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<SEC-DOCUMENT>0000724910-04-000005.txt : 20040120
<SEC-HEADER>0000724910-04-000005.hdr.sgml : 20040119
<ACCEPTANCE-DATETIME>20040120160539
ACCESSION NUMBER:		0000724910-04-000005
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20031231
FILED AS OF DATE:		20040120

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NVE CORP /NEW/
		CENTRAL INDEX KEY:			0000724910
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				411424202
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-12196
		FILM NUMBER:		04532731

	BUSINESS ADDRESS:	
		STREET 1:		11409 VALLEY VIEW ROAD
		CITY:			EDEN PRAIRIE
		STATE:			MN
		ZIP:			55344
		BUSINESS PHONE:		9528299217

	MAIL ADDRESS:	
		STREET 1:		11409 VALLEY VIEW ROAD
		CITY:			EDEN PRAIRIE
		STATE:			MN
		ZIP:			55344

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PREMIS CORP
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>tenq3-04.txt
<TEXT>
                              UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549

                                FORM 10-QSB

(Mark One)
   [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
   ACT OF 1934
                            For the quarterly period ended  December 31, 2003


   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

               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                             (IRS Employer
 incorporation or organization)                           Identification No.)


            11409 Valley View Road, Eden Prairie, Minnesota 55344
                   (Address of principal executive offices)

                                (952) 829-9217
                         (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [X]    No [ ]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.01 Par Value - 4,369,335 shares outstanding as of
January 16, 2004


Transitional Small Business Disclosure Format (Check one): Yes [ ]    No [X]
<PAGE>
                       PART I--FINANCIAL INFORMATION

Item 1. Financial Statements.

                                 NVE CORPORATION
                                  BALANCE SHEET
                                DECEMBER 31, 2003


<TABLE>
<S>                                                                <C>
Current assets:
   Cash                                                            $ 1,339,343
   Investment securities                                             5,360,466
   Accounts receivable, net of allowance for
     uncollectible accounts of $15,000                               1,152,991
   Inventories                                                       1,189,010
   Prepaid expenses and other assets                                   108,086
                                                                   ------------
Total current assets                                                 9,149,896
Fixed assets:
   Machinery and equipment                                           3,431,309
   Leasehold improvements                                              365,187
                                                                   ------------
                                                                     3,796,496
   Less accumulated depreciation                                     2,218,158
                                                                   ------------
Total fixed assets                                                   1,578,338
                                                                   ------------
Total assets                                                       $10,728,234
                                                                   ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                $   394,892
   Accrued payroll and other                                           630,529
   Deferred revenue                                                    420,338
   Capital lease obligations                                           146,267
                                                                   ------------
Total current liabilities                                            1,592,026
   Capital lease obligations, less current portion                     116,684
                                                                   ------------
Total liabilities                                                    1,708,710

Shareholders' equity:
   Common stock                                                         43,438
   Additional paid-in capital                                       12,415,214
   Accumulated other comprehensive income                               50,310
   Accumulated deficit                                              (3,489,438)
                                                                   ------------
Total shareholders' equity                                           9,019,524
                                                                   ------------
Total liabilities and shareholders' equity                         $10,728,234
                                                                   ============
</TABLE>


                            SEE ACCOMPANYING NOTES.

<PAGE>
                                NVE CORPORATION
                            STATEMENT OF OPERATIONS
                 THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                      Three Months Ended December 31
                                            2003           2002
                                      ------------------------------
<S>                                     <C>            <C>
Revenue
  Contract research and development     $ 1,633,361    $ 1,673,502
  Product sales                           1,484,766        565,633
  License revenue                              -            97,917
                                        ------------   ------------
Total revenue                             3,118,127      2,337,052

Cost of sales                             1,907,029      1,424,507
                                        ------------   ------------
Gross profit                              1,211,098        912,545

Expenses
  Research and development                  230,671        327,472
  Selling, general & administrative         464,264        420,862
                                        ------------   ------------
Total expenses                              694,935        748,334
                                        ------------   ------------

Income from operations                      516,163        164,211

Interest income                              46,716         58,454
Interest expense                             (6,107)        (9,210)
Other income                                 20,384         20,706
                                        ------------   ------------
Net income                               $  577,156    $   234,161
                                        ============   ============

Net income per share-basic              $      0.13    $      0.06
                                        ============   ============
Net income per share-diluted            $      0.12    $      0.05
                                        ============   ============

Weighted average shares outstanding:
  Basic                                   4,334,092      4,159,718
  Diluted                                 4,831,540      4,466,199
</TABLE>



                            SEE ACCOMPANYING NOTES.

<PAGE>
                                NVE CORPORATION
                            STATEMENT OF OPERATIONS
                  NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                      Nine Months Ended December 31
                                            2003           2002
                                      -----------------------------
<S>                                     <C>            <C>
Revenue
  Contract research and development     $ 4,949,879    $ 4,843,268
  Product sales                           3,852,282      1,707,633
  License revenue                              -           293,751
                                        ------------   ------------
Total revenue                             8,802,161      6,844,652

Cost of sales                             5,554,726      4,273,553
                                        ------------   ------------
Gross profit                              3,247,435      2,571,099

Expenses
  Research and development                  711,913        944,330
  Selling, general & administrative       1,390,818      1,324,302
                                        ------------   ------------
Total expenses                            2,102,731      2,268,632
                                        ------------   ------------

Income from operations                    1,144,704        302,467

Interest income                             140,184        154,134
Interest expense                            (20,705)       (32,108)
Other income                                 53,867         62,193
                                        ------------   ------------
Net income                              $ 1,318,050    $   486,686
                                        ============   ============

Net income per share-basic              $      0.31    $      0.12
                                        ============   ============
Net income per share-diluted            $      0.28    $      0.11
                                        ============   ============

Weighted average shares outstanding:
  Basic                                   4,241,791      4,118,523
  Diluted                                 4,739,239      4,425,004
</TABLE>



                            SEE ACCOMPANYING NOTES.
<PAGE>
                               NVE CORPORATION
                           STATEMENT OF CASH FLOWS
                  NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                     Nine Months Ended Dec. 31
                                                       2003            2002
                                                    ------------   ------------
<S>                                                 <C>            <C>
OPERATING ACTIVITIES
Net income                                          $ 1,318,050    $   486,686
Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
    Depreciation and amortization                       381,919        370,398
    Changes in operating assets and liabilities:
      Accounts receivable                              (124,701)       (89,757)
      Inventories                                      (348,234)      (334,078)
      Prepaid expenses and other                         62,234       (119,641)
      Accounts payable and accrued expenses              89,008         63,795
      Deferred revenue                                 (469,289)      (483,279)
                                                    ------------   ------------
Net cash provided by (used in) operating activities     908,987       (105,876)

INVESTING ACTIVITIES
Purchases of fixed assets                              (774,110)      (383,377)
Sales (purchases) of investment securities              477,074     (5,583,414)
                                                    ------------   ------------
Net cash used in investing activities                  (297,036)    (5,966,791)

FINANCING ACTIVITIES
Net proceeds from sale of common stock                  246,071      6,224,766
Repayment of note payable and
  capital lease obligations                            (114,447)      (323,868)
                                                     -----------   ------------
Net cash provided by financing activities               131,624      5,900,898
                                                     -----------   ------------
Increase (decrease) in cash                             743,575       (171,769)
Cash and cash equivalents at beginning of period        595,768        537,258
                                                     -----------   ------------

Cash and cash equivalents at end of period           $1,339,343     $  365,489
                                                     ===========   ============
</TABLE>



                            SEE ACCOMPANYING NOTES.
<PAGE>
                                NVE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 2003


1.  INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial statements of NVE Corporation (the
"Company") are consistent with accounting principles generally accepted in the
United States and reporting with SEC 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
condensed financial statements be read in conjunction with the audited
financial statements and the notes included in our latest annual financial
statements included in our report on Form 10-KSB. The results of operations
for the three and nine month periods ended December 31, 2003 are not
necessarily indicative of the results that may be expected for the full year
ending March 31, 2004.

2.  NATURE OF BUSINESS
We develop, manufacture, and sell "spintronics" devices, a nanotechnology which
relies on electron spin rather than electron charge to acquire, store, and
transmit information.

3.  REVENUE RECOGNITION
Revenue from product sales to direct customers is recognized upon shipment.
Revenue from licensing and technology development programs, which is
nonrefundable and for which no significant future obligations exist, is
recognized when the license is signed. Revenue from licensing and technology
development programs, which is refundable, recoupable against future royalties,
or for which future obligations exist, is recognized when we have completed our
obligations under the terms of the agreements. Revenue from royalties is
recognized upon the shipment of product from our technology license partners to
direct customers. Certain research and development activities are conducted for
third parties and such revenue is recognized as the services are performed.

4.  EARNINGS PER SHARE
We calculate our income per share pursuant to Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share. Basic earnings per share is
computed based upon the weighted average number of common shares issued and
outstanding during each year. Diluted net income per share amounts assume
conversion, exercise or issuance of all potential common stock instruments
(stock options, warrants and convertible preferred stock). Potentially dilutive
securities including warrants and stock options are excluded from diluted
earnings per share during net loss periods because these securities would be
anti-dilutive.

5.  INVESTMENTS
We classify and account for debt and equity securities in accordance with SFAS
No. 115, Accounting for Certain Investments in Debt and Equity Securities. The
Company's entire portfolio is classified as available for sale; thus,
securities are recorded at fair market value and any associated unrealized gain
or loss, net of tax, is included as a separate component of shareholders'
equity, "Accumulated other comprehensive income."


<PAGE>
6.  COMPREHENSIVE INCOME
The components of comprehensive income are as follows:

<TABLE>
<CAPTION>
                                    Three months            Nine months
                                 ended December 31       ended December 31
                                 2003          2002      2003          2002
                               --------    --------  ----------    --------
<S>                            <C>         <C>       <C>           <C>
Net income                     $577,156    $234,161  $1,318,050    $486,686
Change in unrealized gains      (24,146)      1,557     (22,911)     92,671
                               --------    --------  ----------    --------
Comprehensive income           $553,010    $235,718  $1,295,139    $579,357
                               ========    ========  ==========    ========
</TABLE>

7.  INVENTORIES
Inventories consisted of the following at December 31, 2003:

<TABLE>
<S>                        <C>
Raw materials              $  388,864
Work-in-process               628,592
Finished goods                426,554
                           -----------
                            1,444,010
Less obsolescence reserve    (255,000)
                           -----------
                           $1,189,010
                           ===========
</TABLE>


8.  STOCK-BASED COMPENSATION
We have adopted the disclosure-only provisions of SFAS Nos. 123 and 148,
Accounting for Stock-Based Compensation, but apply Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations in accounting for our plans. Under APB No. 25, when the
exercise price of employee stock options equals or exceeds the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.

Pro forma information regarding net income and income per share is required by
SFAS Nos. 123 and 148, and has been determined as if we had accounted for our
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted average assumptions:
risk-free interest rate of 2.7% for the three months ended December 31, 2003
and 2002, expected volatility of 55%, a weighted-average expected life of the
options of four to seven years, and no dividend yield.

Option valuation models were developed for use in estimating the fair value of
traded options which have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective
assumptions. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of our employee stock options.


<PAGE>
     The pro forma information is as follows:

<TABLE>
<CAPTION>
                                                    Three Months Ended Dec. 31
                                                        2003           2002
                                                    ------------   ------------
   <S>                                              <C>            <C>
   Net income applicable to common shares:
        As reported                                 $   577,156    $   234,161
        Pro forma adjustment
          for stock options                             (83,590)      (164,710)
                                                    ------------   ------------
        Pro forma net income                        $   493,566    $    69,451
                                                    ============   ============
   Earnings per share:
     Basic - as reported                            $      0.13    $      0.06
     Basic - pro forma                              $      0.11    $      0.02

     Diluted - as reported                          $      0.12    $      0.05
     Diluted - pro forma                            $      0.10    $      0.02
</TABLE>



<TABLE>
<CAPTION>
                                                     Nine Months Ended Dec. 31
                                                        2003           2002
                                                    ------------   ------------
   <S>                                              <C>            <C>
   Net income applicable to common shares:
        As reported                                 $ 1,318,050    $   486,686
        Pro forma adjustment
          for stock options                            (246,240)      (494,129)
                                                    ------------   ------------
        Pro forma net income (loss)                 $ 1,071,810    $    (7,443)
                                                    ============   ============
   Earnings per share:
     Basic - as reported                            $      0.31    $      0.12
     Basic - pro forma                              $      0.25    $      0.00

     Diluted - as reported                          $      0.28    $      0.11
     Diluted - pro forma                            $      0.23    $      0.00
</TABLE>


9.  TECHNOLOGY EXCHANGE AGREEMENT
On April 19, 2002 the Company closed a technology exchange agreement
accompanied by an investment by Cypress Semiconductor Corporation ("Cypress").
Cypress purchased 686,849 shares of NVE Common Stock for $6.228 million, which
on September 5, 2003 they announced they had sold. Cypress also received a
warrant for the purchase of up to 400,000 shares of Common Stock for $15.00 per
share for a term of three years.


<PAGE>
Item 1.  Legal Proceedings.
None.


Item 2. Management's Discussion and Analysis or Plan of Operation.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this Quarterly Report on Form 10-QSB, except for
historical information contained in this Form 10-QSB, 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
Form 10-QSB 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. These differences may be caused by a
variety of factors, including but not limited to adverse economic conditions,
intense competition, including entry of new competitors, our ability to obtain
sufficient financing to support our operations, progress in research and
development activities by us and others, variations in costs that are beyond
our control, adverse federal, state and local government regulations,
unexpected costs, lower sales and net income, or higher net losses than
forecasted, price increases for equipment, our dependence on significant
suppliers, including Taiwan Semiconductor Manufacturing Corporation for foundry
semiconductor wafers, our ability to meet stringent customer technical
requirements, our ability to consummate additional license agreements, our
ability to continue eligibility for SBIR awards, our inability to raise prices,
failure to obtain new customers, the possible fluctuation and volatility of our
operating results and financial condition, inability to carry out marketing and
sales plans, loss of key executives, and other specific risks included in
Exhibit 99.1 "Cautionary statements for purposes of the 'safe harbor'
provisions of The Private Securities Litigation Reform Act," filed herewith.


General

     We develop, manufacture, and sell "spintronics" devices, which are
nanotechnology devices that rely on electron spin rather than electron charge
to acquire, store, and transmit information in electronic systems. We derive
revenue from three sources:

     1) contract spintronics research and development (principally government
        contracts);

     2) commercial sales of spintronic integrated circuit type sensor and
        coupler products; and

     3) licenses for our magnetic random-access memory (MRAM)
        intellectual property.


<PAGE>
Critical accounting policies

     It is important to understand our significant accounting policies in order
to understand our financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States. These accounting principles require us to make estimates and
assumptions that affect amounts reported in our financial statements and the
accompanying notes. Actual results are likely to differ from those estimates,
but we do not believe such differences will materially affect our financial
position or results of operations for the periods presented in this report.


Revenue recognition

     Revenue from product sales to direct customers is recognized upon
shipment. Revenue from licensing and technology development programs, which is
nonrefundable and for which no significant future obligations exist, is
recognized when the license is signed. Revenue from licensing and technology
development programs, which is refundable, recoupable against future royalties,
or for which future obligations exist, is recognized when we complete our
obligations under the terms of the agreements. Revenue from royalties is
recognized upon the shipment of product from our technology license partners
to direct customers. Certain research and development activities are conducted
for third parties and such revenue is recognized as the services are
performed. Payments received from licensing and technology development
programs relating to future obligations as well as prepayments for future
discounts on product sales are recorded as deferred revenue.


Bad Debt

     We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments.
If the financial condition of our customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may
be required.


Inventory

     We reduce the stated value of our inventory for excess quantities or
obsolescence in an amount equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and
market conditions. If actual future demand or market conditions are less
favorable than those projected by management, additional reductions in stated
value may be required.


Income Taxes

     In determining the carrying value of our net deferred tax assets, we must
assess the likelihood of sufficient future taxable income in certain tax
jurisdictions, based on estimates and assumptions to realize the benefit of
these assets. Our management evaluates the realizability of the deferred
assets quarterly and assesses the need for valuation allowances or reduction
of existing allowances quarterly.


<PAGE>
THREE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 2002

     The table below summarizes the percentage of revenue for various items for
the periods indicated:

<TABLE>
<CAPTION>
                                      Three months ended December 31
                                          2003             2002
                                         -------          -------
<S>                                      <C>              <C>
Revenue:
  Research and development                52.4 %           71.6 %
  Product sales                           47.6             24.2
  License fees                              -               4.2
                                         -------          -------
Total revenue                            100.0            100.0
Cost of sales                             61.2             61.0
                                         -------          -------
Gross profit                              38.8             39.0
Total expenses                            20.3             29.0
                                         -------          -------
Net income                                18.5 %           10.0 %
                                         =======          =======
</TABLE>

     Revenue for the three months ended December 31, 2003 was $3,118,127, an
increase of 33% from revenue of $2,337,052 for the three months ended December
31, 2002. The revenue increase was primarily due to a 162% increase in
commercial product sales to $1,484,766 from $565,633. Research and development
revenue decreased 2% to $1,633,361 from $1,673,502 due to completion of revenue
recognized under our agreement with Agilent Technologies, Inc., partially
offset by increased government contract revenue. Such non-recurring revenues
from Agilent were $250,000 for the three months ended December 31, 2002.
Increases in commercial product sales were partially offset by an absence of
license revenue due to completion of revenue recognition for payments under our
MRAM license agreements. Such license revenues were $97,917 for the three
months ended December 31, 2002.

     Gross profit remained the same at 39% for the three months ended December
31, 2003 as compared to the three months ended December 31, 2002.

     Research and development expenses decreased by 30% to $230,671 for the
three months ended December 31, 2003 as compared to $327,472 for the three
months ended December 31, 2002. The decrease was due to completion of the
development of some of our commercial products.

     Selling, general and administrative expenses for the three months ended
December 31, 2003 increased by 10% to $464,264 compared to $420,862 for the
three months ended December 31, 2002. The increase was due to increased
commercial selling expenditures, including new product marketing programs.

