Table of Contents

NVE CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS

We develop and sell devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information. 

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited financial statements of NVE Corporation are prepared consistent with accounting principles generally accepted in the United States and in accordance with Securities and Exchange Commission rules and regulations. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements. Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and it is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and the notes included in our latest annual financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.2023. The results of operations for the quarter and nine months ended December 31, 2022September 30, 2023, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2023.2024.

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, 2022.2023. As of December 31, 2022,September 30, 2023, there were no changes to our significant accounting policies.

NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS

Recently Adopted Accounting Standard

In May 2021,policies except for changes resulting from the adoption of Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-04,2016-13, Earnings Per Share (Topic 260), Debt—ModificationsFinancial Instruments—Credit Losses (ASC Topic 326) as described in the “Marketable securities and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718),credit losses” section below and Derivativesin Note 3.

Marketable securities and Hedging—Contractscredit losses

Our marketable securities consist of corporate bonds and money market funds. Marketable are initially recognized at cost. Marketable securities considered to be “purchased financial assets with credit deterioration” are initially recognized at cost, less any allowance for expected credit losses. Unrealized holding gains and losses are reported in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accountingother comprehensive income, net of applicable taxes, until realized. All marketable securities are carried on the balance sheet at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use a three-level fair value hierarchy in estimating and reporting fair values of our marketable securities:

Level 1 – Securities whose fair values are determined using quoted prices in active markets for Certain Modificationsidentical securities.

Level 2 – Securities whose fair values are determined using quoted prices for similar securities in active markets or Exchangesquoted prices for identical securities in markets that are not active.

Level 3 – Securities whose fair values are determined using unobservable inputs.

Corporate bonds with remaining maturities of Freestanding Equity-Classified Written Call Options. ASU 2021-04 addresses issuers’ accounting for certain modificationsless than one year are classified as short-term and those with remaining maturities of one year or exchangesmore are classified as long-term. We consider all highly liquid investments with maturities of freestanding equity-classified written call options. three months or less when purchased, including money market funds, to be cash equivalents.

We adopted ASU 2021-04 beginning with the quarter ended June 30, 2022. The adoption had no material impactmeasure credit losses on our marketable securities at the individual security level, using the present value of expected cash flows method. Credit losses are measured as the amount by which the amortized cost basis of the security exceeds the present value of expected cash flows (discounted at the effective interest rate implicit in the security at the date of acquisition), limited by the amount by which the fair value of the security is less than its amortized cost basis. When estimating expected cash flows, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as, past incidences of default, credit quality as reported by credit rating agencies, extent of impairment, length of time the security has been in a continuous unrealized loss position, and adverse conditions forecasted by industry, financial statements.
 and economic experts that are relevant to the collectability of expected cash flows. We do not include accrued interest receivables in amortized cost and in fair value when measuring expected credit losses. We will write off uncollectible accrued interest receivable to net income in a timely manner, by reversing interest income, and therefore do not measure credit losses for accrued interest receivable. Timely manner means one year from the date the accrued interest receivable becomes past due. Accrued interest receivables are included in the balance sheet in “prepaid expenses and other assets.”

New Accounting Standard Not Yet Adopted

Accounts Receivable and Allowance for Credit Losses

We grant credit to customers in the normal course of business and at times require customers to pay for orders before shipment. Accounts receivable are presented on the balance sheet net of any allowance for credit losses. We measure credit losses on our trade accounts receivable on a pool basis, and in some cases, on an individual basis, using the loss-rate method. Accounts receivable are pooled based on geographical locations because we believe accounts originating from the same geographical location share risk characteristics. When estimating expected credit losses on our trade accounts receivable, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as historical loss rate, current age and remaining term of the receivable relative to our current days sales outstanding (“DSO”) ratio, pending orders of the customer relative to accounts receivable balance as of the reporting date and amounts paid by the customers subsequent to the reporting period end but before the financial statements are issued.

NOTE 3. RECENTLY ADOPTED ACCOUNTING STANDARD

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) 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. 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 accordanceWe adopted ASU
No. 2016-13 beginning with ASU 2019-10the quarter ended June 30, 2023.

The adoption resulted in disclosure changes and ASU 2020-02, ASU 2016-13 is effectiverequired us to consider the likelihood of default and to measure our allowance for certain Smaller Reporting Companies forcredit losses over the contractual term of our receivables. The adoption did not have a material impact on the financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2024 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted. We are evaluating the potential impact of ASU 2016-13 on our financial statements.

Table of ContentsSeptember 30 or April 1, 2023.

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:

Schedule of Earnings Per Share, Basic and Diluted

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTSMARKETABLE SECURITIES

Our corporate bonds and money market funds are classified as available-for-saleThe following table shows the major categories of our marketable securities and carried at estimated fair value. Unrealized holding gains and losses are included in accumulated other comprehensive income (loss) in the statementtheir contractual maturities as 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.September 30, 2023:

Contractual maturities of available-for-salemarketable securities as of December 31, 2022 are as follows:

Total available-for-salemarketable securities representedrepresent approximately 79% of our total assets as of December 31, 2022.September 30, 2023. Marketable securities as of December 31, 2022September 30, 2023, had remaining maturities between six daysone and 7667 months.

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

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

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

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

Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included on the balance sheets in “Marketable securities, short term” and “Marketable securities, long term.” Accrued interest receivables were $436,932 as of September 30, 2023, and $425,372 as of March 31, 2023, and are included in the balance sheets in “Prepaid expenses and other assets.”

TableWe monitor the credit ratings of Contentsour marketable securities at least quarterly as reported by Standard & Poor’s. The following table summarizes the fair values of our marketable securities as of September 30, 2023, aggregated by credit rating:

Fair values of our marketable securities aggregated by credit rating

The following table shows the estimated fair value of assets that were accounted for atour marketable securities, aggregated by fair value on a recurring basis:hierarchy inputs used in estimating their fair values:

Our available-for-saleThe following table shows the amortized cost, fair value, and gross unrealized holding gains and losses of our marketable securities as of December 31September 30 and March 31, 2022, aggregated into classes of securities, were as follows:2023: