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Item 5. Market for Registrant’s Common Equity

2022-05-04 compared with 2021-05-05 · 98 added, 192 removed, 34 unchanged (90% of the section changed)

MARKET FOR REGISTRANTS COMMON EQUITY, RELATED

STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information and Dividends

Our Common Stock trades on the Capital Market tier

of the NASDAQ Stock Market under the symbol NVEC.

Dividends have been funded from net cash provided

by operating activities and proceeds from maturities of marketable securities.

Our dividend policy is subject to change at any time, and future dividends will

be subject to Board approval and subject to the companys results of operations,

cash and marketable security balances, our forecasts of future cash requirements,

and other factors our Board may deem relevant.

We have approximately 61 shareholders of record

as of April 16, 2021.

There are also several thousand beneficial holders

of our common stock in street name, whose shares of record are held by

banks, brokers, and other financial institutions.

Securities Authorized for Issuance Under Equity Compensation

Information regarding our securities authorized

for issuance under equity compensation plans will be included in the section Equity

Compensation Plan Information of our Proxy Statement for our 2021 Annual

Meeting of Shareholders, and is incorporated by reference into Item 12 of

Our Common Stock trades on the Capital Market tier of the NASDAQ Stock Market under the symbol NVEC.

Dividends have been funded from net cash provided by operating activities and proceeds from maturities of marketable securities.

Our dividend policy is subject to change at any time, and future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, our forecasts of future cash requirements, and other factors our Board may deem relevant.

We have approximately 57 shareholders of record as of April 13, 2022.

There are also several thousand beneficial holders of our common stock in “street name,”

whose shares of record are held by banks, brokers, and other financial institutions.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding our securities authorized for issuance under equity compensation plans will be included in the section “Equity Compensation Plan Information”

of our Proxy Statement for our 2022 Annual Meeting of Shareholders, and is incorporated by reference into Item 12 of this Report.

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 companys 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 maturating marketable securities.

We repurchased 1,806 shares of our Common Stock in fiscal 2021 and 12,972 shares

in fiscal 2020.

The remaining authorization was $3,762,040 as of

March 31, 2021.

Common Stock repurchases during each quarter of

fiscal 2021, all of which were made as part of our publicly announced program,

were as follows:

We repurchased 2,888 shares of our Common Stock in fiscal 2022 and 1,806 shares in fiscal 2021.

All purchases in fiscal 2022 were made in the quarter ended March 31, 2022 as detailed below:

Total number of

shares purchased

dollar value of

as part of publicly

dollar value of

shares that may

1 unchanged sentence

under the program

April 1, 2020 June 30, 2020

July 1, 2020 September 30, 2020

October 1, 2020 December 31, 2020

January 1, 2021 March 31, 2021

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS.

You should read this discussion together with our

financial statements and notes included elsewhere in this Report.

to historical information, the following discussion contains forward-looking information

that involves risks and uncertainties.

Our actual future results could differ

materially from those presently anticipated due to a variety of factors, including

those discussed in Item 1A of this Report.

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 manufacture high-performance spintronic products

including sensors and couplers to revolutionize data sensing and transmission.

We also receive contracts for research and development and are a licensor of spintronic

magnetoresistive random access memory technology, commonly known as MRAM.

January 1, 2022 –

January 31, 2022

February 1, 2022 –

February 28, 2022

March 1, 2022 –

March 31, 2022

(1) All shares were purchased under the plan described in note (2) below.

(2) 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, 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.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read this discussion together with our financial statements and notes included elsewhere in this Report.

In addition to historical information, the following discussion contains forward-looking information that involves risks and uncertainties.

Our actual future results could differ materially from those presently anticipated due to a variety of factors, including those discussed in Item 1A of this Report.

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 manufacture high-performance spintronic products including sensors and couplers to revolutionize data sensing and transmission.

We also receive contracts for research and development and are a licensor of spintronic magnetoresistive random access memory technology, commonly known as MRAM.

Application of Critical Accounting Policies and Estimates

In accordance with SEC guidance, those material

accounting policies that we believe are the most critical to an investors

understanding of our financial results and condition and require complex management

judgment are discussed below.

In accordance with SEC guidance, those material accounting policies that we believe are the most critical to an investor’s understanding of our financial results and condition and require complex management judgment are discussed below.

Investment Valuation

Our investments consist primarily of corporate obligations.

We have generally invested excess cash in high-quality investment grade long-term

marketable securities with less than five years to maturity.

We classify all of

our marketable securities as available-for-sale, thus securities are recorded

at fair value and any associated unrealized gain or loss, net of tax, is included

as a separate component of shareholders equity, Accumulated other

comprehensive income. If we judged a decline in fair value for any security

to be other than temporary, the cost basis of the individual security would be

written down and a charge recognized to net income.

The fair values for our securities

are determined based on quoted market prices as of the valuation date and observable

prices for similar assets.

We consider a number of factors in determining whether

other-than-temporary impairment exists, including:

We have generally invested excess cash in high-quality investment grade long-term marketable securities with less than five years to maturity.

We classify all of our marketable securities as available-for-sale, thus securities are recorded at fair value and any associated unrealized gain or loss, net of tax, is included as a separate component of shareholders’

equity, “Accumulated other comprehensive income.”

If we judged a decline in fair value for any security to be other than temporary, the cost basis of the individual security would be written down and a charge recognized to net income.

The fair values for our securities are determined based on quoted market prices as of the valuation date and observable prices for similar assets.

We consider a number of factors in determining whether other-than-temporary impairment exists, including:

credit market conditions;

credit ratings of the securities;

historical default rates for securities of comparable

credit rating;

the presence of insurance of the securities and, if insured, the

credit rating and financial condition of the insurer;

the effect of market interest

rates on the value of the securities;

and the duration and extent of any unrealized

We also consider the likelihood that we will be required to sell the securities

prior to maturity based on our financial condition and anticipated cash flows.

If any of these conditions and estimates change in the future, or, if different

estimates are used, the fair value of the investments may change significantly

and could result in other-than-temporary decline in value, which could have an

adverse impact on our results of operations.

the credit ratings of the securities;

historical default rates for securities of comparable credit rating;

the presence of insurance of the securities and, if insured, the credit rating and financial condition of the insurer;

the effect of market interest rates on the value of the securities;

and the duration and extent of any unrealized losses.

We also consider the likelihood that we will be required to sell the securities prior to maturity based on our financial condition and anticipated cash flows.

If any of these conditions and estimates change in the future, or, if different estimates are used, the fair value of the investments may change significantly and could result in other-than-temporary decline in value, which could have an adverse impact on our results of operations.

Inventory Valuation

Inventories are stated at the lower of cost or net

realizable value.

Inventories are stated at the lower of cost or net realizable value.

Cost is determined by the first in, first out method.

there is evidence that inventory could be disposed of at less than carrying value,

the inventory is written down to the net realizable value in the current period.

Additionally, we periodically examine our inventory in the context of inventory

turnover, sales trends, competition and other market factors, and we record provisions

to inventory reserve when we determine certain inventory is unlikely to be sold.

If reserved inventory is subsequently sold, corresponding reductions in inventory

and inventory reserves are made.

Our inventory reserve was $230,000

as of March 31, 2021 and $210,000 as of March 31, 2020.

Where there is evidence that inventory could be disposed of at less than carrying value, the inventory is written down to the net realizable value in the current period.

Additionally, we periodically examine our inventory in the context of inventory turnover, sales trends, competition and other market factors, and we record provisions to inventory reserve when we determine certain inventory is unlikely to be sold.

If reserved inventory is subsequently sold, corresponding reductions in inventory and inventory reserves are made.

Our inventory reserve was $215,000 as of March 31, 2022 and $230,000 as of March 31, 2021.

Deferred Tax Assets Estimation

In determining the carrying value of our net deferred

tax assets, we must assess the likelihood of sufficient future taxable income

in certain tax jurisdictions, based on estimates and assumptions to realize the

benefit of these assets.

We evaluate the realizability of the deferred assets

quarterly and assess the need for valuation allowances or reduction of existing

allowances quarterly.

No valuation allowance was recorded as we believe it is

more likely than not that all of the deferred tax assets will be realized.

We had $73,538 of net deferred tax assets as of

March 31, 2021 and $108,119 as of March 31, 2020.

Net deferred tax assets

included $75,189 in deferred tax assets for stock-based compensation deductions

as of March 31, 2021 and $65,218 as of March 31, 2020.

