NVE CORP /NEW/ 10-Q

Item 1. Financial Statements. NVE CORPORATION BALANCE SHEETS (Unaudited) June 30, 2024 March 31, 2024* ASSETS Current assets Cash and cash equivalents $ 6,005,492 $ 10,283,550 Marketable securities, short-term (amortized cost of $ 16,022,057 as of June 30, 2024, and $ 12,283,630 as of March 31, 2024) 15,670,927 11,917,779 Accounts receivable, net of allowance for credit losses of $ 15,000 as of June 30, and March 31, 2024 2,100,018 3,144,833 Inventories 7,164,632 7,158,585 Prepaid expenses and other assets 515,383 689,349 Total current assets 31,456,452 33,194,096 Fixed assets Machinery and equipment 11,417,730 10,501,096 Leasehold improvements 1,956,309 1,956,309 13,374,039 12,457,405 Less accumulated depreciation 11,478,977 11,403,383 Net fixed assets 1,895,062 1,054,022 Deferred tax assets 1,593,506 1,453,704 Marketable securities, long-term (amortized cost of $ 32,112,822 as of June 30, 2024, and $ 31,417,890 as of March 31, 2024) 31,505,264 30,788,301 Right-of-use asset – operating lease 255,000 289,910 Total assets $ 66,705,284 $ 66,780,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 174,243 $ 127,154 Accrued payroll and other 1,338,811 729,215 Operating lease liability 180,262 179,372 Total current liabilities 1,693,316 1,035,741 Long-term operating lease liability 132,388 175,775 Total liabilities 1,825,704 1,211,516 Shareholders’ equity Common stock, $ 0.01 par value, 6,000,000 shares authorized; 4,833,676 issued and outstanding as of June 30 and March 31, 2024 48,337 48,337 Additional paid-in capital 19,573,254 19,554,812 Accumulated other comprehensive loss ( 748,927 ) ( 777,637 ) Retained earnings 46,006,916 46,743,005 Total shareholders’ equity 64,879,580 65,568,517 Total liabilities and shareholders’ equity $ 66,705,284 $ 66,780,033 *The March 31, 2024 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, 2024. See accompanying notes. 3 Table of Contents NVE CORPORATION STATEMENTS OF INCOME (Unaudited ) Quarter Ended June 30, 2024 2023 Revenue Product sales $ 6,615,859 $ 8,700,092 Contract research and development 167,385 131,322 Total revenue 6,783,244 8,831,414 Cost of sales 975,494 2,079,623 Gross profit 5,807,750 6,751,791 Expenses Research and development 878,528 695,992 Selling, general, and administrative 540,404 475,115 Credit loss expense - 212,440 Total expenses 1,418,932 1,383,547 Income from operations 4,388,818 5,368,244 Interest income 493,959 436,526 Income before taxes 4,882,777 5,804,770 Provision for income taxes 785,190 1,401,040 Net income $ 4,097,587 $ 4,403,730 Net income per share – basic $ 0.85 $ 0.91 Net income per share – diluted $ 0.85 $ 0.91 Cash dividends declared per common share $ 1.00 $ 1.00 Weighted average shares outstanding Basic 4,833,676 4,832,166 Diluted 4,838,995 4,840,571 STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Quarter Ended June 30, 2024 2023 Net income $ 4,097,587 $ 4,403,730 Unrealized gain (loss) from marketable securities, net of tax 28,710 ( 234,701 ) Comprehensive income $ 4,126,297 $ 4,169,029 See accompanying notes. 4 Table of Contents NVE CORPORATION STATEMENTS OF SHAREHOLDERS ’ EQUITY (Unaudited) Accumulated Additional Other Common Stock Paid-In Comprehensive Retained Shares Amount Capital Income (Loss) Earnings Total Balance as of March 31, 2024 4,833,676 48,337 $ 19,554,812 $ ( 777,637 ) $ 46,743,005 $ 65,568,517 Comprehensive income: Unrealized gain on marketable securities, net of tax 28,710 28,710 Net income 4,097,587 4,097,587 Total comprehensive income 4,126,297 Stock-based compensation 18,442 18,442 Cash dividends declared ($1.00 per share of common stock) ( 4,833,676 ) ( 4,833,676 ) Balance as of June 30, 2024 4,833,676 48,337 $ 19,573,254 $ ( 748,927 ) $ 46,006,916 $ 64,879,580 See accompanying notes. 5 Table of Contents NVE CORPORATION STATEMENTS OF SHAREHOLDERS ’ EQUITY (Unaudited) Accumulated Additional Other Common Stock Paid-In Comprehensive Retained Shares Amount Capital Income (Loss) Earnings Total Balance as of March 31, 2023 4,830,826 $ 48,308 $ 19,295,442 $ ( 1,213,858 ) $ 48,949,610 $ 67,079,502 Exercise of stock options 2,575 26 117,501 117,527 Comprehensive income: Unrealized loss on marketable securities, net of tax ( 234,701 ) ( 234,701 ) Net income 4,403,730 4,403,730 Total comprehensive income 4,169,029 Stock-based compensation 10,536 10,536 Cash dividends declared ($1.00 per share of common stock) ( 4,830,826 ) ( 4,830,826 ) Balance as of June 30, 2023 4,833,401 $ 48,334 $ 19,423,479 $ ( 1,448,559 ) $ 48,522,514 $ 66,545,768 See accompanying notes. 6 Table of Contents NVE CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Quarter Ended June 30, 2024 2023 OPERATING ACTIVITIES Net income $ 4,097,587 $ 4,403,730 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 75,594 77,022 Corporate bonds discount amortization ( 53,219 ) ( 17,565 ) Provision for current estimate of credit losses - 212,440 Stock-based compensation 18,442 10,536 Deferred income taxes ( 147,844 ) ( 87,000 ) Changes in operating assets and liabilities: Accounts receivable 1,044,815 913,872 Inventories ( 6,047 ) 124,848 Prepaid expenses and other assets 208,876 ( 10,243 ) Accounts payable and accrued expenses 614,188 ( 602,338 ) Net cash provided by operating activities 5,852,392 5,025,302 INVESTING ACTIVITIES Purchases of fixed assets ( 916,634 ) ( 4,131 ) Purchases of marketable securities ( 6,580,140 ) ( 3,937,835 ) Proceeds from maturities of marketable securities 2,200,000 3,400,000 Net cash used in investing activities ( 5,296,774 ) ( 541,966 ) FINANCING ACTIVITIES Proceeds from exercise of stock options - 117,527 Payment of dividends to shareholders ( 4,833,676 ) ( 4,830,826 ) Net cash used in financing activities ( 4,833,676 ) ( 4,713,299 ) Decrease in cash and cash equivalents ( 4,278,058 ) ( 229,963 ) Cash and cash equivalents at beginning of period 10,283,550 1,669,896 Cash and cash equivalents at end of period $ 6,005,492 $ 1,439,933 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ - $ 1,195,542 See accompanying notes. 7 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 the Notes to Financial Statements have been condensed as permitted. It is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and Notes included in our latest Annual Report on Form 10-K for the fiscal year ended March 31, 2024. The results of operations for the quarter ended June 30, 2024, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2025. Significant accounting policies A description of our significant accounting policies and estimates is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. As of June 30, 2024, there were no changes to our significant accounting policies . NOTE 3. NEW ACCOUNTING STANDARDS NOT YET ADOPTED There were no additions to the new accounting standards not yet adopted as described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. We do not expect the adoption of accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date to have a material impact on our financial statements when they are adopted. 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, 2024 2023 Weighted average common shares outstanding – basic 4,833,676 4,832,166 Dilutive effect of stock options 5,319 8,405 Shares used in computing net income per share – diluted 4,838,995 4,840,571 8 Table of Contents NOTE 5. MARKETABLE SECURITIES The following table shows the major categories of our marketable securities and their contractual maturities as of June 30, 2024: Total <1 Year 1–3 Years 3–5 Years Money market funds $ 5,775,400 $ 5,775,400 $ - $ - Corporate bonds 47,176,191 15,670,927 23,206,787 8,298,477 Total $ 52,951,591 $ 21,446,327 $ 23,206,787 $ 8,298,477 Total marketable securities represented approximately 80% of our total assets as of June 30, 2024. Marketable securities as of June 30, 2024, had remaining maturities between four and 58 months. 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 $ 334,757 as of June 30, 2024, and $ 460,627 as of March 31, 2024, and are included in the balance sheets in “Prepaid expenses and other assets.” We monitor the credit ratings of our marketable securities at least quarterly as reported by Standard & Poor’s. The following table summarizes the fair values of our marketable securities as of June 30, 2024, aggregated by credit rating: Credit Rating Fair Value AAA $ 5,775,400 AA+ 3,798,418 AA 9,553,228 AA- 21,145,888 A+ 2,878,474 A 9,800,183 Total $ 52,951,591 The following table shows the estimated fair value of our marketable securities, aggregated by fair value hierarchy inputs used in estimating their fair values: As of June 30, 2024 As of March 31, 2024 Level 1 Level 2 Total Level 1 Level 2 Total Money market funds $ 5,775,400 $ - $ 5,775,400 $ 9,842,796 $ - $ 9,842,796 Corporate bonds - 47,176,191 47,176,191 - 42,706,080 42,706,080 Total $ 5,775,400 $ 47,176,191 $ 52,951,591 $ 9,842,796 $ 42,706,080 $ 52,548,876 The following table shows the amortized cost, fair value and gross unrealized holding gains and losses of our marketable securities as of June 30 and March 31, 2024: As of June 30, 2024 As of March 31, 2024 Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Amortized Cost Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value Money market funds $ 5,775,400 $ - $ - $ 5,775,400 $ 9,842,796 $ - $ - $ 9,842,796 Corporate bonds 48,134,879 - ( 958,688 ) 47,176,191 43,701,520 930 ( 996,370 ) 42,706,080 Total $ 53,910,279 $ - $ ( 958,688 ) $ 52,951,591 $ 53,544,316 $ 930 $ ( 996,370 ) $ 52,548,876 9 Table of Contents The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities for which an allowance for credit losses has not been recorded, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of June 30 and March 31, 2024. Less Than 12 Months 12 Months or Greater Total Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses Estimated Fair Value Gross Unrealized Holding Losses As of June 30, 2024 Corporate bonds $ 10,556,505 $ ( 23,647 ) $ 36,619,686 $ ( 935,041 ) $ 47,176,191 $ ( 958,688 ) Total $ 10,556,505 $ ( 23,647 ) $ 36,619,686 $ ( 935,041 ) $ 47,176,191 $ ( 958,688 ) As of March 31, 2024 Corporate bonds $ 3,154,764 $ ( 4,902 ) $ 36,551,534 $ ( 991,468 ) $ 39,706,298 $ ( 996,370 ) Total $ 3,154,764 $ ( 4,902 ) $ 36,551,534 $ ( 991,468 ) $ 39,706,298 $ ( 996,370 ) None of the securities were impaired at acquisition, and subsequent declines in fair value are attributable to interest rate increases. We do not intend to sell, and it is not more likely than not that we will be required to sell, these securities before recovery of their amortized cost basis. The issuers continue to make timely interest payments on these securities. Because we believe it is more likely than not we will recover the cost basis of our investments, we did not record any impairment attributable to credit losses. None of the marketable securities purchased during the period had experienced more-than-insignificant deterioration in credit quality since its origination and were therefore not considered “Purchased Financial Assets with Credit Deterioration.” Unrealized losses on our marketable securities and their tax effects are as follows: Quarter Ended June 30, 2024 2023 Unrealized gain (loss) from marketable securities $ 36,751 $ ( 300,437 ) Tax effects ( 8,041 ) 65,736 Unrealized gain (loss) from marketable securities, net of tax $ 28,710 $ ( 234,701 ) NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES The following table shows a roll forward of the allowance for credit losses on our accounts receivable: Allowance for credit losses as of March 31, 2024 $ 15,000 Change in provision for current expected credit losses - Allowance for credit losses as of June 30, 2024 $ 15,000 NOTE 7. INVENTORIES Inventories are shown in the following table: June 30, 2024 March 31, 2024 Raw materials $ 1,814,443 $ 1,982,657 Work in process 3,058,150 2,641,085 Finished goods 2,292,039 2,534,843 Total inventories $ 7,164,632 $ 7,158,585 NOTE 8. STOCK-BASED COMPENSATION Stock-based compensation expense was $ 18,442 for the first quarter of fiscal 2025 and $ 10,536 for the first quarter of fiscal 2024. We calculate share-based compensation expense using the Black-Scholes-Merton standard option-pricing model . 10 Table of Contents NOTE 9. 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. As of June 30, 2024, federal and state estimated tax liabilities of $ 912,411 were included in the balance sheet in “Accrued payroll and other.” We had no unrecognized tax benefits as of June 30, 2024, and we do no t 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, 2024, we had no accrued interest related to uncertain tax positions. The tax years 2020 through 2023 remain open to examination by the major taxing jurisdictions to which we are subject. NOTE 10. 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 interest 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. Details of our operating lease are as follows: Quarter Ended June 30, 2024 Operating lease cost $ 37,754 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for leases $ 45,341 Remaining lease term 21 months Discount rate 3.5 % The following table shows the maturities of lease liabilities as of June 30, 2024: Year Ending March 31, Operating Lease Liabilities 2025 136,930 2026 184,995 Total lease payments 321,925 Imputed lease interest ( 9,275 ) Total lease liabilities $ 312,650 NOTE 11. 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 depend 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 maturing marketable securities. The remaining authorization was $ 3,520,369 as of June 30, 2024. We did no t repurchase any of our Common Stock during the first quarter of fiscal 2025. NOTE 12. 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 18. 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 $ 28,767 for the first quarter of fiscal 2025 and $ 27,078 for the first quarter of fiscal 2024. NOTE 13. SUBSEQUENT EVENTS On July 17, 2024 , we announced that our Board of Directors had declared a quarterly cash dividend of $ 1.00 per share of Common Stock to be paid August 30, 2024 , to shareholders of record as of the close of business July 29, 2024 . 11 Table of Contents