at least quarterly
as reported by Standard & Poor's. The following table summarizes the fair
values of our marketable securities as of March 31, 2024, aggregated by credit
rating:
Credit Rating Fair Value
AAA $ 9,842,796
AA+ 2,192,943
AA 6,737,897
AA- 21,140,534
A+ 2,909,870
A 9,724,836
Total $ 52,548,876
The following table shows the estimated fair value of our marketable
securities, aggregated by fair value hierarchy inputs used in estimating their
fair values:
As of March 31, 2024 As of March 31, 2023
Level 1 Level 2 Total Level 1 Level 2 Total
Money market funds $ 9,842,796 $ - $ 9,842,796 $ 906,141 $ - $ 906,141
Corporate bonds - 42,706,080 42,706,080 - 51,638,142 51,638,142
Total $ 9,842,796 $ 42,706,080 $ 52,548,876 $ 906,141 $ 51,638,142 $ 52,544,283
Our available-for-sale securities as of March 31, 2024 and 2023, aggregated
into classes of securities, were as follows:
As of March As of March
31, 2024 31, 2023
Amortized Gross Gross Estimated Amortized Gross Gross Estimated
Cost Unrealized Unrealized Fair Cost Unrealized Unrealized Fair
Holding Holding Value Holding Holding Value
Gains Losses Gains Losses
Money market $ 9,842,796 $ - $ - $ 9,842,796 $ 906,141 $ - $ - $ 906,141
funds
Corporate 43,701,520 930 ( ) 42,706,080 53,191,981 1,007 ( ) 51,638,142
bonds 996,370 1,554,846
Total $ 53,544,316 $ 930 $ ( ) $ 52,548,876 $ 54,098,122 $ 1,007 $ ( ) $ 52,544,283
996,370 1,554,846
The following table shows the gross unrealized holding losses and estimated
fair value of our marketable securities for which an allowance for credit
losses has not been recorded, aggregated by category of securities and length
of time that individual securities had been in a continuous unrealized loss
position as of March 31, 2024 and 2023:
Less Than 12 Months 12 Months or Greater Total
Estimated Gross Estimated Gross Estimated Gross
Fair Unrealized Fair Unrealized Fair Unrealized
Value Holding Losses Value Holding Losses Value Holding Losses
As of March 31, 2024
Corporate bonds $ 3,154,764 $ ( ) $ 36,551,534 $ ( ) $ 39,706,298 $ ( )
4,902 991,468 996,370
Total $ 3,154,764 $ ( ) $ 36,551,534 $ ( ) $ 39,706,298 $ ( )
4,902 991,468 996,370
As of March 31, 2023
Corporate bonds $ 37,084,628 $ ( ) $ 13,294,817 $ ( ) $ 50,379,445 $ ( )
590,967 963,879 1,554,846
Total $ 37,084,628 $ ( ) $ 13,294,817 $ ( ) $ 50,379,445 $ ( )
590,967 963,879 1,554,846
None of the securities were impaired at acquisition, and subsequent declines
in fair value are attributable to interest rate increases. We do not intend to
sell, and it is not more likely than not that we will be required to sell,
these securities before recovery of their amortized cost basis. The issuers
continue to make timely interest payments on these securities. Because we
believe it is more likely than not we will recover the cost basis of our
investments, we did not record any impairment attributable to credit losses.
F-9
-------------------------------------------------------------------------------
Table of Contents
None of the marketable securities purchased during the period had experienced
more-than-insignificant deterioration in credit quality since its origination
and were therefore not considered "Purchased Financial Assets with Credit
Deterioration."
