NVE(NVEC) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents NVE Corporation's unaudited financial statements and related notes Item 1. Financial Statements Presents NVE Corporation's unaudited financial statements, including balance sheets, income, comprehensive income, equity, cash flows, and detailed notes Balance Sheets Summarizes NVE Corporation's financial position, detailing assets, liabilities, and shareholders' equity at specific dates Balance Sheet Summary | ASSETS (Unaudited) | Dec 31, 2020 ($) | Mar 31, 2020 ($) | | :------------------- | :----------- | :----------- | | Cash and cash equivalents | $13,988,308 | $8,065,594 | | Marketable securities, short-term | $11,115,094 | $19,084,814 | | Total current assets | $32,677,205 | $34,384,711 | | Net fixed assets | $366,068 | $582,467 | | Marketable securities, long-term | $40,656,967 | $43,606,495 | | Total assets | $74,420,858 | $79,498,150 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $748,944 | $796,201 | | Total liabilities | $1,452,139 | $1,502,801 | | Total shareholders' equity | $72,968,719 | $77,995,349 | Statements of Income (Quarterly) Details NVE Corporation's financial performance for the quarter, including revenue, expenses, and net income Quarterly Income Statement Summary | Metric | Quarter Ended Dec 31, 2020 ($) | Quarter Ended Dec 31, 2019 ($) | Change (YoY) (%) | | :----------------------------- | :------------------------- | :------------------------- | :----------- | | Product sales | $6,332,349 | $6,160,967 | +2.8% | | Contract research and development | $201,013 | $303,629 | -33.8% | | Total revenue | $6,533,362 | $6,464,596 | +1.1% | | Gross profit | $5,458,314 | $5,200,790 | +5.0% | | Income from operations | $4,444,742 | $4,101,333 | +8.4% | | Net income | $3,925,709 | $3,730,664 | +5.2% | | Net income per share – basic | $0.81 | $0.77 | +5.2% | | Cash dividends declared per common share | $1.00 | $1.00 | 0% | Statements of Comprehensive Income (Quarterly) Presents NVE Corporation's comprehensive income, including net income and other comprehensive income items for the quarter Quarterly Comprehensive Income Summary | Metric | Quarter Ended Dec 31, 2020 ($) | Quarter Ended Dec 31, 2019 ($) | | :------------------------------------ | :------------------------- | :------------------------- | | Net income | $3,925,709 | $3,730,664 | | Unrealized (loss) gain from marketable securities, net of tax | $(145,452) | $31,237 | | Comprehensive income | $3,780,257 | $3,761,901 | Statements of Income (Nine Months) Details NVE Corporation's financial performance for the nine-month period, including revenue, expenses, and net income Nine-Month Income Statement Summary | Metric | Nine Months Ended Dec 31, 2020 ($) | Nine Months Ended Dec 31, 2019 ($) | Change (YoY) (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------- | | Product sales | $14,850,157 | $18,434,039 | -19.4% | | Contract research and development | $653,252 | $827,198 | -21.0% | | Total revenue | $15,503,409 | $19,261,237 | -19.5% | | Gross profit | $12,650,652 | $15,559,296 | -18.7% | | Income from operations | $9,226,939 | $11,861,717 | -22.2% | | Net income | $8,559,914 | $11,160,145 | -23.3% | | Net income per share – basic | $1.77 | $2.30 | -23.0% | | Cash dividends declared per common share | $3.00 | $3.00 | 0% | Statements of Comprehensive Income (Nine Months) Presents NVE Corporation's comprehensive income, including net income and other comprehensive income items for the nine-month period Nine-Month Comprehensive Income Summary | Metric | Nine Months Ended Dec 31, 2020 ($) | Nine Months Ended Dec 31, 2019 ($) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net income | $8,559,914 | $11,160,145 | | Unrealized gain from marketable securities, net of tax | $966,886 | $780,016 | | Comprehensive income | $9,526,800 | $11,940,161 | Statements of Shareholders' Equity (Dec 31, 2020) Outlines changes in NVE Corporation's shareholders' equity for the period ended December 31, 2020 Shareholders' Equity Summary (Dec 31, 2020) | Metric | As of Mar 31, 2020 ($) | As of Dec 31, 2020 ($) | | :----------------------------- | :----------------- | :----------------- | | Total Shareholders' Equity | $77,995,349 | $72,968,719 | | Retained Earnings | $58,046,520 | $52,103,126 | | Accumulated Other Comprehensive Income | $516,523 | $1,483,409 | | Cash Dividends Declared (Q1, Q2, Q3) | $(4,835,038) (Q1) | $(4,833,232) (Q3) | | Repurchase of Common Stock | - | $(91,419) (Q2) | Statements of Shareholders' Equity (Dec 31, 2019) Outlines changes in NVE Corporation's shareholders' equity for the period ended December 31, 2019 Shareholders' Equity Summary (Dec 31, 2019) | Metric | As of Mar 31, 2019 ($) | As of Dec 31, 2019 ($) | | :----------------------------- | :----------------- | :----------------- | | Total Shareholders' Equity | $82,780,211 | $80,230,702 | | Retained Earnings | $62,903,918 | $59,526,033 | | Accumulated Other Comprehensive Income | $(82,725) | $697,291 | | Cash Dividends Declared (Q1, Q2, Q3) | $(4,846,010) (Q1) | $(4,846,010) (Q3) | Statements of Cash Flows Summarizes NVE Corporation's cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary | Cash Flow Activity | Nine Months Ended Dec 31, 2020 ($) | Nine Months Ended Dec 31, 2019 ($) | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $8,531,068 | $12,536,305 | | Cash provided by investing activities | $11,986,373 | $5,277,594 | | Cash used in financing activities | $(14,594,727) | $(14,538,030) | | Increase in cash and cash equivalents | $5,922,714 | $3,275,869 | | Cash and cash equivalents at end of period | $13,988,308 | $10,153,173 | Notes to Financial Statements Provides detailed explanations of NVE Corporation's accounting policies and specific financial statement items NOTE 1. DESCRIPTION OF BUSINESS Describes NVE Corporation's core business, focusing on spintronics-based devices and nanotechnology - NVE Corporation develops and sells devices utilizing spintronics, a nanotechnology based on electron spin for information acquisition, storage, and transmission. The company manufactures high-performance spintronic products, including sensors and couplers[30] NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Outlines NVE Corporation's financial statement preparation basis and key accounting policies, including revenue recognition - Financial statements are prepared in accordance with GAAP and SEC rules, reflecting normal and recurring adjustments[31][32] - Revenue is recognized upon transfer of control of products or services, disaggregated into product sales (point in time) and contract research and development (over time)[33][34] - Performance obligations for product sales and contract R&D are satisfied within one year or less[36] - The company uses practical expedients not to disclose the value of unsatisfied performance obligations or assess significant financing components for contracts under one year[36] NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS Discusses the impact of recently issued accounting standards on NVE Corporation's financial reporting - ASU No. 2019-12 (Income Taxes) is effective for fiscal 2022; no significant impact is expected[37] - ASU No. 2016-13 (Credit Losses) is effective for fiscal 2024 for Smaller Reporting Companies like NVE, with no significant impact anticipated[38] NOTE 4. NET INCOME PER SHARE Details the calculation of NVE Corporation's basic and diluted net income per share Net Income Per Share Details | Metric | Quarter Ended Dec 31, 2020 | Quarter Ended Dec 31, 2019 | | :------------------------------------ | :------------------------- | :------------------------- | | Weighted average common shares outstanding – basic | 4,833,232 | 4,846,010 | | Dilutive effect of stock options | 29 | 1,426 | | Shares used in computing net income per share – diluted | 4,833,261 | 4,847,436 | | Metric | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Weighted average common shares outstanding – basic | 4,834,324 | 4,846,010 | | Dilutive effect of stock options | 87 | 2,496 | | Shares used in computing net income per share – diluted | 4,834,411 | 4,848,506 | NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS Provides information on the fair value measurement of NVE Corporation's financial instruments, primarily marketable securities - Corporate bonds and money market funds are classified as available-for-sale securities and carried at estimated fair value, with unrealized gains/losses in accumulated other comprehensive income[41] - These