UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: December 30, 2001
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act.
NVE Corporation
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(Exact name of registrant as specified in its charter)
Minnesota
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(State or other jurisdiction of incorporation)
000-12196 41-1424202
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Commission File Number I.R.S. Employer
Identification number
11409 Valley View Road, Eden Prairie, Minnesota 55344
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (952) 829-9217
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $.01 Par Value - 17,177,406 shares outstanding as
of January 31, 2002.
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
NVE CORPORATION
BALANCE SHEET
DECEMBER 30, 2001
ASSETS
Current assets:
Cash $ 870,840
Accounts receivable 1,127,975
Inventories 980,621
Prepaid expenses and other assets 33,887
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Total current assets 3,013,323
Fixed assets:
Machinery and equipment 2,248,807
Furniture and fixtures 35,499
Leasehold improvements 354,426
Construction in progress 68,497
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2,707,229
Less accumulated depreciation 1,387,076
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Total fixed assets 1,320,153
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Total assets $4,333,476
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 234,550
Accounts payable 187,437
Accrued expenses 225,854
Deferred revenue 1,796,562
Current portion of long-term debt 135,518
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Total current liabilities 2,579,921
Long-term debt
Leases payable 406,331
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Total liabilities 2,986,252
Shareholders' equity:
Common stock 171,642
Additional paid-in capital 5,735,797
Accumulated deficit (4,560,215)
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Total shareholders' equity 1,347,224
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Total liabilities and shareholders' equity $4,333,476
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SEE ACCOMPANYING NOTES.
NVE CORPORATION
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED:
DECEMBER 30 DECEMBER 31
2001 2000
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Revenues
Contract research and development $1,246,875 $1,061,777
Product sales 402,168 169,416
License revenues 125,699 181,250
Honeywell license revenues - 1,250,000
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Total revenues 1,774,742 2,662,443
Cost of sales 1,332,045 1,248,126
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Gross profit 442,697 1,414,317
Expenses
Research and development 475,266 155,468
Selling, general & administrative 405,368 378,619
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Total expenses 880,634 534,087
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(Loss) income from operations (437,937) 880,230
Interest income 4,099 13,481
Interest expense (21,346) (7,123)
Other income (expense) 20,188 (3,697)
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Net (loss) income (434,996) 882,891
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Net (loss) income per
basic and diluted share (.03) .05
==========================
Weighted average shares outstanding:
Basic 17,104,978 16,891,893
Diluted 17,104,978 18,501,060
SEE ACCOMPANYING NOTES.
NVE CORPORATION
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED:
DECEMBER 30 DECEMBER 31
2001 2000
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Revenues
Research and development $3,319,218 $3,248,854
Product sales 1,098,133 478,555
License revenues 488,197 543,750
Honeywell license revenues - 1,250,000
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Total revenues 4,905,548 5,521,159
Cost of sales 3,815,892 3,452,449
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Gross profit 1,089,656 2,068,710
Expenses
Research and development 1,132,549 575,023
Selling, general & administrative 1,248,887 870,185
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Total expenses 2,381,436 1,445,208
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(Loss) income from operations (1,291,780) 623,502
Interest income 18,683 24,749
Interest expense (33,937) (23,528)
Other income (expense) 100,715 3,018
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Net (loss) income (1,206,319) 627,741
==========================
Net (loss) income per
basic and diluted share (.07) .03
==========================
Weighted average shares outstanding:
Basic 17,104,978 16,830,403
Diluted 17,104,978 18,439,570
SEE ACCOMPANYING NOTES.
