UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2024
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
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 ☐
Non-accelerated filer ☒
Smaller reporting company ☒
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 ☒ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
NVEC
The NASDAQ Stock Market, LLC
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value – 4,837,166 shares outstanding as of December 31, 2024.
Table of Contents
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 December 31, 2024 and 2023
Statements of Comprehensive Income for the Quarters Ended December 31, 2024 and 2023
Statements of Income for the Nine Months Ended December 31, 2024 and 2023
Statements of Comprehensive Income for the Nine Months Ended December 31, 2024 and 2023
Statements of Cash Flows for the Nine Months Ended December 31, 2024 and 2023
Statements of Shareholders’ Equity for the Nine Months Ended December 31, 2024
Statements of Shareholders’ Equity for the Nine Months Ended December 31, 2023
Notes to Financial Statements
Item 2. Management’s 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
PART I–FINANCIAL INFORMATION
Item 1. Financial Statements.
BALANCE SHEETS
(Unaudited)
December 31, 2024
March 31, 2024*
ASSETS
Current assets
Cash and cash equivalents
$
5,485,684
10,283,550
Marketable securities, short-term (amortized cost of $14,993,163 as of December 31, 2024, and $12,283,630 as of March 31, 2024)
14,907,252
11,917,779
Accounts receivable, net of allowance for credit losses of $15,000 as of December 31 and March 31, 2024
1,355,064
3,144,833
Inventories
7,787,624
7,158,585
Prepaid expenses and other assets
736,481
689,349
Total current assets
30,272,105
33,194,096
Fixed assets
Machinery and equipment
11,663,886
10,501,096
Leasehold improvements
1,956,309
13,620,195
12,457,405
Less accumulated depreciation
11,645,199
11,403,383
Net fixed assets
1,974,996
1,054,022
Deferred tax assets
1,689,207
1,453,704
Marketable securities, long-term (amortized cost of $29,996,231 as of December 31, 2024, and $31,417,890 as of March 31, 2024)
29,704,367
30,788,301
Right-of-use asset – operating lease
947,889
289,910
Total assets
64,588,564
66,780,033
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
154,683
127,154
Accrued payroll and other
511,589
729,215
Operating lease liability
84,838
179,372
Total current liabilities
751,110
1,035,741
Long-term operating lease liability
864,966
175,775
Total liabilities
1,616,076
1,211,516
Shareholders’ equity
Common stock, $0.01 par value, 6,000,000 shares authorized; 4,837,166 issued and outstanding as of December 31, 2024 and 4,833,676 as of March 31, 2024
48,372
48,337
Additional paid-in capital
19,806,845
19,554,812
Accumulated other comprehensive loss
(295,358
)
(777,637
Retained earnings
43,412,629
46,743,005
Total shareholders’ equity
62,972,488
65,568,517
Total liabilities and shareholders’ equity
*The March 31, 2024 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, 2024.
See accompanying notes.
