What changed in this filing

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Item 9A. Controls and Procedures

2021-05-05 compared with 2020-05-06 · 180 added, 207 removed, 776 unchanged (33% of the section changed)

31 unchanged sentences

control over financial reporting was effective as of March 31, 2021.

Under an amendment recently adopted by the SEC to

the definition of accelerated filer pursuant to Rule 12b-2 under the

Securities Exchange Act of 1934, we now qualify as a smaller reporting company

and are therefore no longer required to have an audit of our internal control

over financial reporting by an independent registered public accounting firm.

OTHER INFORMATION.

Effective as of April 30, 2021 we executed Amendment

7 to our Supplier Partnering Agreement dated January 3, 2006 by

and between Pacesetter, Inc., now a subsidiary of Abbott Laboratories, and

us, as amended by Amendment No.

1 to the Agreement dated September 6,

2007, Amendment No.

2 dated December 15, 2009, Amendment No.

September 13, 2010, Amendment No.

4 dated February 1, 2011, Amendment

5 dated April 20, 2016, and Amendment No.

6 dated December 18,

We supply products to Abbott Laboratories under the Supplier Partnering

Agreement as amended.

The Amendment extends the Supplier Partnering Agreement

term through November 30, 2021.

The Amendment is filed as Exhibit 10.18 to

this Annual Report on Form 10-K.

Our management, including our Chief Executive Officer

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financial reporting.

OTHER INFORMATION.

We amended our Bylaws to allow our meetings of shareholders

to be held by means of remote communication (often referred to as virtual

This provides us with additional options for our annual meetings

of shareholders, especially with limitations on public movement and the size of

gatherings during the COVID-19 pandemic.

We also modernized and clarified certain

sections of the Bylaws.

Our Bylaws as amended are filed as Exhibit 3.2 to

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The section titled Proposal 1.

of Board of Directors to be included in our

Proxy Statement for our 2020 Annual Meeting of Shareholders sets forth certain

information regarding our directors and executive officers required by Item 10,

the section titled Information About Our Executive Officers sets forth

information regarding our executive officers required by Item 10, and the

section titled Corporate Governance sets forth information regarding

our corporate governance and code of ethics required by Item 10.

The information

in these sections to be included in our Proxy Statement for our 2020 Annual Meeting

of Shareholders are incorporated by reference into this section.

of Board of Directors to be included in our Proxy Statement for our 2021

Annual Meeting of Shareholders sets forth certain information regarding our directors

and executive officers required by Item 10, the section titled Information

About Our Executive Officers sets forth information regarding our executive

officers required by Item 10, and the section titled Corporate Governance

sets forth information regarding our corporate governance and code of ethics required

The information in these sections to be included in our Proxy

Statement for our 2021 Annual Meeting of Shareholders are incorporated by reference

into this section.

EXECUTIVE COMPENSATION.

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Form 10-QSB for the period ended December 31, 2002).

Bylaws of the company as amended

by the Board of Directors effective May 6, 2020.

of the company as amended by the Board of Directors effective May 6, 2020.

Description of the registrants securities registered

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by reference to the Form 8-K/A filed April 21, 2016).

6 to Supplier Partnering Agreement between Abbott and the company (incorporated

by reference to the Form 8-K/A filed December 21, 2020).

Amendment No.

7 to Supplier Partnering Agreement between

Abbott and the company (filed with this Annual Report on Form 10-K).

Agreement by and between the company and Sonova AG (incorporated by reference

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Consent of Boulay PLLP.

Consent of Grant Thornton LLP .

Certification by Daniel A.

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Opinion on the Financial Statements

We have audited the accompanying balance sheet of NVE Corporation (the Company)

as of March 31, 2020, and the related statements of income, comprehensive

income, shareholders' equity, and cash flows for the year ended March 31,

2020, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of March 31, 2020, and the results of

its operations and its cash flows for the year ended March 31, 2020, in conformity

We have audited the accompanying balance sheets of NVE Corporation (the Company)

as of March 31, 2021 and 2020, and the related statements of income, comprehensive

income, shareholders' equity, and cash flows for each of the years in the

two-year period ended March 31, 2021, and the related notes (collectively referred

to as the financial statements).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of

March 31, 2021 and 2020, and the results of its operations and its cash flows

for each of the years in the two-year period ended March 31, 2021, in conformity

with accounting principles generally accepted in the United States of America.

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Our responsibility is to express an opinion on the Companys financial statements

based on our audit.

based on our audits.

We are a public accounting firm registered with the Public

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Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards

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perform, an audit of its internal control over financial reporting.

our audit, we are required to obtain an understanding of internal control over

our audits, we are required to obtain an understanding of internal control over

financial reporting, but not for the purpose of expressing an opinion on the effectiveness

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we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement

Our audits included performing procedures to assess the risks of material misstatement

of the financial statements, whether due to error or fraud, and performing procedures

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evidence regarding the amounts and disclosures in the financial statements.

audit also included evaluating the accounting principles used and significant

audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of

the financial statements.

We believe that our audit provides a reasonable basis

We believe that our audits provide a reasonable basis

for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current

period audit of the financial statements that was communicated or required to

be communicated to the audit committee and that:

(1) related to accounts or disclosures

that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit

matters does not alter in any way our opinion on the financial statements, taken

as a whole, and we are not, by communicating the critical audit matter below,

providing separate opinions on the critical audit matter or on the accounts or

disclosures to which it relates.

Revenue Recognition Refer to Note 1 to the Financial

Description of the Matter

The Company recognizes revenue from product sales to customers and distributors

upon satisfaction of the performance obligation, at a point in time, upon product

shipment or delivery to its customer or distributor as determined by agreed upon

shipping terms.

Additionally, the Company recognizes contract research and development

revenue over a period of time as the performance obligation is satisfied over

a period of time.

Each research and development contract has specifications unique

to each customer and does not create an asset with an alternate use, and the Company

has an enforceable right to payment for performance completed to date.

recognizes revenue over a period of time based on an input method using costs

incurred as the measurement of progress towards completion.

judgment is exercised by the Company in determining revenue recognition for these

customer agreements, and includes the following:

Determination of whether products and services are considered distinct performance

obligations that should be accounted for separately versus together as it relates

to product sales and research and development contracts.

Determination of stand-alone selling prices for each distinct performance

obligation and for products and services that are not sold separately.

The pattern of delivery (i.e., timing of when revenue is recognized) for each

distinct performance obligation.

Estimation of variable consideration when determining the amount of revenue

to recognize (e.g., customer credits, incentives, and in certain instances, estimation

of customer usage of products and services).

Given these factors, the related audit effort in evaluating managements

judgments in determining revenue recognition for these customer agreements was

extensive and required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Companys revenue recognition

for these customer agreements included the following:

We evaluated the Companys accounting policies and related

disclosures for compliance with applicable revenue recognition accounting guidance.

We obtained an understanding of the design and implementation

of internal controls related to the Companys revenue recognition process,

including the identification of performance obligations and allocation of transaction

We performed analytical procedures to test the reasonableness

of recorded balances.

We performed procedures to test the transactions were recorded

in the appropriate accounting period.

We selected a sample of product sales and contract research agreements

and performed the following procedures:

Tested the existence and accuracy of the transaction by obtaining and agreeing

terms to the underlying contract.

Evaluated managements identification of significant terms for completeness,

including the identification of distinct performance obligations and variable

consideration.

We evaluated the reasonableness of managements estimate of stand-alone

selling prices for products and services that are not sold separately.

Tested the underlying costs driving recognition of revenue related to contract

research and development contracts.

Evaluated whether the transaction was accounted for in accordance with the

Companys policies.

/s/ Boulay PLLP

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Minneapolis, Minnesota

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

NVE Corporation

Opinion on the financial statements

We have audited the accompanying balance sheet of NVE Corporation (a Minnesota

corporation) (the Company) as of March 31, 2019, the related

statements of income, comprehensive income, shareholders equity, and cash

flows for the year then ended, and the related notes (collectively referred to

as the financial statements).

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company

as of March 31, 2019, and the results of its operations and its cash flows

for the year then ended, in conformity with accounting principles generally accepted

in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Companys management.

Our responsibility is to express an opinion on the Companys financial statements

based on our audit.

We are a public accounting firm registered with the PCAOB

and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the

Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards

require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement, whether due

to error or fraud.

Our audit included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements.

Our audit also included evaluating the accounting

principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit

provides a reasonable basis for our opinion.

/s/ Grant Thornton LLP

We served as the Companys auditor from 2014 through 2019 and are now the

predecessor auditor.

Minneapolis, Minnesota

BALANCE SHEETS

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Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Retained earnings

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Exercise of stock

Repurchase of common stock

Comprehensive income:

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common stock)

Cumulative effect of accounting change

Balance as of March 31, 2020

Exercise of stock

Repurchase of common stock

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carrying amount.