Unrealized losses on our marketable securities and their tax effects are as
follows:
Year Ended March 31,
2024 2023
Unrealized gain (loss) from marketable securities $ 558,399 $ ( )
1,146,618
Tax effects ( ) 250,880
122,178
Unrealized gain (loss) from marketable securities, net of tax $ 436,221 $ ( )
895,738
NOTE 4. ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES
The following table shows a roll forward of the allowance for accounts
receivable credit losses:
Allowance for credit losses as of March 31, 2023 $ 15,000
Additions during the year 212,440
Reversals during the year ( )
202,926
Specific accounts deemed uncollectible ( )
9,514
Allowance for credit losses as of March 31, 2024 $ 15,000
NOTE 5. INVENTORIES
Inventories are shown in the following table:
March 31,
2024 2023
Raw materials $ 1,982,657 $ 1,601,962
Work in process 2,641,085 3,781,894
Finished goods 2,534,843 1,033,154
Total inventories $ 7,158,585 $ 6,417,010
NOTE 6. STOCK-BASED COMPENSATION
Stock Option Plan
Our 2000 Stock Option Plan, as amended, provides for issuance to employees,
directors, and certain service providers of incentive stock options and
nonstatutory stock options. Generally, the options may be exercised at any
time prior to expiration, subject to vesting based on terms of employment. The
period ranges from immediate vesting to vesting in one year. The options have
exercisable lives of ten years from the date of grant and are generally not
eligible to vest early in the event of retirement, death, disability, or
change in control. Exercise prices are not less than fair market value of the
underlying Common Stock at the date the options are granted. Stock-based
compensation expense was $
141,936
in fiscal 2024 and $
59,657
in fiscal 2023.
Valuation assumptions
We use the
Black-Scholes-Merton option-pricing model
to determine the fair value of stock options. The following assumptions were
used to estimate the fair value of options granted:
Year Ended March 31,
2024 2023
Risk-free interest rate 4.2 0.9
% - % -
5.0 3.0
% %
Expected volatility 40 35
% - % -
42 39
% %
Expected life (years) 5.0 4.6
% %
Dividend yield 4.5 5.0
% - % -
5.0 5.5
% %
The determination of the fair value of the awards on the date of grant using
the Black-Scholes-Merton model is affected by our stock price as well as
assumptions of other variables, including projected stock option exercise
behaviors, risk-free interest rate, and expected volatility of our stock price
in future periods. Our estimates and assumptions affect the amounts reported
in the financial statements and accompanying notes.
Expected life
-------------------------------------------------------------------------------
We analyze historical exercise and termination data to estimate the expected
life assumption. We believe historical data currently represents the best
estimate of the expected life of a new option.
F-10
-------------------------------------------------------------------------------
Table of Contents
Risk-free interest rate
The risk-free rate is based on the yield of U.S. Treasury securities on the
grant date for maturities similar to the expected lives of the options.
Volatility
We use historical volatility to estimate the expected volatility of our common
stock.
Dividend yield
We assumed a 4.5% to 5% dividend yield for fiscal 2024 and 5.0% to 5.5% for
fiscal 2023 based on the dividend yield on the date the options were granted.
Tax effects of stock-based compensation
Stock-based compensation increased deferred tax assets by $29,934
for fiscal 2024 and reduced
deferred tax assets by $16,976 for fiscal 2023.
General stock option information
The following table summarizes the activity for all stock options outstanding
for the years ended March 31, 2024 and 2023:
2024 2023
Shares Weighted Shares Weighted
Average Average
Exercise Price Exercise Price
Options outstanding 34,500 $ 66.26 29,000 $ 69.52
at beginning of year
Granted 6,500 79.29 6,500 50.35
Exercised ( ) 59.85 ( )) 57.46
5,000 1,000
At March 36,000 $ 69.50 34,500 $ 66.26
31,
Options exercisable 33,500 $ 65.12 32,000 $ 63.60
at March 31,
Weighted average grant date fair value $ 22.15 $ 9.06
of options granted during the year
The following table summarizes additional information about stock options
outstanding and exercisable at March 31, 2024:
Options Outstanding Options Exercisable
Weighted Average Weighted Average Weighted Average
Options Remaining Contractual Exercise Price Aggregate Options Exercise Price
Outstanding Life (Years) Intrinsic Value Exercisable Aggregate
Intrinsic Value
36,000 5.96 $ 69.50 $ 764,355 33,500 $ 65.12 $ 764,355
The total fair value of options granted was $
143,943
in fiscal 2024 and $
58,900
in fiscal 2023. There was $
4,181
of unrecognized stock-based compensation as of March 31, 2024 related to
nonvested options, which we expect to recognize in the first quarter of fiscal
2025.
NOTE 7. INCOME TAXES
Income tax provisions for fiscal 2024 and 2023 consisted of the following:
Year Ended March 31,
2024 2023
Current taxes
Federal $ 4,145,804 $ 4,039,848
State 200,926 195,939
Deferred taxes
Federal ( ) 156,053
963,470
State ( ) 6,539
40,374
Income tax provision $ 3,342,886 $ 4,398,379
F-11
-------------------------------------------------------------------------------
Table of Contents
A reconciliation of income tax provisions at the U.S. statutory rate for
fiscal 2024 and 2023 is as follows:
Year Ended March 31,
2024 2023
Tax expense at U.S. Statutory rate $ 4,298,193 $ 5,689,294
State income taxes, net of Federal benefit 180,115 180,091
Research & development and manufacturing tax credits ( ) ( )
68,894 255,713
Tax effect of Foreign-derived intangible income deduction ( ) ( )
1,125,817 1,265,055
Other 59,289 49,762 )
Income tax provision $ 3,342,886 $ 4,398,379
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of our deferred tax assets and liabilities as of March 31, 2024 and 2023 were
as follows:
March 31,
2024 2023
Paid time off accrual $ 64,190 $ 52,525
Inventory reserve 47,042 47,042
Depreciation and amortization ( ) ( )
127,839 167,551
Stock-based compensation deductions 101,668 71,734
Unrealized loss on marketable securities 217,802 339,980
Section 174 R&D expense 930,946 -
UNICAP 263A inventory 202,339 204,424
Other 17,556 23,884
Deferred tax assets $ 1,453,704 $ 572,038
We had
no
unrecognized tax benefits as of March 31, 2024, and we do not expect any
significant unrecognized tax benefits within 12 months of the reporting date.
We recognize interest and penalties related to income tax matters in income
tax expense. As of March 31, 2024 we had no accrued interest related to
uncertain tax positions. Federal and State estimated taxes overpayment were
$31,250 as of March 31, 2024 and estimated taxes payable were $161,092 as of
March 31, 2023. The tax years 2020 through 2023
remain open to examination by the major taxing jurisdictions to which we are
subject.
NOTE 8. LEASES
We conduct our operations in a leased facility under a non-cancellable lease
expiring March 31, 2026. We have an option to extend the lease for an
additional five years at the market rent subject to certain terms and
conditions.
Our lease does not provide an implicit rate, so we used our incremental
borrowing rate to determine the present value of lease payments. Lease expense
is recognized on a straight-line basis over the lease term. Details of our
operating lease are as follows:
Year Ended March 31,
2024 2023
Operating lease cost $ 151,014 $ 151,014
Cash paid for amounts included in the measurement of lease
liabilities
Operating cash flows for leases $ 178,640 $ 75,168
Remaining lease term (years) 2 3
Discount rate 3.5 % 3.5 %
F-12
-------------------------------------------------------------------------------
Table of Contents
The following table presents the maturities of lease liabilities as of March
31, 2024:
Year Ending March 31, Operating
Lease Liabilities
2025 182,271
2026 184,995
Total lease payments 367,266
Imputed lease interest ( )
12,119
Total lease liabilities $ 355,147
NOTE 9. CONCENTRATIONS
The following table summarizes customers comprising 10% or more of revenue for
the two most recent fiscal years:
% of % of Accounts Receivable
Revenue
Year Ended March 31,
2024 2023 2024 2023
Customer A 23 22 21 19
% % % %
We do not currently believe the receivable balances from this customer
represents a significant credit risk based on our analysis of the likelihood
of default.
