(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2017June 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
Commission File Number: 000-12196
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.) | |
11409 Valley View Road, Eden Prairie, Minnesota | 55344 | |
(Address of principal executive offices) | (Zip Code) | |
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒ Yes [ ]☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 [X]☒ 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 – 4,842,0104,830,826 shares outstanding as of January 12, 2018
NVE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I–FINANCIAL INFORMATIONItem 1. Financial StatementsBalance SheetsStatements of Income for the Quarters Ended December 31, 2017 and 2016Statements of Comprehensive Income for the Quarters Ended December 31, 2017 and 2016Statements of Income for the Nine Months Ended December 31, 2017 and 2016Statements of Comprehensive Income for the Nine Months Ended December 31, 2017 and 2016Statements of Cash FlowsNotes to Financial StatementsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 4. Mine Safety DisclosuresItem 6. ExhibitsSIGNATURES
BALANCE SHEETS
(Unaudited) June 30, 2022 | March 31, 2022* | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 13,299,264 | $ | 10,449,510 | ||||
Marketable securities, short-term | 14,888,372 | 20,839,683 | ||||||
Accounts receivable, net of allowance for uncollectible accounts of $15,000 | 3,513,216 | 4,704,829 | ||||||
Inventories | 5,544,037 | 5,088,635 | ||||||
Prepaid expenses and other assets | 721,989 | 420,520 | ||||||
Total current assets | 37,966,878 | 41,503,177 | ||||||
Fixed assets | ||||||||
Machinery and equipment | 9,603,049 | 9,739,244 | ||||||
Leasehold improvements | 1,826,334 | 1,810,872 | ||||||
11,429,383 | 11,550,116 | |||||||
Less accumulated depreciation and amortization | 10,945,847 | 10,943,731 | ||||||
Net fixed assets | 483,536 | 606,385 | ||||||
Deferred tax assets | 578,291 | 483,469 | ||||||
Marketable securities, long-term | 25,517,937 | 24,314,211 | ||||||
Right-of-use asset – operating lease | 527,553 | 560,250 | ||||||
Total assets | $ | 65,074,195 | $ | 67,467,492 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 295,443 | $ | 943,535 | ||||
Accrued payroll and other | 667,372 | 1,356,689 | ||||||
Operating lease | 156,975 | 156,121 | ||||||
Total current liabilities | 1,119,790 | 2,456,345 | ||||||
Operating lease | 411,405 | 446,018 | ||||||
Total liabilities | 1,531,195 | 2,902,363 | ||||||
Shareholders’ equity | ||||||||
Common stock, $0.01 par value, 6,000,000 shares authorized; 4,830,826 issued and outstanding as of June 30 and March 31, 2022 | 48,308 | 48,308 | ||||||
Additional paid-in capital | 19,263,619 | 19,256,485 | ||||||
Accumulated other comprehensive income | (656,673 | ) | (318,120 | ) | ||||
Retained earnings | 44,887,746 | 45,578,456 | ||||||
Total shareholders’ equity | 63,543,000 | 64,565,129 | ||||||
Total liabilities and shareholders’ equity | $ | 65,074,195 | $ | 67,467,492 |
(Unaudited) December 31, 2017 | March 31, 2017* | ||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 4,728,352 | $ | 8,199,364 | |||
Marketable securities, short-term | 18,808,203 | 19,591,833 | |||||
Accounts receivable, net of allowance for uncollectible accounts of $15,000 | 2,165,866 | 3,436,802 | |||||
Inventories | 3,596,326 | 3,358,298 | |||||
Prepaid expenses and other assets | 967,958 | 607,283 | |||||
Total current assets | 30,266,705 | 35,193,580 | |||||
Fixed assets | |||||||
Machinery and equipment | 9,504,983 | 9,007,455 | |||||
Leasehold improvements | 1,751,646 | 1,644,419 | |||||
11,256,629 | 10,651,874 | ||||||
Less accumulated depreciation and amortization | 9,742,050 | 9,238,626 | |||||
Net fixed assets | 1,514,579 | 1,413,248 | |||||
Long-term deferred tax assets | 333,023 | 357,055 | |||||
Marketable securities, long-term | 56,729,730 | 56,810,923 | |||||
Total assets | $ | 88,844,037 | $ | 93,774,806 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 258,869 | $ | 376,275 | |||
Accrued payroll and other | 534,194 | 576,313 | |||||
Deferred revenue | - | 142,733 | |||||
Total current liabilities | 793,063 | 1,095,321 | |||||
Shareholders’ equity | |||||||
Common stock, $0.01 par value, 6,000,000 shares authorized; 4,842,010 issued and outstanding as of December 31, 2017 and 4,841,010 issued and outstanding as of March 31, 2017 | 48,420 | 48,410 | |||||
Additional paid-in capital | 19,599,298 | 19,507,348 | |||||
Accumulated other comprehensive loss | (265,991 | ) | (38,298 | ) | |||
Retained earnings | 68,669,247 | 73,162,025 | |||||
Total shareholders’ equity | 88,050,974 | 92,679,485 | |||||
Total liabilities and shareholders’ equity | $ | 88,844,037 | $ | 93,774,806 |
*The March 31, 20172022 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, 2017.
See accompanying notes.
STATEMENTS OF INCOME
(Unaudited)
Quarter Ended June 30 | ||||||||
2022 | 2021 | |||||||
Revenue | ||||||||
Product sales | $ | 7,072,961 | $ | 6,953,766 | ||||
Contract research and development | 263,446 | 199,397 | ||||||
Total revenue | 7,336,407 | 7,153,163 | ||||||
Cost of sales | 1,651,847 | 1,769,581 | ||||||
Gross profit | 5,684,560 | 5,383,582 | ||||||
Expenses | ||||||||
Research and development | 601,918 | 808,142 | ||||||
Selling, general, and administrative | 371,320 | 466,618 | ||||||
Total expenses | 973,238 | 1,274,760 | ||||||
Income from operations | 4,711,322 | 4,108,822 | ||||||
Interest income | 283,059 | 289,720 | ||||||
Income before taxes | 4,994,381 | 4,398,542 | ||||||
Provision for income taxes | 854,265 | 818,976 | ||||||
Net income | $ | 4,140,116 | $ | 3,579,566 | ||||
Net income per share – basic | $ | 0.86 | $ | 0.74 | ||||
Net income per share – diluted | $ | 0.86 | $ | 0.74 | ||||
Cash dividends declared per common share | $ | 1.00 | $ | 1.00 | ||||
Weighted average shares outstanding | ||||||||
Basic | 4,830,826 | 4,833,232 | ||||||
Diluted | 4,830,871 | 4,836,821 |
Quarter Ended Dec. 31 | |||||||
2017 | 2016 | ||||||
Revenue | |||||||
Product sales | $ | 6,448,831 | $ | 7,116,931 | |||
Contract research and development | 911,958 | 345,748 | |||||
Total revenue | 7,360,789 | 7,462,679 | |||||
Cost of sales | 1,657,700 | 1,502,848 | |||||
Gross profit | 5,703,089 | 5,959,831 | |||||
Expenses | |||||||
Selling, general, and administrative | 313,033 | 384,322 | |||||
Research and development | 852,739 | 826,816 | |||||
Total expenses | 1,165,772 | 1,211,138 | |||||
Income from operations | 4,537,317 | 4,748,693 | |||||
Interest income | 404,665 | 395,207 | |||||
Income before taxes | 4,941,982 | 5,143,900 | |||||
Provision for income taxes | 1,370,380 | 1,660,156 | |||||
Net income | $ | 3,571,602 | $ | 3,483,744 | |||
Net income per share – basic | $ | 0.74 | $ | 0.72 | |||
Net income per share – diluted | $ | 0.74 | $ | 0.72 | |||
Cash dividends declared per common share | $ | 1.00 | $ | 1.00 | |||
Weighted average shares outstanding | |||||||
Basic | 4,841,369 | 4,836,336 | |||||
Diluted | 4,847,290 | 4,839,777 |
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)Quarter Ended Dec. 31 2017 2016 Net income $ 3,571,602 $ 3,483,744 Unrealized loss from marketable securities, net of tax (295,458 ) (571,862 ) Comprehensive income $ 3,276,144 $ 2,911,882
Quarter Ended June 30 | ||||||||
2022 | 2021 | |||||||
Net income | $ | 4,140,116 | $ | 3,579,566 | ||||
Unrealized loss from marketable securities, net of tax | (338,553 | ) | (90,165 | ) | ||||
Comprehensive income | $ | 3,801,563 | $ | 3,489,401 |
See accompanying notes.
