UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-Q
(Mark One)
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
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 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 [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 – 4,835,038 4,833,232 shares outstanding as of July 17, 2020
NVE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTSPART I. FINANCIAL INFORMATIONItem 1. Financial StatementsBalance SheetsStatements of Income for the Quarters Ended June 30, 2020 and 2019Statements of Comprehensive Income for the Quarters Ended June 30, 2020 and 2019Statements of Shareholders’ Equity for the Period Ended June 30, 2020Statements of Shareholders’ Equity for the Period Ended June 30, 2019Statements of Cash FlowsNotes to Financial StatementsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 4. Mine Safety DisclosuresItem 6. ExhibitsSIGNATURES
(Unaudited) | March 31, 2021* | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
Cash and cash equivalents | $ | 8,868,823 | $ | 10,427,340 | ||||
Marketable securities, short-term | 17,061,711 | 7,678,957 | ||||||
Accounts receivable, net of allowance for uncollectible accounts of $15,000 | 3,319,838 | 1,964,281 | ||||||
Inventories | 3,670,026 | 3,900,777 | ||||||
Prepaid expenses and other assets | 658,238 | 391,278 | ||||||
Total current assets | 33,578,636 | 24,362,633 | ||||||
| Fixed assets | ||||||||
Machinery and equipment | 9,280,343 | 9,254,664 | ||||||
Leasehold improvements | 1,810,872 | 1,810,872 | ||||||
| 11,091,215 | 11,065,536 | |||||||
Less accumulated depreciation and amortization | 10,791,821 | 10,728,853 | ||||||
Net fixed assets | 299,394 | 336,683 | ||||||
Deferred tax assets | 101,660 | 73,538 | ||||||
Marketable securities, long-term | 37,463,037 | 47,038,669 | ||||||
Right-of-use asset – operating lease | 657,662 | 689,216 | ||||||
Total assets | $ | 72,100,389 | $ | 72,500,739 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
Accounts payable | $ | 359,394 | $ | 336,591 | ||||
Accrued payroll and other | 651,194 | 540,474 | ||||||
Income taxes payable | 834,483 | 0 | ||||||
Operating lease | 151,110 | 150,273 | ||||||
Total current liabilities | 1,996,181 | 1,027,338 | ||||||
Operating lease | 548,859 | 581,459 | ||||||
Total liabilities | 2,545,040 | 1,608,797 | ||||||
| Shareholders’ equity | ||||||||
Common stock, $0.01 par value, 6,000,000 shares authorized; 4,833,232 issued and outstanding as of June 30 and March 31, 2021 | 48,332 | 48,332 | ||||||
Additional paid-in capital | 19,345,365 | 19,338,127 | ||||||
Accumulated other comprehensive income | 1,010,954 | 1,101,119 | ||||||
Retained earnings | 49,150,698 | 50,404,364 | ||||||
Total shareholders’ equity | 69,555,349 | 70,891,942 | ||||||
Total liabilities and shareholders’ equity | $ | 72,100,389 | $ | 72,500,739 | ||||
| (Unaudited) June 30, 2020 | March 31, 2020* | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 6,402,983 | $ | 8,065,594 | |||
| Marketable securities, short-term | 19,179,495 | 19,084,814 | |||||
| Accounts receivable, net of allowance for uncollectible accounts of $15,000 | 2,297,850 | 2,694,018 | |||||
| Inventories | 3,943,738 | 3,884,450 | |||||
| Prepaid expenses and other assets | 718,122 | 655,835 | |||||
| Total current assets | 32,542,188 | 34,384,711 | |||||
| Fixed assets | |||||||
| Machinery and equipment | 9,280,062 | 9,280,062 | |||||
| Leasehold improvements | 1,797,245 | 1,797,245 | |||||
| 11,077,307 | 11,077,307 | ||||||
| Less accumulated depreciation and amortization | 10,571,515 | 10,494,840 | |||||
| Net fixed assets | 505,792 | 582,467 | |||||
| Deferred tax assets | - | 108,119 | |||||
| Marketable securities, long-term | 45,049,578 | 43,606,495 | |||||
| Right-of-use asset – operating lease | 784,774 | 816,358 | |||||
| Total assets | $ | 78,882,332 | $ | 79,498,150 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 180,338 | $ | 186,993 | |||
| Accrued payroll and other | 492,243 | 482,074 | |||||
| Income taxes payable | 406,326 | - | |||||
| Operating lease | 120,429 | 127,134 | |||||
| Total current liabilities | 1,199,336 | 796,201 | |||||
| Deferred tax liabilities | 189,523 | - | |||||
| Operating lease | 675,928 | 706,600 | |||||
| Total liabilities | 2,064,787 | 1,502,801 | |||||
| Shareholders’ equity | |||||||
| Common stock, $0.01 par value, 6,000,000 shares authorized; 4,835,038 issued and outstanding as of June 30, 2020 and March 31, 2020 | 48,350 | 48,350 | |||||
| Additional paid-in capital | 19,386,663 | 19,383,956 | |||||
| Accumulated other comprehensive income | 1,759,185 | 516,523 | |||||
| Retained earnings | 55,623,347 | 58,046,520 | |||||
| Total shareholders’ equity | 76,817,545 | 77,995,349 | |||||
| Total liabilities and shareholders’ equity | $ | 78,882,332 | $ | 79,498,150 | |||
*The March 31, 20202021 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, 2020.