3
STATEMENTS OF INCOME
Quarter Ended December 31,
2024
2023
Revenue
Product sales
4,960,488
6,366,009
Contract research and development
102,557
390,251
Total revenue
5,063,045
6,756,260
Cost of sales
797,622
1,355,067
Gross profit
4,265,423
5,401,193
Expenses
Research and development
869,677
540,895
Selling, general, and administrative
434,783
389,311
Total expenses
1,304,460
930,206
Income from operations
2,960,963
4,470,987
Interest income
474,180
491,671
Other income
135,057
-
Income before taxes
3,570,200
4,962,658
Provision for income taxes
521,790
778,236
Net income
3,048,410
4,184,422
Net income per share – basic
0.63
0.87
Net income per share – diluted
Cash dividends declared per common share
1.00
Weighted average shares outstanding
Basic
4,835,262
4,833,401
Diluted
4,839,124
4,837,230
STATEMENTS OF COMPREHENSIVE INCOME
Unrealized gain (loss) on marketable securities, net of tax
(226,848
748,830
Comprehensive income
2,821,562
4,933,252
4
Nine Months Ended December 31,
17,680,780
22,183,223
924,199
537,727
18,604,979
22,720,950
2,720,370
5,034,556
15,884,609
17,686,394
2,595,808
1,920,095
1,543,428
1,298,211
Provision for credit losses
9,514
4,139,236
3,227,820
11,745,373
14,458,574
1,432,568
1,440,289
13,312,998
15,898,863
2,140,856
2,587,145
11,172,142
13,311,718
2.31
2.75
3.00
4,834,382
4,832,992
4,839,247
4,839,725
Unrealized gain on marketable securities, net of tax
482,279
460,541
11,654,421
13,772,259
5
STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated
Additional
Other
Common Stock
Paid-In
Comprehensive
Retained
Shares
Amount
Capital
Income (Loss)
Earnings
Total
Balance as of March 31, 2024
4,833,676
Comprehensive income:
28,710
4,097,587
Total comprehensive income
4,126,297
Stock-based compensation
18,442
Cash dividends ($1.00 per share of common stock)
(4,833,676
Balance as of June 30, 2024
19,573,254
(748,927
46,006,916
64,879,580
Exercise of stock options
344
(32
(29
680,417
4,026,145
4,706,562
105,203
Balance as of September 30, 2024
4,834,020
48,340
19,678,425
(68,510
45,199,385
64,857,640
3,146
32
114,159
114,191
Unrealized loss on marketable securities, net of tax
14,261
(4,835,166
Balance as of December 31, 2024
4,837,166
6
Balance as of March 31, 2023
4,830,826
48,308
19,295,442
(1,213,858
48,949,610
67,079,502
2,575
26
117,501
117,527
(234,701
4,403,730
4,169,029
10,536
Cash dividends declared ($1.00 per share of common stock)
(4,830,826
Balance as of June 30, 2023
48,334
19,423,479
(1,448,559
48,522,514
66,545,768
(53,588
4,723,566
4,669,978
106,312
(4,833,401
Balance as of September 30, 2023
19,529,791
(1,502,147
48,412,679
66,488,657
12,544
Balance as of December 31, 2023
19,542,335
(753,317
47,763,700
66,601,052
7
STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
241,816
231,749
Bonds discount amortization
(212,554
(75,676
137,906
129,392
Deferred income taxes
(371,436
(847,235
Non-cash operating lease credit
(63,322
(20,039
Changes in operating assets and liabilities:
Accounts receivable
1,789,769
4,268,102
(629,039
(932,801
(47,132
66,154
27,529
(111,011
(217,626
(914,836
Net cash provided by operating activities
11,828,053
15,115,031
INVESTING ACTIVITIES
Purchases of fixed assets
(1,162,790
(16,731
Purchases of marketable securities
(11,279,773
(6,103,185
Proceeds from maturities of marketable securities
10,205,000
8,400,000
Net cash provided by (used in) investing activities
(2,237,563
2,280,084
FINANCING ACTIVITIES
Proceeds from exercise of stock options
114,162
Payment of dividends to shareholders
(14,502,518
(14,497,628
Net cash used in financing activities
(14,388,356
(14,380,101
Increase (decrease) in cash and cash equivalents
(4,797,866
3,015,014
Cash and cash equivalents at beginning of period
1,669,896
Cash and cash equivalents at end of period
4,684,910
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes
2,782,289
3,685,861
8
NOTES TO FINANCIAL STATEMENTS
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, certain disclosures have been omitted as allowed, and the Notes to Financial Statements have been condensed as permitted. It is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and Notes included in our latest Annual Report on Form 10-K for the fiscal year ended March 31, 2024. The results of operations for the quarter ended December 31, 2024, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2025.
Significant accounting policies
A description of our significant accounting policies and estimates is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. As of December 31, 2024, there were no changes to our significant accounting policies or estimates.
Reclassification
The presentation of certain items in the statement of cash flows for the three- and nine-month periods ending December 31, 2023 has been changed to conform to the classifications used in 2024. These reclassifications had no effect on shareholders’ equity, net income, or comprehensive net income as previously reported.
NOTE 3. NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). ASU 2024-03 aims to enhance transparency for users of financial statements by requiring public business entities to disaggregate specific expense categories. In January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date for non-calendar year-end entities such as us. ASU 2024-03 mandates disclosures in the notes to financial statements detailing the composition and trends of key expense categories within major income statement captions. These enhanced disclosures are intended to help investors more effectively assess the entity’s performance, understand its cost structure, and make more accurate forecasts of future cash flows. For public business entities, ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, which for us will be for fiscal 2028 and for interim reporting periods beginning with the first quarter of fiscal 2029. The adoption will result in disclosure changes only.
We do not expect the adoption of other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date to have a material impact on our financial statements when they are adopted.
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:
Weighted average common shares outstanding – basic
Dilutive effect of stock options
3,862
3,829
Shares used in computing net income per share – diluted
9
4,865
6,733
NOTE 5. MARKETABLE SECURITIES
The following table shows the major categories of our marketable securities and their contractual maturities as of December 31, 2024:
<1 Year
1–3 Years
3–5 Years
Money market funds
5,109,218
Treasury securities
4,686,781
Corporate bonds
39,924,838
17,149,882
7,867,704
49,720,837
20,016,470
21,836,663
Total marketable securities and money market funds represented approximately 77% of our total assets as of December 31, 2024. Marketable securities as of December 31, 2024, had remaining maturities between 10 weeks and 52 months.
Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included in “Marketable securities, short term” and “Marketable securities, long term.” Treasury securities are included in “Marketable securities, long term.” Accrued interest receivable was $354,529 as of December 31, 2024, and $460,627 as of March 31, 2024, and is included in the balance sheets in “Prepaid expenses and other assets.”
We monitor the credit ratings of our marketable securities at least quarterly as reported by Standard & Poor’s. The following table summarizes the fair values of our marketable securities as of December 31, 2024, aggregated by credit rating:
Credit Rating
Fair Value
AAA
9,795,999
AA+
3,877,878
AA
9,755,138
AA-
18,408,078
A+
2,915,398
A
4,968,346
Because we believe it is more likely than not we will recover the cost basis of our investments, we did not record any allowance attributable to credit losses. None of the marketable securities purchased during the period had experienced more-than-insignificant deterioration in credit quality since its origination and were therefore not considered “Purchased Financial Assets with Credit Deterioration.”
The following table shows the estimated fair value of our marketable securities, aggregated by fair value hierarchy inputs used in estimating their fair values:
As of December 31, 2024
As of March 31, 2024
Level 1
Level 2
9,842,796
42,706,080
44,611,619
52,548,876
10
The following table shows the amortized cost, fair value and gross unrealized holding gains and losses of our marketable securities as of December 31 and March 31, 2024:
Amortized
Cost
Gross
Unrealized
Holding
Gains
Losses
Estimated
Fair
Value
4,699,645
(12,864
40,289,749
40,688
(405,599
43,701,520
930
(996,370
50,098,612
(418,463
53,544,316
The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of December 31 and March 31, 2024.
Less Than 12 Months
12 Months or Greater
7,364,614
(97,789
25,812,127
(307,810
33,176,741
12,051,395
(110,653
37,863,522
3,154,764
(4,902
36,551,534
(991,468
39,706,298
None of the securities were impaired at acquisition, and subsequent declines in fair value are attributable to interest rate increases. We do not intend to sell, and it is not more likely than not that we will be required to sell, these securities before recovery of their amortized cost basis. The issuers continue to make timely interest payments on these securities.
Unrealized gains and losses on our marketable securities and their tax effects are as follows:
Unrealized gain (loss) on marketable securities
(290,384
958,564
Tax effects
63,536
(209,734
Unrealized gain from marketable securities
617,665
589,530
(135,386
(128,989
NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES
The following table shows a roll forward of the allowance for credit losses on our accounts receivable:
Allowance for credit losses as of March 31, 2024
15,000
Change in provision for current expected credit losses
Allowance for credit losses as of December 31, 2024
11
NOTE 7. INVENTORIES
Inventories are shown in the following table:
Dec. 31, 2024
March 31, 2024
Raw materials
1,742,871
1,982,657
Work in process
3,795,112
2,641,085
Finished goods
2,249,641
2,534,843
Total inventories
NOTE 8. STOCK-BASED COMPENSATION
Stock-based compensation expense was $14,261 for the third quarter of fiscal 2025, $12,544 for the third quarter of fiscal 2024, $137,906 for the first nine months of fiscal 2025, and $129,392 for the first nine months of fiscal 2024. We calculate share-based compensation expense using the Black-Scholes-Merton standard option-pricing model.
Nine Months EndedDecember 31,
Stock options grant
4,000
6,500
Stock options exercised
8,000
9,000
During the three and nine months ended December 31, 2024 there were 6,000 and 7,000 stock options, respectively, exchanged in a cashless net option exercise which resulted in 1,146 and 1,490 shares issued, respectively. During the nine months ended December 31, 2023 there were 2,000 stock options exchanged in a cashless net option exercise which resulted in 575 shares issued.
NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2024, federal and state estimated tax overpayments of $301,246 were included in the balance sheet in “Prepaid expenses and other assets.”
We had no unrecognized tax benefits as of December 31, 2024, 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 December 31, 2024, we had no accrued interest related to uncertain tax positions. The tax years ended March 31, 2020 through March 31, 2024 remain open to examination by the major taxing jurisdictions to which we are subject.
NOTE 10. LEASES
We conduct our operations in a leased facility under a non-cancellable lease expiring May 31, 2031. Effective November 4, 2024 we executed an Amendment extending our lease, which would have expired March 31, 2026 without the Amendment. Liabilities under the lease Amendment are included in the lease-liabilities table below. For further details on obligations under our lease as amended, refer to our Form 8-K/A filed on November 7, 2024 and referenced in Item 6 of this Report.
Our lease does not provide an implicit interest rate, so we used our incremental borrowing rate to determine the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. Details of our operating lease are as follows:
Operating lease cost
44,727
37,754
120,235
113,261
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for leases
45,341
44,433
136,023
133,299
Right-of-use assets obtained in exchange for new lease liabilities
Operating lease
710,665
Remaining lease term
78 months
Discount rate
7.8
%
12
The following table shows the maturities of lease liabilities as of December 31, 2024:
Year Ending March 31,
Operating Lease Liabilities
2025
46,249
2026
84,995
2027
172,142
2028
213,284
2029
220,216
2030
227,373
2031
234,762
2032
40,399
Total lease payments
1,239,420
Imputed lease interest
(289,616
Total lease liabilities
949,804
NOTE 11. STOCK REPURCHASE PROGRAM
On January 21, 2009, we announced that our Board of Directors authorized the repurchase of up to $2,500,000 of our Common Stock from time to time in open market, block, or privately negotiated transactions. The timing and extent of any repurchases depend on market conditions, the trading price of the company’s stock, and other factors, and subject to the restrictions relating to volume, price, and timing under applicable law. On August 27, 2015, we announced that our Board of Directors authorized up to $5,000,000 of additional repurchases. Our repurchase program does not have an expiration date and does not obligate us to purchase any shares. The Program may be modified or discontinued at any time without notice. We intend to finance any stock repurchases with cash provided by operating activities or maturing marketable securities. The remaining authorization was $3,520,369 as of December 31, 2024. We did not repurchase any of our Common Stock during the first nine months of fiscal 2025.
NOTE 12. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS
All of our employees are eligible to participate in our 401(k) savings plan the first quarter after reaching age 18. Employees may contribute up to the Internal Revenue Code maximum. We make matching contributions of 100% of the first 3% of participants’ salary deferral contributions. Our matching contributions were $22,375 for the third quarter of fiscal 2025, $27,904 for the third quarter of fiscal 2024, $72,442 for the first nine months of fiscal 2025, and $79,388 for the first nine months of fiscal 2024.
NOTE 13. SUBSEQUENT EVENTS
On January 22, 2025, we announced that our Board of Directors had declared a quarterly cash dividend of $1.00 per share of Common Stock to be paid February 28, 2025, to shareholders of record as of the close of business February 3, 2025.
13
Item 2. Management’s 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 terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of NVE, you should be aware that our actual financial condition, operating results, and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors, including but not limited to risks related to our reliance on several large customers for a significant percentage of revenue, our dependence on critical suppliers and packaging vendors, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks of credit losses, risks and uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.
Further information regarding our risks and uncertainties is contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
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.
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 fiscal year ended March 31, 2024. As of December 31, 2024, our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.
14
Quarter ended December 31, 2024, compared to quarter ended December 31, 2023
The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:
Percentage of Revenue
Quarter-
to-Quarter
Change
98.0
94.2
(22.1
)%
2.0
5.8
(73.7
100.0
(25.1
15.8
20.1
(41.1
84.2
79.9
(21.0
) %
17.2
8.0
60.8
8.6
11.7
25.8
13.8
40.2
58.4
66.1
(33.8
9.4
7.3
(3.6
2.7
70.5
73.4
(28.1
10.3
11.5
(33.0
60.2
61.9
(27.1
Total revenue for the quarter ended December 31, 2024 (the third quarter of fiscal 2025) decreased 25% compared to the quarter ended December 31, 2023 (the third quarter of fiscal 2024). The decrease was due to a 22% decrease in product sales and a 74% decrease in contract research and development revenue. The decrease in product sales was due to decreased purchases by existing customers. The decrease in contract research and development revenue was due to the completion of certain contracts.
Gross margin for the third quarter of fiscal 2025 was 84% of revenue, compared to 80% the prior-year quarter. The increase in gross margin percentage was due to a more profitable product mix and a larger portion of direct rather than distributor sales.
Total expenses increased 40% for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 due to a 61% increase in research and development expense and a 12% increase in selling, general, and administrative expense. The increase in research and development expense was due to increased new product development activities. The increase in selling, general, and administrative expenses was primarily due to increased sales and marketing activities.
Interest income for the third quarter of fiscal 2025 decreased 4% due to a decrease in marketable securities and lower yields on recently purchased marketable securities.
Other income in the third quarter of fiscal 2025 was primarily from the reclaiming of precious metals used in our manufacturing process.
Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 15% for the third quarter of fiscal 2025 compared to 16% for the third quarter of fiscal 2024. The decrease in our effective tax rate compared to the prior-year quarter was due changes in the timing and amounts of federal tax credits and deductions.
The 27% decrease in net income in the third quarter of fiscal 2025 compared to the prior-year quarter was primarily due to decreased revenue, increased operating expenses, and decreased interest income, partially offset by increased gross profit margin, increased other income, and a lower effective tax rate.
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Nine months ended December 31, 2024, compared to nine months ended December 31, 2023
The table shown below summarizes the percentage of revenue and period-to-period changes for various items:
Nine Months Ended Dec. 31,
Period-to-Period
95.0
97.6
(20.3
5.0
2.4
71.9
(18.1
14.6
22.2
(46.0
85.4
77.8
(10.2
14.0
8.5
35.2
8.2
5.7
18.9
0.0
14.2
28.2
63.2
63.6
(18.8
7.7
6.3
(0.5
0.7
71.6
69.9
(16.3
11.6
11.3
(17.3
60.0
58.6
(16.1
Total revenue for the nine months ended December 31, 2024, decreased 18% compared to the nine months ended December 31, 2023. The decrease was due to a 20% decrease in product sales, partially offset by a 72% increase in contract research and development revenue. The decrease in product sales was due to decreased purchases by existing customers. The increase in contract research and development revenue was due to a major research and development contract completed during the nine months ended December 31, 2024.
Gross margin for the first nine months of fiscal 2025 was 85% of revenue, compared to 78% for the first nine months of fiscal 2024. The increase in gross margin percentage was due to a more profitable product mix and a larger portion of direct rather than distributor sales.
Total expenses increased 28% for the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024 due to a 35% increase in research and development expense and a 19% increase in selling, general, and administrative expense. The increase in research and development expense was due to increased new product development activities. The increase in selling, general, and administrative expenses was primarily due to increased sales and marketing activities.
The 16% decrease in net income for the first nine months of fiscal 2025 compared to the prior-year period was primarily due to decreased revenue, increased operating expenses, and decreased interest income, partially offset by increased other income and increased gross profit margin.
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Liquidity and Capital Resources
Overview
Cash and cash equivalents were $5,485,684 as of December 31, 2024, compared to $10,283,550 as of March 31, 2024. The $4,797,866 decrease in cash and cash equivalents during the first nine months of fiscal 2025 was due to $2,237,563 of cash used in investing activities and $14,388,356 of net cash used in financing activities, partially offset by $11,828,053 in net cash provided by operating activities.
Operating Activities
Net cash provided by operating activities related to product sales and research and development contract revenue was our primary source of working capital for the current and prior-year quarters.
Accounts receivable decreased $1,789,769 during the first nine months of fiscal 2025 primarily due to decreased revenue and the timing of customer payments. Inventories increased $629,039 primarily due to our decision to increase inventories in anticipation of a semiconductor industry recovery. Prepaid expenses and other assets increased $47,132 primarily due to the timing of federal estimated tax payments. Accrued payroll and other expenses decreased $217,626 primarily due to decreased accrual for performance-based compensation.
Investing Activities
Cash used by investing activities during the nine months ended December 31, 2024, consisted of $11,279,773 of marketable securities purchases and $1,162,790 of fixed asset purchases, partially offset by $10,205,000 in proceeds from maturities of marketable securities. Fixed asset purchases consisted primarily of a $1,125,437 downpayment on production equipment expected to be delivered in fiscal 2026. We plan to significantly increase fixed asset purchases in fiscal 2025 and 2026 compared to fiscal 2024 to support increases in production capacity and new product development.
Financing Activities
Cash used in financing activities during the nine months ended December 31, 2024, consisted of $14,502,518 of cash dividends paid to shareholders, partially offset by $114,162 in proceeds from stock option exercises.
In addition to cash dividends to shareholders paid in the first quarter of fiscal 2025, on January 22, 2025, we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,837,166 based on shares outstanding as of December 31, 2024, to be paid on February 28, 2025.
We plan to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities. All future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, estimates of future cash requirements, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.
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Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Management, with the participation of the Chief Executive Officer and Principal Financial Officer, has performed an evaluation of our disclosure controls and procedures that are defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Report. This evaluation included consideration of the controls, processes, and procedures that are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
Changes in Internal Controls
During the quarter ended December 31, 2024, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II–OTHER INFORMATION
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, 2024.
.
Item 4. Mine Safety Disclosures.
None.
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Item 6. Exhibits.
Exhibit #
Description
10.1
Sixth amendment to lease between the company and GRE–Bryant Lake, LLC (incorporated by reference to the Form 8-K/A filed November 7, 2024).
31.1
Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).
31.2
Certification by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a).
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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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.
(Registrant)
January 22, 2025
/s/ DANIEL A. BAKER
Date
Daniel A. Baker
President and Chief Executive Officer
/s/ DANIEL NELSON
Daniel Nelson
Principal Financial Officer
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