Responses to the Form 10-K of NVE Corporation
Professor Jane Morton
Muhan Li, Madhur Mittal, Adam Rosen
NVE Corporation is in the business of nanotechnology, founded in 1989 in Minneapolis. NVE develops and sells devices that use a new technology known as “spintronics,” and was founded by James M. Daughton, Ph. D., and spintronics pioneer.
NVE has been awarded $50 million+ in government research contracts, including more than 30 contracts to develop memory access and storage solutions using the groundbreaking spintronics technology, creating an expansive intellectual properties portfolio. As of March 31, 2012, NVE holds upwards of 50 US patents and a number of foreign patents pending. The company’s categories of production goods include: * Sensors and custom sensors, which are largely used in medical equipment. * Couplers, used in transmission of data.
* MRAM, which has been called the “ideal or universal memory” because it takes the best features of each type of RAM before it and combines them. The company invests heavily in research and development, and has furthered their groundbreaking development on their sensors, couplers, and memories. Additionally, NVE has completed research and development tasks that were awarded to them by external firms as well as the US Government. As of March 31, 2012, NVE has 58 salaried employees. The employees are not represented by a labor union, which in the case of a small business is beneficial.
The company is currently engaged in a legal battle with Everspin Technologies regarding an intellectual dispute. NVE first filed charges against Everspin, ordering them to stop using NVE’s patented MRAM technology. Seven weeks later, Everspin filed a lawsuit citing similar charges; that NVE’s products infringe on two of Everspin’s patents. NVE believes that Everspin’s case is “wholly without merit .”
NVE reports having 7,479 total shareholders as of April 14, 2012. The company has never paid dividends, and does not to expect to pay any dividends in the foreseeable future. Their stock has done well for the most part. The company’s stock increased over the past two years, reaching over $200/share on March 31, 2011. However, the stock fell to below the $200 line at the end of the 2012 fiscal year. The company is currently seeking to repurchase $2.5 million of its own common stock . -------------------------------------------------
Total revenue followed the trend line of its stock for the past two years; decreasing in fiscal 2012 from fiscal 2011, but increasing in fiscal 2011 from fiscal 2010. NVE reports that the decrease in revenue was due largely to a significant decrease in contract R&D . Due to fluctuations in foreign currencies, NVE reports having some limited revenue risks as a result from business conducted abroad . Question 2
* Part I includes all introductory remarks and relevant company information. This would be useful to an investor because it provides qualitative data about the company’s current status that augments financial and quantitative information . * Item 1 is Business. This is the largest section in Part I, as it includes a summary of company-wide operations. Everything in this section is seen by the company as relevant reasoning to how and why the company performed the way it did in the 2012 fiscal year . * Item 1A is Risk Factors. The company outlines to all potential investors the known possible risks in this section. Therefore, the potential investor can be as fully informed as possible about what could happen . * Item 2 is Properties. This section details the locations of where business, research, and production are all conducted. This item also includes agreement about the property ownership . * Item 3 is Legal Proceedings. This section outlines NVE’s current engagement in lawsuits, as well as minute details about...