STATEMENTS OF INCOME
SHAREHOLDERS’ EQUITY
(Unaudited)
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-In | Comprehensive | Retained | |||||||||||||||||||||
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 | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Unrealized loss on marketable securities, net of tax | 0 | 0 | (338,553 | ) | 0 | (338,553 | ) | |||||||||||||||||
Net income | 0 | 0 | 0 | 4,140,116 | 4,140,116 | |||||||||||||||||||
Total comprehensive income | 0 | 0 | 0 | 0 | 3,801,563 | |||||||||||||||||||
Stock-based compensation | 0 | 7,134 | 0 | 0 | 7,134 | |||||||||||||||||||
Cash dividends declared ($1.00 per share of common stock) | 0 | 0 | 0 | (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 |
Nine Months Ended Dec. 31 | |||||||
2017 | 2016 | ||||||
Revenue | |||||||
Product sales | $ | 19,718,584 | $ | 19,782,529 | |||
Contract research and development | 2,246,105 | 1,690,461 | |||||
Total revenue | 21,964,689 | 21,472,990 | |||||
Cost of sales | 4,809,235 | 4,628,840 | |||||
Gross profit | 17,155,454 | 16,844,150 | |||||
Expenses | |||||||
Selling, general, and administrative | 1,060,757 | 1,117,925 | |||||
Research and development | 2,788,968 | 2,353,372 | |||||
Total expenses | 3,849,725 | 3,471,297 | |||||
Income from operations | 13,305,729 | 13,372,853 | |||||
Interest income | 1,154,303 | 1,263,924 | |||||
Income before taxes | 14,460,032 | 14,636,777 | |||||
Provision for income taxes | 4,429,780 | 4,715,291 | |||||
Net income | $ | 10,030,252 | $ | 9,921,486 | |||
Net income per share – basic | $ | 2.07 | $ | 2.05 | |||
Net income per share – diluted | $ | 2.07 | $ | 2.05 | |||
Cash dividends declared per common share | $ | 3.00 | $ | 3.00 | |||
Weighted average shares outstanding | |||||||
Basic | 4,841,130 | 4,835,639 | |||||
Diluted | 4,846,036 | 4,837,815 |
Nine Months Ended Dec. 31 | |||||||
2017 | 2016 | ||||||
Net income | $ | 10,030,252 | $ | 9,921,486 | |||
Unrealized loss from marketable securities, net of tax | (227,693 | ) | (587,068 | ) | |||
Comprehensive income | $ | 9,802,559 | $ | 9,334,418 |
See accompanying notes.
STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-In | Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | Income | 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 | |||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Unrealized loss on marketable securities, net of tax | 0 | (90,165 | ) | (90,165 | ) | |||||||||||||||||||
Net income | 0 | 3,579,566 | 3,579,566 | |||||||||||||||||||||
Total comprehensive income | 3,489,401 | |||||||||||||||||||||||
Stock-based compensation | 7,238 | 7,238 | ||||||||||||||||||||||
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 |
See accompanying notes.
STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended June 30 | ||||||||
2022 | 2021 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 4,140,116 | $ | 3,579,566 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 87,621 | 140,427 | ||||||
Stock-based compensation | 7,134 | 7,238 | ||||||
Deferred income taxes | 1 | (2,868 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,191,613 | (1,355,557 | ) | |||||
Inventories | (455,402 | ) | 230,751 | |||||
Prepaid expenses and other assets | (268,772 | ) | (235,406 | ) | ||||
Accounts payable and other liabilities | (1,371,168 | ) | 936,243 | |||||
Net cash provided by operating activities | 3,331,143 | 3,300,394 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of fixed assets | (24,500 | ) | (25,679 | ) | ||||
Purchases of marketable securities | (4,976,063 | ) | 0 | |||||
Proceeds from maturities of marketable securities | 9,250,000 | 0 | ||||||
Receipt of tenant improvement allowance | 100,000 | 0 | ||||||
Net cash provided (used) by investing activities | 4,349,437 | (25,679 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Payment of dividends to shareholders | (4,830,826 | ) | (4,833,232 | ) | ||||
Cash used in financing activities | (4,830,826 | ) | (4,833,232 | ) | ||||
Increase (decrease) in cash and cash equivalents | 2,849,754 | (1,558,517 | ) | |||||
Cash and cash equivalents at beginning of period | 10,449,510 | 10,427,340 | ||||||
Cash and cash equivalents at end of period | $ | 13,299,264 | $ | 8,868,823 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for income taxes | $ | 1,275,629 | $ | 0 |
Nine Months Ended Dec. 31 | |||||||
2017 | 2016 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 10,030,252 | $ | 9,921,486 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 726,842 | 868,218 | |||||
Stock-based compensation | 40,920 | 22,000 | |||||
Excess tax deficiencies | - | 293 | |||||
Deferred income taxes | 153,954 | (61,076 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,270,936 | 782,427 | |||||
Inventories | (238,028 | ) | 42,755 | ||||
Prepaid expenses and other assets | (360,675 | ) | (16,909 | ) | |||
Accounts payable and accrued expenses | (159,525 | ) | 162,906 | ||||
Deferred revenue | (142,733 | ) | (714,805 | ) | |||
Net cash provided by operating activities | 11,321,943 | 11,007,295 | |||||
INVESTING ACTIVITIES | |||||||
Purchases of fixed assets | (604,755 | ) | (200,447 | ) | |||
Purchases of marketable securities | (16,256,210 | ) | (11,528,240 | ) | |||
Proceeds from maturities of marketable securities | 16,540,000 | 11,400,000 | |||||
Net cash used in investing activities | (320,965 | ) | (328,687 | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from sale of common stock | 51,040 | 92,310 | |||||
Excess tax (deficiencies) | - | (293 | ) | ||||
Payment of dividends to shareholders | (14,523,030 | ) | (14,506,030 | ) | |||
Net cash used in financing activities | (14,471,990 | ) | (14,414,013 | ) | |||
Decrease in cash and cash equivalents | (3,471,012 | ) | (3,735,405 | ) | |||
Cash and cash equivalents at beginning of period | 8,199,364 | 7,534,593 | |||||
Cash and cash equivalents at end of period | $ | 4,728,352 | $ | 3,799,188 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for income taxes | $ | 4,615,019 | $ | 4,720,000 |
See accompanying notes.6
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. INTERIM FINANCIAL INFORMATION 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, 2017. 2022. The results of operations for the quarter or nine months ended December 31, 2017 June 30, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2018.
