Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

(Mark One)

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

For the quarterly period ended   September 30,December 31, 2022

or

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

Picture

NVE CORPORATION

(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.)

1140911409 Valley View Road, Eden Prairie, Minnesota

55344��

(Address of principal executive offices)

(Zip Code)

(952) (952) 829-9217 

(Registrant’s telephone number, including area code)

 

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 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes   No

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 Par Value – 4,830,826 shares outstanding as of October 14, 2022January 20, 2023


 


 

NVE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Balance Sheets

Statements of Income for the Quarters Ended September 30,December 31, 2022 and 2021

Statements of Comprehensive Income for the Quarters Ended September 30,December 31, 2022 and 2021

Statements of Income for the SixNine Months Ended September 30,December 31, 2022 and 2021

Statements of Comprehensive Income for the SixNine Months Ended September 30,December 31, 2022 and 2021

Statements of Shareholders’ Equity for the SixNine Months Ended September 30,December 31, 2022

Statements of Shareholders’ Equity for the SixNine Months Ended September 30,December 31, 2021

Statements of Cash Flows for the SixNine Months Ended September 30,December 31, 2022 and 2021

Notes to Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 4. Mine Safety Disclosures

Item 6. Exhibits

SIGNATURES

SIGNATURES


 

2

Table of Contents

 

PART IFINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

NVE CORPORATION

BALANCE SHEETS

 

(Unaudited)

September 30, 2022

 

March 31, 2022*

 

 

(Unaudited)

December 31, 2022

 

March 31, 2022*

 

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

 $3,583,539  $10,449,510 

 

$

2,029,714

 

 

$

10,449,510

 

Marketable securities, short-term

 10,326,647  20,839,683 

 

10,337,621

 

 

20,839,683

 

Accounts receivable, net of allowance for uncollectible accounts of $15,000

 5,860,414  4,704,829 

Accounts receivable, net of allowance for uncollectible accounts of $15,000

 

2,097,274

 

 

4,704,829

 

Inventories

 5,794,849  5,088,635 

 

6,459,227

 

 

5,088,635

 

Prepaid expenses and other assets

  600,913   420,520 

 

 

924,161

 

 

420,520

 

Total current assets

  26,166,362   41,503,177 

 

 

21,847,997

 

 

41,503,177

 

Fixed assets

 

 

Machinery and equipment

 9,603,049  9,739,244 

 

10,486,161

 

 

9,739,244

 

Leasehold improvements

  1,826,334   1,810,872 

 

 

1,926,334

 

 

1,810,872

 

 11,429,383  11,550,116 

 

12,412,495

 

11,550,116

 

Less accumulated depreciation and amortization

  10,990,224   10,943,731 

 

 

11,018,857

 

 

10,943,731

 

Net fixed assets

 439,159  606,385 

 

1,393,638

 

 

606,385

 

Deferred tax assets

 894,045  483,469 

 

862,424

 

 

483,469

 

Marketable securities, long-term

 39,514,685  24,314,211 

 

41,167,242

 

 

24,314,211

 

Right-of-use asset – operating lease

  494,070   560,250 

 

 

459,032

 

 

560,250

 

Total assets

 $67,508,321  $67,467,492 

 

$

65,730,333

 

$

67,467,492

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities

 

 

Accounts payable

 $399,263  $943,535 

 

$

470,929

 

 

$

943,535

 

Accrued payroll and other

 2,861,151  1,356,689 

 

1,245,390

 

 

1,356,689

 

Operating lease

  157,830   156,121 

 

 

161,271

 

 

156,121

 

Total current liabilities

 3,418,244  2,456,345 

 

1,877,590

 

 

2,456,345

 

Operating lease

  374,941   446,018 

 

 

397,303

 

 

446,018

 

Total liabilities

 3,793,185  2,902,363 

 

2,274,893

 

2,902,363

 

 

 

Shareholders’ equity

 

 

Common stock, $0.01 par value, 6,000,000 shares authorized; 4,830,826 issued and outstanding as of September 30 and March 31, 2022

 48,308  48,308 

Common stock, $0.01 par value, 6,000,000 shares authorized; 4,830,826 issued and outstanding as of December 31 and March 31, 2022

 

48,308

 

 

48,308

 

Additional paid-in capital

 19,303,570  19,256,485 

 

19,310,703

 

 

19,256,485

 

Accumulated other comprehensive (loss)

 (1,784,035) (318,120)

Accumulated other comprehensive loss

 

(1,451,362

)

 

(318,120

)

Retained earnings

  46,147,293   45,578,456 

 

 

45,547,791

 

 

45,578,456

 

Total shareholders’ equity

  63,715,136   64,565,129 

 

 

63,455,440

 

 

64,565,129

 

Total liabilities and shareholders’ equity

 $67,508,321  $67,467,492 

 

$

65,730,333

 

$

67,467,492

 

 

*The March 31, 2022 Balance Sheet is derived from the audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

 

See accompanying notes.

 

3

Table of Contents

 

NVE CORPORATION

STATEMENTS OF INCOME

(Unaudited)

 

 

Quarter Ended September 30

 

 

Quarter Ended December 31,

 

 

2022

 

2021

 

 

2022

 

2021

 

Revenue

    

 

 

 

 

Product sales

 $10,514,539  $6,630,012 

 

$

7,200,385

 

 

$

5,916,790

 

Contract research and development

  203,285   193,450 

 

 

201,293

 

 

374,019

 

Total revenue

 10,717,824  6,823,462 

 

7,401,678

 

 

6,290,809

 

Cost of sales

  2,402,781   1,544,134 

 

 

1,478,372

 

 

1,385,006

 

Gross profit

 8,315,043  5,279,328 

 

5,923,306

 

 

4,905,803

 

Expenses

    

 

 

 

 

Research and development

 669,978  707,997 

 

700,609

 

 

596,492

 

Selling, general, and administrative

  435,625   483,116 

 

 

403,449

 

 

272,159

 

Total expenses

  1,105,603   1,191,113 

 

 

1,104,058

 

 

868,651

 

Income from operations

 7,209,440  4,088,215 

 

4,819,248

 

 

4,037,152

 

Interest income

  351,375   294,858 

 

 

406,092

 

 

283,940

 

Income before taxes

 7,560,815  4,383,073 

 

5,225,340

 

 

4,321,092

 

Provision for income taxes

  1,470,442   736,566 

 

 

994,016

 

 

855,685

 

Net income

 $6,090,373  $3,646,507 

 

$

4,231,324

 

$

3,465,407

 

Net income per share – basic

 $1.26  $0.75 

 

$

0.88

 

$

0.72

 

Net income per share – diluted

 $1.26  $0.75 

 

$

0.88

 

$

0.72

 

Cash dividends declared per common share

 $1.00  $1.00 

 

$

1.00

 

$

1.00

 

Weighted average shares outstanding

    

 

 

 

 

Basic

 4,830,826  4,833,232 

 

4,830,826

 

 

4,833,604

 

Diluted

 4,830,956  4,836,603 

 

4,832,368

 

 

4,835,770

 

 

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Quarter Ended September 30

 

 

Quarter Ended December 31,

 

 

2022

 

2021

 

 

2022

 

2021

 

Net income

 $6,090,373  $3,646,507 

 

$

4,231,324

 

 

$

3,465,407

 

Unrealized loss from marketable securities, net of tax

  (1,127,362)  (197,034)

Unrealized gain (loss) from marketable securities, net of tax

 

 

332,673

 

 

(380,161

)

Comprehensive income

 $4,963,011  $3,449,473 

 

$

4,563,997

 

$

3,085,246

 

 

See accompanying notes.

 

4


Table of Contents

NVE CORPORATION

STATEMENTS OF INCOME

(Unaudited)

 

Six Months Ended September 30

Nine Months Ended December 31,

2022

 

2021

2022

 

2021

Revenue

 

 

Product sales

$17,587,500 $13,583,778

$

24,787,885

 

$

19,500,567

Contract research and development

 466,731  392,847

 

668,024

 

 

766,866

Total revenue

 18,054,231 13,976,625

 

25,455,909

 

20,267,433

Cost of sales

 4,054,628  3,313,715

 

5,533,000

 

 

4,698,720

Gross profit

 13,999,603 10,662,910

 

19,922,909

 

15,568,713

Expenses

 

 

Research and development

 1,271,896 1,516,139

 

1,972,505

 

2,112,630

Selling, general, and administrative

 806,946  949,734

 

1,210,395

 

 

1,221,893

Total expenses

 2,078,842  2,465,873

 

3,182,900

 

 

3,334,523

Income from operations

 11,920,761 8,197,037

 

16,740,009

 

12,234,190

Interest income

 634,436  584,578

 

1,040,528

 

 

868,519

Income before taxes

 12,555,197 8,781,615

 

17,780,537

 

13,102,709

Provision for income taxes

 2,324,707  1,555,542

 

3,318,723

 

 

2,411,228

Net income

$10,230,490 $7,226,073

$

14,461,814

 

$

10,691,481

Net income per share – basic

$2.12 $1.50

$

2.99

 

$

2.21

Net income per share – diluted

$2.12 $1.49

$

2.99

 

$

2.21

Cash dividends declared per common share

$2.00 $2.00

$

3.00

 

$

3.00

Weighted average shares outstanding

 

 

Basic

 4,830,826 4,833,232

 

4,830,826

 

4,833,356

Diluted

   4,836,621

 

4,831,168

 

4,835,781

 

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Six Months Ended September 30

 

 

Nine Months Ended December 31,

 

 

2022

 

2021

 

 

2022

 

2021

 

Net income

 $10,230,490  $7,226,073 

 

$

14,461,814

 

 

$

10,691,481

 

Unrealized loss from marketable securities, net of tax

  (1,465,915)  (287,199)

 

 

(1,133,242

)

 

 

(667,361

)

Comprehensive income

 $8,764,575  $6,938,874 

 

$

13,328,572

 

$

10,024,120

 

 

See accompanying notes.

 

5


 

Table of Contents

NVE CORPORATION

STATEMENTS OF SHAREHOLDERS EQUITY

(Unaudited)

 

             

Accumulated

        

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

         

Additional

 

Other

        

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

    

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

 

 

 

 

 

Shares

  

Amount

  

Capital

  

Income (Loss)

  

Earnings

  

Total

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Total

 

Balance as of March 31, 2022

 4,830,826  $48,308  $19,256,485  $(318,120) $45,578,456  $64,565,129 

 

4,830,826

 

$

48,308

 

$

19,256,485

 

$

(318,120

)

 

$

45,578,456

 

$

64,565,129

 

Comprehensive income: 

 

Unrealized loss on marketable securities, net of tax     (338,553)  (338,553)

 

(338,553

)

 

(338,553

)

Net income      4,140,116  4,140,116 

 

4,140,116

 

 

4,140,116

 

Total comprehensive income        3,801,563 

 

 

3,801,563

 

Stock-based compensation    7,134   7,134 

 

7,134

 

7,134

 

Cash dividends declared ($1.00 per share of common stock)           (4,830,826)  (4,830,826)

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

(4,830,826

)

 

 

(4,830,826

)

Balance as of June 30, 2022  4,830,826  48,308  19,263,619  (656,673)  44,887,746  63,543,000 

 

 

4,830,826

 

 

48,308

 

 

19,263,619

 