We have not identified any indicators of impairment during fiscal

We did not identify any indicators of impairment during fiscal

2021 or 2020.

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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.

on product shipment or delivery to our customer or distributor as determined

by agreed on shipping terms.

Shipping charges billed to customers are included

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Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In July 2019, the Financial Accounting Standards

Board (FASB) issued Accounting Standards Update (ASU)

2019-07, Codification Updates to SEC SectionsAmendments to SEC Paragraphs

Pursuant to SEC Final Rule Releases No.

33-10532, Disclosure Update and Simplification,

33-10231 and 33-10442, Investment Company Reporting Modernization, and

Miscellaneous Updates .

ASU 2019-07 aligns the guidance in various SEC sections

of the codification with the requirements of certain SEC final rules and is effective

These rules include requiring filers to include in their interim

financial statements a reconciliation of changes in shareholders equity.

We adopted all of the applicable rules for our Quarterly Report on Form

10-Q for the quarter ended June 30, 2019 and subsequent interim reports.

The adoption of ASU 2019-07 only affected presentation and disclosure.

In February 2016, the Financial Accounting Standards

Board (FASB) issued Accounting Standards Update (ASU)

2016-02, Lease Accounting .

ASU 2016-02 requires recognition of

lease assets and lease liabilities on the balance sheet of lessees.

In July 2018,

the FASB issued ASU 2018-10, Codification Improvements to Topic 842 (Leases) ,

which provides narrow amendments to clarify how to apply certain aspects of the

new lease standard.

The guidance is effective for fiscal years beginning after

December 15, 2018, and interim periods within those fiscal years, which is

fiscal 2020 for us.

In July 2018, the FASB issued ASU No.

2018-11, Leases

Targeted Improvements.

2018-11 provided companies

an option to apply the transition provisions of the new lease standard at its

adoption date instead of at the earliest comparative period presented in its financial

statements, and we adopted the new lease guidance using that method in the quarter

ended June 30, 2019.

Currently our only lease is the lease for our facility.

We recognized $298,983 of leased liabilities a right-of-use asset of $261,644

as of April 1, 2019.

The leased liabilities and right-of-use asset exclude non-lease

There was no effect on our results of operations or cash flows.

New Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU No.

Income Taxes (Topic 740)Simplifying the Accounting for Income Taxes .

In December 2019, the Financial Accounting Standards

Board (FASB) issued Accounting Standards Update (ASU)

2019-12, Income Taxes (Topic 740)Simplifying the Accounting for Income

ASU 2019-12 is intended to simplify accounting for income taxes.

certain exceptions to the general principles in Topic 740 and amends existing

guidance to improve consistent application.

ASU 2019-12 is effective for fiscal

years beginning after December 15, 2020 and interim periods within those fiscal

years, which is fiscal 2022 for us, with early adoption permitted.

We do not expect

adoption of the new guidance to have a significant impact on our financial statements.

It removes certain exceptions to the general principles in Topic 740 and amends

existing guidance to improve consistent application.

ASU 2019-12 is effective

for fiscal years beginning after December 15, 2020 and interim periods within

those fiscal years, which is fiscal 2022 for us.

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.

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Marketable securities as of March 31,

2020 had remaining maturities between seven and 47 months.

2021 had remaining maturities between 20 weeks and 47 months.

Generally accepted accounting principles establish

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Holding Losses

Holding Gains

Holding Losses

Corporate bonds

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market value of the underlying Common Stock at the date the options are granted.

Stock-based compensation expense was $48,360 in fiscal 2020 and $93,360

in fiscal 2019.

Stock-based compensation expense was $45,572 in fiscal 2021 and $48,360 in fiscal

Valuation assumptions

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the financial statements and accompanying notes.

Expected life

We analyze historical exercise and termination data

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Dividend yield

We assumed a dividend yield of 5.9% for fiscal 2020

and 3.7% for fiscal 2019 based on the dividend yield on the date the options were granted.

We assumed a 7.0% to 7.4% dividend yield for fiscal

2021 and 5.9% for fiscal 2020 based on the dividend yield on the date the options

were granted.

Tax effects of stock-based compensation

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General stock option information

The following table summarizes information about

options outstanding as of March 31, 2020, all of which were exercisable:

The following table summarizes information on options

outstanding as of March 31, 2021:

Exercise Prices

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$76.13 $107.86

A summary of our stock options

is shown in the following table:

summary of our stock options is shown in the following table:

Option Shares

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was 5.7 years as of March 31, 2021 and 6.6 years as of March 31,

All outstanding options were exercisable as of March 31, 2020 and 2019.

