NVE CORP /NEW/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures Management, with the participation of the Chief Executive Officer and Principal Financial Officer, has performed an evaluation of our disclosure controls and procedures that are defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Report. This evaluation included consideration of the controls, processes, and procedures that are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the times specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, although there have been changes in personnel involved in our controls, processes, and procedures, our Chief Executive Officer and Principal Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were effective. 17 Table of Contents Management ’ s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management, including our Chief Executive Officer and Principal Financial Officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2025. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control — Integrated Framework . Based on our assessment using the criteria set forth by COSO in the 2013 Internal Control — Integrated Framework , management concluded that our internal control over financial reporting was effective as of March 31, 2025. Our management, including our Chief Executive Officer and Principal Financial Officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within NVE have been detected. Our internal controls over financial reporting, however, are designed to provide reasonable assurance that the objectives of internal control over financial reporting are met. Changes in Internal Controls During the year ended March 31, 2025, there was no change in our internal control over financial reporting that materially affected or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. Insider Trading Policies Our insider trading policies and procedures are filed as Exhibit 19 to this Report. Rule 10b5-1 Plan Disclosures for Section 16 Officers and Directors During the quarter ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K). There are no such plans currently in effect. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. 18 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. We have insider trading policies and procedures, which are filed as Exhibit 19 to this Report. Additionally, a section titled “Delinquent Section 16(a) Reports” to be included in our Proxy Statement for our 2025 Annual Meeting of Shareholders will set forth information regarding delinquent Section 16(a) reports required by Item 10. The section titled “Proposal 1. Election of Board of Directors” will set forth certain information regarding our directors and executive officers required by Item 10, the section titled “Information About Our Executive Officers” will set forth information regarding our executive officers required by Item 10, the section titled “Corporate Governance” will set forth information regarding our corporate governance and code of ethics required by Item 10, and the section titled “Option-Grant Timing Practices” will contain information required by Item 10. The information in these sections to be included in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this section of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information in the sections “Executive Compensation,” “Compensation Discussion and Analysis,” “Corporate Governance – Board Committees – Compensation Committee Interlocks and Insider Participation,” and “Director Compensation” to be included in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this section. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information in the sections “Equity Compensation Plan Information” and “Security Ownership” to be included in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this section. Information regarding the material features of our 2000 Stock Option Plan, as amended, is contained in Note 6 to the Financial Statements included elsewhere in this Report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. The information in the sections “Security Ownership – Transactions With Related Persons, Promoters, and Certain Control Persons” and “Corporate Governance – Board Composition and Independence” to be included in our Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this section. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The information in the sections “Audit Committee Disclosure – Fees Billed to Us by Our Independent Registered Public Accounting Firm During Fiscal 2025 and 2024” and “Audit Committee Disclosure – Audit Committee Pre-Approval Policy” to be included in the Proxy Statement for our 2025 Annual Meeting of Shareholders is incorporated by reference into this section. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a) Financial Statements and Schedules Financial statements are provided pursuant to Item 8 of this Report. Certain financial statement schedules have been omitted because they are not required, not applicable, or the required information is provided in other financial statements or the notes to the financial statements. (b) Exhibits A list of exhibits is on the following page. 19 Table of Contents Exhibit # Description 3.1 Amended and Restated Articles of Incorporation of the company as amended by the Board of Directors effective August 3, 2003 (incorporated by reference to our Form 8-K filed August 7, 2023). 3.2 Bylaws of the company as amended by the Board of Directors effective May 6, 2020. 4 Description of the registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. 10.1 Lease dated October 1, 1998, with Glenborough Properties, LP (incorporated by reference to our Form 10-QSB for the period ended September 30, 2002). 10.2 First amendment to lease with Glenborough dated September 18, 2002 (incorporated by reference to our Form 10-QSB for the period ended September 30, 2002). 10.3 Second amendment to lease with Glenborough dated December 1, 2003 (incorporated by reference to our Form 10-QSB for the period ended December 31, 2003). 10.4 Third amendment to lease with Carlson Real Estate (incorporated by reference to our Form 8-K/A filed December 20, 2007). 10.5 Fourth amendment to lease with the Barbara C. Gage Revocable Trust (incorporated by reference to our Form 8-K/A filed August 3, 2011). 10.6 Fifth amendment to lease with GRE – Bryant Lake, LLC (incorporated by reference to our Form 8-K/A filed March 3, 2020). 10.7 Sixth amendment to lease with GRE – Bryant Lake, LLC (incorporated by reference to our Form 8-K/A filed November 7, 2024). 10.8† Employment Agreement with Daniel A. Baker dated January 29, 2001 (incorporated by reference to our Form 10-KSB for the year ended March 31, 2001). 10.9† NVE Corporation 2000 Stock Option Plan as Amended July 19, 2001, by the shareholders (incorporated by reference to our Registration Statement on Form S-8 filed July 20, 2001). 10.10 Indemnification Agreement by and between Pacesetter, Inc., a St. Jude Medical Company, and the company (incorporated by reference to our Form 8-K filed September 27, 2005). 10.11+ Supplier Partnering Agreement by and between St. Jude and the company (incorporated by reference to our Form 8-K filed January 4, 2006). 10.12 Amendment No. 4 to St. Jude Supplier Partnering Agreement (incorporated by reference to our Form 8-K/A filed February 7, 2011). 10.13 Supplier Quality Agreement between St. Jude and the company (incorporated by reference to our Form 8-K filed February 10, 2016). 10.14 Amendment No. 5 to St. Jude Supplier Partnering Agreement (incorporated by reference to our Form 8-K/A filed April 21, 2016). 10.15* Amendment No. 8 to Abbott Supplier Partnering Agreement (incorporated by reference to our Form 8-K/A filed February 2, 2022). 10.16* Amendment No. 1 0 to Supplier Partnering Agreement between Abbott and the company (incorporated by reference to o ur Form 8-K/A filed J anuary 3 , 202 4 ). 10.17* Amendment No. 1 1 to Supplier Partnering Agreement between Abbott and the company (incorporated by reference to our Form 8-K/A filed Febr uary 13 , 2025). 19 Insider Trading Policies and Procedures. 23 Consent of Boulay PLLP. 31.1 Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). 31.2 Certification by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a). 32 Certification by Daniel A. Baker and Daniel Nelson pursuant to 18 U.S.C. Section 1350. 97 Clawback Policy (incorporated by reference to our Form 10-K filed May 1, 2024). 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) †Indicates a management contract or compensatory plan or arrangement. +Confidential portions deleted and filed separately with the SEC. *Certain confidential portions redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause us competitive harm if publicly disclosed. We agree to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission on its request. 20 Table of Contents ITEM 16. FORM 10-K SUMMARY. We have elected not to include an optional Form 10-K Summary. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NVE CORPORATION (Registrant) /s/Daniel A. Baker by Daniel A. Baker President and Chief Executive Officer Date May 7, 2025 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/Terrence W. Glarner Terrence W. Glarner Director and Chairman of the Board May 7, 2025 /s/Daniel A. Baker Daniel A. Baker Director, President and Chief Executive Officer (Principal Executive Officer) May 7, 2025 /s/ Daniel Nelson Daniel Nelson Principal Financial Officer May 7, 2025 /s/Patricia M. Hollister Patricia M. Hollister Director May 7, 2025 /s/James W. Bracke James W. Bracke Director May 7, 2025 /s/Kelly Wei Kelly Wei Director May 7, 2025 21 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of NVE Corporation Opinion on the Financial Statements We have audited the accompanying balance sheets of NVE Corporation (the Company) as of March 31, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of 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 of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our 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 audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. /s/ Boulay PLLP PCOAB ID: 542 We have served as the Company’s auditor since 2019. Minneapolis, Minnesota May 7, 2025 F-1 Table of Contents NVE CORPORATION BALANCE SHEETS March 31, 2025 March 31, 2024 ASSETS Current assets Cash and cash equivalents $ 8,036,564 $ 10,283,550 Marketable securities, short-term (amortized cost of $ 13,730,266 as of March 31, 2025, and $ 12,283,630 as of March 31, 2024) 13,691,593 11,917,779 Accounts receivable, net of allowance for credit losses of $ 15,000 3,589,268 3,144,833 Inventories, net 7,449,083 7,158,585 Prepaid expenses and other assets 433,414 689,349 Total current assets 33,199,922 33,194,096 Fixed assets Machinery and equipment 11,758,205 10,501,096 Leasehold improvements 1,956,309 1,956,309 13,714,514 12,457,405 Less accumulated depreciation and amortization 11,727,615 11,403,383 Net fixed assets 1,986,899 1,054,022 Deferred tax assets 1,867,069 1,453,704 Marketable securities, long-term (amortized cost of $ 26,353,692 as of March 31, 2025, and $ 31,417,890 as of March 31, 2024) 26,304,623 30,788,301 Right-of-use asset – operating lease 917,349 289,910 Total assets $ 64,275,862 $ 66,780,033 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 214,691 $ 127,154 Accrued payroll and other 871,169 729,215 Operating lease 83,010 179,372 Total current liabilities 1,168,870 1,035,741 Long-term operating lease liability 838,221 175,775 Total liabilities 2,007,091 1,211,516 Shareholders’ equity Common stock, $ 0.01 par value, 6,000,000 shares authorized; 4,837,166 issued and outstanding as of March 31, 2025 and 4,833,676 as of March 31, 2024 48,372 48,337 Additional paid-in capital 19,821,106 19,554,812 Accumulated other comprehensive loss ( 68,544 ) ( 777,637 ) Retained earnings 42,467,837 46,743,005 Total shareholders’ equity 62,268,771 65,568,517 Total liabilities and shareholders’ equity $ 64,275,862 $ 66,780,033 See accompanying notes. F-2 Table of Contents NVE CORPORATION STATEMENTS OF INCOME Year Ended March 31, 2025 2024 Revenue Product sales $ 24,632,102 $ 29,218,063 Contract research and development 1,242,592 586,116 Total revenue, net 25,874,694 29,804,179 Cost of sales 4,235,780 6,772,533 Gross profit 21,638,914 23,031,646 Expenses Research and development 3,635,519 2,731,434 Selling, general, and administrative 2,009,246 1,771,833 Credit loss expense - 9,514 Total expenses 5,644,765 4,512,781 Income from operations 15,994,149 18,518,865 Interest income 1,909,218 1,948,720 Other income 135,370 - Income before taxes 18,038,737 20,467,585 Provision for income taxes 2,974,221 3,342,886 Net income $ 15,064,516 $ 17,124,699 Net income per share – basic $ 3.12 $ 3.54 Net income per share – diluted $ 3.11 $ 3.54 Cash dividends declared per common share $ 4.00 $ 4.00 Weighted average shares outstanding Basic 4,835,069 4,833,146 Diluted 4,839,154 4,839,705 STATEMENTS OF COMPREHENSIVE INCOME Year Ended March 31, 2025 2024 Net income $ 15,064,516 $ 17,124,699 Unrealized gain on marketable securities, net of tax 709,093 436,221 Comprehensive income $ 15,773,609 $ 17,560,920 See accompanying notes. F-3 Table of Contents NVE CORPORATION STATEMENTS OF SHAREHOLDERS ’ EQUITY Common Stock Additional Paid-In Accumulated Other Comprehen- sive Income Retained Shares Amount Capital (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, net of shares withheld for exercise price 2,850 29 117,434 117,463 Comprehensive income: Unrealized gain on marketable securities, net of tax 436,221 436,221 Net income 17,124,699 17,124,699 Total comprehensive income 17,560,920 Stock-based compensation 141,936 141,936 Cash dividends ($4.00 per share of common stock) ( 19,331,304 ) ( 19,331,304 ) Balance as of March 31, 2024 4,833,676 $ 48,337 $ 19,554,812 $ ( 777,637 ) $ 46,743,005 $ 65,568,517 Exercise of stock options, net of shares withheld for exercise price 3,490 35 114,127 114,162 Comprehensive income: Unrealized gain on marketable securities, net of tax 709,093 709,093 Net income 15,064,516 15,064,516 Total comprehensive income 15,773,609 Stock-based compensation 152,167 152,167 Cash dividends ($4.00 per share of common stock) ( 19,339,684 ) ( 19,339,684 ) Balance as of March 31, 2025 4,837,166 $ 48,372 $ 19,821,106 $ ( 68,544 ) $ 42,467,837 $ 62,268,771 See accompanying notes. F-4 Table of Contents NVE CORPORATION STATEMENTS OF CASH FLOWS Year Ended March 31, 2025 2024 OPERATING ACTIVITIES Net income $ 15,064,516 $ 17,124,699 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 324,232 308,147 Bond discount amortization ( 307,666 ) ( 106,354 ) Provision for current estimate of credit losses - 9,514 Stock-based compensation 152,167 141,936 Deferred income taxes ( 611,969 ) ( 1,003,844 ) Non-cash operating lease credit ( 61,355 ) ( 27,626 ) Changes in operating