 

(656,673

)

 

 

44,887,746

 

 

63,543,000

 

Comprehensive income:

 

 

Unrealized loss on marketable securities, net of tax

      (1,127,362

)

   (1,127,362

)

 

(1,127,362

)

 

 

 

(1,127,362

)

Net income

       6,090,373   6,090,373 

 

 

 

 

6,090,373

 

6,090,373

 

Total comprehensive income

         4,963,011 

 

4,963,011

 

Stock-based compensation

     39,951     39,951 

 

39,951

 

39,951

 

Cash dividends declared ($1.00 per share of common stock)

               (4,830,826

)

  (4,830,826

)

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,830,826

)

 

 

(4,830,826

)

Balance as of September 30, 2022

  4,830,826  $48,308  $19,303,570  $(1,784,035) $46,147,293  $63,715,136 

 

 

4,830,826

 

 

 

48,308

 

 

19,303,570

 

 

(1,784,035

)

 

 

46,147,293

 

 

63,715,136

 

Comprehensive income:

 

Unrealized gain on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

332,673

 

 

 

 

 

 

332,673

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,231,324

 

 

 

4,231,324

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

4,563,997

 

Stock-based compensation

 

 

 

 

 

 

 

7,133

 

 

 

 

 

 

 

 

7,133

 

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,830,826

)

 

 

(4,830,826

)

Balance as of December 31, 2022

 

 

4,830,826

 

 

$

48,308

 

 

$

19,310,703

 

 

$

(1,451,362

)

 

$

45,547,791

 

 

$

63,455,440

 

 

See accompanying notes. 

 

6

Table of Contents

 

NVE CORPORATION

STATEMENTS OF SHAREHOLDERS EQUITY

(Unaudited)

 

             

Accumulated

        

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

         

Additional

 

Other

        

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

 

 

 

 

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

    

 

Common Stock

 

Paid-In

 

Comprehensive

 

Retained

 

 

 

 

 

Shares

  

Amount

  

Capital

  

Income (Loss)

  

Earnings

  

Total

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Total

 

Balance as of March 31, 2021

 4,833,232  $48,332  $19,338,127  $1,101,119  $50,404,364  $70,891,942 

 

4,833,232

 

$

48,332

 

$

19,338,127

 

$

1,101,119

 

$

50,404,364

 

$

70,891,942

 

Comprehensive income:

 

 

Unrealized loss on marketable securities, net of tax

       (90,165

)

    (90,165

)

 

 

 

 

 

 

 

 

 

(90,165

)

 

 

 

 

 

(90,165

)

Net income

         3,579,566   3,579,566 

 

 

 

 

 

 

 

 

 

 

 

3,579,566

 

 

 

3,579,566

 

Total comprehensive income

             3,489,401 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,489,401

 

Stock-based compensation      7,238       7,238 

 

 

 

 

 

 

 

7,238

 

 

 

 

 

 

 

 

7,238

 

Cash dividends declared ($1.00 per share of common stock)                (4,833,232)  (4,833,232)

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,833,232

)

 

 

(4,833,232

)

Balance as of June 30, 2021  4,833,232  48,332   19,345,365   1,010,954  49,150,698   69,555,349 

 

 

4,833,232

 

 

48,332

 

 

 

19,345,365

 

 

 

1,010,954

 

 

49,150,698

 

 

 

69,555,349

 

Comprehensive income:                

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities, net of tax       (197,034)   (197,034)

 

 

 

 

 

 

 

 

 

 

(197,034

)

 

 

 

 

 

(197,034

)

Net income        3,646,507   3,646,507 

 

 

 

 

 

 

 

 

 

 

 

 

3,646,507 

 

 

 

3,646,507

 

Total comprehensive income           3,449,473 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,449,473

 

Stock-based compensation

     56,999     56,999 

 

 

 

 

 

 

 

56,999

 

 

 

 

 

 

 

 

56,999

 

Cash dividends declared ($1.00 per share of common stock)

               (4,833,232

)

  (4,833,232

)

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,833,232

)

 

 

(4,833,232

)

Balance as of September 30, 2021

  4,833,232  $48,332  $19,402,364  $813,920  $47,963,973  $68,228,589 

 

 

4,833,232

 

 

 

48,332

 

 

 

19,402,364

 

 

 

813,920

 

 

 

47,963,973

 

 

 

68,228,589

 

Exercise of stock options

 

482

 

5

 

 

 

(5

)

 

 

 

 

 

 

 

 

-

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on marketable securities, net of tax

 

 

 

 

 

 

 

 

 

 

(380,161

)

 

 

 

 

 

(380,161

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

3,465,407

 

 

 

3,465,407

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,085,246

 

Stock-based compensation

 

 

 

 

 

 

 

8,799

 

 

 

 

 

 

 

 

8,799

 

Cash dividends declared ($1.00 per share of common stock)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,833,232

)

 

 

(4,833,232

)

Balance as of December 31, 2021

 

 

4,833,714

 

 

$

48,337

 

 

$

19,411,158

 

 

$

433,759

 

 

$

46,596,148

 

 

$

66,489,402

 

 

See accompanying notes. 