     Net income totaled $577,156 for the three months ended December 31, 2003
compared to $234,161 for the three months ended December 31, 2002. The increase
in net income was due to higher revenues and higher commercial product margins.

     Diluted net income per share increased to $0.12 from $0.05. The increase
in diluted net income per share was despite an increase in diluted shares to
4,831,540 from 4,466,199 due primarily to a large increase in our stock price
which resulted in a larger dilutive effect from the Cypress warrant and other
warrants and options.


<PAGE>
NINE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO NINE MONTHS ENDED
DECEMBER 31, 2002

     The table shown below summarizes the percentage of revenue for various
items for the periods indicated:

<TABLE>
<CAPTION>
                                       Nine Months Ended December 31
                                          2003             2002
                                         -------          -------
<S>                                      <C>              <C>
Revenue:
  Research and development                56.2 %           70.8 %
  Product sales                           43.8             24.9
  License fees                              -               4.3
                                         -------          -------
Total revenue                            100.0            100.0
Cost of sales                             63.1             62.4
                                         -------          -------
Gross profit                              36.9             37.6
Total expenses                            21.9             30.5
                                         -------          -------
Net income                                15.0 %            7.1 %
                                         =======          =======
</TABLE>

     Revenue for the nine months ended December 31, 2003 was $8,802,161, an
increase of 29% from revenue of $6,844,652 for the nine months ended December
31, 2002. The revenue increase was primarily due to increases in commercial
product sales and research and development revenue. Commercial product sales
increased 126% to $3,852,282 from $1,707,633. Research and development revenue
increased 2% to $4,949,879 from $4,843,268 due to increased government contract
revenue, partially offset by the completion of revenue recognized under our
agreement with Agilent Technologies, Inc. Such revenues from Agilent were
$550,000 for the nine months ended December 31, 2002. Increases in commercial
product sales and research and development revenue were partially offset by an
absence of license revenue due to completion of revenue recognition for
payments under our MRAM license agreements. Such license revenues were $293,751
for the nine months ended December 31, 2002.

     Gross profit margins decreased to 37% for the nine months ended December
31, 2003 as compared to 38% for the nine months ended December 31, 2002. The
decrease was due to $293,751 in license revenue and $550,000 in revenue
recognized under our agreement with Agilent Technologies, Inc. for the nine
months ended December 31, 2002, which have not recurred. The decrease in gross
profit was mostly offset by higher commercial product margins due to successful
yield improvement and wafer cost reduction programs.

     Research and development expenses decreased by 25% to $711,913 for the
nine months ended December 31, 2003 as compared to $944,330 for the nine months
ended December 31, 2002. The decrease was due to completion of the development
of some of our commercial products.

     Selling, general and administrative expenses for the nine months ended
December 31, 2003 increased by 5% to $1,390,818 compared to $1,324,302 for the
nine months ended December 31, 2002. The increase was due to increased
commercial selling expenditures.

     Net income totaled $1,318,050 for the nine months ended December 31, 2003
compared to $486,686 for the nine months ended December 31, 2002. The increase
in net income was due to higher revenues and higher commercial product margins.


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Cash plus available-for-sale securities were $6,699,809 at December 31,
2003, compared to $6,475,865 at March 31, 2003. The increase was due to net
income, partially offset by investments in machinery and equipment and
increases in inventories related to the growth of our commercial product sales.

     We expect to continue to invest in machinery, equipment, and facilities in
the balance of the fiscal year and in the next fiscal year, as we continue to
increase our manufacturing capacity. We believe our working capital is adequate
to meet our requirements for at least the next twelve months.


OUTLOOK

     We expect to broaden our sensor and coupler product lines, and continue to
increase commercial product sales in the rest of the fiscal year ending March
31, 2004 ("Fiscal 2004"), and we expect to report a solid profit for Fiscal
2004. Possible expenses related to commercialization and market development for
Cypress-manufactured MRAMs to be sold by us could decrease our quarterly
profits in the next several quarters. We expect to make such expenditures,
however, only if Cypress is successful in producing commercial MRAM.


<PAGE>
Item 4. Controls and Procedures.

  a. Evaluation of disclosure controls and procedures.

     Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the last
day of the period covered by this quarterly report (the "Evaluation Date").
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective in timely alerting them to the material information
relating to us required to be included in our periodic SEC filings.


  b. Changes in internal controls.

     There were no significant changes made in our internal controls over
financial reporting (as defined in Rule 13 a-15(f) under the Exchange Act)
during the period covered by this report that materially affected or are
reasonably likely to materially affect our internal controls over financial
reporting.


<PAGE>
                          PART II--OTHER INFORMATION


Item 5. Other Information

     On December 1, 2003, we executed a lease amendment for our principal
offices, located at 11409 Valley View Road, Eden Prairie, Minnesota 55344. The
space consists of approximately 21,362 square feet of office, laboratory, and
production space. The amendment extends through December 31, 2008 a lease that
would have expired December 31, 2006. We believe this space will be adequate
for our needs for the amended term of the lease. We plan to make improvements
to our production space in order to increase our capacity and capabilities, and
the lease extension will allow us a better financial return on such facility
improvements.

     In consideration of the extending the term, the amendment provides us a
$50,000 facility improvement allowance for calendar year 2004 and limits the
base rent increases for each of calendar 2007 and 2008 to 3%. In addition to
base rent, we pay operating expenses for the space including maintenance,
utilities, real estate taxes and insurance.

     The lease amendment is filed herewith.


Item 6.  Exhibits and Reports on Form 8-K.

  a. Exhibits.

  10.1    Second amendment to lease between the company and Glenborough
          Properties, L.P. dated December 1, 2003 (filed herewith).

  10.2    First amendment to lease between the company and Glenborough
          Properties, L.P. dated September 18, 2002 (incorporated by reference
          to our Quarterly Report on Form 10-QSB for the period ended
          September 30, 2002).

  10.3    Lease dated October 1, 1998 between the company and Glenborough
          Properties, L.P. (incorporated by reference to our Quarterly Report
          on Form 10-QSB for the period ended September 30, 2002).

  31.1    Certification by Daniel A. Baker pursuant to
          Rule 13a-14(a)/15d-14(a).

  31.2    Certification by Richard L. George pursuant to
          Rule 13a-14(a)/15d-14(a).

  32.1    Certification by Daniel A. Baker pursuant to 18 U.S.C. Section 1350,
          as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  32.2    Certification by Richard L. George pursuant to 18 U.S.C. Section
          1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

  99.1    Cautionary statements for purposes of the "safe harbor" provisions of
          The Private Securities Litigation Reform Act.

  b. Reports on Form 8-K.
          We submitted a Form 8-K on October 21, 2003 including our press
release reporting results for the quarter ended September 30, 2003. This
information was furnished under Item 12, Results of Operations and Financial
Condition.


<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on behalf of the undersigneds thereunto duly authorized.

NVE CORPORATION

Date: January 20, 2004


By /s/ Daniel A. Baker
- -------------------------------------
Daniel A. Baker
President and Chief Executive Officer


By /s/ Richard L. George
- -------------------------------------
Richard L. George
Chief Financial Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>a-2lease.txt
<DESCRIPTION>EX 10.1 - SECOND AMENDMENT TO LEASE BETWEEN THE COMPANY AND GLENBOROUGH PROPERTIES
<TEXT>
                            SECOND AMENDMENT TO LEASE

            This Second Amendment to Lease ("Agreement") is made and entered
into as of December 1, 2003, by and between Glenborough Fund IX, LLC, a
Delaware limited liability company, ("Landlord") and NVE Corporation, a
Minnesota corporation ("Tenant").

                                R E C I T A L S
            This Agreement is made with reference to the following facts and
objectives:
      A.    By Lease and Addendum to Lease by and between Glenborough
Properties, L.P., a California limited partnership, ("GPLP") and Nonvolatile
Electronics, Inc., a Minnesota corporation, dated as of October 1, 1998,
(together, the "Lease") Tenant leased the Premises depicted in Exhibit "A" to
the Lease, demised in Section 1. of the Lease, and described in Sections 1.,
2.13., and 2.14. as Suites 11405, 11409,11411, and 11415 deemed to contain
approximately 21,362 square feet of Usable Area located at 11405-11415 Valley
View Road, Eden Prairie, Minnesota, in the Project known as Bryant Lake
Business Center - Phase III. The actual mailing address for the Premises is
11409 Valley View Road, Eden Prairie, Minnesota.
      B.    Landlord has succeeded to the interests of GPLP in the Lease and in
the Premises. Tenant has succeeded to the interests and obligations of
Nonvolatile Electronics, Inc., in the Lease and in the Premises, by way of
corporate merger.
      C.    Landlord and Tenant desire to extend the Term, and to otherwise
modify and amend the Lease, on and subject to the terms, covenants, and
conditions set forth below.
            NOW, THEREFORE, Landlord and Tenant hereby agree as follows:

                                 A G R E E M E N T

      1.    Effective immediately, Section 2.5. of the Lease is modified and
amended to set forth a new Expiration Date of December 31, 2008.
      2.    Effective immediately, Sections 2.2. and 2.9. of the Lease shall be
modified and amended to add the following schedule of Monthly Installments of
Base Rent to the existing schedules:

  January 1, 2007,      through      December 31, 2007,      $10,243.35 / month
  January 1, 2008,      through      December 31, 2008,      $10,550.65 / month

      3.    Tenant desires to construct a "clean room" in its Premises and to
perform certain other work to be determined later, and Landlord has consented,
on and subject to the following provisions:
            Landlord shall provide an allowance (the "Allowance") in an amount
not to exceed the lesser of $50,000.00, or Tenant's actual construction costs,
for construction of its clean room and other improvements in its Premises (such
work, hereafter, the "Leasehold Improvements"), as incurred prior to December
31, 2004. Landlord shall disburse the Allowance to Tenant, prior to completion
of such work, in the form of four (4) quarterly payments of $12,500.00 each
commencing March 31, 2004. Within not more than sixty (60) days after December
31, 2004, Tenant shall provide third-party invoices for all portions Leasehold
Improvements work performed prior to December 31, 2004, detailing the dates on
which such work was performed. Tenant understands and agrees that the Allowance
shall only be available for those portions of the Leasehold Improvements
performed prior to December 31, 2004, and Tenant shall return any portion of
the Allowance not applicable to Leasehold Improvements performed prior to such
date. Reimbursable categories of expense shall include design work; permitting
costs; plan check fees, engineering costs; generic HVAC upgrades, if required;

                                        1
<PAGE>
clean-room specific HVAC upgrades as required; clean-room specific door,
window, ceiling, and floor modifications; cabling costs; and actual
construction costs. Non-reimbursable categories of expenses shall include
furniture, equipment, and other personal property costs.
            Tenant may commence construction of the Leasehold Improvements at
any time after the date of this Agreement or execution by Landlord, whichever
is later.
            Once commenced, Tenant shall diligently complete the Leasehold
Improvements, to minimize disruption in the Building, and shall secure a
guarantee of the Leasehold Improvements of not less than one (1) year. Landlord
shall reimburse Tenant for allowable costs of the Leasehold Improvements out of
the Allowance once construction is completed, as detailed above.
            Construction of the Leasehold Improvement shall also be subject to
the following general conditions:
(a) The Leasehold Improvements shall be installed and/or constructed by or
    under the direction of Tenant but be subject to Landlord's ongoing review
    and approval. Tenant shall promptly and diligently install and/or construct
    the Leasehold Improvements and the specifications for the Leasehold
    Improvements shall be at least Building Standard, or the quality of the
    pre-existing improvements in the Premises, except where waived in writing
    by Landlord.

(b) If Tenant elects to perform work that requires any building permit or
    involves relocating walls or doors, then Tenant shall provide Landlord with
    copies of a preliminary space plan and specifications (collectively, the
    "Space Plan") and, after Landlord has approved or made changes to the Space
    Plan, with final construction drawings and specifications (collectively,
    the "Construction Drawings") detailing such work for Landlord's review and
    approval. No Space Plan or Construction Drawings shall be required for
    carpet, paint, and updating lighting and other fixtures. Tenant shall
    obtain all required building permits at its own cost (but subject to
    subsequent reimbursement out of the Allowance) and shall provide Landlord
    with copies. Landlord shall reasonably and promptly sign any building
    permit applications where the owner's signature is required, provided that
    Tenant hereby agrees to protect, defend, and indemnify Landlord from any
    liabilities arising there from.

(c) Tenant's general contractor ("General Contractor") and all subcontractors
    shall be subject to the reasonable approval of Landlord and, at request of
    Landlord if generally required for work in the Building, shall employ only
    union workers. General Contractor and all subcontractors shall be licensed
    and qualified to do business in the State of Minnesota.

(d) Tenant's General Contractor shall provide Landlord with Certificates of
    Insurance:  (i) naming Landlord, its property manager, and any other
    parties designated by Landlord, as additional insureds, as their respective
    interests may appear; (ii) evidencing general liability, owner's and
    contractor's protective ("OCP") liability, and property damage insurance
    with respect to the work of Leasehold Improvements of at least One Million
    Dollars ($1,000,000.00) combined single limit for bodily injury, death and
    property damage liability or such other limits that seem appropriate to the
    scope of the work and financial capacity of the contractor; and (iii)
    evidencing Workers' Compensation insurance in compliance with State law.
    The preceding insurance is in addition to Tenant's insurance obligations
    under the Lease.

(e) Landlord reserves the right to enter the Premises (i) to post such notices,
    including, without limitation, notices of non-responsibility for mechanics'
    liens, as Landlord deems necessary, and (ii) to inspect the progress and
    quality of the Leasehold Improvements.

(f) Tenant shall take all reasonable steps necessary to ensure that the
    Leasehold Improvements shall be installed and/or constructed in a manner
    that will not interfere with the quiet enjoyment of other tenants and of
    guests entering the lobby including, without limitation, complying with
    Landlord's existing rules and regulations, if any, for contractors and/or
    for construction work in the Building and with any separate or additional
    reasonable directives of Landlord. Tenant shall ensure that the work area
    is kept clean and that construction material does not block any corridor,
    hallway, walkway, driveway, or other passageway commonly used by other
    tenants or by maintenance personnel. Tenant shall bring construction
    materials to the Premises in the manner, and during time periods, specified
    by Landlord to minimize impact on other tenants, on Building guests, and on
    the Building. Tenant shall be responsible for all clean-up and disposal of
    waste, which shall not be disposed of, other than in minor quantities

                                        2
<PAGE>
    consistent with normal Premises usage, in Building trash containers.

(g) Tenant shall diligently commence and pursue the Leasehold Improvements to
    completion in accordance with the requirements of this Section and shall be
    solely responsible for any delays in completion. Upon substantial
    completion of the Leasehold Improvements, Landlord, Tenant, any space
    planner or architect, and General Contractor shall walk the Premises
    together and either agree the Leasehold Improvements are complete or agree
    upon a list of minor corrective and finish items ("punch list" items)
    remaining to be done. In addition, not later than ninety (90) days after
    substantial completion, Tenant shall obtain, and provide Landlord with, any
    applicable certificate of occupancy or other evidence of final approvals
    from appropriate municipal authorities, if available, with copies of
    invoices for the Leasehold Improvements indicating payment in full, and
    with final, unconditional mechanics' lien releases. Tenant shall diligently
    pursue correction and/or completion of any outstanding punch list items
    and, at the request of Landlord, shall certify upon their completion that
    the Leasehold Improvements have been completed according to "as-built"
    plans and specifications, providing Landlord with one complete set of such
    "as-built" plans and specifications for any Leasehold Improvements
    requiring a building permit, in CD-ROM format if requested by Landlord.

(h) Landlord understands and agrees that the Leasehold Improvements may not be
    completed prior to December 31, 2004. Tenant understands and agrees that
    the Allowance is only applicable to work prior to such date.

(i) Landlord shall not be liable to Tenant for any noncompliance of the
    Leasehold Improvements with building codes or other laws or regulations
    notwithstanding Landlord's review and approval of the Space Plan and
    Construction Drawings and any inspection and approval of the Leasehold
    Improvements. Tenant shall be solely responsible for complying with all
    laws and regulations including, without limitation, the American's with
    Disabilities Act and with any energy conserving laws or requirements; but
    Landlord shall be responsible for path of travel to the Premises, unless
    Tenant has relocated entry doors.

      4.    All other terms, covenants, and conditions of the Lease, shall
remain in full force and effect.

            This Agreement modifies and amends the Lease. To the extent there
are any inconsistencies between this Agreement and the Lease, the terms,
covenants, and conditions of this Agreement shall govern. Capitalized terms not
defined herein are defined in the Lease.

            IN WITNESS WHEREOF, Landlord and Tenant have executed this
Agreement as of the date first above written.

LANDLORD:
GLENBOROUGH FUND IX, LLC,
a Delaware limited liability company

By:   GRT IX, Inc.,
      a Delaware corporation
      Its Managing Member

            By: /s/ Michael A. Steele
                ---------------------
                  Its Executive Vice President
                      ------------------------


TENANT:
NVE CORPORATION,
a Minnesota corporation

By:  /s/ Daniel A. Baker
     -------------------
            Its President and CEO
                -----------------
By:
     -------------------
            Its
                 ----------------








                                        3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>dabex31.txt
<DESCRIPTION>EX 31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION BY DANIEL A. BAKER
<TEXT>
                                                                   Exhibit 31.1
                               CERTIFICATION

I, Daniel A. Baker, certify that:

   1. I have reviewed this quarterly report on Form 10-QSB of NVE Corporation;

   2. Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered
      by this report;

   3. Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the small business issuer as of, and for, the periods presented in this
      report;

   4. The small business issuer's other certifying officer(s) and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
      for the small business issuer and have:

        (a) Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;

        (b) Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report our
            conclusions about the effectiveness of the disclosure controls and
            procedures, as of the end of the period covered by this report
            based on such evaluation; and

        (c) Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control
            over financial reporting; and

   5. The small business issuer's other certifying officer(s) and I have
      disclosed, based on our most recent evaluation of internal control over
      financial reporting, to the small business issuer's auditors and the
      audit committee of the small business issuer's board of directors (or
      persons performing the equivalent functions):

        (a) All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the small business issuer's
            ability to record, process, summarize and report financial
            information; and

        (b) Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.