In determining the carrying value of our net deferred tax assets, we must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions to realize the benefit of these assets.

We evaluate the realizability of the deferred assets quarterly and assess the need for valuation allowances or reduction of existing allowances quarterly.

No valuation allowance was recorded as we believe it is more likely than not that all of the deferred tax assets will be realized.

We had $483,469 of net deferred tax assets as of March 31, 2022 and $73,538 as of March 31, 2021.

Net deferred tax assets included $88,710 in deferred tax assets for stock-based compensation deductions as of March 31, 2022 and $75,189 as of March 31, 2021.

Results of Operations

The following table summarizes the percentage of

revenue and year-to-year changes for various items for the last two fiscal years:

The following table summarizes the percentage of revenue and year-to-year changes for various items for the last two fiscal years:

Percentage of Revenue

Year Ended March 31

10 unchanged sentences

Income tax provision

Total revenue for fiscal 2021 decreased 16% compared

to fiscal 2020 due to a 16% decrease in product sales and a 18% decrease in contract

research and development revenue.

The decrease in product sales was primarily

due to decreased purchases by existing customers.

The decrease in contract research

and development revenue was due to the completion of certain contracts.

Total expenses decreased 10% for fiscal 2021 compared

to fiscal 2020 due primarily to a 14% decrease in research and development expense.

The decrease in research and development expense was primarily due to the completion

of certain new-product development projects.

Interest income for fiscal 2021 decreased 16% due

to a decrease in our available-for-sale securities and a decrease in the average

interest rates on those securities.

Our effective tax rate for fiscal 2021 was 18% of

income before taxes compared to 16% for fiscal 2020.

The smaller effective rate

for fiscal 2020 was due to tax benefits from the Federal Tax Reform Act enacted

We currently expect our tax rate for fiscal 2022 to be approximately

The decrease in net income in fiscal 2021 compared

to the prior year was primarily due to decreases in revenue and interest income,

partially offset by a decrease in total expenses.

Total revenue for fiscal 2022 increased 26% compared to fiscal 2021 due to a 26% increase in product sales and a 36% increase in contract research and development revenue.

The increase in product sales was primarily due to increased purchases by existing customers, and sales increased in most of our markets and product lines.

The increase in contract research and development revenue was due to new contracts..

Gross profit as a percentage of revenue decreased to 77% for fiscal 2022 from 81% for fiscal 2021 primarily due to increased costs, partially offset by increased prices.

Material, labor, and services costs increased significantly in the most recent fiscal year.

Total expenses decreased 2% for fiscal 2022 compared to fiscal 2021 due primarily to a 8% decrease in research and development expense, partially offset by a 12% increase in selling, general, and administrative expense.

The decrease in research and development expense was primarily due to staffing changes and the completion of certain product development activities.

The increase in selling, general, and administrative expense was primarily due to staffing changes and increased employee compensation.

Interest income for fiscal 2022 decreased 22% due to a decrease in our available-for-sale securities and a decrease in the average interest rates on those securities.

The 24% increase in net income in fiscal 2022 compared to the prior year was primarily due to an increase in total revenue.

The Impact of the COVID-19 Pandemic

We believe the COVID-19 pandemic had a significant

impact on total revenue and net income for fiscal 2021 due to its effects on market

conditions in certain industries, especially medical devices.

We believe the effects

of the pandemic on our business began to subside in the second half of fiscal

We believe the impact of the COVID-19 pandemic on customer demand was less in the year ended March 31, 2022 compared to the prior year.

We believe the impact of the pandemic on our supply chain, however, was significantly more in the year ended March 31, 2022 than in the prior year.

Supply-chain shortages may have been exacerbated by COVID-19 lockdowns in China in late fiscal 2022.

We expect supply-chain shortages to continue in fiscal 2023.

Liquidity and Capital Resources

Cash and cash equivalents were $10,427,340 as of

March 31, 2021 compared to $8,065,594 as of March 31, 2020.

The $2,361,746

increase in cash and cash equivalents was due to $13,364,832 in net cash provided

by operating activities and $8,424,873 net cash provided by investing activities,

partially offset by $19,427,959 net cash used in financing activities.

Our liquidity and operating capital requirements are primarily for purchases of raw materials such as foundry wafers, purchases of packaging services, and for the maintenance of work-in-process inventories.

We maintain most of our marketable securities as long-term to maximize yield and fund future dividends.

Cash and cash equivalents were $10,449,510 as of March 31, 2022 compared to $10,427,340 as of March 31, 2021.

The $22,170 increase in cash and cash equivalents was due to $12,503,679 in net cash provided by operating activities and $7,015,421 net cash provided by investing activities, partially offset by $19,496,930 net cash used in financing activities.

Operating Activities

Net cash provided by operating activities related

to product sales and research and development contract revenue as our primary

source of working capital for fiscal 2021 and 2020.

Net cash provided by operating

activities was $13,364,832 for fiscal 2021 and $15,895,773 for fiscal 2020.

Accounts receivable decreased $729,737 primarily

due to the timing of sales to and payments from customers.

Net cash provided by operating activities related to product sales and research and development contract revenue as our primary source of working capital for fiscal 2022 and 2021.

Net cash provided by operating activities was $12,503,679 for fiscal 2022 and $13,364,832 for fiscal 2021.

Accounts receivable increased $2,740,548 primarily due to the timing of sales to and payments from customers.

Inventory increased $1,187,858 primarily due to our decisions to increase work in process in order to mitigate longer vendor lead-times.

Accounts payable and accrued expenses increased $1,422,677 due to an $815,783 increase in accrued expenses and a $606,944 increase in accounts payable.

The increase in accounts payable was due to the timing of vendor payments.

The increase in accrued expenses was due to increases in accrued payroll and income taxes payable.

Investing Activities

Net cash provided by investing activities in fiscal

2021 was due to marketable security maturities of $19,000,000, partially offset

by marketable security purchases of $10,512,400 and fixed assets purchases of

Purchases of fixed assets were $62,727 in fiscal

2021 and $52,041 in fiscal 2020.

Purchases were primarily for capital equipment

and leasehold improvements and were financed with cash provided by operating activities.

Our capital expenditures have been significantly higher in prior years and can

vary from year to year depending on our needs and equipment purchasing opportunities.

Net cash provided by investing activities in fiscal 2022 was due to marketable security maturities of $7,500,000 and fixed assets purchases of $484,579.

The $484,579 of fixed asset purchases in fiscal 2022 were a significant increase from $62,727 in fiscal 2021.

Purchases in fiscal 2022 were primarily for capital equipment to increase our production throughput and capacity and were financed with cash provided by operating activities.

Our capital expenditures can vary significantly from year to year depending on our needs and equipment purchasing opportunities.

Financing Activities

Net cash used in financing activities in fiscal

2021 was due to $19,336,540 in cash dividends to shareholders and $91,419 in repurchases

of our common stock.

In addition to cash dividends to shareholders paid

in fiscal 2021, on May 5, 2021 we announced that our Board had declared a

cash dividend of $1.00 per share of Common Stock, or $4,833,232 based on shares

outstanding as of April 30, 2021, to be paid May 31, 2021.

fund dividends through cash provided by operating activities and proceeds from

maturities of marketable securities.

All future dividends will be subject to Board

approval and subject to the companys results of operations, cash and marketable

security balances, estimates of future cash requirements, the impacts of the COVID-19

pandemic, and other factors the Board may deem relevant.

Furthermore, dividends

may be modified or discontinued at any time without notice.

We believe our working capital and cash generated

from operations will be adequate for our needs at least through fiscal 2022.

Net cash used in financing activities in fiscal 2022 was due to $19,333,409 in cash dividends to shareholders and $163,521 in repurchases of our common stock.

In addition to cash dividends to shareholders paid in fiscal 2022, on May 4, 2022 we announced that our Board had declared a cash dividend of $1.00 per share of Common Stock, or $4,830,826 based on shares outstanding as of April 29, 2022, to be paid May 31, 2022.

We plan to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities.

All future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, estimates of future cash requirements, the impacts of supply-chain shortages, the impacts of cost inflation, and other factors the Board may deem relevant.

Furthermore, dividends may be modified or discontinued at any time without notice.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Financial statements and accompanying notes are

included in this Report beginning on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE.

Financial statements and accompanying notes are included in this Report beginning on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND  

FINANCIAL  

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity