# NVE Corp: Form 10-Q for the period ended Sep 30, 2013

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2013-10-23
- Accepted by EDGAR: Oct 23, 2013, 20:18 ET
- Period: 2013-09-30
- Accession: 0000724910-13-000036
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491013000036/NVE_Q2_FY2014_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491013000036/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2013-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2013-07-01 to 2013-09-30 | $7.3m | us-gaap:Revenues |
| Revenue | 6 months, 2013-04-01 to 2013-09-30 | $13.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2013-07-01 to 2013-09-30 | $1.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2013-04-01 to 2013-09-30 | $2.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2013-07-01 to 2013-09-30 | $5.8m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2013-04-01 to 2013-09-30 | $10.6m | us-gaap:GrossProfit |
| Research and development | 3 months, 2013-07-01 to 2013-09-30 | $876.5k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2013-04-01 to 2013-09-30 | $1.8m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2013-07-01 to 2013-09-30 | $660.1k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2013-04-01 to 2013-09-30 | $1.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2013-07-01 to 2013-09-30 | $4.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2013-04-01 to 2013-09-30 | $7.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2013-07-01 to 2013-09-30 | $1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2013-04-01 to 2013-09-30 | $2.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2013-07-01 to 2013-09-30 | $3.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2013-04-01 to 2013-09-30 | $5.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2013-07-01 to 2013-09-30 | $0.66 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2013-04-01 to 2013-09-30 | $1.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2013-07-01 to 2013-09-30 | $0.67 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2013-04-01 to 2013-09-30 | $1.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2013-07-01 to 2013-09-30 | 4,873,106 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2013-04-01 to 2013-09-30 | 4,878,599 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2013-04-01 to 2013-09-30 | $6.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2013-04-01 to 2013-09-30 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2013-04-01 to 2013-09-30 | $1.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2013-09-30 | $1.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2013-09-30 | $17.2m | us-gaap:AssetsCurrent |
| Total assets | at 2013-09-30 | $99.6m | us-gaap:Assets |
| Current liabilities | at 2013-09-30 | $1.3m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2013-09-30 | $98.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,869 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 uncertainties related to the economic environments in the industries we serve, uncertainties related to direct and indirect U.S. Government funding, uncertainties relating to future revenue and growth, risks related to developing marketable products, uncertainties relating to the revenue potential of new products, risks in the enforcement of our patents, litigation risks, 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, 2013.

### 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, 2013. At September 30, 2013 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred taxes estimation.

### Quarter ended September 30, 2013 compared to quarter ended September 30, 2012

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

*Revenue*

| 2013 | Percentage of Revenue Quarter Ended Sept. 30 | 2012 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 99.0% | 89.8% | 38.2% |
| Contract research and development | 1.0% | 10.2% | (88.2)% |
| Total revenue | 100.0% | 100.0% | 25.4% |
| Cost of sales | 20.6% | 27.6% | (6.4)% |
| Gross profit | 79.4% | 72.4% | 37.5% |
| Expenses |  |  |  |
| Selling, general, and administrative | 9.0% | 10.4% | 8.6% |
| Research and development | 12.0% | 10.5% | 43.2% |
| Total expenses | 21.0% | 20.9% | 26.0% |
| Income from operations | 58.4% | 51.5% | 42.2% |
| Interest income | 7.1% | 10.7% | (16.3)% |
| Income before taxes | 65.5% | 62.2% | 32.2% |
| Provision for income taxes | 21.3% | 20.2% | 32.1% |
| Net income | 44.2% | 42.0% | 32.2% |

Total revenue for the quarter ended September 30, 2013 (the second quarter of fiscal 2014) increased 25% compared to the quarter ended September 30, 2012 (the second quarter of fiscal 2013). The increase was due to a 38% increase in product sales, partially offset by an 88% decrease in contract research and development revenue.

The increase in product sales from the prior-year quarter was due to increased purchase volume by existing customers. The decrease in research and development revenue was due to completion of the majority of activities on a large contract and a challenging environment for new U.S. Government contract funding. In addition to direct Government funding, certain of our non-Government customers and prospective customers depend on Government support to fund their contracts with us. 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 79% of revenue for the second quarter of fiscal 2014 compared to 72% for the second quarter of fiscal 2013, due to a more favorable revenue mix and a more favorable product sales mix.