Date: January 20, 2004

                                  /s/ Daniel A. Baker
                                  -------------------
                                  Daniel A. Baker
                                  President and Chief Executive Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>dgex31.txt
<DESCRIPTION>EX 31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION BY RICHARD L. GEORGE
<TEXT>
                                                                   Exhibit 31.2
                               CERTIFICATION

I, Richard L. George, certify that:

   1. I have reviewed this quarterly report on Form 10-QSB of NVE Corporation;

   2. Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered
      by this report;

   3. Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the small business issuer as of, and for, the periods presented in this
      report;

   4. The small business issuer's other certifying officer(s) and I are
      responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
      for the small business issuer and have:

        (a) Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under our
            supervision, to ensure that material information relating to the
            small business issuer, including its consolidated subsidiaries, is
            made known to us by others within those entities, particularly
            during the period in which this report is being prepared;

        (b) Evaluated the effectiveness of the small business issuer's
            disclosure controls and procedures and presented in this report our
            conclusions about the effectiveness of the disclosure controls and
            procedures, as of the end of the period covered by this report
            based on such evaluation; and

        (c) Disclosed in this report any change in the small business issuer's
            internal control over financial reporting that occurred during the
            small business issuer's most recent fiscal quarter (the small
            business issuer's fourth fiscal quarter in the case of an annual
            report) that has materially affected, or is reasonably likely to
            materially affect, the small business issuer's internal control
            over financial reporting; and

   5. The small business issuer's other certifying officer(s) and I have
      disclosed, based on our most recent evaluation of internal control over
      financial reporting, to the small business issuer's auditors and the
      audit committee of the small business issuer's board of directors (or
      persons performing the equivalent functions):

        (a) All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the small business issuer's
            ability to record, process, summarize and report financial
            information; and

        (b) Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the small business
            issuer's internal control over financial reporting.


Date: January 20, 2004

                                  /s/ Richard L. George
                                  -----------------------
                                  Richard L. George
                                  Chief Financial Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>6
<FILENAME>dabex32.txt
<DESCRIPTION>EX 32.1 - SECTION 906 CERTIFICATION BY DANIEL A. BAKER
<TEXT>
                                                                   Exhibit 32.1

                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                            AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NVE Corporation (the "Company")
on Form 10-QSB for the period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel
A. Baker, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that based on my knowledge:

           1. The Report fully complies with the requirements of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

           2. The information contained in the Report fairly presents, in all
              material respects, the financial condition and results of
              operations of the Company.


Date: January 20, 2004

/s/ Daniel A. Baker
- -------------------
Daniel A. Baker
President and Chief Executive Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>dgex32.txt
<DESCRIPTION>EX 32.2 - SECTION 906 CERTIFICATION BY RICHARD L. GEORGE
<TEXT>
                                                                   Exhibit 32.2

                           CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                            AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NVE Corporation (the "Company")
on Form 10-QSB for the period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Richard
L. George, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that based on my knowledge:

           1. The Report fully complies with the requirements of section 13(a)
              or 15(d) of the Securities Exchange Act of 1934; and

           2. The information contained in the Report fairly presents, in all
              material respects, the financial condition and results of
              operations of the Company.


Date: January 20, 2004

/s/ Richard L. George
- -----------------------
Richard L. George
Chief Financial Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>risk1-04.txt
<DESCRIPTION>EX 99.1 - CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
<TEXT>
                                                                   EXHIBIT 99.1

            CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
           PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT

NVE Corporation is filing this Exhibit 99.1 to its Quarterly Report on Form 10-
QSB to avail itself of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-
QSB, future filings with the Securities and Exchange Commission, press releases
and in oral statements made with the approval of an authorized executive
officer, the words 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 are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These types of statements and the facts or events to which they relate
express risks and uncertainties that could cause actual results to differ
materially from historical financial condition, operating results, business
prospects or any other aspect of NVE, and those presently anticipated or
projected. We caution readers that the following important factors, among
others, could affect our financial condition, operating results, business
prospects or any other aspect of NVE, and could cause our actual results to
differ materially from that projected or estimated by us in the forward-looking
statements made by us or on our behalf. Although we have attempted to list
below the important factors which do or may affect our financial condition,
operating results, business prospects or any other aspect of NVE, other factors
may in the future prove to be more important. New factors emerge from time to
time and it is not possible for us to predict all of such factors. Similarly,
we cannot necessarily assess or quantify the impact of each such factor on the
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in forward-
looking statements.


RISKS RELATED TO OUR BUSINESS

ALTHOUGH WE WERE PROFITABLE IN THE MOST RECENT QUARTER AND FISCAL YEAR, WE HAVE
A HISTORY OF OPERATING LOSSES AND COULD SUFFER FURTHER LOSSES IN THE FUTURE.

We had net income (loss) of $646,850 and ($2,100,442) for the years ended March
31, 2003 and 2002, which we refer to as Fiscal 2003 and Fiscal 2002. As of
December 31, 2003 we had an accumulated deficit of $3,489,438. We reported net
income in Fiscal 2003 and in each of the three quarters of the Fiscal 2004.
During Fiscal 2004 approximately $250,000 per quarter of contract research and
development revenue and recognition of MRAM license revenues of approximately
$98,000 per quarter have ceased. We were able to replace those revenue and
profit sources with expanded commercial product sales in Fiscal 2004, but we
may not be able to do so in future periods. Furthermore, start-up costs
associated with manufacturing, marketing, and selling MRAM devices could lead
to operating losses.


<PAGE>


WE RELY ON GOVERNMENT CONTRACTS FOR A LARGE PERCENTAGE OF OUR REVENUES AND WE
WILL LOSE REVENUE IF WE LOSE THESE CONTRACTS.

During Fiscal 2003 United States government contracts accounted for
approximately 60% of our revenues. Disqualification as a vendor to the United
States government for any reason or a material decrease in government funding
research would cause serious setbacks and would likely hamper both future
research and development activity, as well as related revenues.


