NVE CORP /NEW/ 10-K

ITEM 1. BUSINESS. In 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. NVE History and Background NVE is a Minnesota corporation headquartered in a suburb of Minneapolis. We were founded in 1989 by James M. Daughton, Ph.D., a spintronics pioneer. Our common stock became publicly traded in 2000 through a reverse merger and became NASDAQ listed in 2003. Since our founding, we have been awarded more than $50 million in government research contracts. These contracts have helped us develop products and build our intellectual property portfolio. We have adopted a March 31 fiscal year, so fiscal years referenced in this report end March 31. Industry Background Much of the electronics industry is devoted to the acquisition, storage, and transmission of information. We have focused on three applications for our spintronic technology: magnetic sensors, couplers, and memories. Sensors acquire information, couplers transmit information, and memories store information. In that sense, our technology can provide the eyes, nerves, and brains of electronic systems. Magnetic sensors can be used for many purposes including detecting the position or speed of robotics and mechanisms, or for communicating with implantable medical devices. We believe our spintronic sensors are smaller, more precise, and more reliable than competing devices. Couplers are widely used in factory automation, providing reliable digital communication between electronic subsystems in factories. For example, couplers are used to send high-speed data between robots and central controllers. As manufacturing automation expands, there is a need for higher-speed data and more channel density. Because of their unique properties, we believe our couplers transmit more data at higher speeds and over longer distances than conventional devices. Near-term potential MRAM applications include mission-critical storage such as military, industrial, and antitamper applications. Long term, MRAM could address the market for ubiquitous high-density memory. Our Enabling Technology Our designs are generally based on either giant magnetoresistance or tunneling magnetoresistance. These structures produce a large change in electrical resistance depending on the electron spin orientation in a free layer. In giant magnetoresistance (GMR) devices, resistance changes due to conduction electrons scattering at interfaces within the devices. The GMR effect is only significant if the layer thicknesses are less than the mean free path of conduction electrons, which is approximately five nanometers. Our critical GMR conductor layers may be less than two nanometers, or five atomic layers, thick. 3 Table of Contents A more advanced type of spintronic structure we use is based on tunneling magnetoresistance (TMR). Such devices are known as Spin-Dependent Tunnel (SDT) junctions or Magnetic Tunnel Junctions (MTJs). SDT junctions use tunnel barriers that are so thin that electrons can “tunnel” through a normally insulating material to cause a resistance change. SDT barrier thicknesses can be in the range of one to four nanometers (less than ten molecular layers). In our products, the spintronic elements are connected to integrated circuitry and encapsulated (“packaged”) in much the same way as conventional integrated circuits. Our Strategy Our vision is to become the leading developer of practical spintronics technology and devices. Our spintronic technology provides eyes, nerves, and brains for electronic systems, breathing life and intelligence into inanimate objects. Our unique products support global trends of efficient energy conversion and smart, low-power end nodes for the “Internet of Things.” To grow product sales, we plan to broaden our sensor and coupler product lines and enhance our product benefits in target markets. Our Products and Markets Sensor Products and Markets Our sensor products detect the strength or gradient of magnetic fields and are often used to determine position or speed. GMR or TMR elements change electrical resistance depending on the magnetic field. In many of our devices, sensor elements are combined with foundry integrated circuitry or digital cores, and packaged in much the same way as conventional integrated circuits. Our sensors are small, highly sensitive to magnetic fields, precise, and reliable. We sell standard (“catalog”) sensors, and custom sensors designed to meet customers’ exact requirements. Standard sensors Our standard, or catalog sensors are generally used to detect the presence of a magnetic or metallic material to determine position, rotation, or speed. We believe our spintronic sensors are smaller, more precise, more reliable, and lower power than competing devices. Our major market for standard sensors is the Industrial Internet of Things (IIoT) for factory automation. Custom and medical sensors Our primary custom products are sensors for medical devices, which are customized to our customers’ requirements and manufactured under stringent medical device quality standards. Many are used to replace electromechanical magnetic switches. We believe our sensors have important advantages in medical devices compared to electromechanical switches, including no moving parts for inherent reliability, and being smaller, more sensitive, and more precise. Our sensors can be customized for size, range, and sensitivity to magnetic fields, electrical resistance, and embedded software. Coupler Products and Markets Our spintronic couplers combine a GMR sensor element and an integrated microscopic coil. The coil creates a small magnetic field that is detected by the spintronic sensor, transmitting data almost instantly. Couplers are also known as “isolators” because they electrically isolate the coupled systems. Our major coupler markets are power conversion and the IIoT. Our couplers enable more efficient power conversion and interconnections to implement the IIoT for advanced factory automation. Power Products and Markets Power products include voltage regulators, interface ICs, DC-to-DC convertors, and products that combine couplers and DC-to-DC convertors to transmit energy as well as data. Our isolated DC-to-DC convertors transfer energy between systems without direct electrical connections and are used in energy conversion systems and industrial networks for the IIoT. Energy conversion applications include battery energy storage systems and hybrid/electric vehicles. MRAM Products and Markets MRAM uses spintronics to store data. Unlike electrical charge, the spin of an electron is inherently permanent. We have invented several types of memory cells including inventions related to advanced MRAM designs and MRAM for tamper prevention or detection. Our MRAM strategy has been focused on low bit density for applications such as tamper prevention and detection. Product Manufacturing Our product manufacturing includes “front-end” wafer production and “back-end” product testing. We believe having our own U.S. wafer production and test capabilities is an advantage over competitors that outsource such operations. Wafer production is a cleanroom area with specialized equipment to deposit, pattern, etch, and process spintronic materials. Most of our products are fabricated in our facility using either raw silicon wafers or foundry wafers. Foundry wafers contain conventional electronics that perform housekeeping functions such as voltage regulation and signal conditioning in our products. Each wafer may include thousands of devices. We build spintronics structures on wafers in our fabrication facility and do wafer-level inspection and testing. 4 Table of Contents We either dice wafers to be sold in die form, send wafers to Asia for dicing and packaging, or process wafers into Wafer-Level Chip-Scale Parts (WLCSPs). Packaged parts are returned to us to be tested, inventoried, and shipped. Alternatively, the process to convert wafers to WLCSPs includes attaching solder balls, electrical testing, and wafer dicing. Our facility has been certified under the ISO 9001:2015 quality management standard and is an Approved Place of Manufacture under ECS/CIG 021-024: 2014. Sales and Product Distribution We rely on distributors who stock and resell our products in more than 75 countries. Distributors of our products include America II Electronics, Inc., Angst+Pfister Sensors and Power, and Digi-Key Corporation. Our distributor agreements generally renew annually. In addition, we distribute versions of some of our products under private-brand partnerships with large integrated device manufacturers. These private-brand partnerships broaden our distribution and enhance our sales support, technical support, and product awareness. New Product Status In the past year, we began marketing several new and improved products, including: · high-sensitivity ultraminiature sensors; · a new type of rotation sensor; · our first Wafer-Level Chip-Scale sensors; · advanced position sensors; and · new product evaluation boards. Long-term product development programs in fiscal 2025 included: · ultrahigh-sensitivity TMR sensors; · next-generation sensors for hearing aids and implanted medical devices; · wafer-level chip-scale devices; and · next-generation MRAM for antitamper applications. Our Competition Industrial Sensor Competition Several other companies either make or may have the capability to make GMR or TMR sensors. Also, several competitors make solid-state industrial magnetic sensors including silicon Hall-effect sensors and anisotropic magnetoresistive (AMR) sensors. We believe those types of sensors are not as sensitive or power-efficient as our GMR or TMR sensors. Medical Sensor Competition Our sensors for medical devices face competition from electromechanical magnetic sensors and other solid-state magnetic sensors. Electromechanical magnetic sensors such as reed and micro-electromechanical system (MEMS) switches have been in use for several decades. Because our sensors have no moving parts, we believe they are inherently more reliable than electromechanical magnetic sensors. We also believe our sensors are smaller than the smallest electromechanical magnetic sensors, more precise in their magnetic switch points, and more sensitive. Compared to other solid-state sensors, our medical sensors may have advantages in size, sensitivity to small magnetic fields, or electrical interface simplicity. Coupler Competition Competing coupler technologies include optical couplers, inductive couplers (transformers), capacitive couplers, and radio-frequency modulation couplers. Our strategy is to compete based on product features rather than to compete solely on price. Our couplers are smaller and therefore require less circuit board space per channel than most competing couplers. Our other advantages over competing technologies may include smaller size, higher immunity to transients, and longer product life. MRAM Competition Several emerging technologies could compete with MRAM. Sources and Availability of Raw Materials Our principal sources of raw materials include suppliers of raw silicon and semiconductor foundry wafers that are incorporated into our products, and suppliers of device packaging services. Our wafer sources are based around the world; most of our packaging services take place in Asia. 5 Table of Contents Intellectual Property Patents As of March 31, 2025, we had more than 50 issued U.S. patents assigned to us. We also have a number of foreign patents, several U.S. and foreign patents pending, and we have licensed patents from others. There are no patents we regard as critical to our current business owned by us or licensed to us that expire in the next 12 months. We have patents on advanced MRAM designs that we believe are important, including patents that relate to magnetothermal MRAM, spin-momentum MRAM, and synthetic antiferromagnetic storage. Some of our intellectual property has been developed with U.S. Government support. Under federal legislation, companies normally may retain the principal worldwide patent rights to any invention developed with U.S. Government support. Trademarks “NVE” and “IsoLoop” are our registered trademarks. Other trademarks we claim include “GMR Switch” and “GT Sensor.” Dependence on Major Customers We rely on several large customers for a significant percentage of our revenue, including Abbott Laboratories, certain distributors, and certain other customers. The loss of one or more of these customers could have a material adverse effect on us. Government Regulations We are subject to government regulations including, but not limited to, regulations related to environmental matters, tax matters, securities regulations, conflict minerals, ethics and foreign corrupt practices, import and export controls, tariffs and duties on incoming and outgoing goods, product safety and liability, workplace health and safety, labor and employment, and data privacy. We incur and expect to continue to incur costs and expenses to comply with these regulations and may incur penalties for any failure to do so. Additionally, certain contracts require us to maintain facilities and personnel security clearances to protect classified information. Such clearances are subject to Government audits and investigations, and any deficiencies or illegal activities identified during the audits or investigations could result in the forfeiture or suspension of payments and civil or criminal penalties. Environmental Matters We are subject to environmental laws and regulations particularly state and local laws and regulations relating to industrial waste and emissions. Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, or competitive position to date. Existing and future environmental laws and regulations could result in expenses related to emission abatement or remediation, but we are currently unable to estimate such expenses. 6 Table of Contents Human Capital Resources Employee Headcount We had 42 employees as of March 31, 2025, 41 of whom were full-time. We had no contingent workers. Our hiring was limited in fiscal 2025, in line with depressed industry conditions. Workforce Demographics Although we are not required to file forms with the U.S. Equal Employment Opportunity Commission, we assessed our demographics using the data collection procedures for EEOC form EEO-1. Specifically, we conducted a voluntary survey for self-identification and supplemented those data with personnel data and observer identification. Minnesota data are from U.S. Census Bureau data for the latest quarter available. Gender Demographics The gender demographics of our workforce compared to those of all Minnesota workers were as follows as of March 31, 2025: Gender NVE Minnesota Male 69% 50% Female 31% 50% As is the case with many technology companies, female employees are underrepresented in our workforce, particularly in engineer and technician jobs. We provide opportunities for equipment operators (a job where female employees are well represented) to advance to technician and engineer positions, including internal equipment training, tuition reimbursement, and scheduling flexibility to attend classes. Racial Demographics Our workforce demographics by race as of March 31, 2025, were as follows: Race NVE Minnesota African American or Black 10% 8% American Indian or Alaska Native 2% 1% Asian 19% 6% White or Caucasian 69% 83% Educational Demographics We have a highly educated workforce. Forty-three percent of our employees have bachelor’s or advanced degrees compared to 26% of all Minnesota workers. Employee Turnover Our voluntary employee turnover was 4% for fiscal 2025. Voluntary turnover is calculated as the number of regular full-time employees as of March 31, 2024 who left voluntarily in the year ended March 31, 2025 (excluding retirements), divided by the average number of employees. We define average number of employees as the average of the employees at the beginning and at the end of the fiscal year. Executive Demographics We have three Named Executive Officers . All three are male; one identifies as African American. Board of Directors Demographics Two of our five directors are women; one identifies as Asian. 7 Table of Contents Women and Families We have family-friendly policies and fully comply with the Minnesota Women’s Economic Security Act (WESA) by providing reasonable accommodations to employees for health conditions related to pregnancy or childbirth and up to 12 weeks of pregnancy and parental leave. Additionally, Minnesota’s paid family and medical leave law, which provides paid time off during or following a pregnancy, goes into effect on January 1, 2026. We are preparing for the timely implementation of such paid leave. Employee Benefits We offer employees excellent fringe benefits, including medical insurance coverage paid for mostly by the Company, dental insurance, Company-paid life and accidental death and dismemberment insurance, Company-paid long-term disability insurance, generous 401(k) matches, Company-funded Health Savings Accounts, Dependent Care Flexible Spending Accounts, ample holidays and Paid Time Off, tuition reimbursement, and free coffee. Employee Health and Safety NVE is committed to providing a safe and healthy work environment. The Compensation Committee of our Board of Directors oversees employee health and safety. We offer employees a variety of health and fitness resources in conjunction with our medical insurance. Employee Development and Training NVE provides paid training including paid on-the-job training, specialized online training, tuition reimbursement, and paid internships. Employee Relations None of our employees are represented by a labor union or are subject to a collective bargaining agreement. Based on periodic employee surveys, we believe we have good relations with our employees. Available Information All reports we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements and additional proxy materials on Schedule 14A, as well as any amendments to those reports and schedules, are accessible at no cost through the “Investors” section of our Website (www.nve.com). These filings are also accessible through the SEC’s Website ( www.sec.gov ). 8 Table of Contents