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-K for the year ended March 31, 2022. As of June 30, 2022, there were no changes to our significant accounting policies.
NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting Pronouncements Recently Adopted Accounting Standard
In July 2015, May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11,2021-04, Simplifying the MeasurementEarnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Inventory. Freestanding Equity-Classified Written Call Options. ASU 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower2021-04 addresses issuers’ accounting for certain modifications or exchanges of cost or net realizable value.freestanding equity-classified written call options. We adopted ASU 2015-11 prospectively in2021-04 beginning with the first quarter of the current fiscal year, and theended June 30,2022. The adoption has not had a significantno material impact on our financial statements.
New Accounting Standard Not Yet Adopted
In MarchJune 2016, the FASB issued ASU No. 2016-09,2016-13, Compensation—Stock CompensationFinancial Instruments-Credit Losses (Topic 326), which simplifiesMeasurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the accountingnet amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the taxes related to stock based compensation, including adjustments to how excess tax benefits and a company’s payments for tax withholdings should be classified. We adopted ASU 2016-09 prospectively in the first quarteramortized cost basis of the fiscal year ending March 31, 2018. The adoption did not have a significant impactfinancial asset(s) to present the net carrying value at the amount expected to be collected on ourthe financial statements.Future Accounting Pronouncements
asset. In May 2014,November 2018 the FASB issued ASU No. 2014-09,2018-19,Codification Improvements to Topic326, Financial Instruments-Credit Losses, which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. ASU 2014-09 is based on the principle that revenue is recognized to depict the transferclarifies codification and corrects unintended application of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance, recognized at the date of initial application. In August 2015, and in November 2019, the FASB issued ASU No. 2015-14,2019-11, Revenue from Contracts with Customers: Deferral of the Effective DateCodification Improvements to Topic 326, Financial Instruments-Credit Losses, which deferredclarifies 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 (Topic326) 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 2014-092016-13 by one year. As a result,three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU 2014-09No.2020-03,Codification Improvements to Financial Instruments; which modifies the measurement of expected credit losses of certain financial instruments. In accordance with ASU 2019-10 and ASU 2020-02, ASU 2016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15, 20172022 and interim periods within those fiscal years, which will be fiscal 20192024 for us. We plan to adopt the guidance retrospectively with any effect of initially applying the guidance recognized at the date of initial application. Under this approach,us if we would not restate prior financial statements presented. Based on an evaluation, we do not expect therecontinue to be classified as a materialSmaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-13 on our financial statements, because we do not expect to change the manner or timing of recognizing revenue. We have evaluated each of our revenue streams, product sales and contract research and development. We recognize revenue on product sales to customers and distributors when we satisfy our performance obligations as the products are shipped. We recognize contract research and development revenue pro-rata as work progresses using costs incurred relative to the total expected costs as the measurement basis for progress toward completion. We are currently evaluating the impact of new disclosure requirements required under the guidance. Information regarding all other applicable recently issued accounting standards, on which our position have not changed since our latest annual financial statements, are contained in the financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2017.
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. Stock options totaling 4,000 for the quarter and 6,000 for the nine months ended December 31, 2016 were not included in the computation of diluted earnings per share because the exercise prices were greater than the market price of the common stock. The following tables show the components of diluted shares:
Quarter Ended Dec. 31 | |||
2017 | 2016 | ||
Weighted average common shares outstanding – basic | 4,841,369 | 4,836,336 | |
Dilutive effect of stock options | 5,921 | 3,441 | |
Shares used in computing net income per share – diluted | 4,847,290 | 4,839,777 |
Nine Months Ended Dec. 31 | |||
2017 | 2016 | ||
Weighted average common shares outstanding – basic | 4,841,130 | 4,835,639 | |
Dilutive effect of stock options | 4,906 | 2,176 | |
Shares used in computing net income per share – diluted | 4,846,036 | 4,837,815 |
Quarter Ended June 30 | |||
2022 | 2021 | ||
Weighted average common shares outstanding – basic | 4,830,826 | 4,833,232 | |
Dilutive effect of stock options | 45 | 3,589 | |
Shares used in computing net income per share – diluted | 4,830,871 | 4,836,821 |
NOTE 5. MARKETABLE SECURITIES FAIR VALUE OF FINANCIAL INSTRUMENTS Marketable
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. The fair valueWe consider all highly-liquid investments with maturities of ourthree 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 December 31, 2017, by maturity, wereJune 30, 2022 are as follows:
Total | <1 Year | 1–3 Years | 3–5 Years | |||||||
$ | 75,537,933 | $ | 18,808,203 | $ | 29,512,416 | $ | 27,217,314 |
Total | <1 Year | 1–3 Years | 3–5 Years | ||||||||
$ | 51,663,939 | $ | 26,146,002 | $ | 25,517,937 | $ | 0 |
Total available-for-sale securities represented approximately 79% of December 31 and March 31, 2017, our marketabletotal assets. Marketable securities were as follows:
As of December 31, 2017 | As of March 31, 2017 | ||||||||||||||||||||||||
Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | Adjusted Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Market Value | ||||||||||||||||||
Corporate bonds | $ | 75,955,697 | $ | 27,442 | $ | (445,206 | ) | $ | 75,537,933 | $ | 75,158,087 | $ | 187,001 | $ | (246,935 | ) | $ | 75,098,153 | |||||||
Municipal bonds | - | - | - | - | 1,304,817 | - | (214 | ) | 1,304,603 | ||||||||||||||||
Total | $ | 75,955,697 | $ | 27,442 | $ | (445,206 | ) | $ | 75,537,933 | $ | 76,462,904 | $ | 187,001 | $ | (247,149 | ) | $ | 76,402,756 |
Less Than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||
Fair Market Value | Gross Unrealized Losses | Fair Market Value | Gross Unrealized Losses | Fair Market Value | Gross Unrealized Losses | ||||||||||||||||
As of December 31, 2017 | |||||||||||||||||||||
Corporate bonds | $ | 44,282,521 | $ | (325,912 | ) | $ | 9,224,878 | $ | (119,294 | ) | $ | 53,507,399 | $ | (445,206 | ) | ||||||
Municipal bonds | - | - | - | - | - | - | |||||||||||||||
Total | $ | 44,282,521 | $ | (325,912 | ) | $ | 9,224,878 | $ | (119,294 | ) | $ | 53,507,399 | $ | (445,206 | ) | ||||||
As of March 31, 2017 | |||||||||||||||||||||
Corporate bonds | $ | 32,198,766 | $ | (246,935 | ) | $ | - | $ | - | $ | 32,198,766 | $ | (246,935 | ) | |||||||
Municipal bonds | 1,304,603 | (214 | ) | - | - | 1,304,603 | (214 | ) | |||||||||||||
Total | $ | 33,503,369 | $ | (247,149 | ) | $ | - | $ | - | $ | 33,503,369 | $ | (247,149 | ) |
December 31, 2017 | March 31, 2017 | ||||
Raw materials | $ | 1,044,845 | $ | 786,775 | |
Work in process | 1,710,799 | 1,968,990 | |||
Finished goods | 840,682 | 602,533 | |||
Total inventories | $ | 3,596,326 | $ | 3,358,298 |
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. Our
Level 1 financial instruments consist of publicly-traded marketable corporate debt securities, which are classified as available-for-sale. On the balance sheets, these securities are included in “Marketable securities, short term” and “Marketable securities, long term.” All of our marketable securities were Level 1 as of December 31, 2017. The fair value of these securities was $75,537,933 as of December 31, 2017 and $75,098,153 as of March 31, 2017. 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. We had no
Level 2 financial instruments as of December 31, 2017. We had one Level 2 instrument, a municipal debt security with a fair value of $1,304,603, as of March 31, 2017. This security was classified as available-for-sale and included in “Marketable securities, short term” on the March 31, 2017 balance sheet. Level 3 – Inputs to the fair value measurement are unobservable inputs or valuation techniques. We do not have any financial
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.”
The following table shows the estimated fair value of assets or liabilities being measuredthat were accounted for at fair value on a recurring basis:
As of June 30, 2022 | As of March 31, 2022 | ||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | ||||||||||||||||||
Money market funds | $ | 11,257,630 | $ | 0 | $ | 11,257,630 | $ | 6,756,993 | $ | 0 | $ | 6,756,993 | |||||||||||
Corporate bonds | 0 | 40,406,309 | 40,406,309 | 0 | 45,153,894 | 45,153,894 | |||||||||||||||||
Total | $ | 11,257,630 | $ | 40,406,309 | $ | 51,663,939 | $ | 6,756,993 | $ | 45,153,894 | $ | 51,910,887 |
Our available-for-sale securities as of June 30 and March 31, 2022, aggregated into classes of securities, were as follows:
As of June 30, 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 | ||||||||||||||||||||||||
Money market funds | $ | 11,257,630 | $ | 0 | $ | 0 | $ | 11,257,630 | $ | 6,756,993 | $ | 0 | $ | 0 | $ | 6,756,993 | |||||||||||||||
Corporate bonds | 41,246,905 | 25,066 | (865,662 | ) | 40,406,309 | 45,561,114 | 230,085 | (637,305 | ) | 45,153,894 | |||||||||||||||||||||
Total | $ | 52,504,535 | $ | 25,066 | $ | (865,662 | ) | $ | 51,663,939 | $ | 52,318,107 | $ | 230,085 | $ | (637,305 | ) | $ | 51,910,887 |
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 June 30 and March 31,2022.