See accompanying notes.
Quarter Ended June 30 2021 2020 Product sales Contract research and development Total revenue Cost of sales Gross profit Research and development Selling, general, and administrative Total expenses Income from operations Interest income Income before taxes Provision for income taxes Net income Net income per share – basic Net income per share – diluted Cash dividends declared per common share Basic Diluted STATEMENTS OF COMPREHENSIVE INCOME Quarter Ended June 30 2021 2020 Net income Unrealized (loss) gain from marketable securities, net of tax ) Comprehensive income See accompanying notes. Accumulated Balance as of March 31, 2021 Unrealized loss on marketable securities, net of tax Net income Cash dividends declared ($1.00 per share of common stock) ) ) Balance as of June 30, 2021 Balance as of March 31, 2020 Unrealized gain on marketable securities, net of tax Net income Cash dividends declared ($1.00 per share of common stock) ) ) Balance as of June 30, 2020 Quarter Ended June 30 2021 2020 Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Stock-based compensation Accounts receivable ) Inventories ) Prepaid expenses and other assets ) ) Accounts payable and other liabilities Net cash provided by operating activities Purchases of fixed assets ) Purchases of marketable securities Proceeds from maturities of marketable securities Cash used in investing activities ) Payment of dividends to shareholders ) ) Cash used in financing activities ) ) Decrease in cash and cash equivalents ) ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Cash paid during the period for income taxes 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 In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. New Accounting Standard Not Yet Adopted Quarter Ended June 30 2021 2020 Weighted average common shares outstanding – basic Dilutive effect of stock options Shares used in computing net income per share – diluted NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS Total <1 Year 1–3 Years 3–5 Years Total available-for-sale securities represented approximately 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: As of June 30, 2021 As of March 31, 2021 Level 1 Level 2 Total Level 1 Level 2 Total Money market funds Corporate bonds Total Our available-for-sale securities as of June 30 and March 31, As of June 30, 2021 As of March 31, 2021 Amortized Gross Gains Gross Losses Estimated Amortized Gross Gains Gross Losses Estimated Money market funds Corporate bonds ) ) Total ) ) 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, 2021 and March 31,2021. Less Than 12 Months 12 Months or Greater Total Estimated Gross Losses Estimated Gross Losses Estimated Gross Losses Corporate bonds ) ) Total ) ) Corporate bonds ) ) Total ) ) We did not consider any of our available-for-sale securities to be impaired as of June 30, 2021. None of the securities were impaired at acquisition, and subsequent declines in fair value are not attributed to declines in credit quality. The effects of the COVID-19 pandemic, however, have degraded outlooks for some of our marketable securities’ issuers, which could lead to credit-quality downgrades in the future. 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 June 30,2021. June 30, March 31, Raw materials Work in process Finished goods Total inventories NOTE 7. STOCK-BASED COMPENSATION NOTE 8. INCOME TAXES NOTE 9. LEASES Quarter Ended Operating lease cost Variable lease cost Total Operating cash flows for leases Discount rate % The following table presents the maturities of lease liabilities as of June 30, Year Ending March 31 Operating Leases 2022 2023 2024 2025 2026 Total lease payments Imputed lease interest ) Total lease liabilities NOTE 10. STOCK REPURCHASE PROGRAM NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS Item 2. Forward-looking statements Quarter ended June30, Percentage of Revenue Quarter- 2021 2020 Product sales % % % Contract research and development % % )% Total revenue % % % Cost of sales % % % Gross profit % % % Research and development % % )% Selling, general, and administrative % % % Total expenses % % % Income from operations % % % Interest income % % )% Income before taxes % % % Provision for income taxes % % % Net income % % % Total revenue for the quarter ended June 30, 2021 (the first quarter of fiscal 2022) increased 56% compared to the quarter ended June 30, 2020 (the first quarter of fiscal 2021) The Gross profit as a percentage of revenue decreased to 75% the first quarter of fiscal 2022 from 82% the first quarter of fiscal 2021 Total expenses Interest income for the first quarter of fiscal The We believe the impact of the COVID-19 pandemic Liquidity and Capital Resources Item 4. Controls and Procedures. Item 1. Legal Proceedings. Exhibit# Description 31.1 Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). 31.2 Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a). 32 Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section 1350. 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 104 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) July /s/ DANIEL A. BAKER Date Daniel A. Baker President and Chief Executive Officer July /s/ CURT A. REYNDERS Date Curt A. Reynders Chief Financial Officer
NVE CORPORATION
STATEMENTS OF INCOME
(Unaudited) Revenue $ 6,953,766 $ 4,358,635 199,397 230,627 7,153,163 4,589,262 1,769,581 836,422 5,383,582 3,752,840 Expenses 808,142 880,983 466,618 355,011 1,274,760 1,235,994 4,108,822 2,516,846 289,720 399,212 4,398,542 2,916,058 818,976 504,193 $ 3,579,566 $ 2,411,865 $ 0.74 $ 0.50 $ 0.74 $ 0.50 $ 1.00 $ 1.00 Weighted average shares outstanding 4,833,232 4,835,038 4,836,821 4,835,157 Quarter Ended June 30 2020 2019 Revenue Product sales $ 4,358,635 $ 6,085,364 Contract research and development 230,627 209,332 Total revenue 4,589,262 6,294,696 Cost of sales 836,422 1,092,037 Gross profit 3,752,840 5,202,659 Expenses Research and development 880,983 973,067 Selling, general, and administrative 355,011 330,009 Total expenses 1,235,994 1,303,076 Income from operations 2,516,846 3,899,583 Interest income 399,212 459,039 Income before taxes 2,916,058 4,358,622 Provision for income taxes 504,193 751,203 Net income $ $2,411,865 $ 3,607,419 Net income per share – basic $ 0.50 $ 0.74 Net income per share – diluted $ 0.50 $ 0.74 Cash dividends declared per common share $ 1.00 $ 1.00 Weighted average shares outstanding Basic 4,835,038 4,846,010 Diluted 4,835,157 4,850,388
(Unaudited)Quarter Ended June 30 2020 2019 Net income $ 2,411,865 $ 3,607,419 Unrealized gain from marketable securities, net of tax 1,242,662 570,063 Comprehensive income $ 3,654,527 $ 4,177,482 $ 3,579,566 $ 2,411,865 (90,165 1,242,662 $ 3,489,401 $ 3,654,527
NVE CORPORATION
STATEMENTS OF SHAREHOLDERS’SHAREHOLDERS’ EQUITY
(Unaudited) Additional Other Common Stock Paid-In Comprehensive Retained Shares Amount Capital Income Earnings Total 4,833,232 $ 48,332 $ 19,338,127 $ 1,101,119 $ 50,404,364 $ 70,891,942 Comprehensive income: 0 0 (90,165 ) 0 (90,165 ) 0 0 0 3,579,566 3,579,566 Total comprehensive income 0 0 0 0 3,489,401 Stock-based compensation 0 7,238 0 0 7,238 0 0 0 (4,833,232 (4,833,232 4,833,232 $ 48,332 $ 19,345,365 $ 1,010,954 $ 49,150,698 $ 69,555,349
Additional
Paid-In
Capital Accumulated
Other
Comprehen-
sive
Income Retained
Earnings Common Stock Shares Amount Total Balance as of March 31, 2020 4,835,038 $ 48,350 $ 19,383,956 $ 516,523 $ 58,046,520 $ 77,995,349 Comprehensive income: Unrealized gain onmarketable securities,
net of tax 1,242,662 1,242,662 Net income 2,411,865 2,411,865 Total comprehensive income 3,654,527 Stock-based compensation 2,707 2,707 Cash dividends declared($1.00 per share of
common stock) (4,835,038 ) (4,835,038 ) Balance as of June 30, 2020 4,835,038 $ 48,350 $ 19,386,663 $ 1,759,185 $ 55,623,347 $ 76,817,545
NVE CORPORATION
STATEMENTS OF SHAREHOLDERS’SHAREHOLDERS’ EQUITY
(Unaudited) Accumulated Additional Other Common Stock Paid-In Comprehensive Retained Shares Amount Capital Income Earnings Total 4,835,038 $ 48,350 $ 19,383,956 $ 516,523 $ 58,046,520 $ 77,995,349 Comprehensive income: 0 0 1,242,662 0 1,242,662 0 0 0 2,411,865 2,411,865 Total comprehensive income 0 0 0 0 3,654,527 Stock-based compensation 0 2,707 0 0 2,707 0 0 0 (4,835,038 (4,835,038 4,835,038 $ 48,350 $ 19,386,663 $ 1,759,185 $ 55,623,347 $ 76,817,545
Additional
Paid-In
Capital Accumulated
Other
Comprehen-
sive (Loss)
Income Retained
Earnings Common Stock Shares Amount Total Balance as of March 31, 2019 4,846,010 $ 48,460 $ 19,910,558 $ (82,725 ) $ 62,903,918 $ 82,780,211 Comprehensive income: Unrealized gain onmarketable securities,
net of tax 570,063 570,063 Net income 3,607,419 3,607,419 Total comprehensive income 4,177,482 Cash dividends declared($1.00 per share of
common stock) (4,846,010 ) (4,846,010 ) Balance as of June 30, 2019 4,846,010 $ 48,460 $ 19,910,558 $ 487,338 $ 61,665,327 $ 82,111,683
NVE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited) OPERATING ACTIVITIES $ 3,579,566 $ 2,411,865 140,427 129,620 7,238 2,707 Deferred income taxes (2,868 ) (50,405 ) Changes in operating assets and liabilities: (1,355,557 396,168 230,751 (59,288 (235,406 (30,703 936,243 372,463 3,300,394 3,172,427 INVESTING ACTIVITIES (25,679 0 0 0 0 0 (25,679 0 FINANCING ACTIVITIES (4,833,232 (4,835,038 (4,833,232 (4,835,038 (1,558,517 (1,662,611 10,427,340 8,065,594 $ 8,868,823 $ 6,402,983 Supplemental disclosures of cash flow information: $ 0 $ 0 Quarter Ended June 30 2020 2019 OPERATING ACTIVITIES Net income $ 2,411,865 $ 3,607,419 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 129,620 134,733 Stock-based compensation 2,707 - Deferred income taxes (50,405 ) (664 ) Changes in operating assets and liabilities: Accounts receivable 396,168 248,955 Inventories (59,288 ) 45,093 Prepaid expenses and other assets (30,703 ) 205,399 Accounts payable and other liabilities 372,463 296,693 Net cash provided by operating activities 3,172,427 4,537,628 INVESTING ACTIVITIES Purchases of fixed assets - (16,100 ) Purchases of marketable securities - (3,013,530 ) Proceeds from maturities of marketable securities - 9,500,000 Cash provided by investing activities - 6,470,370 FINANCING ACTIVITIES Payment of dividends to shareholders (4,835,038 ) (4,846,010 ) Cash used in financing activities (4,835,038 ) (4,846,010 ) (Decrease) increase in cash and cash equivalents (1,662,611 ) 6,161,988 Cash and cash equivalents at beginning of period 8,065,594 6,877,304 Cash and cash equivalents at end of period $ 6,402,983 $ 13,039,292 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ - $ - NVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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, 2020.2021. The results of operations for the quarter ended June 30, 20202021 are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2021.
2022.