 

7

Table of Contents

 

NVE CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six Months Ended September 30

 

 

Nine Months Ended December 31,

 

 

2022

  

2021

 

 

2022

 

 

2021

 

OPERATING ACTIVITIES

 

 

Net income

 $10,230,490  $7,226,073 

 

$

14,461,814

 

 

$

10,691,481

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

 158,851  271,207 

 

 

187,781

 

 

 

358,828

 

Stock-based compensation

 47,085  64,237 

 

 

54,218

 

 

 

73,036

 

Deferred income taxes

 -  16,539 

 

 

(61,972

 

 

319

 

Changes in operating assets and liabilities:

 

 

Accounts receivable

 (1,155,585) (911,821)

 

 

2,607,555

 

 

 

(1,073,922

)

Inventories

 (706,214) 81,994 

 

 

(1,370,592

)

 

 

(466,898

)

Prepaid expenses and other assets

 (114,213) (298,099)

 

 

(502,423

)

 

 

(435,067

)

Accounts payable and accrued expenses

  890,822   172,054 

 

 

(627,470

 

 

(49,447

)

Net cash provided by operating activities

  9,351,238   6,458,196 

 

 

14,748,911

 

 

 

9,098,330

 

 

 

INVESTING ACTIVITIES

 

 

 

Purchases of fixed assets

 (24,500) (73,916)

 

 

(907,612

)

 

 

(58,317

)

Purchases of marketable securities

  (25,381,057)  - 

 

 

(26,618,617

)

 

 

-

 

Proceeds from maturities of marketable securities  18,750,000   4,000,000 

 

 

18,750,000

 

 

 

4,000,000

 

Receipt of tenant improvement allowance  100,000   - 

 

 

100,000

 

 

 

-

 

Net cash provided (used) by investing activities

  (6,555,557)   3,926,084 

 

 

(8,676,229)

 

 

 

3,941,683

 

 

 

FINANCING ACTIVITIES

 

 

Payment of dividends to shareholders

  (9,661,652)  (9,666,464)

 

 

(14,492,478

)

 

 

(14,499,696

)

Cash used in financing activities

  (9,661,652)  (9,666,464)

 

 

(14,492,478

)

 

 

(14,499,696

)

(Decrease) increase in cash and cash equivalents

 (6,865,971) 717,816 

Decrease in cash and cash equivalents

 

 

(8,419,796

)

 

 

(1,459,683

)

 

 

Cash and cash equivalents at beginning of period

  10,449,510   10,427,340 

 

 

10,449,510

 

 

 

10,427,340

 

 

 

Cash and cash equivalents at end of period

 $3,583,539  $11,145,156 

 

$

2,029,714

 

 

$

8,967,657

 

 

 

Supplemental disclosures of cash flow information:

 

 

Cash paid during the period for income taxes

 $1,281,629  $1,760,000 

 

$

4,130,278

 

 

$

2,490,000

 

 

See accompanying notes. 

 

8

Table of Contents

 

NVE CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

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. 

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements of NVE Corporation are prepared consistent with accounting principles generally accepted in the United States and in accordance with Securities and Exchange Commission rules and regulations. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements. Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and it is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and the notes included in our latest annual financial statements included in our Annual Report on Form 10-K10-K for the fiscal year ended March 31, 2022. The results of operations for the quarter and sixnine months ended September 30,December 31, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2023.

 

Significant accounting policies

A description of our significant accounting policies is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K10-K for the year ended March 31, 2022. As of September 30,December 31, 2022, there were no changes to our significant accounting policies.

NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS

Recently Adopted Accounting Standard

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.2021-04, 2021-04, Earnings Per Share (Topic 260)260), Debt—Modifications and Extinguishments (Subtopic 470-50)470-50), Compensation—Stock Compensation (Topic 718)718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-042021-04 addresses issuers’ accounting for certain modifications or exchanges of freestanding equity-classified written call options. We adopted ASU 2021-042021-04 beginning with the quarter ended June 30,2022. The adoption had no material impact on our financial statements.
 

New Accounting Standard Not Yet Adopted

In June 2016, the FASB issued ASU No.2016-13, 2016-13, Financial Instruments-Credit Losses (Topic 326)326), Measurement of Credit Losses on Financial Statements. ASU 2016-132016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis 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, 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, 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13.2016-13. In November 2019 the FASB issued ASU No.2019-10, 2019-10, Financial InstrumentsCredit Losses (Topic 326)326), Derivatives and Hedging (Topic 815)815), and Leases (Topic 842)842): Effective Dates, and in February 2020 the FASB issued ASU No.2020-02, 2020-02, Financial InstrumentsCredit Losses (Topic 326)326) and Leases (Topic 842)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, 2016-02, Leases (Topic 842)842), both of which delay the effective date of ASU 2016-132016-13 by three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU No.2020-03, 2020-03, Codification Improvements to Financial Instruments; which modifies the measurement of expected credit losses of certain financial instruments. In accordance with ASU 2019-102019-10 and ASU 2020-02,2020-02, ASU 2016-132016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15,2022 and interim periods within those fiscal years, which will be fiscal 2024 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-132016-13 on our financial statements.

 


Table of Contents

NOTE 4. NET INCOME PER SHARE

Net income per basic share is computed based on the weighted-average number of common shares issued and outstanding during each period. Net income per diluted share amounts assume exercise of all stock options. The following tables show the components of diluted shares:

 

Quarter Ended September 30

Quarter Ended December 31,

2022

 

2021

2022

 

2021

Weighted average common shares outstanding – basic

4,830,826 4,833,232

4,830,826

 

4,833,604

Dilutive effect of stock options

130 3,371

1,542

 

2,166

Shares used in computing net income per share – diluted

4,830,956 4,836,603

4,832,368

 

4,835,770

Six Months Ended September 30

Nine Months Ended December 31,

2022 2021

2022

 

2021

Weighted average common shares outstanding – basic4,830,826 4,833,232

4,830,826

 

4,833,356

Dilutive effect of stock options101 3,389

342

 

2,425

Shares used in computing net income per share – diluted4,830,927 4,836,621

4,831,168

 

4,835,781

 

9

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS

Our corporate bonds and money market funds are classified as available-for-sale securities and carried at estimated fair value. Unrealized holding gains and losses are included in accumulated other comprehensive income (loss) in the statement of shareholders’ equity. Corporate bonds with remaining maturities less than one year are classified as short-term, and those with remaining maturities greater than one year 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. Gains and losses on marketable security transactions are reported on the specific-identification method.