NVE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED:
DECEMBER 30 DECEMBER 31
2001 2000
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OPERATING ACTIVITIES
Net (loss) income $(1,206,319) $ 627,741
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 233,452 187,446
Changes in operating assets and liabilities:
Accounts receivable 188,753 (412,727)
Inventories 107,195 (454,656)
Prepaid expenses and other 39,992 (30,249)
Accounts payable and accrued expenses (208,253) 195,530
Deferred revenue 481,140 680,095
Other assets - 40,495
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Net cash provided by operating activities (364,040) 833,675
INVESTING ACTIVITIES
Purchases of fixed assets (855,310) (117,479)
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Net cash used in investing activities (855,310) (117,479)
FINANCING ACTIVITIES
Net proceeds from sale of common stock 89,599 996,854
Net proceeds from (repayment of) note payable 508,511 (15,607)
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Net cash provided by financing activities 598,110 981,247
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Increase (decrease) in cash (621,240) 1,697,443
Cash at beginning of period 1,492,080 383,030
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Cash at end of period $ 870,840 $2,080,473
==========================
SEE ACCOMPANYING NOTES.
NVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001
1. Interim Financial Information
The accompanying unaudited condensed financial statements of NVE Corporation
(the "Company") are consistent with generally accepted principles for financial
reporting with SEC 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 the Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that that these condensed
financial statements be read in conjunction with the audited financial
statements and the notes there to included in the Company's latest annual
financial statements included in its report on Form 10-KSB. The results
of operations for the three and nine month periods ended December 30, 2001 are
not necessarily indicative of the results that may be expected for the full
year ending March 31, 2002.
2. Nature of Business
NVE is a leader in the practical commercialization of "spintronics," magnetic
devices which many experts believe represent the next generation of
microelectronics.
3. Merger
On November 21, 2000, then privately-owned Nonvolatile Electronics,
Incorporated ("NVE") and publicly-held Premis Corporation completed a merger
with Premis surviving under the new name NVE Corporation. The Company issued
new shares of Common Stock in exchange for outstanding shares of NVE capital
stock. The shares of Common Stock issued to NVE shareholders represented 94% of
the common shares outstanding immediately following the consummation of the
merger. In applying generally-accepted accounting principles ("GAAP"), the
Merger has been deemed to be equivalent, for accounting purposes, to NVE's
issuance of capital stock in exchange for the fair-market value of the assets
and liabilities of the Company. As a result, no goodwill has been recorded, and
the assets of NVE are recorded at their historic values.
4. Revenue Recognition
In December 1999, the Securities and Exchange Commission issued Staff Account-
ing Bulletin ("SAB") No. 101, "Revenue Recognition," which provides guidance
on the recognition, presentation and disclosure of revenue in financial
statements. SAB 101 requires that license and other up-front fees received from
research collaborators be recognized over the term of the agreement unless the
fee is in exchange for products delivered or services performed that represent
the culmination of a separate earnings process. Effective January 1, 2000, the
Company adopted SAB 101. In the current fiscal year, the Company recognized
$125,699 for the three months and $488,197 for the nine months which was
included in the cumulative effect adjustment. In the prior fiscal year, the
Company recognized $181,250 for the three months and $543,750 for the nine
months. The effect of those revenues was to reduce net losses by the amount
reported.
5. Earnings Per Share
The Company calculates its income (loss) per share pursuant to Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share.
Basic earnings per share is computed based upon the weighted average number
of common shares issued and outstanding during each year. Diluted net
income per share amounts assume conversion, exercise or issuance of all
potential common stock instruments (stock options, warrants and convertible
preferred stock). Potentially dilutive securities including warrants and
stock options are excluded from diluted earnings per share during net loss
periods because these securities would be anti-dilutive. All per share amounts
have been restated, based on the same conversion resulting from the Merger.
6. Reclassification
The Company has reclassified certain research and development costs related to
contract research and development programs to cost of sales. Previously, these
costs were included with research and development costs reported as operating
expenses.
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATIONS
Results reported herein are for prior periods and not necessarily
indicative of results which may be expected in the future. Management has made
no predictions or estimates as to future operations, and no inferences as to
future operations should be drawn.
General
NVE is a leader in the practical commercialization of "spintronics,"
which many experts believe represents the next generation of microelectronics.