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 | |||||||||||||||||||
As of June 30, 2022 | ||||||||||||||||||||||||
Corporate bonds | $ | 8,981,072 | $ | (100,920 | ) | $ | 9,554,349 | $ | (764,742 | ) | $ | 18,535,421 | $ | (865,662 | ) | |||||||||
Total | $ | 8,981,072 | $ | (100,920 | ) | $ | 9,554,349 | $ | (764,742 | ) | $ | 18,535,421 | $ | (865,662 | ) | |||||||||
As of March 31, 2022 | ||||||||||||||||||||||||
Corporate bonds | $ | 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 | ) |
None of the securities were impaired at acquisition, and subsequent declines in fair value are classifiednot 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 Level 3 financial instruments.
NOTE 6. INVENTORIES
Inventories are shown in the following table:
June 30, 2022 | March 31, 2022 | ||||
Raw materials | $ | 988,317 | $ | 987,062 | |
Work in process | 3,863,801 | 3,355,838 | |||
Finished goods | 691,919 | 745,735 | |||
Total inventories | $ | 5,544,037 | $ | 5,088,635 |
NOTE 7. STOCK-BASED COMPENSATION
Stock-based compensation expense was $7,134 for the first quarter of fiscal 2023 and $7,238 for the first quarter 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.
We had no unrecognized tax benefits as of June 30, 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 June 30, 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.
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 June 30, 2022 | ||
Operating lease cost | $ | 42,515 |
Variable lease cost | 31,190 | |
Total | $ | 73,705 |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows for leases | $ | 44,433 |
Remaining lease term | 45 months | |
Discount rate | 3.5 |
The following table presents the maturities of lease liabilities as of June 30, 2022:
Year Ending March 31 | Operating Leases | ||
2023 | 117,304 | ||
2024 | 159,592 | ||
2025 | 163,224 | ||
2026 | 165,947 | ||
Total lease payments | 606,067 | ||
Imputed lease interest | (37,687 | ) | |
Total lease liabilities | $ | 568,380 |
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. We did notOur repurchase program does not have an expiration date and does not obligate us to purchase any of our Common Stock under the program during the quarter ended December 31, 2017.shares. The remaining authorization was $4,540,806 as of December 31, 2017. The Repurchase 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 June 30, 2022. We did not repurchase any of our Common Stock during the first quarter of fiscal 2023.
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 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 $28,426 for the first quarter of fiscal 2023 and $28,584 for the first quarter of fiscal 2022.
NOTE 12. SUBSEQUENT EVENTS
On January 17, 2018 July 20, 2022 we announced that our Board had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid February 28, 2018 August 31, 2022to shareholders of record as of the close of business January 29, 2018.
August 1, 2022.
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 contract researchsales and development revenue,revenues, risks and uncertainties related to future stock repurchases and dividend payments, uncertainties related to the future impact of Federal tax reform, 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, 2017, as updated in Part II, Item 1A of this Quarterly Report on Form 10-Q.
2022.
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. We have also licensed our spintronic magnetoresistive random access memory technology, commonly known as MRAM.
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, 2017.2022. As of December 31, 2017June 30, 2022 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.
Quarter ended December 31, 2017June 30, 2022 compared to quarter ended December 31, 2016
June 30, 2021
The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:Percentage of Revenue
Quarter Ended Dec. 31Quarter-
to-Quarter
Change2017 2016 Revenue Product sales 87.6 % 95.4 % (9.4 )% Contract research and development 12.4 % 4.6 % 163.8 % Total revenue 100.0 % 100.0 % (1.4 )% Cost of sales 22.5 % 20.1 % 10.3 % Gross profit 77.5 % 79.9 % (4.3 )% Expenses Selling, general, and administrative 4.3 % 5.2 % (18.5 )% Research and development 11.6 % 11.1 % 3.1 % Total expenses 15.9 % 16.3 % (3.7 )% Income from operations 61.6 % 63.6 % (4.5 )% Interest income 5.5 % 5.3 % 2.4 % Income before taxes 67.1 % 68.9 % (3.9 )% Provision for income taxes 18.6 % 22.2 % (17.5 )% Net income 48.5 % 46.7 % 2.5 %
Percentage of Revenue Quarter Ended June 30 | Quarter- to-Quarter | |||||||
2022 | 2021 | Change | ||||||
Revenue | ||||||||
Product sales | 96.4 | % | 97.2 | % | 1.7 | % | ||
Contract research and development | 3.6 | % | 2.8 | % | 32.1 | % | ||
Total revenue | 100.0 | % | 100.0 | % | 2.6 | % | ||
Cost of sales | 22.5 | % | 24.7 | % | (6.7) | % | ||
Gross profit | 77.5 | % | 75.3 | % | 5.6 | % | ||
Expenses | ||||||||
Research and development | 8.2 | % | 11.3 | % | (25.5) | % | ||
Selling, general, and administrative | 5.1 | % | 6.6 | % | (20.4) | % | ||
Total expenses | 13.3 | % | 17.9 | % | (23.7) | % | ||
Income from operations | 64.2 | % | 57.4 | % | 14.7 | % | ||
Interest income | 3.9 | % | 4.1 | % | (2.3) | % | ||
Income before taxes | 68.1 | % | 61.5 | % | 13.5 | % | ||
Provision for income taxes | 11.7 | % | 11.5 | % | 4.3 | % | ||
Net income | 56.4 | % | 50.0 | % | 15.7 | % |
Total revenue for the quarter ended December 31, 2017June 30, 2022 (the thirdfirst quarter of fiscal 2018) decreased 1%2023) increased 3% compared to the quarter ended December 31, 2016June 30, 2021 (the thirdfirst quarter of fiscal 2017)2022). The decreaseincrease was due to a 9% decrease2% increase in product sales partially offset byand a 164%32% increase in contract research and development revenue. The decrease in product sales from the prior-year quarter was primarily due to decreased purchases by existing customers.