Significant Accounting Policiesaccounting policiesRevenue Recognition We recognize revenue when we satisfy performance obligations by
A description of our significant accounting policies is provided in Note 2 to the transferFinancial Statements in our Annual Report on Form 10-K for the year ended March 31,2021. As of control of products or servicesJune 30,2021, there were no changes to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. Revenue is disaggregated into product sales and contract research and development to depict the nature, amount, timing of revenue recognition and economic characteristics of our business, and is represented within the financial statements. We recognize revenue from product sales to customers and distributors when we satisfy our performance obligation, at a point in time, upon product shipment or delivery to our customer or distributor as determined by agreed upon shipping terms. Shipping charges billed to customers are included in product sales and the related shipping costs are included in cost of sales. Under certain limited circumstances, our distributors may earn commissions for activities unrelated to their purchases of our products, such as for facilitating the sale of custom products or research and development contracts with third parties. We recognize any such commissions as selling, general, and administrative expenses. We recognize discounts provided to our distributors as reductions in revenue. We recognize contract research and development revenue over a period of time as the performance obligation is satisfied over a period of time rather than a point in time. Contracts have specifications unique to each customer and do not create an asset with an alternate use, and we have an enforceable right to payment for performance completed to date. We recognize revenue over a period of time using costs incurred as the measurement of progress towards completion. Accounts receivable is recognized when we have transferred a good or service to a customer and our right to receive consideration is unconditional through the completion of our performance obligation. A contract asset is recognized when we have a right to consideration from the transfer of goods or services to a customer but have not completed our performance obligation. A contract liability is recognized when we have been paid by a customer but have not yet satisfied the performance obligation by transferring goods or services. We had no material contract assets or contract liabilities as of June 30, 2020 or March 31, 2020. Our performance obligations related to product sales and contract research and development contracts are satisfied in one year or less. Unsatisfied performance obligations represent contracts with an original expected duration of one year or less. As permitted under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we are using the practical expedient not to disclose the value of these unsatisfied performance obligations. We also use the practical expedient in which we do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.Table of Contents
NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDSNewRecently Adopted Accounting Standards Not Yet AdoptedStandard 2019-12, 2019-12,Income Taxes (Topic 740)740)—Simplifying the Accounting for Income Taxes.Taxes. ASU 2019-12 is intended to simplify2019-12 simplifies accounting for income taxes. Ittaxes, removes certain exceptions to the general principles in Topic 740, and amends existing guidance to improve consistent application. We adopted ASU 2019-122019-12 for this Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. The adoption had no material impact on our financial statements.
In May 2021, the FASB issued ASU No.2021-04,Earnings 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 Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. ASU 2021-04 is effective for fiscal years beginning after December 15, 2020 2021 and interim periods within those fiscal years, which is fiscal 20222023 for us, with early adoption permitted. We do not expect adoption of the new guidance to have a significant impact on our financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) 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, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which clarifies codification and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in February 2020 the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), both of which delay the effective date of ASU 2016-13 by three years for certain Smaller Reporting Companies such as us. We were unaffected by the change in the effective date of the ASU related to Leases (Topic 842) because we have already adopted that ASU. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments; which modifies the measurement of expected credit losses of certain financial instruments. 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, 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 do not expect adoption of the new guidance to have a significant impact on our financial statements.
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 June 30 2020 2019 Weighted average common shares outstanding – basic 4,835,038 4,846,010 Dilutive effect of stock options 119 4,378 Shares used in computing net income per share – diluted 4,835,157 4,850,388 4,833,232 4,835,038 3,589 119 4,836,821 4,835,157 8
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 June 30, 20202021 are as follows:Total <1 Year 1–3 Years 3–5 Years $ 70,315,124 $ 25,265,545 $ 33,132,700 $ 11,916,879
$ 62,756,448 $ 25,293,411 $ 27,108,299 $ 10,354,738 89%87% of our total assets. Marketable securities as of June 30, 20202021 had remaining maturities between foursix weeks and 44 months.
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.”
