# NVE Corp: Form 10-Q for the period ended Jun 30, 2012

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2012-07-18
- Accepted by EDGAR: Jul 18, 2012, 16:24 ET
- Period: 2012-06-30
- Accession: 0000724910-12-000026
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491012000026/NVE_Q1_FY2013_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491012000026/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-04-01 to 2012-06-30 | $7.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2012-04-01 to 2012-06-30 | $1.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2012-04-01 to 2012-06-30 | $5.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2012-04-01 to 2012-06-30 | $688.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2012-04-01 to 2012-06-30 | $536.1k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-04-01 to 2012-06-30 | $4.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2012-04-01 to 2012-06-30 | $1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-04-01 to 2012-06-30 | $3.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-04-01 to 2012-06-30 | $0.69 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-04-01 to 2012-06-30 | $0.70 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-04-01 to 2012-06-30 | 4,886,873 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2012-04-01 to 2012-06-30 | $4.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2012-04-01 to 2012-06-30 | $445.2k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2012-06-30 | $1.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-06-30 | $28.1m | us-gaap:AssetsCurrent |
| Total assets | at 2012-06-30 | $87.6m | us-gaap:Assets |
| Current liabilities | at 2012-06-30 | $2.8m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2012-06-30 | $84.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 7,420 characters.

### Forward-looking statements

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 the 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 associated with competition, progress in research and development activities by us and others, variations in costs that are beyond our control, decreased sales, failure of suppliers to meet our requirements, loss of supply from any of our packaging vendors, failure to obtain new customers, inability to meet customer technical requirements, ineligibility for SBIR awards, 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 are contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2012, as updated in Part II, Item 1A of this Quarterly Report on Form 10-Q.

### 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. We have also licensed our spintronic magnetoresistive random access memory technology, commonly known as MRAM.

### Critical accounting 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, 2012. At June 30, 2012 our critical accounting policies and estimates continued to include research and development contract percentage of completion estimation, inventory valuation, allowance for doubtful accounts estimation, and deferred tax assets estimation.

### Quarter ended June 30, 2012 compared to quarter ended June 30, 2011

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

*Revenue*

| 2012 | Percentage of Revenue Quarter Ended June 30 | 2011 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 94.2% | 85.5% | 0.1% |
| Contract research and development | 5.8% | 14.5% | (63.7)% |
| Total revenue | 100.0% | 100.0% | (9.1)% |
| Cost of sales | 24.2% | 31.6% | (30.6)% |
| Gross profit | 75.8% | 68.4% | 0.8% |
| Expenses |  |  |  |
| Selling, general, and administrative | 7.2% | 7.5% | (12.9)% |
| Research and development | 9.2% | 6.0% | 39.0% |
| Total expenses | 16.4% | 13.5% | 10.2% |
| Income from operations | 59.4% | 54.9% | (1.6)% |
| Interest and other income | 7.5% | 6.9% | (0.5)% |
| Income before taxes | 66.9% | 61.8% | (1.5)% |
| Provision for income taxes | 21.7% | 19.9% | (0.8)% |
| Net income | 45.2% | 41.9% | (1.8)% |

Total revenue for the quarter ended ended June 30, 2012 (the first quarter of fiscal 2013) decreased 9% to $7,462,905 compared to $8,213,762 for the quarter ended ended June 30, 2011 (the first quarter of fiscal 2012). The decrease was due to a 64% decrease in contract research and development revenue.

The decrease in research and development revenue was due to the completion of certain contracts and contract activities. Contract research and development activities can fluctuate for a number of reasons, some of which are beyond our control, and there can be no assurance of additional or follow-on contracts for expired or completed contracts.

Gross profit margin increased to 76% of revenue for the first quarter of fiscal 2013 compared to 68% for the first quarter of fiscal 2012, due to a more favorable revenue mix, a more favorable product sales mix, and more efficient product manufacturing.

Total expenses increased 10% for the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012 due to a 39% increase in research and development expense, partially offset by a 13% decrease in selling, general, and administrative expense. The increase in research and development expense was due to increased product development activities, and a decrease in contract research and development activities, which caused resources to be reallocated to expensed research and development activities. Research and development expense can fluctuate significantly depending on staffing, project requirements, and contract research and development activities. The decrease in selling, general, and administrative expense was primarily due to a decrease in legal expenses. The decrease in selling, general, and administrative expense may not be representative of future trends. Selling, general, and administrative expense can fluctuate significantly depending on a number of factors including revenue, profitability, and legal expenses.

The provision for income taxes was $1,621,376 for the first quarter of fiscal 2013 compared to $1,633,765 for the first quarter of fiscal 2012. The effective tax rate was 32% of income before taxes for the first quarters of fiscal 2013 and 2012.

The 2% decrease in net income in the first quarter of fiscal 2013 compared to the prior-year quarter was primarily due to decreased contract research and development revenue and increased research and development expense, partially offset by increased gross margin and decreased selling, general, and administrative expense.

### Liquidity and capital resources

At June 30, 2012 we had $77,061,787 in cash plus short-term and long-term marketable securities compared to $73,541,463 at March 31, 2012. Our entire portfolio of short-term and long-term marketable securities is classified as available for sale. The increase in cash plus marketable securities in the first quarter of fiscal 2013 was primarily due to $4,099,997 in net cash provided by operating activities, offset by purchases of fixed assets of $445,186, primarily for production equipment.

Income taxes payable increased $1,397,138 because we had no estimated income tax payments due in the quarter ended June 30, 2012.

We currently believe our working capital and cash generated from operations will be adequate for our needs at least for the next 12 months.

## Market risk

As filed, 1,028 characters.

The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in a variety of securities including government agency obligations, municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of estimated tax. Marketable securities as of June 30, 2012 had remaining maturities between one day and 245 weeks. Our short-term and long-term marketable securities had a fair market value of $75,568,269 at June 30, 2012, representing approximately 86% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,280 characters.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (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 Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

During the quarter ended June 30, 2012, 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.

## Risk factors

As filed, 1,589 characters.

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, 2012, except the risk factor titled “We could incur losses on our marketable securities” is replaced in its entirety by the following:

### We could incur losses on our marketable securities.

At June 30, 2012, we held $75,568,269 in short-term and long-term marketable securities, representing approximately 86% of our total assets. During the past two fiscal years a number of the securities we hold were downgraded by Moody’s or Standard and Poor’s, indicating a possible increase in default risk. Additionally, in the quarter ended June 30, 2012, Moody’s downgraded the credit ratings of bonds backed by many firms with global capital markets operations, affecting a number of the securities we hold. Criteria cited for those downgrades included exposure to the volatility and risk of outsized losses inherent to capital markets activities. Conditions and circumstances beyond our control or ability to anticipate can cause downgrades and increases in default risk. Downgrades of any of our marketable securities are possible at any time for reasons beyond our control. Additionally, the assignment of a high credit rating does not preclude the risk of default on any marketable security. We could incur losses on our marketable securities, which could have a material adverse impact on our financial condition, income, or cash flows.

This risk factor is being updated because in the past quarter a number of the securities we hold were downgraded.

Filed Jul 18, 2012.
Source: SEC EDGAR, the filing index for accession 0000724910-12-000026. Last ingested by Listed: Nov 5, 2026, 19:10 ET. No prices; not investment advice.