Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended   June 30,December 31, 2021

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  ☒ 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 – – 4,833,2324,833,714 shares outstanding as of JulyJanuary 14, 202216, 2021
 

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

NVE CORPORATION

BALANCE SHEETS

*The March 31, 2021 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, 2021.

See accompanying notes.

NVE CORPORATION

STATEMENTS OF INCOME

(Unaudited)

STATEMENTS OF COMPREHENSIVE INCOME
     

(Unaudited)

See accompanying notes.

NVE CORPORATION

Table of ContentsSTATEMENTS OF INCOME

(Unaudited)

STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

See accompanying notes.

NVE CORPORATION

STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

See accompanying notes.
 

NVE CORPORATION
STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)

See accompanying notes.
 

NVE CORPORATION

STATEMENTS OF CASH FLOWSSHAREHOLDERS
’ EQUITY

(Unaudited)

See accompanying notes.

Table of ContentsNVE CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying notes. 

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, 2021. 31,2021.The results of operations for the quarter and nine months ended JuneDecember 31, 2021 30,2021are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31,2022.

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, 2021. 31,2021.As of JuneDecember 31, 2021, 30,2021,there were no changes to our significant accounting policies.

NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS

Recently Adopted Accounting Standard

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies accounting for income taxes, removes certain exceptions to the general principles in Topic 740, and amends existing guidance to improve consistent application. We adopted ASU 2019-12 for this Quarterly Report on Form 10-Q forbeginning with the quarter ended June 30, 2021. The adoption had no material impact on our financial statements.
 

New Accounting Standard Not Yet Adopted
     

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, 2021 and interim periods within those fiscal years, which is fiscal 2023 for us, 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:

NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS
     

Our corporate bonds and money market funds are classified as available-for-sale securities and carried at estimated fair value. Unrealized holding gains and losses are included in accumulated other comprehensive income (loss) in the statement of shareholders’ equity. Corporate bonds with remaining maturities less than one year are classified as short-term, and those with remaining maturities greater than one year are classified as long-term. We consider all highly-liquid investments with maturities of three months or less when purchased, including money market funds, to be cash equivalents. Gains and losses on marketable security transactions are reported on the specific-identification method.

     

Contractual maturities of available-for-sale securities as of JuneDecember 31, 2021 30,2021are as follows:
 

Total available-for-sale securities represented approximately 87%84% of our total assets. Marketable securities as of JuneDecember 31, 2021 30,2021had remaining maturities between sixthree weeks and 4438 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.”
 
     

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

Our available-for-sale securities as of JuneDecember 31 30and March 31, 2021, 31,2021,aggregated into classes of securities, were as follows:

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,December 31, 2021 and March 31, 2021.

We did not consider any of our available-for-sale securities to be impaired as of June 30,December 31, 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,December 31, 2021.

NOTE 6. INVENTORIES
     

Inventories are shown in the following table:

NOTE 7. STOCK-BASED COMPENSATION
     

Stock-based compensation expense was $7,238$8,799 for the firstthird quarter of fiscal 2022, and $2,707$4,275 for the third quarter of fiscal 2021, $73,036 for the first quarternine months of fiscal 2022, and $41,297 for the firstnine months of fiscal 2021. 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 no0 unrecognized tax benefits as of JuneDecember 31, 2021, 30,2021,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 JuneDecember 31, 2021 30,2021we had no0 accrued interest related to uncertain tax positions. The tax years 2016 through 2020 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:
 

The following table presents the maturities of lease liabilities as of June 30,December 31, 2021:

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, 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 $3,762,040 as of JuneDecember 31, 2021. 30,2021.We didhave not repurchaserepurchased any of our Common Stock during the first quarter of fiscal 2022.

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 $28,584 for$21,579 for the firstthird quarter of fiscal 2022, and $25,381$22,571 for the firstthird quarter of fiscal 2021, $76,995 for the firstnine months of fiscal 2022, and $69,227 for the firstnine months of fiscal 2021.

NOTE 12. SUBSEQUENT EVENTS
     

On JulyJanuary 19, 2022 21,2021we announced that our Board had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid February 28, 2022August 31,2021to shareholders of record as of the close of business August 2,2021January 31, 2022.

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

Forward-looking statements
     

Some of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of the terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of NVE, you should be aware that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors, including but not limited to risks related to our reliance on several large customers for a significant percentage of revenue, our dependence on critical suppliers and packaging vendors, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks and uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

     

Further information regarding our risks and uncertainties are contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 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, 2021. As of June 30,December 31, 2021 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

Quarter ended June30,December 31, 2021 compared to quarter ended June30,December 31, 2020
     

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

Total revenue for the quarter ended June 30,December 31, 2021 (the firstthird quarter of fiscal 2022) increased 56%decreased 4% compared to the quarter ended June 30,December 31, 2020 (the firstthird quarter of fiscal 2021). The increasedecrease was due to a 60% increase7% decrease in product sales partially offset by a 14% decreasean 86% increase in contract research and development revenue.

The increasedecrease in product sales in the firstthird quarter of fiscal 2022 from the prior-year quarter was primarily due to increased purchases by existing customers,raw materials shortages and sales increased in most of our marketslonger lead-times for critical materials and product lines.services. The decreaseincrease in contract research and development revenue was due to the completion of certainnew contracts.

Gross profit as a percentage of revenue decreased to 75%78% the firstthird quarter of fiscal 2022 from 82%84% the firstthird quarter of fiscal 2021 primarily due to revenue mix.mix and increased costs.

Total expenses increased 3%decreased 14% in the firstthird quarter of fiscal 2022 compared to the firstthird quarter of fiscal 2021 due to a 31% increase15% decrease in research and development expense and a 13% decrease in selling, general, and administrative expense, partially offset by an 8% decrease in research and development 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 decrease in selling, general, and administrative expense was primarily due to staffing changes.

Interest income for the firstthird quarter of fiscal 2022 decreased 27%22% due to a decrease in our available-for-sale securities and a decrease in the average interest rates on those securities.

The 48% increase12% decrease in net income in the firstthird quarter of fiscal 2022 compared to the prior-year quarter was primarily due to decreased revenue, decreased gross margin, and decreased interest income partially offset by decreased expenses. 

Nine months ended December 31, 2021 compared to nine months ended December 31, 2020

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