 

Contractual maturities of available-for-sale securities as of September 30,December 31, 2022 are as follows:

 

Total

Total

 

<1 Year

 

1–3 Years

 

3–7 Years

 

Total

 

<1 Year

 

1–3 Years

 

3–7 Years

 

$51,598,609 $12,083,924 $24,387,794 $15,126,891 

52,020,382

 

$

10,853,140

 

$

25,270,655

 

$

15,896,587

 

 

Total available-for-sale securities represented approximately 76%79% of our total assets.assets as of December 31, 2022. Marketable securities as of September 30,December 31, 2022 had remaining maturities between 14 weekssix days and 7976 months.

 

Generally accepted accounting principles establish a framework for measuring fair value, provide a definition of fair value, and prescribe required disclosures about fair-value measurements. Generally accepted accounting principles define fair value as the price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Generally accepted accounting principles utilize a valuation hierarchy for disclosure of fair value measurements. The categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The categories within the valuation hierarchy are described as follows:

Level 1 – Financial instruments with quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Financial instruments with quoted prices in active markets for similar assets or liabilities. Level 2 fair value measurements are determined using either prices for similar instruments or inputs that are either directly or indirectly observable, such as interest rates.

 

Level 3 – Inputs to the fair value measurement are unobservable inputs or valuation techniques.

 

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.”

 


Table of Contents

The following table shows the estimated fair value of assets that were accounted for at fair value on a recurring basis:

 

 

As of September 30, 2022

 

As of March 31, 2022

 

As of December 31, 2022

 

As of March 31, 2022

 

Level 1

 

Level 2

 

Total

 

Level 1

 

Level 2

 

Total

 

Level 1

 

Level 2

 

Total

 

Level 1

 

Level 2

 

Total

Money market funds

 $1,757,277  $-  $1,757,277  $6,756,993  $-  $6,756,993

 

$

515,519

 

 

$

-

 

 

$

515,519

 

 

$

6,756,993

 

 

$

-

 

 

$

6,756,993

Corporate bonds

  -   49,841,332   49,841,332   -   45,153,894   45,153,894

 

 

-

 

 

51,504,863

 

 

51,504,863

 

 

-

 

 

45,153,894

 

 

45,153,894

Total

 $1,757,277  $49,841,332  $51,598,609  $6,756,993  $45,153,894  $51,910,887

 

$

515,519

 

$

51,504,863

 

$

52,020,382

 

$

6,756,993

 

$

45,153,894

 

$

51,910,887

 

Our available-for-sale securities as of September 30 December 31 and March 31, 2022, aggregated into classes of securities, were as follows:

 

 

As of September 30, 2022

 

As of March 31, 2022

 

As of December 31, 2022

 

As of March 31, 2022

 

Amortized

Cost

 

Gross

Unrealized

Holding

Gains

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Amortized

Cost

 

Gross

Unrealized

Holding

Gains

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Amortized

Cost

 

Gross

Unrealized

Holding

Gains

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Amortized

Cost

 

Gross

Unrealized

Holding

Gains

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

Money market funds

 $1,757,277  $-  $-  $1,757,277  $6,756,993  $-  $-  $6,756,993

 

$

515,519

 

 

$

-

 

 

$

-

 

 

$

515,519

 

 

$

6,756,993

 

 

$

-

 

 

$

-

 

 

$

6,756,993

Corporate bonds

  52,125,043   -   (2,283,711)  49,841,332   45,561,114   230,085   (637,305

)

  45,153,894

 

 

53,362,727

 

 

372

 

 

(1,858,236

)

 

 

51,504,863

 

 

45,561,114

 

 

230,085

 

 

(637,305

)

 

 

45,153,894

Total

 $53,882,320  $-  $(2,283,711) $51,598,609  $52,318,107  $230,085  $(637,305

)

 $51,910,887

 

$

53,878,246

 

$

372

 

$

(1,858,236

)

 

$

52,020,382

 

$

52,318,107

 

$

230,085

 

$

(637,305

)

 

$

51,910,887

 

10

The following table shows the gross unrealized holding losses and fair value of our available-for-sale securities with unrealized holding losses, aggregated by class of securities and length of time that individual securities had been in a continuous unrealized loss position as of September 30 December 31 and March 31,2022.

 

 

Less Than 12 Months

 

12 Months or Greater

 

Total

 

 

Less Than 12 Months

 

12 Months or Greater

 

Total

 

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

Estimated

Fair

Value

 

Gross

Unrealized

Holding

Losses

 

 

 

As of September 30, 2022

            

As of December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 $40,510,241  $(1,327,302) $9,331,091  $(956,409) $49,841,332  $(2,283,711)

 

$

38,850,214

 

$

 (1,014,674

)

 

$

9,410,692

 

$

(843,562

)

 

$

48,260,906

 

$

(1,858,236

)

Total

 $40,510,241  $(1,327,302) $9,331,091  $(956,409) $49,841,332  $(2,283,711)

 

$

38,850,214

 

$

(1,014,674

)

 

$

9,410,692

 

$

(843,562

)

 

$

48,260,906

 

$

(1,858,236

)

 

 

As of March 31, 2022

            

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 $6,306,750  $(23,727

)

 $9,738,338  $(613,578) $16,045,088  $(637,305

)

 

$

6,306,750

 

$

(23,727

)

 

$

9,738,338

 

$

(613,578

)

 

$

16,045,088

 

$

(637,305

)

Total

 $6,306,750  $(23,727

)

 $9,738,338  $(613,578) $16,045,088  $(637,305

)

 

$

6,306,750

 

$

(23,727

)

 

$

9,738,338

 

$

(613,578

)

 

$

16,045,088

 

$

(637,305

)

 

None of the securities were impaired at acquisition, and subsequent declines in fair value are not attributed to declines in credit quality. When evaluating for impairment we assess indicators that include, but are not limited to, earnings performance, changes in underlying credit ratings, market conditions, bona fide offers to purchase or sell, and ability to hold until maturity. Because we believe it is more likely than not we will recover the cost basis of our investments, we did not consider any of our marketable securities to be impaired as of September 30,December 31, 2022.

NOTE 6. INVENTORIES

Inventories are shown in the following table:

 

 September 30, 2022  March 31, 2022

 

December 31, 2022

      

 

March 31, 2022

Raw materials

$1,324,358 $987,062

$

1,340,276

 

$

987,062

Work in process

 3,829,498 3,355,838

 

4,153,063

 

3,355,838

Finished goods

 640,993  745,735

 

965,888

 

 

745,735

Total inventories

$5,794,849 $5,088,635

$

6,459,227

 

$

5,088,635


Table of Contents

NOTE 7. STOCK-BASED COMPENSATION

Stock-based compensation expense was $39,951$7,133 for the secondthird quarter of fiscal 2023, $56,999 $8,799 for the secondthird quarter of fiscal 2022, $47,085 $54,218 for the firstsix nine months of fiscal 2023, and $64,237$73,036 for the firstsix nine months of fiscal 2022. We calculate the share-based compensation expense using the Black-Scholes standard option-pricing model.

NOTE 8. INCOME TAXES

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. FederalAs of December 31, 2022, federal and state income taxes payable asestimated tax overpayments of September 30,2022 of approximately $1,457,000 are$291,000 were included in accrued expenses.prepaid assets.

 

We had no unrecognized tax benefits as of September 30,December 31, 2022, 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 September 30,December 31, 2022 we had no accrued interest related to uncertain tax positions. The tax years 2018 through 2022 remain open to examination by the major taxing jurisdictions to which we are subject.

 

11

NOTE 9. LEASES

We conduct our operations in a leased facility under a non-cancellable lease expiring March 31, 2026. 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. Variable lease costs consist primarily of common area maintenance and real estate taxes which are paid based on actual costs incurred by the lessor. Details of our operating lease are as follows:

 

Quarter Ended September 30, 2022  Six Months Ended September 30, 2022

Quarter Ended December 31, 2022 

 

Nine Months Ended December 31, 2022

Operating lease cost$42,515 $85,031 

$

4,419

 

$

89,450

 

Variable lease cost 30,126  61,315 

 

33,460

 

 

94,775

 

Total$72,641 $146,346 

$

37,879

 

$

184,225

 

     

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities     

 

 

 

 

 

Operating cash flows for leases$42,723 87,156 

$

43,578

 

130,735

 

Remaining lease term42 months   

39 months

 

 

 

Discount rate 3.5%   

 

3.5

%

 

 

 

 

The following table presents the maturities of lease liabilities as of September 30,December 31, 2022:

 

Year Ending March 31Operating Leases 
2023 78,487 
2024 159,592 
2025 163,224 
2026 165,947 
Total lease payments 567,250 
Imputed lease interest (34,479)
Total lease liabilities$532,771 

As of December 31, 2022

Operating Leases

 

Fiscal 2023

 

44,433

 

Fiscal 2024

 

178,640

 

Fiscal 2025

 

182,271

 

Fiscal 2026

 

184,995

 

Total lease payments

 

590,339

 

Imputed lease interest

 

(31,765

)

Total lease liabilities

$

558,574

 

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, 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. The remaining authorization was $3,598,519 as of September 30,December 31, 2022. We did not repurchase any of our Common Stock during the firstsix nine months of fiscal 2023.

 


Table of Contents

NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS

All of our employees are eligible to participate in our 401(k)401(k) savings plan the first quarter after reaching age 21. Employees may contribute up to the Internal Revenue Code maximum. We make matching contributions of 100% of the first 3% of participants’ salary deferral contributions. Our matching contributions were $23,751 for$21,484 for the secondthird quarter of fiscal 2023, $26,831 $21,579 for the secondthird quarter of fiscal 2022, $52,177 $73,661 for the firstsix nine months of fiscal 2023, and $55,415$76,995 for the firstsix nine months of fiscal 2022.

NOTE 12. SUBSEQUENT EVENTS

On October 19, 2022 January 25, 2023 we announced that our Board of Directors had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid November 30, 2022February 28, 2023 to shareholders of record as of the close of business October 31, 2022.January 30, 2023.

 

12

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-looking statements

Some of the statements made in this Report or in 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 the terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on 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, our dependence on critical suppliers and packaging vendors, 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 in the documents incorporated by reference in this Report.

 

Further information regarding our risks and uncertainties are contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2022.2022 as updated in Item 1A of this report.

 

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.

 

Critical accounting policies

A description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2022. As of September 30,December 31, 2022 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

 

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Quarter ended September 30,December 31, 2022 compared to quarter ended September 30,December 31, 2021

The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

 

 

Percentage of Revenue

Quarter Ended September 30

  

Quarter-

to-Quarter

 
 

2022

  

2021

  

Change

 

Revenue

        

Product sales

 98.1

%

 97.2

%

 58.6

%

Contract research and development

1.9

%

 2.8

%

  5.1

%

Total revenue

100.0

%

 100.0

%

 57.1

%

Cost of sales

 22.4

%

  22.6

%

  55.6

%

Gross profit

 77.6

%

  77.4

%

 57.5

%

Expenses

        

Research and development

6.2

%

 10.4

%

  (5.4)

%

Selling, general, and administrative

 4.1

%

  7.1

%

  (9.8)

%

Total expenses

 10.3

%

  17.5

%

  (7.2)

%

Income from operations

 67.3

%

 59.9

%

 76.3

%

Interest income

 3.2

%

  4.3

%

 19.2

%

Income before taxes

70.5

%

  64.2

%

 72.5

%

Provision for income taxes

 13.7

%

  10.8

%

 99.6

%

Net income

 56.8

%

 53.4

%

 67.0

%

 

Percentage of Revenue

Quarter Ended December 31,

 

 

Quarter-

to-Quarter

 

 

2022

 

 

2021

 

 

Change

 

Revenue

 

 

 

 

 

 

 

 

Product sales

97.3

%

 

94.1

%

 

21.7

%

Contract research and development

2.7

%

 

5.9

%

 

(46.2)

%

Total revenue

100.0

%

 

100.0

%

 

17.7

%

Cost of sales

20.0

%

 

 22.0

%

 

6.7

%

Gross profit

80.0

%

 

 78.0

%

 

20.7

%

Expenses

 

 

 

 

 

 

 

 

Research and development

9.5

%

 

9.5

%

 

17.5

%

Selling, general, and administrative

5.4

%

 

 4.3

%

 

48.2

%

Total expenses

14.9

%

 

 13.8

%

 

27.1

%

Income from operations

65.1

%

 

64.2

%

 

19.4

%

Interest income

5.5

%

 

 4.5

%

 

43.0

%

Income before taxes

70.6

%

 

 68.7

%

 

20.9

%

Provision for income taxes

13.4

%

 

 13.6

%

 

16.2

%

Net income

57.2

%

 

55.1

%

 

22.1

%

 

Total revenue for the quarter ended September 30,December 31, 2022 (the secondthird quarter of fiscal 2023) increased 57%18% compared to the quarter ended September 30,December 31, 2021 (the secondthird quarter of fiscal 2022). The increase was due to a 59%22% increase in product sales, andpartially offset by a 5% increase46% decrease in contract research and development revenue. The increase in product sales was primarily due to increased purchases by existing customers and new customers. Sales increased in most of our markets and product lines. The increasedecrease in contract research and development revenue was due to newthe completion of certain contracts.

Gross profit as a percentage of revenue increased to 80% for the third quarter of fiscal 2023 from 78% for the third quarter of fiscal 2022. The increase was primarily due to increased prices and economies of scale due to increased revenue, partially offset by increased costs.

 

Total expenses decreased 7%increased 27% for the secondthird quarter of fiscal 2023 compared to the secondthird quarter of fiscal 2022 due to a 5% decreasean 18% increase in research and development expense and a 10% decrease48% increase in selling, general, and administrative expense. The decreasesincreases in expenses were primarily due to the reallocation of resources to revenue-generating activities.increased employee compensation expenses and increased staffing.

 

Interest income for the secondthird quarter of fiscal 2023 increased 19%43% due to an increase in our available-for-sale securities and an increase in their average interest rate.

 

The 67%22% increase in net income in the secondthird quarter of fiscal 2023 compared to the prior-year quarter was primarily due to increased revenue and decreasedincreased interest income, partially offset by increased expenses.

 

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SixNine months ended September 30,December 31, 2022 compared to sixnine months ended September 30,December 31, 2021

The table shown below summarizes the percentage of revenue and period-to-period changes for various items:

 

Percentage of Revenue

Six Months Ended September 30

  

Period-

to-Period

 

Percentage of Revenue

Nine Months Ended December 31

,

 

Period-

to-Period

 

2022

  

2021

  

Change

 

2022

 

 

2021

 

 

Change

 

Revenue

      

 

 

 

 

 

 

 

 

Product sales

 97.4

%

 97.2

%

 29.5

%

97.4

%

 

96.2

%

 

27.1

%

Contract research and development

2.6

%

 2.8

%

  18.8

%

2.6

%

 

3.8

%

 

(12.9)

%

Total revenue

100.0

%

 100.0

%

 29.2

%

100.0

%

 

100.0

%

 

25.6

%

Cost of sales

 22.5

%

  23.7

%

 22.4

%

21.7

%

 

23.2

%

 

17.8

%

Gross profit

 77.5

%

  76.3

%

 31.3

%

78.3

%

 

76.8

%

 

28.0

%

Expenses

 

 

Research and development

 7.0

%

 10.9

%

  (16.1)

%

7.7

%

 

10.4

%

 

(6.6)

%

Selling, general, and administrative

4.5

%

  6.8

%

  (15.0)

%

4.8

%

 

6.0

%

 

(0.9)

%

Total expenses

 11.5

%

  17.7

%

  (15.7)

%

12.5

%

 

16.4

%

 

(4.5)

%

Income from operations

 66.0

%

 58.6

%

 45.4

%

65.8

%

 

60.4

%

 

36.8

%

Interest income

 3.5

%

  4.2

%

 8.5

%

4.1

%

 

 4.2

%

 

19.8

%

Income before taxes

 69.5

%

  62.8

%

 43.0

%

69.9

%

 

64.6

%

 

35.7

%

Provision for income taxes

 12.8

%

  11.1

%

 49.4

%

13.1

%

 

11.8

%

 

37.6

%

Net income

 56.7

%

 51.7

%

 41.6

%

56.8

%

 

52.8

%

 

35.3

%

 

Total revenue for the sixnine months ended September 30,December 31, 2022 (the first sixnine months of fiscal 2023) increased 29%26% compared to the sixnine months ended September 30,December 31, 2021 (the first sixnine months of fiscal 2022). The increase was due to a 29%27% increase in product sales, andpartially offset by a 19% increase13% decrease in contract research and development revenue. The increase in product sales was primarily due to increased purchases by existing customers and new customers. Sales increased in most of our markets and product lines. The increasedecrease in contract research and development revenue was due to newthe completion of certain contracts.