assets and liabilities: Accounts receivable ( 444,435 ) 3,368,997 ) Inventories ( 290,498 ) ( 741,575 ) Prepaid expenses and other assets 255,935 ( 25,890 ) Accounts Payable 87,537 ( 154,558 ) Accrued Payroll and other 141,954 ( 646,035 ) Net cash provided by operating activities 14,310,418 18,247,411 INVESTING ACTIVITIES Purchases of fixed assets ( 1,257,109 ) ( 16,731 ) Purchases of marketable securities ( 11,279,773 ) ( 6,103,185 ) Proceeds from maturities of marketable securities 15,205,000 15,700,000 Net cash provided by investing activities 2,668,118 9,580,084 FINANCING ACTIVITIES Net proceeds from exercise of stock options 114,162 117,463 Payment of dividends to shareholders ( 19,339,684 ) ( 19,331,304 ) Net cash used in financing activities ( 19,225,522 ) ( 19,213,841 ) (Decrease) increase in cash and cash equivalents ( 2,246,986 ) 8,613,654 Cash and cash equivalents at beginning of year 10,283,550 1,669,896 Cash and cash equivalents at end of year $ 8,036,564 $ 10,283,550 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 3,311,534 $ 4,539,071 See accompanying notes. F-5 Table of Contents NVE CORPORATION NOTES TO FINANCIAL STATEMENTS 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. We operate in one reportable segment. Our CEO is our “Chief Operating Decision Maker” as defined under Accounting Standards Update 2023-07. Our CEO assesses our performance and allocates resources based on net income and total assets, which are the same amounts in all material respects as those reported on the statements of income and balance sheets. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Concentration of Risk and Financial Instruments Financial instruments potentially subject to significant concentrations of credit risk consist principally of cash equivalents, marketable securities, and accounts receivable. Cash and cash equivalents have been maintained in financial institutions we believe have high credit quality, however, these accounts may not be federally insured. We have invested our excess cash in corporate-backed and municipal-backed bonds and money market instruments. Our investment policy prescribes purchases of only high-grade securities and limits the amount of credit exposure to any one issuer. Our customers are throughout the world. We generally do not require collateral from our customers, but we perform ongoing credit evaluations of their financial condition. More information on accounts receivable is contained in the paragraph titled “Accounts Receivable and Allowance for Credit Losses” of this note. Additionally, we are dependent on critical suppliers including our packaging vendors and suppliers of certain raw silicon and semiconductor wafers that are incorporated in our products. Recent changes in tariffs and trade regulations may increase the risks of supply interruptions. Marketable securities Our marketable securities consist of corporate bonds and money market funds and are classified as available for sale. Marketable securities are initially recognized at cost. Marketable securities considered to be “purchased financial assets with credit deterioration” are initially recognized at cost, less any allowance for expected credit losses. Unrealized holding gains and losses are reported in other comprehensive income, net of applicable taxes, until realized. All marketable securities are carried on the balance sheet at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use a three-level fair value hierarchy in estimating and reporting fair values of our marketable securities: Level 1 – Securities whose fair values are determined using quoted prices in active markets for identical securities. Level 2 – Securities whose fair values are determined using quoted prices for similar securities in active markets or quoted prices for identical securities in markets that are not active. Level 3 – Securities whose fair values are determined using unobservable inputs. Corporate bonds with remaining maturities of less than one year are classified as short-term and those with remaining maturities of one year or more 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. Accounts Receivable and Allowance for Credit Losses We extend credit terms to customers in the normal course of business. We perform ongoing credit valuations of customers’ financial condition, and generally require no collateral. We maintain an allowance for expected credit losses on accounts receivables, which is recorded as an offset to accounts receivable. Changes in the allowance for credit losses are included as a component of operating expenses in the Statements of Income and Statements of Comprehensive Income. We assesses credit losses on a collective basis where similar risk characteristics exist. Risk characteristics we consider include customer type, geography, market, credit risk, and receivable age. Receivables that do not share risk characteristics with other receivables, or where known collectability issues exist, are evaluated on an individual basis. F-6 Table of Contents In determining the allowance for credit losses, the Company considers historical loss rates, adjusted for current market conditions, and reasonable and supportable forecasts of future economic conditions, when applicable. Accounts considered to be uncollectible are written off against the allowance for credit losses. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined by the first in, first out method. We record inventory reserves when we determine certain inventory is unlikely to be sold based on sales trends, turnover, competition, and other market factors. Product Warranty In general, we warranty our products to be free from defects in material and workmanship for one year. Fixed Assets Fixed assets are stated at cost. Depreciation of machinery and equipment is recorded over the estimated useful lives of the assets, generally five years, using the straight-line method. Amortization of leasehold improvements is recorded using the straight-line method over the lesser of the remaining term of the lease and five-year useful life. We record losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those asset groups are less than the assets’ carrying amount. We did not identify any indicators of impairment during fiscal 2025 or 2024. Depreciation expense related to fixed assets was $ 324,232 for fiscal 2025 and $ 308,147 for fiscal 2024. Revenue Recognition We recognize revenue when we satisfy performance obligations by the transfer of control of products or services to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. Revenue is disaggregated into product sales and contract research and development to depict the nature, amount, and timing of revenue recognition and economic characteristics of our business, and is represented within the financial statements. We recognize revenue from product sales to customers and distributors when we satisfy our performance obligation, at a point in time, on product shipment or delivery to our customer or distributor as determined by agreed-on shipping terms. Shipping charges billed to customers are included in product sales and the related shipping costs are included in cost of sales as incurred. Under certain limited circumstances, our distributors may earn commissions for activities unrelated to their purchases of our products, such as for facilitating the sale of custom products or research and development contracts with third parties. We recognize any such commissions as selling, general, and administrative expenses. We recognize discounts provided to our distributors as reductions in revenue. We recognize contract research and development revenue as the performance obligations are satisfied. Contracts have specifications unique to each customer and do not create an asset with an alternate use, and we have an enforceable right to payment for performance completed to date. We use the proportion of total contract consideration attributable to performance milestones achieved as the measurement of progress toward completion. Accounts receivable is recognized when we have transferred a good or service to a customer and our right to receive consideration is unconditional through the completion of our performance obligation. Accounts receivable as of March 31, 2025 and 2024 are reported on the balance sheets. Accounts receivable, net of allowance for credit losses, as of April 1, 2023 were $6,523,344. A contract asset is recognized when we have a right to consideration from the transfer of goods or services to a customer but have not completed our performance obligation. A contract liability is recognized when we have been paid by a customer but have not yet satisfied the performance obligation by transferring goods or services. We had no material contract assets or contract liabilities as of March 31, 2025, or 2024. Our performance obligations related to product sales and contract research and development contracts are satisfied in one year or less. Unsatisfied performance obligations represent contracts with an original expected duration of one year or less. As permitted under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , we are using the practical expedient not to disclose the value of these unsatisfied performance obligations. We also use the practical expedient in which we do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Income Taxes We account for income taxes using the asset and liability method. Deferred income taxes are provided for temporary differences between the financial reporting and tax bases of assets and liabilities. We provide valuation allowances against deferred tax assets if we determine that it is less likely than not that we will be able to utilize the deferred tax assets. Research and Development Expense Recognition Research and development costs are expensed as they are incurred. Customer-sponsored research and development costs are