securities represented approximately 88% of total assets as of December 31, 2020[43] Fair Value of Financial Instruments Summary | Fair Value Category | As of Dec 31, 2020 ($) | As of Mar 31, 2020 ($) | | :------------------ | :----------------- | :----------------- | | Money market funds (Level 1) | $13,921,961 | $7,903,433 | | Corporate bonds (Level 2) | $51,772,061 | $62,691,309 | | Total | $65,694,022 | $70,594,742 | Available-for-Sale Securities Details | Available-for-Sale Securities | Amortized Cost (Dec 31, 2020) ($) | Estimated Fair Value (Dec 31, 2020) ($) | Gross Unrealized Gains (Dec 31, 2020) ($) | | :---------------------------- | :---------------------------- | :---------------------------------- | :------------------------------------ | | Money market funds | $13,921,961 | $13,921,961 | $0 | | Corporate bonds | $49,873,178 | $51,772,061 | $1,898,883 | | Total | $63,795,139 | $65,694,022 | $1,898,883 | NOTE 6. INVENTORIES Details the composition and valuation of NVE Corporation's inventory, including raw materials, WIP, and finished goods Inventory Composition | Inventory Category | Dec 31, 2020 ($) | Mar 31, 2020 ($) | | :----------------- | :----------- | :----------- | | Raw materials | $839,102 | $1,017,451 | | Work in process | $1,959,692 | $1,863,000 | | Finished goods | $1,043,683 | $1,003,999 | | Total inventories | $3,842,477 | $3,884,450 | NOTE 7. STOCK-BASED COMPENSATION Reports NVE Corporation's stock-based compensation expense for the specified periods Stock-Based Compensation Expense | Period | Stock-based Compensation Expense ($) | | :------------------------------------ | :------------------------------- | | Third quarter of fiscal 2021 (Dec 31, 2020) | $4,275 | | First nine months of fiscal 2021 (Dec 31, 2020) | $41,297 | | First nine months of fiscal 2020 (Dec 31, 2019) | $48,360 | | Third quarter of fiscal 2020 (Dec 31, 2019) | $0 | NOTE 8. INCOME TAXES Explains NVE Corporation's income tax accounting, including deferred taxes and unrecognized tax benefits - Deferred income taxes reflect temporary differences between financial reporting and tax amounts[49] - The company had no unrecognized tax benefits as of December 31, 2020, and does not expect significant changes within 12 months[50] - Tax years 2016-2019 remain open for examination[50] NOTE 9. LEASES Details NVE Corporation's lease arrangements, including lease costs and liabilities - NVE operates in a leased facility under a non-cancellable lease expiring March 31, 2026[51] - Lease expense is recognized straight-line, and the incremental borrowing rate (3.5%) is used for present value calculations[51] Lease Cost and Liabilities | Lease Cost | Quarter Ended Dec 31, 2020 ($) | Nine Months Ended Dec 31, 2020 ($) | | :-------------------- | :------------------------- | :----------------------------- | | Operating lease cost | $38,641 | $115,923 | | Variable lease cost | $30,608 | $91,824 | | Total lease cost | $69,249 | $207,747 | | Total lease liabilities (as of Dec 31, 2020) | | $720,618 | | Remaining lease term (as of Dec 31, 2020) | 63 months | | NOTE 10. STOCK REPURCHASE PROGRAM Describes NVE Corporation's authorized stock repurchase program and remaining authorization - The Board of Directors authorized a stock repurchase program, with $3,762,040 remaining authorization as of December 31, 2020[52] - The program has no expiration date and is financed by operating activities or maturing marketable securities[52] NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS Outlines NVE Corporation's employee 401(k) savings plan and matching contributions - All employees are eligible for the 401(k) savings plan, with the company matching 100% of the first 3% of salary deferral contributions[53] - Matching contributions were $22,571 for Q3 FY2021 and $69,227 for the first nine months of FY2021[53] NOTE 12. SUBSEQUENT EVENTS Reports significant events occurring after the balance sheet date, such as dividend declarations - On January 20, 2021, the Board declared a quarterly cash dividend of $1.00 per share, payable February 26, 2021, to shareholders of record as of February 1, 2021[54] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of NVE Corporation's financial condition, operating results, liquidity, and capital