Total expenses increased 26% for the second quarter of fiscal 2014 compared to the second quarter of fiscal 2013, primarily due to a 43% increase in research and development 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. Selling, general, and administrative expense can also fluctuate significantly depending on a number of factors including legal expenses.

Interest income for the second quarter of fiscal 2014 decreased 16% due to lower interest rates on our marketable securities.

The 32% increase in net income in the second quarter of fiscal 2014 compared to the prior-year quarter was primarily due to increased product sales and increased gross profit margin as a percentage of revenue, partially offset by decreased contract research and development revenue, increased expenses, and decreased interest income.

### Six months ended September 30, 2013 compared to six months ended September 30, 2012

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

*Revenue*

| 2013 | Percentage of Revenue Six Months Ended Sept. 30 | 2012 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 98.0% | 92.3% | 7.7% |
| Contract research and development | 2.0% | 7.7% | (73.4)% |
| Total revenue | 100.0% | 100.0% | 1.4% |
| Cost of sales | 21.4% | 25.7% | (15.5)% |
| Gross profit | 78.6% | 74.3% | 7.3% |
| Expenses |  |  |  |
| Selling, general, and administrative | 9.0% | 8.6% | 6.0% |
| Research and development | 13.6% | 9.8% | 41.5% |
| Total expenses | 22.6% | 18.4% | 24.9% |
| Income from operations | 56.0% | 55.9% | 1.5% |
| Interest income | 7.7% | 8.9% | (11.6)% |
| Income before taxes | 63.7% | 64.8% | (0.3)% |
| Provision for income taxes | 20.7% | 21.0% | 0.1% |
| Net income | 43.0% | 43.8% | (0.4)% |

Total revenue for the six months ended September 30, 2013 increased 1% compared to the six months ended September 30, 2012. The increase was due to an 8% increase in product sales, partially offset by a 73% decrease in contract research and development revenue.

The increase in product sales from the prior-year period was due to increased purchase volume by existing customers. The decrease in research and development revenue was due to completion of the majority of activities on a large contract and a challenging environment for new U.S. Government contract funding. In addition to direct Government funding, certain of our non-Government customers and prospective customers depend on Government support to fund their contracts with us. 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 79% of revenue for the first six months of fiscal 2014 compared to 74% for the first six months of fiscal 2013, due to a more favorable revenue mix, a more favorable product sales mix, and more efficient product manufacturing.

Total expenses increased 25% for the first six months of fiscal 2014 compared to the first six months of fiscal 2013, primarily due to a 41% increase in research and development 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.

Interest income for the first six months of fiscal 2014 decreased 12% due to lower interest rates on our marketable securities.

Net income was approximately the same in the first six months of fiscal 2014 compared to the prior-year period as increased product sales and increased gross profit margin as a percentage of revenue were offset by decreased contract research and development revenue, increased expenses, and decreased interest income.

### Liquidity and capital resources

At September 30, 2013 we had $89,032,516 in cash plus short-term and long-term marketable securities compared to $85,260,969 at March 31, 2013. 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 six months of fiscal 2014 was due to $5,994,031 in net cash provided by operating activities less $1,263,405 for repurchases of our Common Stock and a $959,079 unrealized loss from marketable securities.

We had no purchases of fixed assets in the first six months of fiscal 2014 because an expansion of production space and infrastructure upgrades were completed in the previous fiscal year. Our capital expenditures can vary significantly depending on our needs, equipment purchasing opportunities, and production expansion activities.

We repurchased $1,263,405 of our Common Stock in the first six months of fiscal 2014. The repurchases were under a program announced January 21, 2009 authorizing the repurchase of up to $2,500,000 of our Common Stock, $1,236,595 of which remained available as of September 30, 2013. The repurchase program may be modified or discontinued at any time without notice.

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, 969 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 securities including 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 or loss, net of estimated tax. Our marketable securities as of September 30, 2013 had remaining maturities between five and 258 weeks. Marketable securities had a market value of $87,470,945 at September 30, 2013, representing approximately 88% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,285 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 September 30, 2013, 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, 143 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, 2013.

Filed Oct 23, 2013.
Source: SEC EDGAR, the filing index for accession 0000724910-13-000036. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.