The following table shows the estimated fair value of assets that were accounted for at fair value on a recurring basis:As of June 30, 2020 As of March 31, 2020 Level 1 Level 2 Total Level 1 Level 2 Total Money market funds $ 6,086,051 $ - $ 6,086,051 $ 7,903,433 $ - $ 7,903,433 Corporate bonds - 64,229,073 64,229,073 - 62,691,309 62,691,309 Total $ 6,086,051 $ 64,229,073 $ 70,315,124 $ 7,903,433 $ 62,691,309 $ 70,594,742 $ 8,231,700 $ 0 $ 8,231,700 $ 10,143,196 $ 0 $ 10,143,196 0 54,524,748 54,524,748 0 54,717,626 54,717,626 $ 8,231,700 $ 54,524,748 $ 62,756,448 $ 10,143,196 $ 54,717,626 $ 64,860,822 2020,2021, aggregated into classes of securities, were as follows:As of June 30, 2020 As of March 31, 2020
Amortized
Cost Gross
Unrealized
Holding Gains Gross
Unrealized
Holding Losses Estimated
Fair
Value
Amortized
CostGross
Unrealized
Holding GainsGross
Unrealized
Holding LossesEstimated
Fair
ValueMoney market
funds$ 6,086,051 $ - $ - $ 6,086,051 $ 7,903,433 $ - $ - $ 7,903,433 Corporate bonds 61,977,175 2,251,898 - 64,229,073 62,030,120 752,621 (91,432 ) 62,691,309 Total $ 68,063,226 $ 2,251,898 $ - $ 70,315,124 $ 69,933,553 $ 752,621 $ (91,432 ) $ 70,594,742
Cost
Unrealized
Holding
Unrealized
Holding
Fair
Value
Cost
Unrealized
Holding
Unrealized
Holding
Fair
Value $ 8,231,700 $ 0 $ 0 $ 8,231,700 $ 10,143,196 $ 0 $ 0 $ 10,143,196 53,230,646 1,389,752 (95,650 54,524,748 53,308,105 1,570,195 (160,674 54,717,626 $ 61,462,346 $ 1,389,752 $ (95,650 $ 62,756,448 $ 63,451,301 $ 1,570,195 $ (160,674 $ 64,860,822 9
Fair
Value
Unrealized
Holding
Fair
Value
Unrealized
Holding
Fair
Value
Unrealized
Holding As of June 30, 2021 $ 10,354,738 $ (95,650 $ 0 $ 0 $ 10,354,738 $ (95,650 $ 10,354,738 $ (95,650 $ 0 $ 0 $ 10,354,738 $ (95,650 As of March 31, 2021 $ 10,322,539 $ (160,674 $ 0 $ 0 $ 10,322,539 $ (160,674 $ 10,322,539 $ (160,674 $ 0 $ 0 $ 10,322,539 $ (160,674
NOTE 6. INVENTORIES
Inventories are shown in the following table:June 30,
2020March 31,
2020Raw materials $ 907,618 $ 1,017,451 Work in process 2,026,032 1,863,000 Finished goods 1,010,088 1,003,999 Total inventories $ 3,943,738 $ 3,884,450
2021
2021 $ 696,047 $ 660,678 2,399,064 2,220,723 574,915 1,019,376 $ 3,670,026 $ 3,900,777
Stock-based compensation expense was $7,238 for the first quarter of fiscal 2022 and $2,707 for the first quarter of fiscal 2021. There were no stock-based compensation expenses for the first quarter of fiscal 2020. We calculate the share-based compensation expense using the Black-Scholes standard option-pricing model.
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, 2020,2021, 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, 20202021 we had no accrued interest related to uncertain tax positions. The tax years 2016 through 20192020 remain open to examination by the major taxing jurisdictions to which we are subject.
10
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, 2020Operating lease cost $ 38,641 Variable lease cost 30,608 Total $ 69,249 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for leases $ 44,433 Remaining lease term 69 months Discount rate 3.5 %
June 30, 2021 $ 42,516 31,028 $ 73,544 Cash paid for amounts included in the measurement of lease liabilities $ 37,962 Remaining lease term (in months) 57 3.5 2020:Year Ending March 31 Operating Leases 2021 84,104 2022 152,703 2023 156,121 2024 159,592 2025 163,224 2026 165,947 Total lease payments 881,691 Imputed lease interest (85,334 ) Total lease liabilities $ 796,357
2021: 114,740 156,121 159,592 163,224 165,947 759,624 (59,655 $ 699,969 Table of Contents
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 $3,853,459$3,762,040 as of June 30, 2020.2021. We did not repurchase any of our Common Stock during the first quarter of fiscal 2021.
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 $28,584 for the first quarter of fiscal 2022 and $25,381 for the first quarter of fiscal 2021 and $24,066 for the first quarter of fiscal 2020.
NOTE 12. SUBSEQUENT EVENTS
On July 22, 202021,2021 we announced that our Board had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid August 31, 20202021 to shareholders of record as of the close of business August 3, 2020.
2,2021.
11Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
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, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks related to the COVID-19 pandemic, 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, 2020.
2021 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, 2020.2021. As of June 30, 20202021 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.20202021 compared to quarter ended June30, 20192020
The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:Percentage of Revenue
Quarter Ended June 30Quarter-
to-Quarter
Change2020 2019 Revenue Product sales 95.0 % 96.7 % (28.4 )% Contract research and development 5.0 % 3.3 % 10.2 % Total revenue 100.0 % 100.0 % (27.1 )% Cost of sales 18.2 % 17.3 % (23.4 )% Gross profit 81.8 % 82.7 % (27.9 )% Expenses Research and development 19.2 % 15.5 % (9.5 )% Selling, general, and administrative 7.7 % 5.2 % 7.6 % Total expenses 26.9 % 20.7 % (5.1 )% Income from operations 54.9 % 62.0 % (35.5 )% Interest income 8.7 % 7.2 % (13.0 )% Income before taxes 63.6 % 69.2 % (33.1 )% Provision for income taxes 11.0 % 11.9 % (32.9 )% Net income 52.6 % 57.3 % (33.1 )%
Quarter Ended June 30
to-Quarter Change Revenue 97.2 95.0 59.5 2.8 5.0 (13.5 100.0 100.0 55.9 24.7 18.2 111.6 75.3 81.8 43.5 Expenses 11.3 19.2 (8.3 6.6 7.7 31.4 17.9 26.9 3.1 57.4 54.9 63.3 4.1 8.7 (27.4 61.5 63.6 50.8 11.5 11.0 62.4 50.0 52.6 48.4 decreased 27% compared to the quarter ended June 30, 2019 (the first quarter of fiscal 2020). The decreaseincrease was due to a 28% decrease60% increase in product sales partially offset by a 10% increase14% decrease in contract research and development revenue.decreaseincrease in product sales in the first quarter of fiscal 2022 from the prior-year quarter was primarily due to decreasedincreased purchases by existing customers.customers, and sales increased in most of our markets and product lines. The increasedecrease in contract research and development revenue was due to the completion of certain contracts.wasprimarily due to the timing of progress towards contract completion.
revenue mix.decreased 5%increased 3% in the first quarter of fiscal 20212022 compared to the first quarter of fiscal 20202021 due to a 9%31% increase in selling, general, and administrative expense, partially offset by an 8% decrease in research and development expense, partially offset by a 8%expense. The increase in selling, general, and administrative expense was primarily due to increased employee compensation expense. The decrease in research and development expense was primarily due to staffing changes and the completion of certain product development activities. The increase in selling, general, and administrative expense was primarily due to staffing changes.20212022 decreased 13%27% due to a decrease in our available-for-sale securities and a decrease in the average interest rates on our marketable securities and money market funds.
those securities.33% decrease48% increase in net income in the first quarter of fiscal 20212022 compared to the prior-year quarter was primarily due to a decreasean increase in product sales.
The Impact of the COVID-19 Pandemic had a significant impact on total revenue and net income forwas significantly less in the quarter ended June 30, 2020 compared to2021 than in the prior-year quarter due to its effects on market conditions in certain industries, especially medical devices. Total revenue and net income will likely continue to decrease for future quarters compared to prior-year quarters due to the effects of the COVID-19 pandemic.
ended June 30, 2020.
Overview
Cash and cash equivalents were $6,402,983$8,868,823 as of June 30, 20202021 compared to $8,065,594$10,427,340 as of March 31, 2020.2021. The $1,662,611$1,558,517 decrease in cash and cash equivalents during first quarter of fiscal 2022 was due to $4,835,038$4,833,232 of cash used in financing activities consistingand $25,679 of cash dividends paid to shareholders,used investing activities, partially offset by $3,172,427$3,300,394 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 $3,300,394 for first quarter of fiscal 2022 and $3,172,427 for the first quarter of fiscal 2021.
Accounts receivable increased by $1,355,557 during first quarter of fiscal 2022 primarily due to the timing of sales to and payments from customers.
Investing Activities We had no maturities or purchases of debt securities and no capital expenditures
Cash used in investing activities during the quarter ended June 30, 2020.2021 consisted of $25,679 in capital expenditures. Capital expenditures can vary from quarter to quarter depending on our needs and equipment purchasing opportunities.
We currently plan significantly more capital expenditures during fiscal 2022 than the $62,727 we invested in fiscal 2021.
Financing Activities
Cash used in financing activities during the quarter ended June 30, 2021 consisted of $4,833,232 of cash dividends paid to shareholders. In addition to cash dividends to shareholders paid in first quarter of fiscal 2021,2022, on July 22, 202021, 2021 we announced that our Board had declared a cash dividend of $1.00 per share of Common Stock, or $4,835,038$4,833,232 based on shares outstanding as of July 17, 2020,16, 2021, to be paid August 31, 2020.2021. We plan to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities. All future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, estimates of future cash requirements, the impacts of the COVID-19 pandemic, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.
We currently believe our working capital and cash generated from operations will be adequate for our needs at least for the next 12 months.Off-Balance-Sheet Arrangements Our off-balance sheet arrangements consist of purchase commitments. We believe such arrangements have no material current or anticipated future effect on our profitability, cash flows, or financial position.
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 Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as June 30, 2020,2021, our disclosure controls and procedures were effective.
Changes in Internal Controls
During the quarter ended June 30, 2020,2021, 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.
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, 2020,2021, except the following two risk factors arefactor is replaced in theirits entirety by the following to reflect the expiration of certainnew COVID-19 related restrictions:Public health crises could have an adverse effectrestrictions on our operations and financial results. Public health crises could adversely affect our ongoing business operations. In particular, the COVID-19 pandemic has severely impacted global economic activity and caused many of our important customers to delay or cancel orders. We were allowed to operate under Minnesota Emergency Executive Orders because the Company is in several “Critical Sectors” as defined in the Orders, however there can be no assurance we will be exempted from any future restrictions imposed by Federal, State, or local authorities in response to possible future surges or “waves” of COVID-19. Such restrictions could limit or prohibit our operations. Furthermore, if one or more of our employees become infected with COVID-19, we could be forced to curtail or cease operations to protect the health of our employees or to prevent the spread of the disease. Additionally, any customer or supplier disruptions could affect our ability to operate. These and other impacts of COVID-19 pandemic or other public health crises could have a material adverse effect on our results of operations or our financial condition.
certain packaging vendors:
The loss of supply from any of our packaging vendors could impact our ability to produce and deliver products and cause loss of revenue.
We are dependent on our packaging vendors. Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits. Some of our products use processes or tooling unique to a particular packaging vendor, and it might be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors’ business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics. Lead times for packaging services have increased during the COVID-19 pandemic and there have been shortages of raw materials and equipment our packaging vendors need for their process. One of our packaging vendors, located in India was forced to suspend its factory operations from late Marchin 2020 until mid-May,due to government-imposed restrictions and is still not fully operational. Another packaging vendor, located in Malaysia, has been permitted only limited operationsubject to strict government lockdown restrictions since mid-May pursuant to COVID-19 government orders. The COVID-19 pandemic has also caused shortages of materials and subassemblies ourJune 1, 2021. Our packaging vendors need forcould face further restrictions in the packaging process.future. Additionally, certain of our packaging vendors are in flood-susceptible areas. Flooding risks to such vendors may increase in the future due to possible higher ocean levels, extreme weather, and other potential effects of climate change. We have alternate vendors or potential alternate vendors for the majority of our products, but it can be expensive, time-consuming, and technically challenging to convert to alternate vendors. Furthermore, we may not be able to recover work in process or finished goods at a packaging vendor in the event of a disruption. Any supply interruptions or loss of inventory could seriously jeopardize our ability to provide products that are critical to our business and operations and may cause us to lose revenue.
Item 4. Mine Safety Disclosures.
Not applicable. 31.2 32101.INS
(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)101.CAL101.DEF101.LAB101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
22, 202021, 2021
22, 202021, 20211617