resources, including COVID-19 impact Forward-looking statements Highlights forward-looking statements and associated risks that could cause actual results to differ - The report contains forward-looking statements subject to safe harbor provisions[56] - Actual results may differ due to factors like reliance on large customers, economic uncertainties, future sales, COVID-19 risks, and uncertainties related to stock repurchases and dividends[56] General Provides a general overview of NVE Corporation's business and product offerings - NVE Corporation develops and sells spintronics-based devices, including high-performance sensors and couplers, utilizing nanotechnology that relies on electron spin[58] Critical accounting policies Identifies NVE Corporation's critical accounting policies and estimates impacting financial reporting - Critical accounting policies and estimates as of December 31, 2020, include investment valuation, inventory valuation, and deferred tax assets estimation[59] Quarter ended December 31, 2020 compared to quarter ended December 30, 2019 Compares NVE Corporation's financial performance for the quarter ended December 31, 2020, against the prior year Quarterly Financial Performance Comparison | Metric | Q3 FY2021 (Dec 31, 2020) | Q3 FY2020 (Dec 31, 2019) | Quarter-to-Quarter Change | | :----------------------------- | :----------------------- | :----------------------- | :------------------------ | | Total revenue | $6,533,362 | $6,464,596 | +1.1% | | Product sales | 96.9% of revenue | 95.3% of revenue | +2.8% | | Contract R&D | 3.1% of revenue | 4.7% of revenue | -33.8% | | Gross profit margin | 83.5% | 80.5% | +5.0% | | Total expenses | 15.5% of revenue | 17.1% of revenue | -7.8% | | Income from operations | 68.0% of revenue | 63.4% of revenue | +8.4% | | Interest income | 5.6% of revenue | 6.9% of revenue | -17.6% | | Net income | 60.1% of revenue | 57.7% of revenue | +5.2% | - The increase in product sales was primarily due to increased purchases by existing customers[61] - The decrease in contract R&D revenue was due to the completion of certain contracts[61] - Gross profit margin increased to 84% due to a more profitable revenue mix[62] - Total expenses decreased by 8% due to a 9% decrease in R&D expense (completion of product development) and a 5% decrease in SG&A (staffing changes)[63] - Interest income decreased by 18% due to lower marketable securities and money market funds balances, and decreased average interest rates[64] Nine months ended December 31, 2020 compared to nine months ended December 31, 2019 Compares NVE Corporation's financial performance for the nine months ended December 31, 2020, against the prior year Nine-Month Financial Performance Comparison | Metric | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | Period-to-Period Change | | :----------------------------- | :----------------------------- | :----------------------------- | :---------------------- | | Total revenue | $15,503,409 | $19,261,237 | -19.5% | | Product sales | 95.8% of revenue | 95.7% of revenue | -19.4% | | Contract R&D | 4.2% of revenue | 4.3% of revenue | -21.0% | | Gross profit | 81.6% of revenue | 80.8% of revenue | -18.7% | | Total expenses | 22.1% of revenue | 19.2% of revenue | -7.4% | | Income from operations | 59.5% of revenue | 61.6% of revenue | -22.2% | | Interest income | 7.5% of revenue | 7.0% of revenue | -14.2% | | Net income | 55.2% of revenue | 57.9% of revenue | -23.3% | - The decrease in total revenue was due to a 19% decrease in product sales (decreased purchase volumes by existing customers) and a 21% decrease in contract R&D revenue (completion of certain contracts)[66][67] - Total expenses decreased by 7% primarily due to a 10% decrease in R&D expense, also attributed to the completion of certain product development activities[68] - Interest income decreased by 14% due to lower marketable securities and money market funds balances, and decreased average interest rates[69] The Impact of the COVID-19 Pandemic Assesses the COVID-19 pandemic's impact on NVE Corporation's revenue, net income, and market conditions - The COVID-19 pandemic significantly impacted total revenue and net income for the nine months ended December 31, 2020, particularly affecting market conditions in industries like medical devices[70] - However, the effects on the business are believed to have subsided in the quarter ended December 31, 2020[70] Liquidity and Capital Resources Discusses NVE Corporation's cash position, working capital, and ability to meet future financial obligations - Cash and cash equivalents increased by $5,922,714 to $13,988,308 as of December 31, 2020, from $8,065,594 as of March 31, 2020[71] - This increase was driven by operating and investing activities, partially offset by financing activities[71] - Management believes current working capital and cash from operations will be adequate for needs for at least the next 12 months[74] Investing Activities Details NVE Corporation's cash flows from investing activities, primarily marketable securities and fixed assets - Cash provided by investing activities for the nine months ended December 31, 2020, was $11,986,373, primarily from $12,000,000 in marketable security maturities, partially offset by $13,627 in fixed asset purchases[72] Financing Activities Outlines NVE Corporation's cash flows from financing activities, including dividends and stock repurchases - Cash used in financing activities for the first nine months of fiscal 2021 totaled $14,594,727, including $14,503,308 in cash dividends and $91,419 for common stock repurchases[73] - A quarterly cash dividend of $1.00 per share was declared on January 20, 2021, to be paid on February 26, 2021[73] - Future dividends are subject to Board approval and various financial and operational factors[73] Off-Balance-Sheet Arrangements Describes NVE Corporation's off-balance-sheet arrangements, such as purchase commitments - Off-balance-sheet arrangements consist of purchase commitments, which are not expected to have a material current or anticipated future effect on profitability, cash flows, or financial position[75] Item 4. Controls and Procedures Management's evaluation of NVE Corporation's disclosure controls and internal control over financial reporting Disclosure Controls and Procedures Reports on the effectiveness of NVE Corporation's disclosure controls and procedures as of December 31, 2020 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of December 31, 2020[77] Changes in Internal Controls Confirms no material changes in NVE Corporation's internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended December 31, 2020[78] PART II. OTHER INFORMATION Presents additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Confirms NVE Corporation is not involved in any material legal proceedings or governmental actions - NVE is not aware of any material pending or threatened legal proceedings or governmental actions expected to have a material adverse impact on future results of operations and financial condition[80] Item 1A. Risk Factors Updates NVE Corporation's risk factors, particularly regarding COVID-19's impact on supply chain and operations - No material changes to risk factors from the Annual Report on Form 10-K, except for updates regarding the effects of the COVID-19 pandemic[81] - Risks include reliance on packaging vendors, potential supply interruptions due to unique product requirements, vendor business decisions, acts of God (including pandemics), increased lead times, and raw material shortages during COVID-19[81] - Public health crises, such as COVID-19, could adversely affect operations and financial results, leading to delayed or canceled customer orders, potential curtailment of operations due to employee infections, or disruptions from customers/suppliers[82] Item 4. Mine Safety Disclosures This item is not applicable - This item is not applicable[83] Item 6. Exhibits Lists exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL documents - Exhibits include Amendment No. 6 to Supplier Partnering Agreement with Abbott, Certifications by Daniel A. Baker and Curt A. Reynders (Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and various XBRL Taxonomy Extension Documents[84][86] SIGNATURES Contains official signatures of NVE Corporation's authorized officers, certifying the quarterly report filing - The report was signed on January 20, 2021, by Daniel A. Baker, President and Chief Executive Officer, and Curt A. Reynders, Chief Financial Officer[89]