included in cost of sales. F-7 Table of Contents Stock-Based Compensation We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize the compensation expense over the requisite service period, which is generally the vesting period. We recognize any forfeitures as they occur. Net Income Per Share Net income per basic share is computed based on the weighted average number of common shares issued and outstanding during the year. Net income per diluted share amounts assume the exercise of all stock options. The following table shows the components of diluted shares: Year Ended March 31, 2025 2024 Weighted average common shares outstanding – basic 4,835,069 4,833,146 Dilutive effect of stock options 4,085 6,559 Shares used in computing net income per share – diluted 4,839,154 4,839,705 Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information on estimates and assumptions. Reclassification The presentation of certain items in the statement of cash flows for the year ended March 31, 2024 has been changed to conform to the classifications used for the year ended March 31, 2025. These reclassifications had no effect on shareholders’ equity, net income, or comprehensive net income as previously reported. NOTE 3. NEW ACCOUNTING STANDARDS NOT YET ADOPTED In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 aims to enhance transparency for users of financial statements by requiring public business entities to disaggregate specific expense categories. In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date , which clarified the effective date for non-calendar year-end entities such as us. ASU 2024-03 mandates disclosures in the notes to financial statements detailing the composition and trends of key expense categories within major income statement captions. These enhanced disclosures are intended to help investors more effectively assess the entity’s performance, understand its cost structure, and make more accurate forecasts of future cash flows. For public business entities, ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, which for us will be for fiscal 2028 and for interim reporting periods beginning with the first quarter of fiscal 2029. The adoption will result in disclosure changes only. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires additional quantitative and qualitative income tax disclosures to enable financial statements users to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024, which will be fiscal 2026 for us. The adoption will result in disclosure changes only. We do not expect the adoption of other 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. MARKETABLE SECURITIES The following table shows the major categories of our marketable securities and cash equivalents and their contractual maturities as of March 31, 2025: Total <1 Year 1–3 Years 3–5 Years Money market funds $ 7,905,042 $ 7,905,042 $ - $ - Treasury securities 4,715,238 - 4,715,238 - Corporate bonds 35,280,978 13,691,593 14,679,135 6,910,250 Total $ 47,901,258 $ 21,596,635 $ 19,394,373 $ 6,910,250 F-8 Table of Contents Total marketable securities and money market funds represent approximately 75% of our total assets as of March 31, 2025. Marketable securities as of March 31, 2025, had remaining maturities between six weeks and 49 months. Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included in “Marketable securities, short-term” and “Marketable securities, long-term.” Treasury securities are included in “Marketable securities, long-term.” Accrued interest receivables were $ 340,241 as of March 31, 2025, 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 March 31, 2025, aggregated by credit rating: Credit Rating Fair Value AAA $ 12,620,280 AA+ 3,909,789 AA 9,819,477 AA- 18,594,307 A+ 2,957,405 Total $ 47,901,258 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 March 31, 2025 As of March 31, 2024 Level 1 Level 2 Total Level 1 Level 2 Total Money market funds $ 7,905,042 $ - $ 7,905,042 $ 9,842,796 $ - $ 9,842,796 Treasury securities - 4,715,238 4,715,238 - - - Corporate bonds - 35,280,978 35,280,978 - 42,706,080 42,706,080 Total $ 7,905,042 $ 39,996,216 $ 47,901,258 $ 9,842,796 $ 42,706,080 $ 52,548,876 Our available-for-sale securities as of March 31, 2025 and 2024, aggregated into classes of securities, were as follows: As of March 31, 2025 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 $ 7,905,042 $ - $ - $ 7,905,042 $ 9,842,796 $ - $ - $ 9,842,796 Treasury securities 4,699,686 15,552 - 4,715,238 - - - - Corporate bonds 35,384,272 55,858 ( 159,152 ) 35,280,978 43,701,520 930 ( 996,370 ) 42,706,080 Total $ 47,989,000 $ 71,410 $ ( 159,152 ) $ 47,901,258 $ 53,544,316 $ 930 $ ( 996,370 ) $ 52,548,876 The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of March 31, 2025 and 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 March 31, 2025 Corporate bonds $ 7,323,059 $ ( 31,808 ) $ 21,020,717 $ ( 127,344 ) $ 28,343,776 $ ( 159,152 ) Total $ 7,323,059 $ ( 31,808 ) $ 21,020,717 $ ( 127,344 ) $ 28,343,776 $ ( 159,152 ) 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 ) F-9 Table of Contents 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. Unrealized gains on our marketable securities and their tax effects are as follows: Year Ended March 31, 2025 2024 Unrealized gain on marketable securities $ 907,698 $ 558,399 Tax effects ( 198,605 ) ( 122,178 ) Unrealized gain on marketable securities, net of tax $ 709,093 $ 436,221 NOTE 5. INVENTORIES Inventories are shown in the following table: March 31, 2025 2024 Raw materials $ 1,608,632 $ 1,982,657 Work in process 3,609,273 2,641,085 Finished goods 2,231,178 2,534,843 Total inventories $ 7,449,083 $ 7,158,585 NOTE 6. STOCK-BASED COMPENSATION Stock Option Plan Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors, and certain service providers of incentive stock options and nonstatutory stock options. Generally, the options may be exercised at any time prior to expiration, subject to vesting based on terms of employment. The period ranges from immediate vesting to vesting in one year. The options have exercisable lives of ten years from the date of grant and are generally not eligible to vest early in the event of retirement, death, disability, or change in control. Exercise prices are not less than fair market value of the underlying Common Stock at the date the options are granted. Stock-based compensation expense was $ 152,167 in fiscal 2025 and $ 141,936 in fiscal 2024. Valuation assumptions We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options. The following assumptions were used to estimate the fair value of options granted: Year Ended March 31, 2025 2024 Risk-free interest rate 4.0 % – 4.6 % 4.2 % – 5.0 % Expected volatility 40 % – 42 % 40 % – 42 % Expected life (years) 5.0 % 5.0 % Dividend yield 4.6 % – 5.0 % 4.5 % – 5.0 % The determination of the fair value of the awards on the date of grant using the Black-Scholes-Merton model is affected by our stock price as well as assumptions of other variables, including projected stock option exercise behaviors, risk-free interest rate, and expected volatility of our stock price in future periods. Our estimates and assumptions affect the amounts reported in the financial statements and accompanying notes. Expected life We analyze historical exercise and termination data to estimate the expected life assumption. We believe historical data currently represents the best estimate of the expected life of a new option. Risk-free interest rate The risk-free rate is based on the yield of U.S. Treasury securities on the grant date for maturities similar to the expected lives of the options. Volatility We use historical volatility to estimate the expected volatility of our common stock. F-10 Table of Contents Dividend yield We assumed a 4.6% to 5% dividend yield for fiscal 2025 and 4.5% to 5% dividend yield for fiscal 2024 based on the dividend yield on the date the options were granted. Tax effects of stock-based compensation Stock-based compensation increased deferred tax assets by $17,142 for fiscal 2025 and by $29,934 for fiscal 2024. General stock option information The following table summarizes the activity for all stock options outstanding for the years ended March 31, 2025 and 2024: 2025 2024 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Options outstanding at beginning of year 36,000 $ 69.50 34,500 $ 66.26 Granted 6,500 81.96 6,500 79.29 Exercised ( 9,000 ) 61.06 ( 5,000 )) 59.85 At March 31, 33,500 $ 74.19 36,000 $ 69.50 Options exercisable at March 31, 31,000 $ 73.56 33,500 $ 65.12 Weighted average grant date fair value of options granted during the year $ 22.77 $ 22.15 Of the 9,000 stock options exercised during the year ended March 31, 2025, 7,000 were exchanged in a cashless net option exercise which resulted into the issuance of 1,490 common shares. Of the 5,000 stock options exercised during the year ended March 31, 2024, 2,000 were exchanged in a cashless net option exercise which resulted into the issuance of 850 common shares. The following table summarizes additional information about stock options outstanding and exercisable at March 31, 2025: Options Outstanding Options Exercisable Options Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value Options Exercisable Weighted Average Exercise Price Aggregate Intrinsic Value 33,500 6.13 $ 74.19 $ 94,190 31,000 $ 73.56 $ 94,190 The total fair value of options granted was $ 147,986 in fiscal 2025 and $ 143,943 in fiscal 2024. There was $ 4,181 of unrecognized stock-based compensation as of March 31, 2024 related to nonvested options, which was recognized in the first quarter of fiscal 2025. There was no unrecognized stock-based compensation as of March 31, 2025 related to nonvested options. NOTE 7. INCOME TAXES Income tax provisions for fiscal 2025 and 2024 consisted of the following: Year Ended March 31, 2025 2024 Current taxes Federal $ 3,403,776 $ 4,145,804 State 182,414 200,926 Deferred taxes Federal ( 587,356 ) ( 963,470 ) State ( 24,613 ) ( 40,374 ) Income tax provision $ 2,974,221 $ 3,342,886 F-11 Table of Contents A reconciliation of income tax provisions at the U.S. statutory rate for fiscal 2025 and 2024 is as follows: Year Ended March 31, 2025 2024 Tax expense at U.S. statutory rate $ 3,788,135 $ 4,298,193 State income taxes, net of Federal benefit 158,741 180,115 R&D and manufacturing tax credits ( 202,166 ) ( 68,894 ) Tax effect of foreign-derived intangible income deduction ( 816,143 ) ( 1,125,817 ) Other 45,654 59,289 Income tax provision $ 2,974,221 $ 3,342,886 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. Significant components of our deferred tax assets and liabilities as of March 31, 2025 and 2024 were as follows: March 31, 2025 2024 Paid time off accrual $ 67,594 $ 64,190 Inventory reserve 47,042 47,042 Depreciation and amortization ( 118,314 ) ( 127,839 ) Stock-based compensation deductions 118,810 101,668 Unrealized loss on marketable securities 19,198 217,802 Section 174 R&D expense 1,417,015 930,946 UNICAP 263A inventory 311,729 202,339 Other 3,995 17,556 Deferred tax assets $ 1,867,069 $ 1,453,704 We had no unrecognized tax benefits as of March 31, 2025, 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 March 31, 2025 we had no accrued interest related to uncertain tax positions. Federal and State taxes payable were $243,394 as of March 31, 2025 and estimated taxes overpayment was $31,250 as of March 31, 2024. The tax years ended March 31, 2021 through March 31, 2025 remain open to examination by the major taxing jurisdictions to which we are subject. NOTE 8. LEASES We conduct our operations in a leased facility under a non-cancellable lease expiring May 31, 2031. Effective November 4, 2024 we executed an Amendment extending our lease, which would have expired March 31, 2026 without the Amendment. Liabilities under the lease Amendment are included in the lease-liabilities table below. For further details on obligations under our lease as amended, refer to our Form 8-K/A filed on November 7, 2024. We have an option to extend the lease for an additional five years at the market rent subject to certain terms and conditions. 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. Details of our operating lease are as follows: Year Ended March 31, 2025 2024 Operating lease cost $ 168,449 $ 151,014 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for leases $ 182,271 $ 178,640 Right-of-use assets obtained in exchange for new lease liabilities Operating lease 710,665 Remaining lease term (months) 74 24 Discount rate 7.8 % 3.5 % F-12 Table of Contents The following table presents the maturities of lease liabilities as of March 31, 2025: Year Ending March 31, Operating Lease Liabilities 2026 84,995 2027 172,142 2028 213,284 2029 220,216 2030 227,373 2031 234,762 2032 40,399 Total lease payments 1,193,171 Imputed lease interest ( 271,940 ) Total lease liabilities $ 921,231 NOTE 9. CONCENTRATIONS The following table summarizes customers comprising 10% or more of revenue for the two most recent fiscal years: % of Revenue % of Accounts Receivable Year Ended March 31, 2025 2024 2025 2024 Customer A 35 % 23 % 26 % 21 % Customer B 19 % 3 % 40 % 31 % We do not currently believe the receivable balances from these customers represent significant credit risks based on our analysis of the likelihood of default. 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, tax considerations, 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. We intend to finance any stock repurchases with cash provided by operating activities or maturating marketable securities. Our repurchase program does not have an expiration date and does not obligate us to purchase any shares, and in recent years we have focused on cash dividends as a more efficient way to return capital to our shareholders. The remaining authorization was $ 3,520,369 as of March 31, 2025.The repurchase program may be modified or discontinued at any time without notice. NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS All of our employees except interns 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’ before-tax salary deferral contributions. Our matching contributions were $ 94,912 for fiscal 2025 and $ 101,931 for fiscal 2024. NOTE 12. SUBSEQUENT EVENTS On May 7, 2025 we announced that our Board had declared a quarterly cash dividend of $ 1.00 per share of Common Stock to be paid May 30, 2025 to shareholders of record as of the close of business May 19, 2025 . F-13 Table of Contents EXHIBIT INDEX Exhibit # Description 19 Insider Trading Policies and Procedures. 23 Consent of Boulay PLLP. 31.1 Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). 31.2 Certification by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a). 32 Certification by Daniel A. Baker and Daniel Nelson pursuant to 18 U.S.C. Section 1350. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). F-14