The total intrinsic value of options exercised during fiscal 2020 was $32,108

based on the difference between the exercise price and stock price at the time

of exercise for in-the-money options.

The total intrinsic value of options outstanding

March 31, 2020, based on our closing stock price for that day, was $2,170,

all of which was exercisable.

The total fair value of option grants was $48,360

in fiscal 2020.

There was no unrecognized stock-based compensation as of March 31,

28,000 outstanding options were exercisable as of March 31, 2021 and

24,000 outstanding options were exercisable as of March 31, 2020.

The total intrinsic

value of options outstanding March 31, 2021, based on our closing stock price

for that day, was $230,540, $191,140 of which was exercisable.

The total fair

value of option grants was $47,140 in fiscal 2021.

There was $1,568 of unrecognized

stock-based compensation as of March 31, 2021 related to nonvested options, which

we expect to recognize in the first quarter of fiscal 2022.

Income tax provisions for fiscal 2021 and 2020 consisted

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Income tax provision

A reconciliation of income tax provisions at the

statutory rate for fiscal 2020 and 2019 is as follows:

reconciliation of income tax provisions at the U.S.

statutory rate for fiscal

2021 and 2020 is as follows:

Ended March 31

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Stock-based compensation deductions

Unrealized (gain) loss on marketable securities

Unrealized gain on marketable securities

Deferred tax assets

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a non-cancellable lease expiring March 31, 2026.

On March 2, 2020 we executed

a fifth amendment to the lease agreement between us and GRE Bryant

Lake, LLC covering our facility.

Our lease would have expired December 31,

2020 without the fifth amendment, which extended the lease for an additional term

of 63 months.

The fifth amendment is incorporated in this Report by reference

to our Current Report on Form 8-K/A filed March 3, 2020.

The fifth amendment

will decrease our monthly base rent to $14,241 in 2021 from $14,811 in 2020

under the current lease, with subsequent 2% annual increases for 2022, 2023,

2024, and 2025.

The fifth amendment also provides the first three months of 2021

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.

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:

March 31, 2020

Year Ended March 31

Operating lease cost

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Discount rate

following table presents the maturities of lease liabilities as of March 31, 2020:

The following table presents the maturities

of lease liabilities as of March 31, 2021:

Year Ending March 31

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Less than 10%

These customers accounted for 43% of our accounts

receivable as of March 31, 2020 and 41% as of March 31, 2019.

the receivable balances from these customers do not represent a significant credit

risk based on past collection experience.

These customers accounted for 43% of our

accounts receivable as of March 31, 2021 and 43% as of

March 31, 2020.

We believe the receivable balances from these customers do

not represent a significant credit risk based on past collection experience.

STOCK REPURCHASE PROGRAM

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We repurchased 1,806 shares of our Common Stock in fiscal 2021

We did not repurchase

shares in fiscal 2019.

and 12,972 shares in fiscal 2020.

The remaining authorization was $3,762,040 as of March 31, 2021.

The Stock Repurchase Program may be modified or discontinued at any time without

The Stock Repurchase Program may be modified or

discontinued at any time without notice.

INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS

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2021 to shareholders of record as of the close of business May 17, 2021.

Bylaws of the company as amended by the Board of Directors

effective May 6, 2020.

Description of the registrants securities registered

pursuant to Section 12 of the Securities Exchange Act of 1934.

Fifth amendment to lease between the company and GRE Bryant Lake, LLC

(incorporated by reference to the Form 8-K/A filed March 3,

First Amendment to Supply Agreement by and between the company and Sonova AG

(incorporated by reference to the Form

8-K/A filed February 18, 2020).

Certain portions of this exhibit

have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

information is (i) not material and (ii) would likely cause competitive

harm to us if publicly disclosed.

We agree to furnish supplementally an unredacted

copy of the exhibit to the Securities and Exchange Commission on its request.

EXHIBIT INDEX

Description of the registrants securities

registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Amendment No.

7 to Supplier Partnering Agreement between

Abbott and the company.

Consent of Boulay PLLP.

Consent of Grant Thornton LLP.

Certification by Daniel A.

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Certification by Curt A.

Reynders pursuant

to Rule 13a-14(a)/15d-14(a).

Reynders pursuant to Rule 13a-14(a)/15d-14(a).

Certification by Daniel A.

Baker and Curt

Baker and Curt A.

Reynders pursuant to 18 U.S.C.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures