10-Q - NVEC - Equibles

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number:

000-12196

NVE

CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota	41-1424202
(State<br> or other jurisdiction of incorporation or organization)	(I.R.S.<br> Employer Identification No.)
11409 Valley View Road, Eden Prairie, Minnesota	55344
(Address<br> of principal executive offices)	(Zip<br> Code)
(952) 829-9217
(Registrant’s<br> telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated<br> filer ☐	Accelerated<br> filer ☐
Non-accelerated<br> filer ☒	Smaller<br> reporting company ☒
	Emerging<br> growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:

Title<br> of each class	Trading<br> symbol(s)	Name<br> of each exchange on which registered
Common Stock, $0.01 par value	NVEC	The NASDAQ Stock Market, LLC

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common

Stock, $0.01 Par Value – 4,833,401 shares outstanding as of October 13, 2023

NVE

CORPORATION

QUARTERLY

REPORT ON FORM 10-Q

TABLE

OF CONTENTS

PART I. FINANCIAL INFORMATION	3
Item<br> 1. Financial Statements	3
Balance<br> Sheets	3
Statements<br> of Income for the Quarters Ended September 30, 2023 and 2022	4
Statements<br> of Comprehensive Income for the Quarters Ended September 30, 2023 and 2022	4
Statements<br> of Income for the Six Months Ended September 30, 2023 and 2022	5
Statements<br> of Comprehensive Income for the Six Months Ended September 30, 2023 and 2022	5
Statements<br> of Shareholders’ Equity for the Six Months Ended September 30, 2023	6
Statements<br> of Shareholders’ Equity for the Six Months Ended September 30, 2022	7
Statements<br> of Cash Flows for the Six Months Ended September 30, 2023 and 2022	8
Notes<br> to Financial Statements	9
Item<br> 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item<br> 4. Controls and Procedures	18
PART II. OTHER INFORMATION	18
Item<br> 1. Legal Proceedings	18
Item<br> 1A. Risk Factors	18
Item<br> 4. Mine Safety Disclosures	18
Item<br> 6. Exhibits	19
SIGNATURES	20

PART

I–FINANCIAL INFORMATION

Item1. Financial Statements.

NVE

CORPORATION

BALANCE

SHEETS

			March 31,<br> 2023^*^
ASSETS
Current assets
Cash and cash equivalents	6,953,448		$	1,669,896
Marketable securities, short-term (amortized cost of 7,302,714 as of September 30, 2023, and 15,696,135 as of March 31, 2023)	7,224,056			15,513,095
Accounts receivable, net of allowance for credit losses of 15,000	2,915,762			6,523,344
Inventories	6,967,766			6,417,010
Prepaid expenses and other assets	1,064,853			663,459
Total current assets	25,125,885			30,786,804
Fixed assets
Machinery and equipment	10,501,096			10,484,365
Leasehold improvements	1,956,309			1,956,309
Total fixed assets	12,457,405			12,440,674
Less accumulated depreciation and amortization	11,250,170			11,095,236
Net fixed assets	1,207,235			1,345,438
Deferred tax assets	1,395,430			572,038
Marketable securities, long-term (amortized cost of 41,467,512 as of September 30, 2023, and 37,495,846 as of March 31, 2023)	39,623,299			36,125,047
Right-of-use asset – operating lease	358,590			425,843
Total assets	67,710,439		$	69,255,170
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	244,236		$	281,712
Accrued payroll and other	539,452			1,375,250
Operating lease	177,585			175,798
Total current liabilities	961,273			1,832,760
Operating lease	260,509			342,908
Total liabilities	1,221,782			2,175,668
Shareholders’ equity
Common stock, 0.01 par value, 6,000,000 shares authorized; 4,833,401 issued and outstanding as of September 30, 2023, and 4,830,826 as of March 31, 2023	48,334			48,308
Additional paid-in capital	19,529,791			19,295,442
Accumulated other comprehensive loss	(1,502,147	)		(1,213,858	)
Retained earnings	48,412,679			48,949,610
Total shareholders’ equity	66,488,657			67,079,502
Total liabilities and shareholders’ equity	67,710,439		$	69,255,170

All values are in US Dollars.

*	The March 31, 2023<br>Balance Sheet is derived from the audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended<br>March 31, 2023.

See

accompanying notes.

NVE

CORPORATION

STATEMENTS

OF INCOME

(Unaudited)

	Quarter Ended September 30,
	2023			2022
Revenue
Product sales	$	7,117,122		$	10,514,539
Contract research and development		16,154			203,285
Total revenue		7,133,276			10,717,824
Cost of sales		1,599,866			2,402,781
Gross profit		5,533,410			8,315,043
Expenses
Research and development		683,208			669,978
Selling, general, and administrative		433,785			435,625
Provision for credit losses		(202,926	)		—
Total expenses		914,067			1,105,603
Income from operations		4,619,343			7,209,440
Interest income		512,092			351,375
Income before taxes		5,131,435			7,560,815
Provision for income taxes		407,869			1,470,442
Net income	$	4,723,566		$	6,090,373
Net income per share – basic	$	0.98		$	1.26
Net income per share – diluted	$	0.98		$	1.26
Cash dividends declared per common share	$	1.00		$	1.00
Weighted average shares outstanding
Basic		4,833,401			4,830,826
Diluted		4,840,770			4,830,956

STATEMENTS

OF COMPREHENSIVE INCOME

(Unaudited)

	Quarter Ended September 30,
	2023			2022
Net income	$	4,723,566		$	6,090,373
Unrealized loss from marketable securities, net of tax		(53,588	)		(1,127,362	)
Comprehensive income	$	4,669,978		$	4,963,011

See

accompanying notes.

NVE

CORPORATION

STATEMENTS

OF INCOME

(Unaudited)

	Six Months Ended September 30,
	2023		2022
Revenue
Product sales	$	15,817,214	$	17,587,500
Contract research and development		147,476		466,731
Total revenue		15,964,690		18,054,231
Cost of sales		3,679,489		4,054,628
Gross profit		12,285,201		13,999,603
Expenses
Research and development		1,379,200		1,271,896
Selling, general, and administrative		908,900		806,946
Provision for credit losses		9,514		—
Total expenses		2,297,614		2,078,842
Income from operations		9,987,587		11,920,761
Interest income		948,618		634,436
Income before taxes		10,936,205		12,555,197
Provision for income taxes		1,808,909		2,324,707
Net income	$	9,127,296	$	10,230,490
Net income per share – basic	$	1.89	$	2.12
Net income per share – diluted	$	1.89	$	2.12
Cash dividends declared per common share	$	2.00	$	2.00
Weighted average shares outstanding
Basic		4,832,786		4,830,826
Diluted		4,840,688		4,830,927

STATEMENTS

OF COMPREHENSIVE INCOME

(Unaudited)

	Six Months Ended September 30,
	2023			2022
Net income	$	9,127,296		$	10,230,490
Unrealized loss from marketable securities, net of tax		(288,289	)		(1,465,915	)
Comprehensive income	$	8,839,007		$	8,764,575

See

accompanying notes.

NVE

CORPORATION

STATEMENTS

OF SHAREHOLDERS’ EQUITY

(Unaudited)

						Accumulated
				Additional		Other
				Paid-In		Comprehensive			Retained
		Amount		Capital		Income (Loss)			Earnings			Total
Balance as of March 31, 2023	4,830,826	$	48,308	$	19,295,442	$	(1,213,858	)	$	48,949,610		$	67,079,502
Exercise of stock options	2,575		26		117,501								117,527
Comprehensive income:
Unrealized loss on marketable securities, net of tax	-						(234,701	)					(234,701	)
Net income										4,403,730			4,403,730
Total comprehensive income													4,169,029
Stock-based compensation					10,536								10,536
Cash dividends declared (1.00 per share of common stock)										(4,830,826	)		(4,830,826	)
Balance as of June 30, 2023	4,833,401	$	48,334	$	19,423,479	$	(1,448,559	)	$	48,522,514		$	66,545,768
Comprehensive income:
Unrealized loss on marketable securities, net of tax	-		-				(53,588	)					(53,588	)
Net income										4,723,566			4,723,566
Total comprehensive income													4,669,978
Stock-based compensation					106,312								106,312
Cash dividends declared (1.00 per share of common stock)										(4,833,401	)		(4,833,401	)
Balance as of September 30, 2023	4,833,401	$	48,334	$	19,529,791	$	(1,502,147	)	$	48,412,679		$	66,488,657

All values are in US Dollars.

See

accompanying notes.

NVE

CORPORATION

STATEMENTS

OF SHAREHOLDERS’ EQUITY

(Unaudited)

						Accumulated
				Additional		Other
				Paid-In		Comprehensive			Retained
		Amount		Capital		Income (Loss)			Earnings			Total
Balance as of March 31, 2022	4,830,826	$	48,308	$	19,256,485	$	(318,120	)	$	45,578,456		$	64,565,129
Comprehensive income:
Unrealized loss on marketable securities, net of tax	-		-				(338,553	)					(338,553	)
Net income										4,140,116			4,140,116
Total comprehensive income													3,801,563
Stock-based compensation					7,134								7,134
Cash dividends declared (1.00 per share of common stock)										(4,830,826	)		(4,830,826	)
Balance as of June 30, 2022	4,830,826	$	48,308	$	19,263,619	$	(656,673	)	$	44,887,746		$	63,543,000
Comprehensive income:
Unrealized loss on marketable securities, net of tax	-		-				(1,127,362	)					(1,127,362	)
Net income										6,090,373			6,090,373
Total comprehensive income													4,963,011
Stock-based compensation					39,951								39,951
Cash dividends declared (1.00 per share of common stock)										(4,830,826	)		(4,830,826	)
Balance as of September 30, 2022	4,830,826	$	48,308	$	19,303,570	$	(1,784,035	)	$	46,147,293		$	63,715,136

All values are in US Dollars.

See

accompanying notes.

NVE

CORPORATION

STATEMENTS

OF CASH FLOWS

(Unaudited)

	SixMonths Ended September 30,
	2023			2022
OPERATING ACTIVITIES
Net income	$	9,127,296		$	10,230,490
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		114,524			158,851
Provision for current estimate of credit losses		9,514			—
Stock-based compensation		116,848			47,085
Deferred income taxes		(742,649	)		—
Changes in operating assets and liabilities:
Accounts receivable		3,598,068			(1,155,585	)
Inventories		(550,756	)		(706,214	)
Prepaid expenses and other assets		(334,141	)		(114,213	)
Accounts payable and accrued expenses		(953,886	)		890,824
Net cash provided by operating activities		10,384,818			9,351,238
INVESTING ACTIVITIES
Purchases of fixed assets		(16,731	)		(24,500	)
Purchases of marketable securities		(3,937,835	)		(25,381,057	)
Proceeds from maturities of marketable securities		8,400,000			18,750,000
Receipt of tenant improvement allowance		—			100,000
Net cash provided (used) by investing activities		4,445,434			(6,555,557	)
FINANCING ACTIVITIES
Proceeds from exercise of stock options		117,527			—
Payment of dividends to shareholders		(9,664,227	)		(9,661,652	)
Cash used in financing activities		(9,546,700	)		(9,661,652	)
Increase (decrease) in cash and cash equivalents		5,283,552			(6,865,971	)
Cash and cash equivalents at beginning of period		1,669,896			10,449,510
Cash and cash equivalents at end of period	$	6,953,448		$	3,583,539
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes	$	3,120,830		$	1,281,629

See

accompanying notes.

NVE

CORPORATION

NOTES

TO FINANCIAL STATEMENTS

(Unaudited)

NOTE

DESCRIPTION OF BUSINESS

We develop and sell devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information.

NOTE

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basisof Presentation

The accompanying unaudited financial statements of NVE Corporation are prepared consistent with accounting principles generally accepted in the United States and in accordance with Securities and Exchange Commission rules and regulations. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements. Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and it is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and the notes included in our latest Annual Report on Form 10-K for the fiscal year ended March 31, 2023. The results of operations for the quarter ended September 30, 2023, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2024.

Significantaccounting policies

A description of our significant accounting policies is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2023. As of September 30, 2023, there were no changes to our significant accounting policies except for changes resulting from the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (ASC Topic 326) as described in the “Marketable securities and credit losses” section below and in Note 3.

Marketablesecurities and credit losses

Our marketable securities consist of corporate bonds and money market funds. Marketable 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.

We measure credit losses on our marketable securities at the individual security level, using the present value of expected cash flows method. Credit losses are measured as the amount by which the amortized cost basis of the security exceeds the present value of expected cash flows (discounted at the effective interest rate implicit in the security at the date of acquisition), limited by the amount by which the fair value of the security is less than its amortized cost basis. When estimating expected cash flows, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as, past incidences of default, credit quality as reported by credit rating agencies, extent of impairment, length of time the security has been in a continuous unrealized loss position, and adverse conditions forecasted by industry, financial and economic experts that are relevant to the collectability of expected cash flows. We do not include accrued interest receivables in amortized cost and in fair value when measuring expected credit losses. We will write off uncollectible accrued interest receivable to net income in a timely manner, by reversing interest income, and therefore do not measure credit losses for accrued interest receivable. Timely manner means one year from the date the accrued interest receivable becomes past due. Accrued interest receivables are included in the balance sheet in “prepaid expenses and other assets.”

AccountsReceivable and Allowance for Credit Losses

We grant credit to customers in the normal course of business and at times require customers to pay for orders before shipment. Accounts receivable are presented on the balance sheet net of any allowance for credit losses. We measure credit losses on our trade accounts receivable on a pool basis, and in some cases, on an individual basis, using the loss-rate method. Accounts receivable are pooled based on geographical locations because we believe accounts originating from the same geographical location share risk characteristics. When estimating expected credit losses on our trade accounts receivable, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as historical loss rate, current age and remaining term of the receivable relative to our current days sales outstanding (“DSO”) ratio, pending orders of the customer relative to accounts receivable balance as of the reporting date and amounts paid by the customers subsequent to the reporting period end but before the financial statements are issued.

NOTE

RECENTLY ADOPTED ACCOUNTING STANDARD

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losseson Financial Statements. ASU 2016-13 requires a financial asset (or a group of financial assets) to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In November 2018 the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, FinancialInstruments-Credit Losses, which clarifies codification and corrects unintended application of the guidance, and in November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies or addresses specific issues about certain aspects of ASU 2016-13. In November 2019 the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815),and Leases (Topic 842): Effective Dates, and in February 2020 the FASB issued ASU No. 2020-02, Financial Instruments—CreditLosses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting BulletinNo. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases(Topic 842), both of which delay the effective date of ASU 2016-13 by three years for certain Smaller Reporting Companies such as us. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments; which modifies the measurement of expected credit losses of certain financial instruments. We adopted ASU

No. 2016-13 beginning with the quarter ended June 30, 2023.

The adoption resulted in disclosure changes and required us to consider the likelihood of default and to measure our allowance for credit losses over the contractual term of our receivables. The adoption did not have a material impact on the financial statements as of September 30 or April 1, 2023.

NOTE

NET INCOME PER SHARE

Net income per basic share is computed based on the weighted-average number of common shares issued and outstanding during each period. Net income per diluted share amounts assume exercise of all stock options. The following tables show the components of diluted shares:

Schedule of Earnings Per Share, Basic and Diluted

	Quarter Ended September 30,
	2023		2022
Weighted average common shares outstanding – basic		4,833,401		4,830,826
Dilutive effect of stock options		7,369		130
Shares used in computing net income per share – diluted		4,840,770		4,830,956
	Six Months Ended September 30,
---	---	---	---	---
	2023		2022
Weighted average common shares outstanding – basic		4,832,786		4,830,826
Dilutive effect of stock options		7,902		101
Shares used in computing net income per share – diluted		4,840,688		4,830,927

NOTE

MARKETABLE SECURITIES

The following table shows the major categories of our marketable securities and their contractual maturities as of September 30, 2023:

Contractual maturities of marketable securities

	Total		<1 Year		1–3 Years		3–6 Years
Money market funds	$	6,853,047	$	6,853,047	$	—	$	—
Corporate bonds		46,847,355		7,224,056		27,387,122		12,236,177
Total	$	53,700,402	$	14,077,103	$	27,387,122	$	12,236,177

Total marketable securities represent approximately 79% of our total assets as of September 30, 2023. Marketable securities as of September 30, 2023, had remaining maturities between one and 67 months.

Money

market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included on the balance sheets in “Marketable securities, short term” and “Marketable securities, long term.” Accrued interest receivables were $436,932 as of September 30, 2023, and $425,372 as of March 31, 2023, and are included in the balance sheets in “Prepaid expenses and other assets.”

We monitor the credit ratings of our marketable securities at least quarterly as reported by Standard & Poor’s. The following table summarizes the fair values of our marketable securities as of September 30, 2023, aggregated by credit rating:

Fair values of our marketable securities aggregated by credit rating

Credit Rating	Fair Value
AAA	$	8,134,255
AA		6,622,847
AA-		20,699,684
A+		2,833,709
A		9,467,058
A-		5,942,849
Total	$	53,700,402

The following table shows the estimated fair value of our marketable securities, aggregated by fair value hierarchy inputs used in estimating their fair values:

	As of September 30, 2023						As of March 31, 2023
	Level 1		Level 2		Total		Level 1		Level 2		Total
Money market funds	$	6,853,047	$	—	$	6,853,047	$	906,141	$	—	$	906,141
Corporate bonds		—		46,847,355		46,847,355		—		51,638,142		51,638,142
Total	$	6,853,047	$	46,847,355	$	53,700,402	$	906,141	$	51,638,142	$	52,544,283

The following table shows the amortized cost, fair value, and gross unrealized holding gains and losses of our marketable securities as of September 30 and March 31, 2023:

	As of September 30, 2023									As of March 31, 2023
	Amortized<br> <br>Cost		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Gains		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Losses			Estimated<br> <br>Fair<br> <br>Value		Amortized<br> <br>Cost		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Gains		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Losses			Estimated<br> <br>Fair<br> <br><br> <br>Value
Money market funds	$	6,853,047	$	—	$	—		$	6,853,047	$	906,141	$	—	$	—		$	906,141
Corporate bonds		48,770,226		1		(1,922,872	)		46,847,355		53,191,981		1,007		(1,554,846	)		51,638,142
Total	$	55,623,273	$	1	$	(1,922,872	)	$	53,700,402	$	54,098,122	$	1,007	$	(1,554,846	)	$	52,544,283

The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities for which an allowance for credit losses has not been recorded, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of September 30 and March 31, 2023.

Gross unrealized holding losses and estimated fair value of marketable securities for which an allowance for credit losses has not been recorded

	Less Than 12 Months					12 Months or Greater					Total
	Estimated<br> <br>Fair<br> <br>Value		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Losses			Estimated<br> <br>Fair<br> <br>Value		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Losses			Estimated<br> <br>Fair<br> <br>Value		Gross<br> <br>Unrealized<br> <br>Holding<br> <br>Losses
As of September 30, 2023
Corporate bonds	$	6,998,824	$	(86,868	)	$	39,848,531	$	(1,836,004	)	$	46,847,355	$	(1,922,872	)
Total	$	6,998,824	$	(86,868	)	$	39,848,531	$	(1,836,004	)	$	46,847,355	$	(1,922,872	)
As of March 31, 2023
Corporate bonds	$	37,084,628	$	(590,967	)	$	13,294,817	$	(963,879	)	$	50,379,445	$	(1,554,846	)
Total	$	37,084,628	$	(590,967	)	$	13,294,817	$	(963,879	)	$	50,379,445	$	(1,554,846	)

None of the securities were impaired at acquisition, and subsequent declines in fair value are attributable to interest rate increases. We do not intend to sell, and it is not more likely than not that we will be required to sell, these securities before recovery of their amortized cost basis. The issuers continue to make timely interest payments on these securities. Because we believe it is more likely than not we will recover the cost basis of our investments, we did not record any impairment attributable to credit losses.

None of the marketable securities purchased during the period had experienced more-than-insignificant deterioration in credit quality since its origination and were therefore not considered “Purchased Financial Assets with Credit Deterioration.”

Unrealized losses on our marketable securities and their tax effects are as follows:

	Quarter Ended September 30,
	2023			2022
Unrealized loss from marketable securities	$	(68,597	)	$	(252,894	)
Tax effects		15,009			55,333
Unrealized loss from marketable securities, net of tax	$	(53,588	)	$	(197,561	)
	Six Months Ended September 30,
---	---	---	---	---	---	---
	2023			2022
Unrealized loss from marketable securities	$	(369,034	)	$	(1,876,491	)
Tax effects		80,745			410,576
Unrealized loss from marketable securities, net of tax	$	(288,289	)	$	(1,465,915	)

NOTE

ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES

The following table shows a roll forward of the allowance for credit losses on our accounts receivable:

Allowance for credit losses as of March 31, 2023	$	15,000
Provision for credit losses recorded in the quarter ended June 30, 2023		212,440
Change in provision for credit losses in the quarter ended September 30, 2023		(202,926	)
Specific accounts deemed uncollectible		(9,514	)
Allowance for credit losses as of September 30, 2023	$	15,000

NOTE

INVENTORIES

Inventories are shown in the following table:

	September 30, <br><br>2023		March 31, 2023
Raw materials	$	2,066,047	$	1,601,962
Work in process		3,104,015		3,781,894
Finished goods		1,797,704		1,033,154
Total inventories	$	6,967,766	$	6,417,010

NOTE

STOCK-BASED COMPENSATION

Stock-based compensation expense was $106,312 for the second quarter of fiscal 2024, $39,951 for the second quarter of fiscal 2023, $116,848 for the first six months of fiscal 2024, and $47,085 for the first six months of fiscal 2023. We calculate share-based compensation expense using the Black-Scholes-Merton standard option-pricing model.

NOTE

INCOME TAXES

Deferred

income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of September 30, 2023, federal and state estimated tax overpayments of $408,184 were included in the balance sheet in “Prepaid expenses and other assets.”

We had no unrecognized tax benefits as of September 30, 2023, 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 September 30, 2023, we had no accrued interest related to uncertain tax positions. The tax years 2019 through 2023 remain open to examination by the major taxing jurisdictions to which we are subject.

NOTE

LEASES

We conduct our operations in a leased facility under a non-cancellable lease expiring March 31, 2026. Our lease does not provide an implicit interest rate, so we used our incremental borrowing rate to determine the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. Details of our operating lease are as follows:

Lease, Cost

	Quarter Ended <br> Sept. 30, 2023			Six Months Ended <br> Sept. 30, 2023
Operating lease cost	$	37,754		$	75,507
Cash paid for amounts included <br> in the measurement of lease liabilities
Operating cash flows for leases	$	44,433		$	88,866
Remaining lease term		30 months
Discount rate		3.5	%

The following table shows the maturities of lease liabilities as of September 30, 2023:

Lessee, Operating Lease, Liability, Maturity

Year Ending March 31,	Operating Lease Liabilities
2024	$	89,774
2025		182,271
2026		184,995
Total lease payments		457,040
Imputed lease interest		(18,946	)
Total lease liabilities	$	438,094

NOTE 11. STOCK REPURCHASE PROGRAM

On January 21, 2009, we announced that our Board of Directors authorized the repurchase of up to $2,500,000 of our Common Stock from time to time in open market, block, or privately negotiated transactions. The timing and extent of any repurchases depend on market conditions, the trading price of the company’s stock, and other factors, and subject to the restrictions relating to volume, price, and timing under applicable law. On August 27, 2015, we announced that our Board of Directors authorized up to $5,000,000 of additional repurchases. Our repurchase program does not have an expiration date and does not obligate us to purchase any shares. The Program may be modified or discontinued at any time without notice. We intend to finance any stock repurchases with cash provided by operating activities or maturing marketable securities. The remaining authorization was $3,520,369 as of September 30, 2023. We did not repurchase any of our Common Stock during fiscal 2024.

NOTE

INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS

All

of our employees are eligible to participate in our 401(k) savings plan the first quarter after reaching age 18. Employees may contribute up to the Internal Revenue Code maximum. We make matching contributions of 100% of the first 3% of participants’ salary deferral contributions. Our matching contributions were $24,406 for the second quarter of fiscal 2024, $23,751 for the second quarter of fiscal 2023, $51,483 for the first six months of fiscal 2024, and $52,177 for the first six months of fiscal 2023.

NOTE

SUBSEQUENT EVENTS

On October 18, 2023, we announced that our Board of Directors had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid November 30, 2023, to shareholders of record as of the close of business October 30, 2023.

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-lookingstatements

Some of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of NVE, you should be aware that our actual financial condition, operating results, and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors, including but not limited to risks related to our reliance on several large customers for a significant percentage of revenue, our dependence on critical suppliers and packaging vendors, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks of credit losses, risks and uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

Further information regarding our risks and uncertainties is contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2023, as updated in Item 1A of this report.

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.

Criticalaccounting policies

A description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2023. As of September 30, 2023, our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

Quarterended September 30, 2023, compared to quarter ended September 30, 2022

The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

	Percentage of Revenue<br> <br>Quarter Ended September 30,						Quarter-<br> <br><br> <br>to-Quarter
	2023			2022			Change
Revenue
Product sales		99.8	%		98.1	%		(32.3	)%
Contract research and development		0.2	%		1.9	%		(92.1	)%
Total revenue		100.0	%		100.0	%		(33.4	)%
Cost of sales		22.4	%		22.4	%		(33.4	)%
Gross profit		77.6	%		77.6	%		(33.5	)%
Expenses
Research and development		9.6	%		6.2	%		2.0	%
Selling, general, and administrative		6.0	%		4.1	%		(0.4	)%
Provision for credit losses		(2.8	)%		—	%		—	%
Total expenses		12.8	%		10.3	%		(17.3	)%
Income from operations		64.8	%		67.3	%		(35.9	)%
Interest income		7.2	%		3.2	%		45.7	%
Income before taxes		72.0	%		70.5	%		(32.1	)%
Provision for income taxes		5.8	%		13.7	%		(72.3	)%
Net income		66.2	%		56.8	%		(22.4	)%

Total revenue for the quarter ended September 30, 2023 (the second quarter of fiscal 2024) decreased 33% compared to the quarter ended September 30, 2022 (the second quarter of fiscal 2023). The decrease was due to a 32% decrease in product sales and a 92% decrease in contract research and development revenue. The decrease in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry, and a semiconductor industry downturn. The decrease in contract research and development revenue was due to the completion of most contracts.

Total expenses decreased 17% for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 primarily due to a $202,926 credit loss provision reversal, partially offset by a 2% increase in research and development expense. The change in the provision for credit losses was due to a reassessment of our allowance for credit losses based on payments and debtor customer information as of September 30, 2023.

Interest income for the second quarter of fiscal 2024 increased 46% due to higher yields on securities purchased after September 30, 2022.

Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 8% for the second quarter of fiscal 2024 compared to 19% for the second quarter of fiscal 2023. The decrease was due to the impact of the $202,926 credit loss provision reversal and changes in the amounts and timing of tax deductions and credits. Our effective tax rate can vary from quarter to quarter. Our effective tax rate in subsequent quarters will likely be higher than the effective tax rate in the quarter ended September 30, 2023.

The 22% decrease in net income for the second quarter of fiscal 2024 compared to the prior-year quarter was primarily due to decreased revenue, partially offset by decreased expenses, increased interest income, and a lower effective tax rate.

Sixmonths ended September 30, 2023, compared to six months ended September 30, 2022

The table shown below summarizes the percentage of revenue and period-to-period changes for various items:

	Percentage of Revenue<br> <br>Six Months Ended Sept. 30,						Period-<br> to-Period
	2023			2022			Change
Revenue
Product sales		99.1	%		97.4	%		(10.1	)%
Contract research and development		0.9	%		2.6	%		(68.4	)%
Total revenue		100.0	%		100.0	%		(11.6	)%
Cost of sales		23.0	%		22.5	%		(9.3	)%
Gross profit		77.0	%		77.5	%		(12.2	)%
Expenses
Research and development		8.6	%		7.0	%		8.4	%
Selling, general, and administrative		5.7	%		4.5	%		12.6	%
Provision for credit losses		0.1	%		—	%		—	%
Total expenses		14.4	%		11.5	%		10.5	%
Income from operations		62.6	%		66.0	%		(16.2	)%
Interest income		5.9	%		3.5	%		49.5	%
Income before taxes		68.5	%		69.5	%		(12.9	)%
Provision for income taxes		11.3	%		12.8	%		(22.2	)%
Net income		57.2	%		56.7	%		(10.8	)%

Total revenue for the six months ended September 30, 2023, decreased 12% compared to the six months ended September 30, 2022. The decrease was due to a 10% decrease in product sales and a 68% decrease in contract research and development revenue. The decrease in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry, and a semiconductor industry downturn. The decrease in contract research and development revenue was due to the completion of most contracts.

Total expenses increased 11% for the first six months of fiscal 2024 compared to the first six months of fiscal 2023 due to an 8% increase in research and development expense and a 13% increase in selling, general, and administrative expense. The increases in research and development and selling, general, and administrative expenses were primarily due to increased staffing and increased employee compensation expenses.

Interest income for the first six months of fiscal 2024 increased 50% due to higher yields on securities purchased after September 30, 2022.

Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 17% for the first six months of fiscal 2024 from 19% for the first six months of fiscal 2023. The decrease was due to changes in the amount and timing of tax deductions and tax credits.

The 11% decrease in net income for the first six months of fiscal 2024 compared to the prior-year period was primarily due to decreased revenue and increased expenses, partially offset by increased interest income and a lower effective tax rate.

Liquidityand Capital Resources

Overview

Cash and cash equivalents were $6,953,448 as of September 30, 2023, compared to $1,669,896 as of March 31, 2023. The $5,283,552 increase in cash and cash equivalents during the first six months of fiscal 2024 was due to $10,384,818 of cash provided by operating activities and $4,445,434 of cash provided by investing activities, partially offset by $9,546,700 of cash used in financing activities.

OperatingActivities

Net cash provided by operating activities related to product sales was our primary source of working capital for the current and prior-year quarters. Net cash provided by operating activities was $10,384,818 for the first six months of fiscal 2024 compared to $9,351,238 for the first six months of fiscal 2023.

Accounts receivable decreased $3,598,068 during the first six months of fiscal 2024 due to the timing of customer payments and decreased revenue.

Inventories increased $550,756 during the first six months of fiscal 2024 primarily due to our decision to increase inventories to mitigate longer vendor lead times and to support growth.

Accounts payable and accrued expenses decreased $953,886 during the first six months of fiscal 2024 primarily due to decreases in income tax payable, long-term operating lease, and a decrease in accruals for performance-based compensation.

InvestingActivities

Cash provided by investing activities during the first six months of fiscal 2024 consisted of $8,400,000 in proceeds from maturities of marketable securities, partially offset by $16,731 of fixed assets purchases and $3,937,835 of marketable securities purchases. Purchases of fixed assets can vary from period to period depending on our needs and equipment purchasing opportunities. Such purchases could increase significantly in future periods.

FinancingActivities

Cash used in financing activities during the six months ended September 30, 2023, consisted of $9,664,227 of cash dividends paid to shareholders, partially offset by $117,527 in proceeds from the exercise of stock options.

In addition to cash dividends to shareholders paid in the second quarter of fiscal 2024, on October 18, 2023, we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,833,401, to be paid November 30, 2023, to shareholders of record as of the close of business October 30, 2023.

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, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.

Item4. Controls and Procedures.

DisclosureControls 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 time periods 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. Our management concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.

Changesin Internal Controls

During the quarter ended September 30, 2023, 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.

PART

II–OTHER INFORMATION

Item1. Legal Proceedings.

In the ordinary course of business, we may become involved in litigation. At this time, we are not aware of any material pending or threatened legal proceedings or other proceedings contemplated by governmental authorities that we expect would have a material adverse impact on our future results of operation and financial condition.

Item1A. Risk Factors.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, as updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

Item4. Mine Safety Disclosures.

None.

Item6. Exhibits.

Exhibit #	Description
31.1	Certification<br> by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Certification<br> by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a).
32	Certification<br> Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline<br> XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded<br> within the Inline XBRL document)
101.SCH	Inline<br> XBRL Taxonomy Extension Schema Document
101.CAL	Inline<br> XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline<br> XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline<br> XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline<br> XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover<br> Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements 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)
October 18, 2023	/s/ DANIEL A. BAKER
Date	Daniel A. Baker
	President and Chief<br> Executive Officer
October 18, 2023	/s/ DANIEL NELSON
Date	Daniel Nelson
	Principal Financial<br> Officer

Exhibit 31.1

CERTIFICATION

I, Daniel A. Baker, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NVE Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 18, 2023

/s/ DANIEL A. BAKER
Daniel A. Baker
President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Daniel Nelson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NVE Corporation;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 18, 2023

/s/ DANIEL NELSON
Daniel Nelson
Principal Financial Officer

Exhibit 32

CERTIFICATION PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18U.S.C. SECTION 1350)

The undersigned certify pursuant to 18 U.S.C. Section 1350, that to the undersigned’s knowledge:

The accompanying Annual Report of NVE Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2023, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 18, 2023

/s/ DANIEL A. BAKER
Daniel A. Baker
President and Chief Executive Officer
/s/ DANIEL NELSON
---
Daniel Nelson
Principal Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.