NVE CORP /NEW/ 10-Q

Item 1. Financial Statements. NVE CORPORATION BALANCE SHEETS (Unaudited) September 30, 2024 March 31, 2024* ASSETS Current assets Cash and cash equivalents $ 3,096,179 $ 10,283,550 Marketable securities, short-term (amortized cost of $ 20,002,199 as of September 30, 2024, and $ 12,283,630 as of March 31, 2024) 19,836,293 11,917,779 Accounts receivable, net of allowance for credit losses of $ 15,000 as of September 30 and March 31, 2024 2,952,431 3,144,833 Inventories 7,417,611 7,158,585 Prepaid expenses and other assets 533,233 689,349 Total current assets 33,835,747 33,194,096 Fixed assets Machinery and equipment 11,626,533 10,501,096 Leasehold improvements 1,956,309 1,956,309 13,582,842 12,457,405 Less accumulated depreciation 11,560,984 11,403,383 Net fixed assets 2,021,858 1,054,022 Deferred tax assets 1,518,646 1,453,704 Marketable securities, long-term (amortized cost of $ 28,203,595 as of September 30, 2024, and $ 31,417,890 as of March 31, 2024) 28,281,803 30,788,301 Right-of-use asset – operating lease 219,747 289,910 Total assets $ 65,877,801 $ 66,780,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 170,077 $ 127,154 Accrued payroll and other 580,274 729,215 Operating lease liability 181,159 179,372 Total current liabilities 931,510 1,035,741 Long-term operating lease liability 88,651 175,775 Total liabilities 1,020,161 1,211,516 Shareholders’ equity Common stock, $ 0.01 par value, 6,000,000 shares authorized; 4,834,020 issued and outstanding as of September 30, 2024 and 4,833,676 as of March 31, 2024 48,340 48,337 Additional paid-in capital 19,678,425 19,554,812 Accumulated other comprehensive loss ( 68,510 ) ( 777,637 ) Retained earnings 45,199,385 46,743,005 Total shareholders’ equity 64,857,640 65,568,517 Total liabilities and shareholders’ equity $ 65,877,801 $ 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 September 30, 2024 2023 Revenue Product sales $ 6,104,433 $ 7,117,122 Contract research and development 654,257 16,154 Total revenue 6,758,690 7,133,276 Cost of sales 947,254 1,599,866 Gross profit 5,811,436 5,533,410 Expenses Research and development 847,603 683,208 Selling, general, and administrative 568,241 433,785 Recovery of credit losses - ( 202,926 ) Total expenses 1,415,844 914,067 Income from operations 4,395,592 4,619,343 Interest income 464,429 512,092 Income before taxes 4,860,021 5,131,435 Provision for income taxes 833,876 407,869 Net income $ 4,026,145 $ 4,723,566 Net income per share – basic $ 0.83 $ 0.98 Net income per share – diluted $ 0.83 $ 0.98 Cash dividends declared per common share $ 1.00 $ 1.00 Weighted average shares outstanding Basic 4,833,855 4,833,401 Diluted 4,839,291 4,840,770 STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Quarter Ended September 30, 2024 2023 Net income $ 4,026,145 $ 4,723,566 Unrealized gain (loss) from marketable securities, net of tax 680,417 ( 53,588 ) Comprehensive income $ 4,706,562 $ 4,669,978 See accompanying notes. 4 Table of Contents NVE CORPORATION STATEMENTS OF INCOME (Unaudited ) Six Months Ended September 30, 2024 2023 Revenue Product sales $ 12,720,292 $ 15,817,214 Contract research and development 821,642 147,476 Total revenue 13,541,934 15,964,690 Cost of sales 1,922,748 3,679,489 Gross profit 11,619,186 12,285,201 Expenses Research and development 1,726,131 1,379,200 Selling, general, and administrative 1,108,645 908,900 Provision for credit losses - 9,514 Total expenses 2,834,776 2,297,614 Income from operations 8,784,410 9,987,587 Interest income 958,388 948,618 Income before taxes 9,742,798 10,936,205 Provision for income taxes 1,619,066 1,808,909 Net income $ 8,123,732 $ 9,127,296 Net income per share – basic $ 1.68 $ 1.89 Net income per share – diluted $ 1.68 $ 1.89 Cash dividends declared per common share $ 2.00 $ 2.00 Weighted average shares outstanding Basic 4,833,766 4,832,786 Diluted 4,839,145 4,840,688 STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Six Months Ended September 30, 2024 2023 Net income $ 8,123,732 $ 9,127,296 Unrealized gain (loss) from marketable securities, net of tax 709,127 ( 288,289 ) Comprehensive income $ 8,832,859 $ 8,839,007 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, 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 ($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 Exercise of stock options 344 3 ( 32 ) ( 29 ) Comprehensive income: Unrealized gain on marketable securities, net of tax 680,417 680,417 Net income 4,026,145 4,026,145 Total comprehensive income 4,706,562 Stock-based compensation 105,203 105,203 Cash dividends ($1.00 per share of common stock) ( 4,833,676 ) ( 4,833,676 ) Balance as of September 30, 2024 4,834,020 $ 48,340 $ 19,678,425 $ ( 68,510 ) $ 45,199,385 $ 64,857,640 See accompanying notes. 6 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 ($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 Comprehensive income: Unrealized loss on marketable securities, net of tax ( 53,588 ) ( 53,588 ) Net income 4,723,566 4,723,566 Total comprehensive income 4,669,978 Stock-based compensation 106,312 106,312 Cash dividends ($1.00 per share of common stock) ( 4,833,401 ) ( 4,833,401 ) Balance as of September 30, 2023 4,833,401 $ 48,334 $ 19,529,791 $ ( 1,502,147 ) $ 48,412,679 $ 66,488,657 See accompanying notes. 7 Table of Contents NVE CORPORATION STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended September 30, 2024 2023 OPERATING ACTIVITIES Net income $ 8,123,732 $ 9,127,296 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 157,601 154,935 Bonds discount amortization ( 124,135 ) ( 40,411 ) Provision for credit losses - 9,514 Stock-based compensation 123,645 116,848 Deferred income taxes ( 263,556 ) ( 742,649 ) Non-cash operating lease credit ( 15,174 ) ( 13,359 ) Changes in operating assets and liabilities: Accounts receivable 192,402 3,598,068 Inventories ( 259,026 ) ( 550,756 ) Prepaid expenses and other assets 156,116 ( 401,394 ) Accounts payable 42,923 ( 37,476 ) Accrued payroll and other ( 148,941 ) ( 835,798 ) Net cash provided by operating activities 7,985,587 10,384,818 INVESTING ACTIVITIES Purchases of fixed assets ( 1,125,437 ) ( 16,731 ) Purchases of marketable securities ( 6,580,140 ) ( 3,937,835 ) Proceeds from maturities of marketable securities 2,200,000 8,400,000 Net cash Provided (used) by investing activities ( 5,505,577 ) 4,445,434 FINANCING ACTIVITIES (Payments on) proceeds from exercise of stock options ( 29 ) 117,527 Payment of dividends to shareholders ( 9,667,352 ) ( 9,664,227 ) Net cash used in financing activities ( 9,667,381 ) ( 9,546,700 ) Decrease (increase) in cash and cash equivalents ( 7,187,371 ) 5,283,552 Cash and cash equivalents at beginning of period 10,283,550 1,669,896 Cash and cash equivalents at end of period $ 3,096,179 $ 6,953,448 Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 1,809,878 $ 3,120,830 See accompanying notes. 8 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 September 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 September 30, 2024, there were no changes to our significant accounting policies or estimates. 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 Financial Accounting Standards Board (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 September 30, 2024 2023 Weighted average common shares outstanding – basic 4,833,855 4,833,401 Dilutive effect of stock options 5,436 7,369 Shares used in computing net income per share – diluted 4,839,291 4,840,770 Six Months Ended September 30, 2024 2023 Weighted average common shares outstanding – basic 4,833,766 4,832,786 Dilutive effect of stock options 5,379 7,902 Shares used in computing net income per share – diluted 4,839,145 4,840,688 9 Table of Contents NOTE 5. MARKETABLE SECURITIES The following table shows the major categories of our marketable securities and their contractual maturities as of September 30, 2024: Total <1 Year 1–3 Years 3–5 Years Money market funds $ 2,653,557 $ 2,653,557 $ - $ - Corporate bonds 48,118,096 19,836,293 20,219,709 8,062,094 Total $ 50,771,653 $ 22,489,850 $ 20,219,709 $ 8,062,094 Total marketable securities represented approximately 77% of our total assets as of September 30, 2024. Marketable securities as of September 30, 2024, had remaining maturities between one and 55 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 $ 413,483 as of September 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 September 30, 2024, aggregated by credit rating: Credit Rating Fair Value AAA $ 2,653,557 AA+ 3,903,078 AA 9,735,137 AA- 21,573,351 A+ 2,990,546 A 9,915,984 Total $ 50,771,653 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 September 30, 2024 As of March 31, 2024 Level 1 Level 2 Total Level 1 Level 2 Total Money market funds $ 2,653,557 $ - $ 2,653,557 $ 9,842,796 $ - $ 9,842,796 Corporate bonds - 48,118,096 48,118,096 - 42,706,080 42,706,080 Total $ 2,653,557 $ 48,118,096 $ 50,771,653 $ 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 September 30 and March 31, 2024: As of September 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 $ 2,653,557 $ - $ - $ 2,653,557 $ 9,842,796 $ - $ - $ 9,842,796 Corporate bonds 48,205,794 139,857 ( 227,555 ) 48,118,096 43,701,520 930 ( 996,370 ) 42,706,080 Total $ 50,859,351 $ 139,857 $ ( 227,555 ) $ 50,771,653 $ 53,544,316 $ 930 $ ( 996,370 ) $ 52,548,876 10 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 September 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 September 30, 2024 Corporate bonds $ - $ - $ 30,875,572 $ ( 227,555 ) $ 30,875,572 $ ( 227,555 ) Total $ - $ - $ 30,875,572 $ ( 227,555 ) $ 30,875,572 $ ( 227,555 ) 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 September 30, 2024 2023 Unrealized gain (loss) on marketable securities $ 870,990 $ ( 68,597 ) Tax effects ( 190,573 ) 15,009 Unrealized gain (loss) on marketable securities, net of tax $ 680,417 $ ( 53,588 ) Six Months Ended September 30, 024 2023 Unrealized gain (loss) from marketable securities $ 907,741 $ ( 369,034 ) Tax effects ( 198,614 ) 80,745 Unrealized gain (loss) on marketable securities, net of tax $ 709,127 $ ( 288,289 ) 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 September 30, 2024 $ 15,000 NOTE 7. INVENTORIES Inventories are shown in the following table: Sept. 30, 2024 March 31, 2024 Raw materials $ 1,798,541 $ 1,982,657 Work in process 3,310,310 2,641,085 Finished goods 2,308,760 2,534,843 Total inventories $ 7,417,611 $ 7,158,585 11 Table of Contents NOTE 8. STOCK-BASED COMPENSATION Stock-based compensation expense was $ 105,203 for the second quarter of fiscal 2025, $ 106,312 for the second quarter of fiscal 2024, $ 123,645 for the first six months of fiscal 2025, and $ 116,848 for the first six months of fiscal 2024. We calculate share-based compensation expense using the Black-Scholes-Merton standard option-pricing model . Quarter Ended September 30, Six Months Ended September 30, 2024 2023 2024 2023 Stock options grant 4,000 4,000 6,500 6,500 Stock options exercised 1,000 - - 1,000 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 September 30, 2024, federal and state estimated tax liabilities of $ 41,495 were included in the balance sheet in “Accrued payroll and other.” We had no unrecognized tax benefits as of September 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 September 30, 2024, we had no accrued interest related to uncertain tax positions. The tax years ended March 31, 2020 through March 31, 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 September Six Months Ended September 2024 2023 2024 2023 Operating lease cost $ 37,754 37,754 $ 75,507 75,507 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for leases $ 43,341 44,433 $ 90,682 88,866 Remaining lease term 18 months 30 months Discount rate 3.5 % 3.5 % The following table shows the maturities of lease liabilities as of September 30, 2024: Year Ending March 31, Operating Lease Liabilities 2025 91,590 2026 184,995 Total lease payments 276,585 Imputed lease interest ( 6,775 ) Total lease liabilities $ 269,810 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 September 30, 2024. We did no t repurchase any of our Common Stock during the first six months of fiscal 2025. 12 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 $ 21,300 for the second quarter of fiscal 2025, $ 24,406 for the second quarter of fiscal 2024, $ 50,067 for the first six months of fiscal 2025, and $ 51,483 for the first six months of fiscal 2024. NOTE 13. SUBSEQUENT EVENTS On October 23, 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 November 29, 2024 , to shareholders of record as of the close of business November 4, 2024 . 13 Table of Contents