 

Gross profit as a percentage of revenue increased to 78% for the first sixnine months of fiscal 2023 from 76%77% for the first sixnine months of fiscal 20222022. The increase was primarily due to increased prices and economies of scale due to increased revenue, partially offset by increased costs.

 

Total expenses decreased 16%5% for the first sixnine months of fiscal 2023 compared to the first sixnine months of fiscal 2022 due to a 16%an 7% decrease in research and development expense and a 15%1% decrease in selling, general, and administrative expense. The decreasesdecrease in expenses wereresearch and development expense was primarily due to the reallocation of resources to revenue-generating activities.

 

Interest income for the first sixnine months of fiscal 2023 increased 9%20% due to an increase in our available-for-sale securities and an increase in their average interest rate.

 

The 42% 35% increase in net income in the first sixnine months of fiscal 2023 compared to the prior-year period was primarily due to increased revenue and decreased expenses.increased interest income.

 

Supply Chain Disruptions

Supply chain disruptions related to the COVID-19 pandemic may have favorably affected product sales in the quarter and sixnine months ended September 30,December 31, 2022 since we believe the disruptions may have been less severe for us than for our competitors. We may be less susceptible to supply chain disruptions because we have our own wafer fabrication and product test operations. We believe supply chain disruptions also had an unfavorable impact on our costs of sales.

 

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Table of Contents

 

Liquidity and Capital Resources

Overview

Cash and cash equivalents were $3,583,539$2,029,714 as of September 30,December 31, 2022 compared to $10,449,510 as of March 31, 2022. The $6,865,971$8,419,796 decrease in cash and cash equivalents during the first sixnine months of fiscal 2023 was due to $9,661,652$14,492,478 of cash used in financing activities for dividend payments and $6,555,557$8,676,229 of cash used by investing activities, partially offset by $9,351,238$14,748,911 in net cash provided by operating activities.

 

Operating Activities

Net cash provided by operating activities related to product sales and research and development contract revenue as our primary source of working capital for the current and prior-year quarters. Net cash provided by operating activities was $9,351,238$14,748,911 for the first sixnine months of fiscal 2023 compared to $6,458,196$9,098,330 for the first sixnine months of fiscal 2022.

 

Accounts receivable increased $1,155,585decreased $2,607,555 during the first sixnine months of fiscal 2023 primarily due to increased product sales.the timing of customer payments.

 

Inventories increased $706,214$1,370,592 due primarily to our decisionsdecision to increase work in process in orderinventories to support increased product sales and to mitigate longer vendor lead-times.

Accounts payablesupplier lead-times and accrued expenses increased $890,822 due primarily due to a $1,504,462 increase in accrued expenses partially offset by a $544,272 decrease in accounts payable and a $69,368 net decrease in current and long-term operating lease liabilities. The increase in accrued expenses was due to increases in income taxes payable and deferred revenue. The decrease in accounts payable was due to the timing of vendor payments.supply-chain risks.

 

Investing Activities

Cash used by investing activities during the sixnine months ended September 30,December 31, 2022 consisted of $25,381,057$26,618,617 of marketable securities purchases and $24,500$907,612 of fixed asset purchases, partially offset by $18,750,000 in proceeds from maturities of marketable securities and the receipt of a $100,000 tenant improvement allowance. Fixed asset purchases can vary from quarter to quarter depending on our needs and equipment purchasing opportunities. We have orderedPurchases of fixed assets were primarily capital expenditures for additional new production equipment to increase our productionmanufacturing capacity. Therefore we currently expect significantly more fixed asset purchases during fiscal 2023 than the $484,579 we invested in fiscal 2022.

 

Financing Activities

Cash used in financing activities during the sixnine months ended September 30,December 31, 2022 consisted of $9,661,652$14,492,478 of cash dividends paid to shareholders.

In addition to cash dividends to shareholders paid in secondthird quarter of fiscal 2023, on October 19, 2022January 25, 2023 we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,830,826 based on shares outstanding as of October 14, 2022,January 20, 2023, to be paid November 30, 2022. February 28, 2023.

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, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.

 

16

Table of Contents

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

Management, with the participation of the Chief Executive Officer and Chief 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 time periods 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. Although there have been changes in personnel involved in our controls, processes, and procedures, our management concluded that, as of September 30,December 31, 2022, our disclosure controls and procedures were effective.

 

Changes in Internal Controls

During the quarter ended September 30,December 31, 2022, 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.

 

PART IIOTHER INFORMATION

 

Item 1. 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 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2022, except the following risk factor is replaced in its entirety by the following to reflect an amendment to an agreement with Abbott Laboratories, which extends the Agreement term through December 31, 2023:

 

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, 2023. We cannot predict if these agreements will be renewed, or if renewed, under what terms. Although it is possible we could continue 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.

Item 4. Mine Safety Disclosures.

None.
 

17


 

Table of Contents

Item 6. Exhibits. 

 

Exhibit #

Description

10

DescriptionAmendment No. 9 to Supplier Partnering Agreement between Abbott and the company (incorporated by reference to the Form 8-K/A filed January 25, 2023).

31.1

Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification by Joseph P. Schmitz pursuant to Rule 13a-14(a)/15d-14(a).

32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH     

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

18


 

Table of Contents

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

NVE CORPORATION

 (Registrant)

October 19, 2022

January 25, 2023

/s/ DANIEL A. BAKER 

Date

Daniel A. Baker

President and Chief Executive Officer

October 19, 2022January 25, 2023

/s/ JOSEPH P. SCHMITZ

Date

Joseph P. Schmitz

Chief Financial Officer

19