Amended Quarterly Report (10-q/a)
15 Ottobre 2018 - 9:15PM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended
September 30, 2018
or
[ ] 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 or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|
11409
Valley View Road, Eden Prairie, Minnesota
|
|
55344
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
(952)
829-9217
|
(Registrants
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.
[X] Yes [ ] No
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post
such files).
[X] 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 filer [ ]
|
Accelerated filer [X]
|
Non-accelerated filer [ ]
|
Smaller reporting company [X]
|
Emerging 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 [X] No
Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value 4,844,010
shares outstanding as of October 12, 2018
NVE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance
Sheets
Statements
of Income for the Quarters Ended September 30, 2018 and 2017
Statements
of Comprehensive Income for the Quarters Ended September 30, 2018 and 2017
Statements
of Income for the Six Months Ended September 30, 2018 and 2017
Statements
of Comprehensive Income for the Six Months Ended September 30, 2018 and 2017
Statements
of Cash Flows
Notes
to Financial Statements
Item 2. Managements Discussion
and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Mine Safety Disclosures
Item 6. Exhibits
SIGNATURES
2
Table
of Contents
EXPLANATORY NOTE
This Amendment No. 1 to our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2018 amends an incomplete Form 10-Q
that was filed due to an administrative error. The Original Filing was missing
Item 2 of Part I (Managements Discussion and Analysis of Financial Condition
and Results of Operations), Item 4 of Part I (Controls and Procedures), Part II
(Other Information), Exhibits 31.1, 31.2, and 32 (certifications by Danial A.
Baker and Curt A. Reynders), and Signatures. No other changes have been made to
the Original Filing or its exhibits.
PART IFINANCIAL INFORMATION
Item 1. Financial Statements.
NVE CORPORATION
BALANCE SHEETS
|
(Unaudited)
Sept. 30, 2018
|
|
March
31, 2018*
|
ASSETS
|
Current assets
|
Cash and cash equivalents
|
$
|
6,047,918
|
|
|
$
|
4,755,082
|
|
Marketable securities, short-term
|
|
23,941,749
|
|
|
|
20,765,809
|
|
Accounts receivable, net of allowance for uncollectible
accounts of $15,000
|
|
3,045,230
|
|
|
|
2,888,779
|
|
Inventories
|
|
3,575,963
|
|
|
|
3,650,439
|
|
Prepaid expenses and other assets
|
650,748
|
|
|
635,160
|
|
Total current assets
|
|
37,261,608
|
|
|
|
32,695,269
|
|
Fixed assets
|
Machinery and equipment
|
|
9,395,987
|
|
|
|
9,395,987
|
|
Leasehold improvements
|
1,787,269
|
|
|
1,749,284
|
|
|
|
11,183,256
|
|
|
|
11,145,271
|
|
Less accumulated depreciation and amortization
|
10,066,677
|
|
|
9,819,888
|
|
Net fixed assets
|
|
1,116,579
|
|
|
|
1,325,383
|
|
Deferred tax assets
|
625,024
|
|
|
572,655
|
|
Marketable securities, long-term
|
46,860,152
|
|
|
52,838,158
|
|
Total assets
|
$
|
85,863,363
|
|
|
$
|
87,431,465
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities
|
Accounts payable
|
$
|
253,702
|
|
|
$
|
414,970
|
|
Accrued payroll and other
|
462,262
|
|
|
574,755
|
|
Total current liabilities
|
|
715,964
|
|
|
|
989,725
|
|
|
Shareholders equity
|
Common stock, $0.01 par value,
6,000,000 shares authorized;
4,844,010 issued and outstanding as of Sept. 30, 2018 and 4,842,010 as of
March 31, 2018
|
|
48,440
|
|
|
|
48,420
|
|
Additional paid-in capital
|
|
19,817,088
|
|
|
|
19,599,298
|
|
Accumulated other comprehensive loss
|
|
(1,031,790
|
)
|
|
|
(915,635
|
)
|
Retained earnings
|
66,313,661
|
|
|
67,709,657
|
|
Total shareholders equity
|
85,147,399
|
|
|
86,441,740
|
|
Total liabilities and shareholders equity
|
$
|
85,863,363
|
|
|
$
|
87,431,465
|
|
*The March 31, 2018 Balance Sheet is derived from the audited financial statements
contained in our Annual Report on
Form 10-K
for the fiscal year ended March 31, 2018.
See accompanying notes.
3
Table of Contents
NVE CORPORATION
STATEMENTS OF INCOME
(Unaudited
)
|
Quarter Ended Sept. 30
|
2018
|
|
2017
|
Revenue
|
Product sales
|
$
|
7,054,977
|
|
|
$
|
6,387,080
|
|
Contract research and development
|
451,098
|
|
|
609,154
|
|
Total revenue
|
|
7,506,075
|
|
|
|
6,996,234
|
|
Cost of sales
|
1,352,845
|
|
|
1,353,169
|
|
Gross profit
|
|
6,153,230
|
|
|
|
5,643,065
|
|
Expenses
|
Research and development
|
|
971,963
|
|
|
|
1,030,504
|
|
Selling, general, and administrative
|
377,448
|
|
|
348,363
|
|
Total expenses
|
1,349,411
|
|
|
1,378,867
|
|
Income from operations
|
|
4,803,819
|
|
|
|
4,264,198
|
|
Interest income
|
443,325
|
|
|
387,860
|
|
Income before taxes
|
|
5,247,144
|
|
|
|
4,652,058
|
|
Provision for income taxes
|
964,534
|
|
|
1,491,023
|
|
Net income
|
$
|
4,282,610
|
|
|
$
|
3,161,035
|
|
Net income per share basic
|
$
|
0.88
|
|
|
$
|
0.65
|
|
Net income per share diluted
|
$
|
0.88
|
|
|
$
|
0.65
|
|
Cash dividends declared per common share
|
$
|
1.00
|
|
|
$
|
1.00
|
|
Weighted average shares outstanding
|
Basic
|
|
4,843,032
|
|
|
|
4,841,010
|
|
Diluted
|
|
4,852,644
|
|
|
|
4,845,632
|
|
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Quarter Ended Sept. 30
|
2018
|
|
2017
|
Net income
|
$
|
4,282,610
|
|
|
$
|
3,161,035
|
|
Unrealized gain from marketable securities, net of tax
|
51,237
|
|
|
12,738
|
|
Comprehensive income
|
$
|
4,333,847
|
|
|
$
|
3,173,773
|
|
See accompanying notes.
4
Table
of Contents
NVE CORPORATION
STATEMENTS OF INCOME
(Unaudited)
|
Six Months Ended Sept. 30
|
2018
|
|
2017
|
Revenue
|
Product sales
|
$
|
13,925,623
|
|
|
$
|
13,269,753
|
|
Contract research and development
|
688,358
|
|
|
1,334,147
|
|
Total revenue
|
|
14,613,981
|
|
|
|
14,603,900
|
|
Cost of sales
|
2,748,850
|
|
|
3,151,535
|
|
Gross profit
|
|
11,865,131
|
|
|
|
11,452,365
|
|
Expenses
|
Research and development
|
|
1,960,989
|
|
|
|
1,936,229
|
|
Selling, general, and administrative
|
706,209
|
|
|
747,724
|
|
Total expenses
|
2,667,198
|
|
|
2,683,953
|
|
Income from operations
|
|
9,197,933
|
|
|
|
8,768,412
|
|
Interest income
|
868,095
|
|
|
749,638
|
|
Income before taxes
|
|
10,066,028
|
|
|
|
9,518,050
|
|
Provision for income taxes
|
1,838,369
|
|
|
3,059,400
|
|
Net income
|
$
|
8,227,659
|
|
|
$
|
6,458,650
|
|
Net income per share basic
|
$
|
1.70
|
|
|
$
|
1.33
|
|
Net income per share diluted
|
$
|
1.70
|
|
|
$
|
1.33
|
|
Cash dividends declared per common share
|
$
|
2.00
|
|
|
$
|
2.00
|
|
Weighted average shares outstanding
|
Basic
|
|
4,842,524
|
|
|
|
4,841,010
|
|
Diluted
|
|
4,851,072
|
|
|
|
4,845,907
|
|
STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
Six Months Ended Sept. 30
|
2018
|
|
2017
|
Net income
|
$
|
8,227,659
|
|
|
$
|
6,458,650
|
|
Unrealized (loss) gain from marketable securities, net of tax
|
(55,790
|
)
|
|
67,765
|
|
Comprehensive income
|
$
|
8,171,869
|
|
|
$
|
6,526,415
|
|
See accompanying notes.
5
Table
of Contents
NVE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
|
Six Months Ended Sept. 30
|
2018
|
|
2017
|
OPERATING ACTIVITIES
|
Net income
|
$
|
8,227,659
|
|
|
$
|
6,458,650
|
|
Adjustments to reconcile net income to net cash
provided by operating activities:
|
Depreciation and amortization
|
|
357,166
|
|
|
|
480,143
|
|
Stock-based compensation
|
|
93,360
|
|
|
|
40,920
|
|
Deferred income taxes
|
|
(36,743
|
)
|
|
|
(113,718
|
)
|
Changes in operating assets and liabilities:
|
Accounts receivable
|
|
(156,451
|
)
|
|
|
777,184
|
|
Inventories
|
|
74,476
|
|
|
|
(146,180
|
)
|
Prepaid expenses and other assets
|
|
(15,588
|
)
|
|
|
84,093
|
|
Accounts payable and accrued expenses
|
|
(273,761
|
)
|
|
|
(122,053
|
)
|
Deferred revenue
|
|
-
|
|
|
|
(142,733
|
)
|
Net cash provided by operating activities
|
|
8,270,118
|
|
|
|
7,316,306
|
|
|
INVESTING ACTIVITIES
|
Purchases of fixed assets
|
(37,985
|
)
|
|
|
(526,377
|
)
|
Purchases of marketable securities
|
|
(6,679,727
|
)
|
|
|
(12,138,960
|
)
|
Proceeds from maturities and sales of marketable securities
|
|
9,300,000
|
|
|
|
11,940,000
|
|
Net cash provided by (used in) investing activities
|
|
2,582,288
|
|
|
|
(725,337
|
)
|
|
FINANCING ACTIVITIES
|
Proceeds from sale of common stock
|
|
124,450
|
|
|
|
-
|
|
Payment of dividends to shareholders
|
|
(9,684,020
|
)
|
|
|
(9,682,020
|
)
|
Net cash used in financing activities
|
|
(9,559,570
|
)
|
|
|
(9,682,020
|
)
|
|
Increase (decrease) in cash and cash equivalents
|
|
1,292,836
|
|
|
|
(3,091,051
|
)
|
Cash and cash equivalents at beginning of period
|
4,755,082
|
|
|
8,199,364
|
|
|
Cash and cash equivalents at end of period
|
$
|
6,047,918
|
|
|
$
|
5,108,313
|
|
|
Supplemental disclosures of cash flow information:
|
Cash paid during the period for income taxes
|
$
|
1,866,045
|
|
|
$
|
2,975,019
|
|
See accompanying notes.
6
Table of Contents
NVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE
1. 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 2.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of 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,
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
financial statements included in our Annual Report on
Form
10-K
for the fiscal year ended March 31, 2018. The results of operations
for the quarter or six months ended September 30, 2018 are not necessarily
indicative of the results that may be expected for the full fiscal year ending
March 31, 2019.
Significant Accounting Policies
Revenue Recognition
We recognize revenue when we satisfy performance obligations
by the transfer of control of products or services to our customers, in an amount
that reflects the consideration we expect to be entitled to in exchange for those
products or services. Revenue is disaggregated into product sales and contract
research and development to depict the nature, amount, timing of revenue recognition
and economic characteristics of our business, and is represented within the financial
statements.
We recognize revenue from product sales to customers
and distributors when we satisfy our performance obligation, at a point in time,
upon product shipment or delivery to our customer or distributor as determined
by agreed upon shipping terms. Shipping charges billed to customers are included
in product sales and the related shipping costs are included in selling, general,
and administrative expenses. Under certain limited circumstances, our distributors
may earn commissions for activities unrelated to their purchases of our products,
such as for facilitating the sale of custom products or research and development
contracts with third parties. We recognize any such commissions as selling, general,
and administrative expenses. We recognize discounts provided to our distributors
as reductions in revenue.
We recognize contract research and development revenue
over a period of time as the performance obligation is satisfied over a period
of time rather than a point in time. Contracts have specifications unique to each
customer and do not create an asset with an alternate use, and we have an enforceable
right to payment for performance completed to date. We recognize revenue over
a period of time using costs incurred as the measurement of progress towards completion.
Accounts receivable is recognized when we have transferred
a good or service to a customer and our right to receive consideration is unconditional
through the completion of our performance obligation. A contract asset is recognized
when we have a right to consideration from the transfer of goods or services to
a customer but have not completed our performance obligation. A contract liability
is recognized when we have been paid by a customer but have not yet satisfied
the performance obligation by transferring goods or services. We had no material
contract assets or contract liabilities as of September 30, 2018 or March 31,
2018.
Our performance obligations related to product sales
and contract research and development contracts are satisfied in one year or less.
Unsatisfied performance obligations represent contracts with an original expected
duration of one year or less. As permitted under Accounting Standards Codification
(ASC) Topic 606,
Revenue from Contracts with Customers
, we
are using the practical expedient not to disclose the value of these unsatisfied
performance obligations. We also use the practical expedient in which we do not
assess whether a contract has a significant financing component if the expectation
at contract inception is such that the period between payment by the customer
and the transfer of the promised goods or services to the customer will be one
year or less.
7
Table
of Contents
NOTE 3.
RECENTLY ISSUED ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
In August 2018, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU)
No. 2018-13,
Fair Value Measurement
. ASU 2018-13 modifies the disclosure
requirements for fair value measurements by removing, modifying, or adding certain
disclosures. The amendments in ASU 2018-13 will be effective for fiscal years
beginning after December 15, 2019, and interim periods within those fiscal
years, which will be fiscal 2021 for us. Early adoption is permitted for the removed
disclosures and delayed adoption is permitted until fiscal 2021 for the new disclosures.
We adopted ASU 2018-13 early, effective the quarter ended September 30, 2018.
The removed and modified disclosures were adopted on a retrospective basis and
the new disclosures on a prospective basis. The adoption did not have a significant
effect on our financial statements.
In February 2018, the FASB issued ASU No. 2018-02,
Income StatementReporting Comprehensive Income (Topic 220)
. ASU 2018-02
addresses the effect of the change in the U.S. federal corporate tax rate on items
within accumulated other comprehensive income or loss due to the enactment of
the Act To provide for reconciliation pursuant to titles II and V of
the concurrent resolution on the budget for fiscal year 2018 (the Tax
Reform Act) on December 22, 2017. The guidance will be effective for
fiscal years beginning after December 15, 2018, and interim periods within
those fiscal years, which will be fiscal 2020 for us. Early adoption is permitted,
and we adopted ASU 2018-02 in the quarter ended June 30, 2018. The adoption
resulted in a $60,365 reclassification from accumulated other comprehensive loss
to retained earnings due to the change in the federal corporate tax rate.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts
and Cash Payments
, which made eight targeted changes to how cash receipts
and cash payments are presented and classified in the statement of cash flows.
We adopted ASU 2016-15 retrospectively in the quarter ended June 30,
2018. The adoption did not have a significant impact on our financial statements.
In January 2016, the FASB issued ASU No. 2016-01,
Financial InstrumentsOverall: Recognition and Measurement of Financial
Assets and Financial Liabilities
. The amendment changed the accounting for
and financial statement presentation of equity investments, other than those accounted
for under the equity method of accounting or those that result in consolidation
of the investee. The amendment provides clarity on the measurement methodology
to be used for the required disclosure of fair value of financial instruments
measured at amortized cost on the balance sheet and clarifies that an entity should
evaluate the need for a valuation allowance on deferred tax assets related to
available-for-sale securities in combination with the entitys other deferred
tax assets, among other changes. We adopted ASU 2016-01 retrospectively in
the quarter ended June 30, 2018. The adoption did not have a significant
impact on our financial statements.
In May 2014, the FASB issued ASU No. 2014-09,
which superseded the revenue recognition requirements in Accounting Standards
Codification 605,
Revenue Recognition
. ASU 2014-09 is based on the
principle that revenue is recognized to depict the transfer of goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. It also requires
additional disclosure about the nature, amount, timing and uncertainty of revenue
and cash flows arising from customer contracts, including significant judgments
and changes in judgments and assets recognized from costs incurred to obtain or
fulfill a contract. We adopted the guidance using the modified retrospective method
to contracts that were not complete as of April 1, 2018. The adoption did
not have significant impact on our financial statements.
Information regarding all other applicable recently
issued accounting standards, on which our position have not changed since our
latest annual financial statements, are contained in the financial statements
included in our Annual Report on
Form 10-K
for the year ended March 31, 2018.
New Accounting Standard Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02,
Lease Accounting
. ASU 2016-02 requires recognition of lease assets and
lease liabilities on the balance sheet of lessees. In July 2018, the FASB issued
ASU 2018-10,
Codification Improvements to Topic 842 (Leases)
, which provides
narrow amendments to clarify how to apply certain aspects of the new lease standard.
The guidance will be effective for fiscal years beginning after December 15,
2018, and interim periods within those fiscal years, which will be fiscal 2020
for us. In July 2018, the FASB issued ASU No. 2018-11,
Leases Topic (842):
Targeted Improvements.
This ASU provides companies an option to apply the
transition provisions of the new lease standard at its adoption date instead of
at the earliest comparative period presented in its financial statements. We expect
to adopt the new lease guidance using the newly-approved transition method. We
expect to recognize a liability and corresponding asset associated with in-scope
operating and finance leases but are still in the process of determining those
amounts and the processes required to account for leasing activity on an ongoing
basis.
8
Table
of Contents
NOTE 4. 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:
|
Quarter Ended Sept. 30
|
2018
|
|
2017
|
Weighted average common shares outstanding basic
|
4,843,032
|
|
4,841,010
|
Dilutive effect of stock options
|
9,612
|
|
4,622
|
Shares used in computing net income per share
diluted
|
4,852,644
|
|
4,845,632
|
|
Six Months Ended Sept. 30
|
2018
|
|
2017
|
Weighted average common shares outstanding basic
|
4,842,524
|
|
4,841,010
|
Dilutive effect of stock options
|
8,548
|
|
4,897
|
Shares used in computing net income per share
diluted
|
4,851,072
|
|
4,845,907
|
NOTE 5.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Our corporate bonds and money market funds are classified
as available-for-sale securities and carried at estimated fair value. Unrealized
holding gains and losses are included in accumulated other comprehensive income
(loss) in the statement of shareholders equity. Corporate bonds with remaining
maturities less than one year are classified as short-term, and those with remaining
maturities greater than one year 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. Gains and losses on marketable
security transactions are reported on the specific-identification method.
The fair value of our available-for-sale securities
as of September 30, 2018 by maturity were as follows:
Total
|
|
<1
Year
|
|
13
Years
|
|
35
Years
|
$
|
76,576,286
|
|
$
|
29,716,134
|
|
$
|
22,784,235
|
|
$
|
24,075,917
|
Total available-for-sale securities represented
approximately 89% of our total assets. Marketable securities as of September 30,
2018 had remaining maturities between one and 55 months.
Generally accepted accounting principles establish
a framework for measuring fair value, provide a definition of fair value, and
prescribe required disclosures about fair-value measurements. Generally accepted
accounting principles define fair value as the price that would be received to
sell an asset or paid to transfer a liability. Fair value is a market-based measurement
that should be determined using assumptions that market participants would use
in pricing an asset or liability. Generally accepted accounting principles utilize
a valuation hierarchy for disclosure of fair value measurements. The categorization
within the valuation hierarchy is based on the lowest level of input that is significant
to the fair value measurement. The categories within the valuation hierarchy are
described as follows:
Level 1 Financial instruments with quoted
prices in active markets for identical assets or liabilities.
Level 2 Financial instruments with quoted
prices in active markets for similar assets or liabilities. Level 2 fair
value measurements are determined using either prices for similar instruments
or inputs that are either directly or indirectly observable, such as interest
rates.
Level 3 Inputs to the fair value measurement
are unobservable inputs or valuation techniques.
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.
9
Table
of Contents
The following table shows the estimated fair value
of assets that were accounted for at fair value on a recurring basis:
|
As of
September 30, 2018
|
|
As of
March 31, 2018
|
Level
1
|
|
Level
2
|
|
Total
|
Level
1
|
|
Level
2
|
|
Total
|
Money market funds
|
$
|
5,774,385
|
|
$
|
-
|
|
$
|
5,774,385
|
|
$
|
3,951,032
|
|
$
|
-
|
|
$
|
3,951,032
|
Corporate bonds
|
|
-
|
|
|
70,801,901
|
|
|
70,801,901
|
|
|
54,517,969
|
|
|
19,085,998
|
|
|
73,603,967
|
Total
|
$
|
5,774,385
|
|
$
|
70,801,901
|
|
$
|
76,576,286
|
|
$
|
58,469,001
|
|
$
|
19,085,998
|
|
$
|
77,554,999
|
Our available-for-sale securities as of September 30
and March 31, 2018, aggregated into classes of securities, were as follows:
|
As
of September 30, 2018
|
|
As
of March 31, 2018
|
Amortized
Cost
|
|
Gross
Unrealized
Holding Gains
|
|
Gross
Unrealized
Holding Losses
|
|
Estimated
Fair
Value
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
Money market
funds
|
$
|
5,774,385
|
|
$
|
-
|
|
$
|
-
|
|
|
$
|
5,774,385
|
|
$
|
3,951,032
|
|
$
|
-
|
|
$
|
-
|
|
|
$
|
3,951,032
|
Corporate bonds
|
|
72,122,677
|
|
|
-
|
|
|
(1,320,776
|
)
|
|
|
70,801,901
|
|
|
74,853,327
|
|
|
-
|
|
|
(1,249,360
|
)
|
|
|
73,603,967
|
Total
|
$
|
77,897,062
|
|
$
|
-
|
|
$
|
(1,320,776
|
)
|
|
$
|
76,576,286
|
|
$
|
78,804,359
|
|
$
|
-
|
|
$
|
(1,249,360
|
)
|
|
$
|
77,554,999
|
The following table shows the gross unrealized holding
losses and fair value of our available-for-sale securities with unrealized holding
losses, aggregated by class of securities and length of time that individual securities
had been in a continuous unrealized loss position as of September 30 and
March 31, 2018.
|
Less
Than 12 Months
|
|
12 Months
or Greater
|
|
Total
|
Estimated
Fair
Value
|
|
Gross
Unrealized
Holding Losses
|
Estimated
Fair
Value
|
|
Gross
Unrealized
Holding Losses
|
Estimated
Fair
Value
|
|
Gross
Unrealized
Holding Losses
|
|
As of September 30, 2018
|
|
Corporate bonds
|
$
|
47,928,537
|
|
$
|
(580,584
|
)
|
|
$
|
22,873,364
|
|
$
|
(740,192
|
)
|
|
$
|
70,801,901
|
|
$
|
(1,320,776
|
)
|
|
Total
|
$
|
47,928,537
|
|
$
|
(580,584
|
)
|
|
$
|
22,873,364
|
|
$
|
(740,192
|
)
|
|
$
|
70,801,901
|
|
$
|
(1,320,776
|
)
|
|
As of March 31, 2018
|
|
Corporate bonds
|
$
|
61,731,248
|
|
$
|
(1,003,849
|
)
|
|
$
|
9,072,719
|
|
$
|
(245,511
|
)
|
|
$
|
70,803,967
|
|
$
|
(1,249,360
|
)
|
|
Total
|
$
|
61,731,248
|
|
$
|
(1,003,849
|
)
|
|
$
|
9,072,719
|
|
$
|
(245,511
|
)
|
|
$
|
70,803,967
|
|
$
|
(1,249,360
|
)
|
We did not consider any of our available-for-sale
securities to be impaired as of September 30, 2018. None of the securities
were impaired at acquisition, and subsequent declines in fair value are not attributed
to declines in credit quality. When evaluating for impairment we assess indicators
that include, but are not limited to, earnings performance, changes in underlying
credit ratings, market conditions, bona fide offers to purchase or sell, and ability
to hold until maturity. Because we believe it is more likely than not we will
recover the cost basis of our investments, we did not consider any of our marketable
securities to be impaired as of September 30, 2018.
NOTE 6. INVENTORIES
Inventories are shown in the following table:
|
Sept. 30,
2018
|
|
March
31,
2018
|
Raw materials
|
$
|
1,103,638
|
|
$
|
1,084,030
|
Work in process
|
|
1,871,388
|
|
|
1,828,492
|
Finished goods
|
600,937
|
|
737,917
|
Total inventories
|
$
|
3,575,963
|
|
$
|
3,650,439
|
10
Table
of Contents
NOTE 7.
STOCK-BASED COMPENSATION
Stock-based compensation expense was $93,360 for
the second quarter and first six months of fiscal 2019, and $40,920 for the second
quarter and first six months of fiscal 2018. Stock-based compensation expenses
for the quarters and six months ended September 30, 2018 and 2017 were due
to the automatic issuance to our non-employee directors of options to purchase
1,000 shares of stock on their reelection to our Board. We calculate the share-based
compensation expense using the Black-Scholes standard option-pricing model. The
increase in stock-based compensation expense for fiscal 2019 compared to fiscal
2018 was due to an increase in the model valuation
for the same number of options to purchase shares.
NOTE 8.
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.
The Act To provide for reconciliation pursuant
to titles II and V of the concurrent resolution on the budget for fiscal year
2018 (the Tax Reform Act) was enacted December 22, 2017.
The Tax Reform Act reduced certain Federal corporate income tax rates effective
January 1, 2018 and changed certain other provisions. As a result of the
Tax Reform Act, our tax rate decreased to an estimated 18% for fiscal 2019 from
30% for fiscal 2018.
We had no unrecognized tax benefits as of September 30,
2018, 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, 2018 we had no accrued
interest related to uncertain tax positions. The tax years 1999 and 2014 through
2017 remain open to examination by the major taxing jurisdictions to which we
are subject.
NOTE 9.
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,
and on August 27, 2015 we announced that our Board authorized $5,000,000
of additional repurchases. We did not repurchase any of our Common Stock under
the program during the quarter ended September 30, 2018. The remaining authorization
was $4,540,806 as of September 30, 2018. The Repurchase Program may be modified
or discontinued at any time without notice.
NOTE 10. SUBSEQUENT EVENTS
On October 17, 2018 we announced that our Board
had declared a quarterly cash dividend of $1.00 per share of Common Stock to be
paid November 30, 2018 to shareholders of record as of the close of business
October 29, 2018.
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations.
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 related
to our reliance on several large customers for a significant percentage of revenue,
uncertainties related to the economic environments in the industries we serve,
uncertainties related to future contract research and development revenue, uncertainties
related to the impact of Federal tax reform, 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
are contained in Part I, Item 1A Risk Factors of our Annual Report
on
Form 10-K
for the year ended March 31,
2018.
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.
11
Table
of Contents
Critical
accounting policies
A description of our critical accounting policies
is provided in Managements Discussion and Analysis of Financial Condition
and Results of Operations in our Annual Report on
Form
10-K
for the year ended March 31, 2018. As of September 30, 2018
our critical accounting policies and estimates continued to include investment
valuation, inventory valuation, and deferred tax assets estimation.
Quarter ended September 30, 2018 compared to quarter ended September 30, 2017
The table shown below summarizes the percentage
of revenue and quarter-to-quarter changes for various items:
|
Percentage
of Revenue
Quarter Ended Sept. 30
|
|
Quarter-
to-Quarter
Change
|
2018
|
|
2017
|
Revenue
|
Product sales
|
94.0
|
%
|
|
91.3
|
%
|
|
10.5
|
%
|
Contract research and development
|
6.0
|
%
|
|
8.7
|
%
|
|
(25.9
|
)%
|
Total revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
7.3
|
%
|
Cost of sales
|
18.0
|
%
|
|
19.3
|
%
|
|
0.0
|
%
|
Gross profit
|
82.0
|
%
|
|
80.7
|
%
|
|
9.0
|
%
|
Expenses
|
Research and development
|
13.0
|
%
|
|
14.8
|
%
|
|
(5.7
|
)%
|
Selling, general, and administrative
|
5.0
|
%
|
|
5.0
|
%
|
|
8.3
|
%
|
Total expenses
|
18.0
|
%
|
|
19.8
|
%
|
|
(2.1)
|
%
|
Income from operations
|
64.0
|
%
|
|
60.9
|
%
|
|
12.7
|
%
|
Interest income
|
5.9
|
%
|
|
5.6
|
%
|
|
14.3
|
%
|
Income before taxes
|
69.9
|
%
|
|
66.5
|
%
|
|
12.8
|
%
|
Provision for income taxes
|
12.8
|
%
|
|
21.3
|
%
|
|
(35.3
|
)%
|
Net income
|
57.1
|
%
|
|
45.2
|
%
|
|
35.5
|
%
|
Total revenue for the quarter ended September 30,
2018 (the second quarter of fiscal 2019) increased 7% compared to the quarter
ended September 30, 2017 (the second quarter of fiscal 2018). The increase
was due to an 10% increase in product sales, partially offset by a 26% decrease
in contract research and development revenue.
The increase in product sales from the prior-year
quarter was primarily due to increased purchase volumes by existing customers
and new customers. The decrease in contract research and development revenue was
due to the completion of certain contracts.
Gross profit margin increased to 82% of revenue
for the second quarter of fiscal 2019 compared to 81% for the second quarter of
fiscal 2018, due to a more profitable revenue mix.
Total expenses decreased 2% for the second quarter
of fiscal 2019 compared to the second quarter of fiscal 2018 due to a 6% decrease
in research and development expense, partially offset by a 8% increase in selling,
general, and administrative expense. The decrease in research and development
expense was due to the timing of new product development expenses. The increase
in selling, general, and administrative expense was primarily due to an increase
in noncash stock-based compensation expense to $93,360 from $40,920. The increase
in stock-based compensation expense for fiscal 2019 compared to fiscal 2018 was due to an increase in the model valuation for the same number of options
to purchase shares.
Interest income for the second quarter of fiscal
2019 increased 14% due to an increase in the average interest rates on our marketable
securities, partially offset by a decrease in our securities.
Our effective tax rate was 18% of net income before
taxes for the quarter compared to 32% in the prior-year quarter. The decrease
was due to the effect of a decrease in the Federal tax rate and certain other
provisions with the enactment of the Tax Reform Act. See Note 8 to the financial
statements for more information on income taxes.
The 35% increase in net income in the second quarter
of fiscal 2019 compared to the prior-year quarter was primarily due to an increase
in product sales and a decrease in the Federal tax rate.
12
Table of Contents
Six months ended September 30, 2018 compared to six months ended September 30,
2017
The table shown below summarizes the percentage
of revenue and period-to-period changes for various items:
|
Percentage
of Revenue
Six Months Ended Sept. 30
|
|
Period-
to-Period
Change
|
2018
|
|
2017
|
Revenue
|
Product sales
|
95.3
|
%
|
|
90.9
|
%
|
|
4.9
|
%
|
Contract research and development
|
4.7
|
%
|
|
9.1
|
%
|
|
(48.4
|
)%
|
Total revenue
|
100.0
|
%
|
|
100.0
|
%
|
|
0.1
|
%
|
Cost of sales
|
18.8
|
%
|
|
21.6
|
%
|
|
(12.8
|
)%
|
Gross profit
|
81.2
|
%
|
|
78.4
|
%
|
|
3.6
|
%
|
Expenses
|
Research and development
|
13.4
|
%
|
|
13.3
|
%
|
|
1.3
|
%
|
Selling, general, and administrative
|
4.9
|
%
|
|
5.1
|
%
|
|
(5.6
|
)%
|
Total expenses
|
18.3
|
%
|
|
18.4
|
%
|
|
(0.6
|
)%
|
Income from operations
|
62.9
|
%
|
|
60.0
|
%
|
|
4.9
|
%
|
Interest income
|
6.0
|
%
|
|
5.2
|
%
|
|
15.8
|
%
|
Income before taxes
|
68.9
|
%
|
|
65.2
|
%
|
|
5.8
|
%
|
Provision for income taxes
|
12.6
|
%
|
|
21.0
|
%
|
|
(39.9
|
)%
|
Net income
|
56.3
|
%
|
|
44.2
|
%
|
|
27.4
|
%
|
Total revenue for the six months ended September 30,
2018 increased slightly compared to the six months ended September 30, 2017,
as a 5% increase in product sales was nearly offset by a 48% decrease in contract
research and development revenue.
The increase in product sales from the prior-year
period was due to increased purchase volumes by existing customers and new customers.
The decrease in contract research and development revenue was due to the completion
of certain contracts.
Gross profit margin increased to 81% of revenue
for the second quarter of fiscal 2019 compared to 78% for the second quarter of
fiscal 2018, due to a more profitable revenue mix.
Total expenses decreased 1% for the first six months
of fiscal 2019 compared to the first six months of fiscal 2018, due to a 6% decrease
in selling, general, and administrative expense, partially offset by a 1% increase
in research and development expense. The decrease in selling, general, and administrative
expense was due to staffing changes.
Our effective tax rate was 18% of net income before
taxes for the first six months of fiscal 2019, compared to 32% in the prior-year
period. The decrease was due to the effect of a decrease in the Federal tax rate
and certain other provisions with the enactment of the Tax Reform Act. See Note 8
to the financial statements for more information on income taxes.
The 27% increase in net income in the first six
months of fiscal 2019 compared to the prior-year period was primarily due to an
increase in product sales, an increase in gross profit margin, and a decrease
in the Federal tax rate, partially offset by a decrease in contract research and
development revenue.
13
Table
of Contents
Liquidity
and capital resources
Overview
Cash and cash equivalents were $6,047,918 as of
September 30, 2018 compared to $4,755,082 as of March 31, 2018.
The $1,292,836 increase in cash and cash equivalents during the six months ended
September 30, 2018 was due to $8,270,118 in net cash provided by operating
activities and $2,582,288 of cash provided by investing activities, partially
offset by $9,559,570 of net cash used in financing activities. We currently believe
our working capital and cash generated from operations will be adequate for our
needs at least for the next 12 months.
Investing Activities
Cash provided by investing activities in the six
months ended September 30, 2018 was due to $9,300,000 of marketable security
maturities, partially offset by $6,679,727 of purchases of marketable securities
and $37,985 of purchases of fixed assets.
Financing Activities
Cash used in financing activities in the first six
months of fiscal 2019 was due to $9,684,020 of cash dividends paid to shareholders,
partially offset by $124,450 of proceeds from the sale of common stock from stock
option exercises. In addition to the dividends already paid in fiscal 2019, on
October 17, 2018 we announced that our Board had declared a cash quarterly
dividend of $1.00 per share of common stock, or $4,844,010 based on shares outstanding
as of October 12, 2018, to be paid November 30, 2018. We plan to fund
dividends through cash provided by operating activities and proceeds from maturities
and sales of marketable securities. All future dividends will be subject to Board
approval and subject to the companys results of operations, cash and marketable
security balances, estimates of future cash requirements, and other factors the
Board may deem relevant. Furthermore, dividends may be modified or discontinued
at any time without notice.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Management, with the participation of the Chief
Executive Officer and Chief 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 SECs 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 September 30, 2018, our disclosure controls and
procedures were effective.
Changes in Internal Controls
During the quarter ended September 30, 2018,
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.
14
Table
of Contents
PART IIOTHER INFORMATION
Item 1. 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.
Item 1A. 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, 2018.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 6. Exhibits.
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 17, 2018
|
/s/ DANIEL A. BAKER
|
Date
|
Daniel A. Baker
|
|
President and Chief Executive Officer
|
|
October 17, 2018
|
/s/ CURT A. REYNDERS
|
Date
|
Curt A. Reynders
|
|
Chief Financial Officer
|
15
Grafico Azioni NVE (NASDAQ:NVEC)
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