NOTE 10. STOCK REPURCHASE PROGRAM
On January 21, 2009 we announced that our Board of Directors authorized the
repurchase of up to $
2,500,000
of our Common Stock from time to time in open market, block, or privately
negotiated transactions. The timing and extent of any repurchases depends on
market conditions, the trading price of the company's stock, tax considerations,
and other factors, and subject to the restrictions relating to volume, price,
and timing under applicable law. On August 27, 2015, we announced that our
Board of Directors authorized up to $5,000,000 of additional repurchases. Our
repurchase program does not have an expiration date and does not obligate us
to purchase any shares. The Program may be modified or discontinued at any
time without notice.
We intend to finance any stock repurchases with cash provided by operating
activities or maturating marketable securities. We repurchased
264
shares of our Common Stock in fiscal 2023. The remaining authorization was $
3,520,369
as of March 31, 2024.
NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS
All of our employees are eligible to participate in our 401(k) savings plan
the first quarter after reaching age 18. Employees may contribute up to the
Internal Revenue Code maximum. We make matching contributions of
100
% of the first
3
% of participants' before-tax salary deferral contributions. Our matching
contributions were $
101,931
for fiscal 2024 and $
98,029
for fiscal 2023.
NOTE 12. SUBSEQUENT EVENTS
On
May 1, 2024
we announced that our Board had declared a quarterly cash dividend
of $
1.00
per share of Common Stock to be paid
May 31, 2024
to shareholders of record as of the close of business
May 13, 2024
.
F-13
-------------------------------------------------------------------------------
Table of Contents
EXHIBIT INDEX
Exhibit Description
#
23 Consent of Boulay PLLP.
31.1 Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).
31.2 Certification by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a).
32 Certification by Daniel A. Baker and Daniel Nelson pursuant to 18 U.S.C. Section 1350.
97 Clawback Policy.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
F-14
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated May 1, 2024, with respect to the financial
statements included in the Annual Report of NVE Corporation on Form 10-K for
the year ended March 31, 2024. We hereby consent to the incorporation by
reference of said report in the Registration Statement of NVE Corporation on
Form S-8 (File No. 333-65560).
/s/ Boulay PLLP
Boulay PLLP
Minneapolis, Minnesota
May 1, 2024
Exhibit 31.1
CERTIFICATION
I, Daniel A. Baker, certify that:
1. I have reviewed this Annual Report on Form 10-K of NVE Corporation;
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.
Date: May 1, 2024
/s/ DANIEL A. BAKER
Daniel A. Baker
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Daniel Nelson, certify that:
1. I have reviewed this Annual Report on Form 10-K of NVE Corporation;
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.
Date: May 1, 2024
/s/ DANIEL NELSON
Daniel Nelson
Principal Financial Officer
Exhibit 32
CERTIFICATION PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)
The undersigned certify pursuant to 18 U.S.C. Section 1350, that to the
undersigned's knowledge:
1. The accompanying Annual Report of NVE Corporation (the "Company") on Form
10-K for the year ended March 31, 2024, 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 Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: May 1, 2024
/s/ DANIEL A. BAKER
Daniel A. Baker
President and Chief Executive Officer
/s/ DANIEL NELSON
Daniel Nelson
Principal Financial 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.
Executive Officer Incentive-Based Compensation "Clawback" Policy
(as adopted by the NVE Corporation Board of Directors, October 16, 2023)
Effectivity
This Policy shall be effective when required by rules of the NASDAQ Stock
Market and shall be automatically revoked immediately if such rules are
rescinded or the Company is no longer listed on the NASDAQ or other stock
exchange requiring such a policy.
Triggering Events
This Policy requires recoupment ("Clawback") of "Incentive-Based Compensation"
that has been paid in error during the three completed fiscal years
immediately preceding the date on which the Company is required to prepare an
accounting restatement that corrects (1) errors that are material to
previously issued financial statements (a "Big R" restatement) or (2) errors
that are not material to previously issued financial statements but would
result in a material misstatement if the errors were left uncorrected in the
current report or the error correction was recognized in the current period (a
"little r" restatement). The "date on which the Company is required to prepare
an accounting restatement" is defined as the earlier of (i) the date the
Company's Board, a Board committee, or the officer or officers of the Company
authorized to take such action if board action is not required, concludes, or
reasonably should have concluded, that the Company is required to prepare an
accounting restatement, and (ii) the date a court, regulator, or other legally
authorized body directs the Company to prepare an accounting restatement.
Covered Executive Officers and Compensation
"Executive Officers" for purposes of this Policy will be determined using the
same definition as "officer" under Section 16 of the Securities Exchange Act
of 1934, and includes the President, Chief Executive Officer, Chief Financial
Officer, Principal Financial Officer, principal accounting officer (or if
there is no such accounting officer, the controller), any vice president in
charge of a principal business unit, division, or function, any other officer
who performs a policy-making function, or any other person who performs
similar policy-making functions for the Company. The Clawback applies to all
Incentive-Based Compensation received by a person (i) after beginning service
as an Executive Officer, (ii) who served as an Executive Officer at any time
during the performance period for the Incentive-Based Compensation subject to
recoupment, and (iii) while the Company has a class of securities listed on
the NASDAQ or other stock exchange requiring this policy.
Incentive-Based Compensation
"Incentive-Based Compensation" is defined as any compensation that is granted,
earned, or vested based wholly or in part on the attainment of Financial
Reporting Measures. "Financial Reporting Measures" for the purposes of this
Policy include any measures that are determined and presented in accordance
with the accounting principles used in preparing the Company's financial
statements, and any measures derived wholly or in part from such measures,
including non-GAAP financial measures such as stock price or Total Shareholder
Return ("TSR").
Determination of Erroneously Awarded Compensation
The amount subject to recoupment in connection with any accounting restatement
will be the amount of Incentive-Based Compensation received by a current or
former Executive Officer that exceeds the amount of Incentive-Based
Compensation that otherwise would have been received had it been determined
based on the restated amounts. If the amount of erroneously awarded
compensation is not subject to mathematical recalculation directly from the
information in an accounting restatement (e.g., if Incentive-Based
Compensation was measured based on stock price or TSR), the amount subject to
recoupment shall be based on a reasonable estimate of the
-------------------------------------------------------------------------------
effect of the accounting restatement on the measure (e.g., stock price or TSR)
on which the Incentive-Based Compensation was received, and the Company shall
maintain documentation of the determination of that reasonable estimate and
provide such documentation to the NASDAQ.
Making the Company Whole
In order to make the Company whole for the entire amount erroneously paid,
recoupment shall be determined on a pre-tax basis. Each Executive Officer is
required to reimburse the Company for any costs or expenses incurred by the
Company in recouping Incentive-Based Compensation from the Executive Officer
after the Company formally requests repayment.
Exceptions to Clawback Requirement
The Company shall not seek recoupment under this Policy if the Company's
Compensation Committee makes a determination that recovery would be
impracticable. For this purpose, recovery will only be deemed impracticable if
(i) the direct expense paid to a third party to assist in enforcing the policy
would exceed the amount to be recovered (and only after the Company has made a
reasonable attempt to recover the erroneously awarded compensation, documented
such reasonable attempts and provided such information to the NASDAQ), (ii)
recovery would violate a law in effect prior to the effectivity of this Policy
and only after obtaining an opinion from counsel acceptable to the NASDAQ that
recovery would result in such violation and such opinion is provided to the
NASDAQ, or (iii) recovery would likely cause a tax-qualified retirement plan
to fail to meet certain statutory requirements for tax exemption.
No Indemnification or Insurance
The Company shall not indemnify or insure any current or former Executive
Officer against the loss of erroneously awarded compensation.
{graphic omitted}
{graphic omitted}
{graphic omitted}
{graphic omitted}