The Company derives revenue from three sources: 1) contract R&D (principally
government contracts); 2) commercial sales of its GMR sensor and coupler
products; and 3) licenses for its magnetic random-access memory (MRAM)
technology.
Three months ended December 30, 2001 compared to three months ended
December 31, 2000
Revenues for the three months ended December 30, 2001 were
$1,774,742, a decrease of 33% from revenues of $2,662,443 for the three months
ended December 31, 2000. The higher revenues in the 2000 period were primarily
due to $1.25 million of non-recurring license revenues resulting from a
December, 2000 agreement with Honeywell International for MRAM technology.
Additionally, recurring license revenues decreased $55,551 as revenue
recognition for one of the Company's license agreements was completed during
the third quarter of the current year (see Note 4 to Financial Statements--
Revenue Recognition). The decrease in license revenues was partially offset
by a 138% increase in commercial product sales and $150,000 in new revenues
recognized under an agreement with Agilent Technologies, Inc. ("Agilent").
Research and development expenses increased by 206% to $475,266 for
the quarter ended December 30, 2001 as compared to $155,468 in the prior
year's quarter. The increase was due to a greater emphasis on commercial
product development.
Gross profit margins decreased from 53% to 25%, primarily due to
lower license revenues and start up costs associated with new commercial
products. This resulted in a cost of sales of $1,332,045 for the current
quarter.
Selling, general and administrative expenses for the quarter ended
December 30, 2001 increased by 7% to $405,368 compared to $378,619 in the
prior year. The increase is primarily due to higher expenses associated with
commercial selling activities and additional legal and accounting expenses
associated with being publicly-held.
The Company had a net loss in the quarter ended December 30, 2001 of
$434,996 compared to a net income of $882,891 for the quarter ended December
31, 2000. The loss was due primarily to higher R&D expenses and lower license
revenues.
Nine months ended December 30, 2001 compared to nine months ended
December 31, 2000
Revenues for the nine months ended December 30, 2001 were
$4,905,548, a decrease of 11% from revenues of $5,521,159 for the nine months
ended December 31, 2000. The higher revenues in the 2000 period were primarily
due to $1.25 million of non-recurring license revenues resulting from a
December, 2000 agreement with Honeywell International for MRAM technology. The
decrease in non-recurring license revenues was partially offset by a 130%
increase in commercial product sales.
Research and development expenses increased by 97% to $1,132,549 for
the nine months ended December 30, 2001 as compared to $575,023 in the prior
year period. The increase was due to a greater emphasis on commercial product
development.
Gross profit margins decreased from 37% to 22%, primarily due to
Lower license revenues and start-up costs associated with new commercial
products. This resulted in a cost of sales of $3,815,892 for the current period.
Selling, general and administrative expenses for the nine months ended
December 30, 2001 increased by 44% to $1,248,887 compared to $870,185 in the
prior year. The increase is primarily due to higher expenses associated with
commercial selling activities and additional general and administrative
expenses. General and administrative expenses increased due to additional legal
and accounting expenses associated with being publicly-held and the costs
of implementing a new accounting software system in the current period.
The Company had a net loss in the nine months ended December 30, 2001
of $1,206,319 compared to a net income of $627,741 for the nine months ended
December 31, 2000. The loss was due primarily to higher R&D expenses and lower
license revenues.
Liquidity and capital resources
Cash flow for the nine months ended December 30, 2001 shows a
decrease of $621,240. The Company had cash on December 30, 2001 of $870,840.
The decrease in cash was primarily due to investments in developing and selling
the Company's commercial products, partially offset by the sale and lease-back
of equipment and payments from Agilent. The Company is exploring various
sources of additional capital to fund its long-term growth strategy.
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None.
b. Reports on Form 8-K
None.
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 behalf of the undersigneds thereunto duly authorized.
NVE CORPORATION
Dated: February 4, 2002 By /s/ Daniel A. Baker
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Daniel A. Baker
President and Chief Executive Officer
By /s/ Richard George
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Richard George
Chief Financial Officer