The increase in contract research and development revenue for the third quarter of fiscal 2018 was due to new contracts.
Gross profit margin decreasedas a percentage of revenue increased to 77% of revenue for the thirdfirst quarter of fiscal 2018 compared to 80%2023 from 75% for the thirdfirst quarter of fiscal 20172022 primarily due to increased prices.
Total expenses decreased 24% for the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 due to a less profitable revenue mix. Total expenses decreased 4% for the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017, due to26% decrease in research and development expense and a 19%20% decrease in selling, general, and administrative expense, partially offset by a 3% increase in research and development expense. The decrease in selling, general, and administrative expense was due to decreased performance-based compensation and decreased legal expenses. The increase in research and development expense was due to increased new product development activities. Interest income for the third quarter of fiscal 2018 increased 2% due to an increase in the average interest rates on our marketable securities, partially offset by a decrease in our securities. Our effective tax rate was 27.7% of net income before taxes for the quarter, compared to 32.3% in the prior-year quarter. The decrease wasprimarily due to the blended effectreallocation of a decrease in the Federal tax rate with the enactment of the Tax Reform Act, partially offset by a $206,693 one-time increase in our provision for income taxesresources from the effect of the new rate on our deferred tax assets. Although we have not yet fully assessed the impact of the Tax Reform Act on our future taxes or net income, we currently expect our effective tax rate to be approximately 29% for the quarter ending March 31, 2018. See Note 8 to the financial statements for more information on income taxes. The 3% increase in net income in the third quarter of fiscal 2018 compared to the prior-year quarter was primarily due to increased contract research and development revenue, decreased selling, general, and administrative expense, and a decrease in the provision for income taxes, partially offset by decreased product sales, decreased gross profit margin, and increased research and development expense.
Percentage of Revenue Nine Months Ended Dec. 31 | Period- to-Period Change | |||||||
2017 | 2016 | |||||||
Revenue | ||||||||
Product sales | 89.8 | % | 92.1 | % | (0.3 | )% | ||
Contract research and development | 10.2 | % | 7.9 | % | 32.9 | % | ||
Total revenue | 100.0 | % | 100.0 | % | 2.3 | % | ||
Cost of sales | 21.9 | % | 21.6 | % | 3.9 | % | ||
Gross profit | 78.1 | % | 78.4 | % | 1.8 | % | ||
Expenses | ||||||||
Selling, general, and administrative | 4.8 | % | 5.2 | % | (5.1 | )% | ||
Research and development | 12.7 | % | 10.9 | % | 18.5 | % | ||
Total expenses | 17.5 | % | 16.1 | % | 10.9 | % | ||
Income from operations | 60.6 | % | 62.3 | % | (0.5 | )% | ||
Interest income | 5.2 | % | 5.9 | % | (8.7 | )% | ||
Income before taxes | 65.8 | % | 68.2 | % | (1.2 | )% | ||
Provision for income taxes | 20.1 | % | 22.0 | % | (6.1 | )% | ||
Net income | 45.7 | % | 46.2 | % | 1.1 | % |
Interest income for the first nine monthsquarter of fiscal 20182023 decreased 9%2% primarily due to a decrease in marketableour available-for-sale securities. Our effective tax rate was 30.6% of net income before taxes for the first nine months of fiscal 2018, compared to 32.2% in the prior-year period.
The decreased rate was due to a decrease in the Federal tax rate with the enactment of the Tax Reform Act, partially offset by a $206,693 one-time increase in our provision for income taxes from the effect of the new rate on our deferred tax assets. Although we have not yet fully assessed the impact of the Tax Reform Act on our future taxes or net income, we currently expect our effective tax rate to decrease to approximately 29% for the full fiscal year ending March 31, 2018, and to approximately 22% for the fiscal year ending March 31, 2019. The lower Federal tax rate is effective for one quarter of fiscal 2018 and all of fiscal 2019. See Note 8 to the financial statements for more information on income taxes. The 1%16% increase in net income in the first nine monthsquarter of fiscal 20182023 compared to the prior-year periodquarter was primarily due to increased contract researchrevenue, increased gross profit margin, and development revenuedecreased expenses.
The Impact of the COVID-19 Pandemic
We believe revenues and a decreasecosts in the provision for income taxes, partially offsetquarter ended June 30, 2022 were unfavorably affected by increased research and development expense and decreased interest income.
Liquidity and capital resources
Capital Resources
Overview
Cash and cash equivalents were $4,728,352$13,299,264 as of December 31, 2017June 30, 2022 compared to $8,199,364$10,449,510 as of March 31, 2017.2022. The $3,471,012 decrease$2,849,754 increase in cash and cash equivalents during the nine months ended December 31, 2017first quarter of fiscal 2023 was due to $14,471,990 cash used in financing activities and $320,965 cash used in investing activities, partially offset by $11,321,943$3,331,143 in net cash provided by operating activities. We currently believe our working capitalactivities and $4,349,437 of cash generated from operations will be adequate for our needs at least for the next 12 months.
provided by investing activities, partially offset by $4,830,826 of cash used in financing 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 $3,331,143 for first quarter of fiscal 2023 and $3,300,394 for the first quarter of fiscal 2022.
Accounts receivable asdecreased by $1,191,613 during the first quarter of December 31, 2017 decreased $1,270,936 compared to March 31, 2017,fiscal 2023 primarily due to the timing of sales to and payments from certain customers.Investing Activities Cash used
Inventories increased $455,402 due primarily to our decisions to increase work in investing activitiesprocess in the nine months ended December 31, 2017order to mitigate longer vendor lead-times.
Accounts payable and accrued expenses decreased $1,371,168 due to a $689,317 decrease in accrued expenses, a $648,092 decrease in accounts payable, and a $33,759 net decrease in operating lease liabilities. The decrease in accounts payable was due to $16,256,210the timing of vendor payments. The decrease in purchasesaccrued expenses was due to decreases in accrued payroll and income taxes payable.
Investing Activities
Cash provided by investing activities during the quarter ended June 30, 2022 consisted of $9,250,000 in proceeds from maturities of marketable securities and $604,755 in purchasesthe receipt of fixed assets,a $100,000 buildout allowance, partially offset by $16,540,000$4,976,063 marketable securities purchases and $24,500 of marketable security maturities.
fixed asset purchases. Fixed asset purchases can vary from quarter to quarter depending on our needs and equipment purchasing opportunities. We have ordered and are in the process of deploying additional new production equipment to increase our 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 induring the first nine monthsquarter ended June 30, 2022 consisted of fiscal 2018 was primarily due to $14,523,030$4,830,826 of cash dividends paid to shareholders. In addition to cash dividends to shareholders paid in the first nine monthsquarter of fiscal 2018,2023, on January 17, 2018July 20, 2022 we announced that our Board had declared a cash quarterly dividend of $1.00 per share of common stock,Common Stock, or $4,842,010$4,830,826 based on shares outstanding as of January 12, 2018,July 15, 2022, to be paid February 28, 2018.August 31, 2022. We plan to fund dividends through cash provided by operating activities and proceeds from maturities and sales 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. As discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, we are exposed to financial market risks, primarily marketable securities and, to a lesser extent, changes in currency exchange rates.Marketable Securities The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in securities including municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income or loss, net of estimated tax. Our marketable securities as of December 31, 2017 had remaining maturities between 12 days and 56 months. Marketable securities had a market value of $75,537,933 as of December 31, 2017, representing approximately 85% of our total assets. We have not used derivative financial instruments in our investment portfolio.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 ChiefPrincipal 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 Chief Executive Officercontrols, processes, and Chief Financial Officerprocedures, our management concluded that, as of December 31, 2017,June 30, 2022, our disclosure controls and procedures were effective.
Changes in Internal Controls
During the quarter ended December 31, 2017,June 30, 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.
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.
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, 2017, except the following risk factor is added:
2022.
The impacts of the Tax Reform Act could be materially different from our current estimates. The Act “To provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (the “Tax Reform Act”) was enacted December 22, 2017. The Tax Reform Act reduced Federal corporate income tax rates effective January 1, 2018 and changed certain other provisions. We expect the new law to significantly reduce our tax rate in future periods, and we expect our fourth-quarter tax provision to reflect the benefit of a Federal tax rate reduction. Our estimated impacts of the new law are based on our current knowledge and assumptions, and recognized impacts could be materially different from current estimates based on our actual results in the fourth quarter of fiscal 2018 and our further analysis of the Act.
Item 4. Mine Safety Disclosures. Not applicable.
None.
Table of Contents
Item 6. Exhibits.
Exhibit # | Description |
31.1 | Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). |
31.2 | Certification by |
32 | Certification |
101.INS | Inline XBRL Instance 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) |
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) | |||
June 20, 2022 | /s/ DANIEL A. BAKER | ||
Date | Daniel A. Baker | ||
President and Chief Executive Officer | |||
June 20, 2022 | /s/ | ||
Date | Joseph P. Schmitz | ||
Chief Financial Officer |