OUR POTENTIAL FUTURE INELIGIBILITY FOR GOVERNMENT FUNDED RESEARCH GRANTS COULD
HAVE A SIGNIFICANT IMPACT ON OUR REVENUE AND OUR ABILITY TO MAKE RESEARCH AND
DEVELOPMENT PROGRESS.

Federal regulations require a business to be at least 51% owned by one or more
individuals to be eligible to compete for Small Business Innovation Research
(SBIR) awards. In the three months ended December 31, 2003, we were awarded
approximately $3.04 million in SBIR contracts. SBIR contracts represented 47.7%
of total revenue in Fiscal 2003. While we believe we currently meet the 51%
ownership rule, purchases by non-individuals in the open market or by other
means could cause us to become ineligible. Such changes in ownership are beyond
our control and could cause us to lose our eligibility to compete for SBIR
awards, which in turn could have a material adverse effect on our revenues
profits, and research and development efforts.


WE MAY LOSE REVENUE IF ANY OF OUR LARGE CUSTOMERS CANCEL, POSTPONE, OR REDUCE
THEIR PURCHASES.

We rely on several large customers for a large percentage of our commercial
revenues; these include Agilent Technologies, Inc., St. Jude Medical, Inc.,
United States Government, and certain distributors. Orders from these customers
can be cancelled, postponed, or reduced without cause or notice, and the loss
of any of these customers could have a significant impact on our commercial
revenues and our profitability.


WE FACE A DIFFICULT AND UNCERTAIN ECONOMIC ENVIRONMENT IN OUR INDUSTRY WHICH
COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATIONS.

The semiconductor and electronics industries in general have experienced a
significant economic downturn during the past two years. The poor economic
environment may have adversely affected the sales of many of our customers'
products, thus limiting our sales. Economic conditions may not improve in the
near term or at all. Any failure of the economic environment to improve or a
future downturn would likely have a material adverse impact on our business and
revenues.


OUR REPUTATION COULD BE DAMAGED AND WE COULD LOSE REVENUE IF WE FAIL TO MEET
TECHNICAL CHALLENGES REQUIRED TO PRODUCE MARKETABLE PRODUCTS.

Our products use new technology and we are continually researching and
developing product designs and production processes. Our production processes
require control of magnetic and other parameters that are not required in
conventional semiconductor processes. If we are unable to develop stable
designs and production processes we may not be able to produce products that
meet our customers' requirements, which could cause damage to our reputation
and loss of revenues.


<PAGE>


WE MAY LOSE BUSINESS AND REVENUE IF OUR CRITICAL PRODUCTION EQUIPMENT FAILS.

Our production process relies on certain critical pieces of equipment for
defining, depositing, and modifying the magnetic properties of very thin metal
films. Some of this equipment was designed or customized by us, and some may no
longer be in production. While we have back-ups for some of the equipment, an
in-house maintenance staff, some critical spare parts, and maintenance
agreements for certain pieces of equipment, we cannot be sure we could repair
or replace critical manufacturing equipment were it to fail.


OUR FAILURE TO MEET STRINGENT CUSTOMER TECHNICAL REQUIREMENTS COULD RESULT IN
THE LOSS OF KEY CUSTOMERS AND POTENTIAL REDUCED SALES.

Some of our customers, including Agilent and St. Jude Medical, have stringent
technical requirements which require our products to pass certain test and
qualification criteria before they are accepted by such customers. Failure to
meet those criteria could result in the loss of current sales revenue,
customers and future sales.


IF WE ARE UNABLE TO DELIVER PRODUCTS WE FACE PENALTIES, INCLUDING LOSS OF
CERTAIN EXCLUSIVE MANUFACTURING RIGHTS.

Our Agilent supply agreement allows Agilent to gain rights to manufacture
couplers based on our technology if we are unable to deliver products on time.
The imposition of this penalty could have a material impact on future sales of
our products. Furthermore, on reaching certain sales goals, Agilent could gain
exclusive rights to distribute certain couplers based on our technology, which
could reduce our product sales and leave us partially or totally dependent on
Agilent for future coupler sales.


THE LOSS OF SUPPLY FROM ANY OF OUR KEY SINGLE-SOURCE SUPPLIERS COULD IMPACT OUR
ABILITY TO PRODUCE AND DELIVER PRODUCTS AND CAUSE LOSS OF REVENUE.

Critical suppliers include our suppliers of certain semiconductor wafers which
are incorporated in our products. These critical suppliers include Taiwan
Semiconductor Manufacturing Corporation, Advanced Semiconductor Manufacturing
Corporation of Shanghai (China), Texas Instruments Inc., and AMI Semiconductor,
Inc. We maintain inventory of some critical wafers, but we have not identified
or qualified alternate suppliers for many of the wafers now being obtained from
single sources. We are also dependent on our packaging vendors, including
Circuit Electronics Industries (Ayutthaya, Thailand), and NS Electronics
Bangkok (Thailand), Ltd. Some of our products use processes or tooling unique
to a particular packaging vendor, and it might be expensive, time-consuming, or
impractical to convert to another vendor in the event of a supply interruption.
Supply interruptions could seriously jeopardize our ability to provide products
that are critical to our business and operations which may cause us to lose
revenue.


<PAGE>


BECAUSE WE ARE SIGNIFICANTLY SMALLER THAN THE MAJORITY OF OUR COMPETITORS, WE
MAY LACK THE FINANCIAL RESOURCES NEEDED TO INCREASE OUR MARKET SHARE AND FUTURE
REVENUE.

Our known competitors and potential competitors include Royal Philips
Electronics, Allegro Microsystems, Inc., Agilent Technologies, Inc., Vishay
Intertechnology, NEC Corporation, Analog Devices, Inc., Texas Instruments Inc.,
Advanced Micro Devices, Inc., Intel Corporation, Ramtron International
Corporation, Infineon Technologies AG, Xicor, Inc., IBM Corporation, Fujitsu
Limited, and others. Most of our competitors and potential competitors are
established companies that have significantly greater financial, technical, and
marketing resources than us. While we believe that our products have important
competitive advantages, our competitors may succeed in developing and marketing
products that perform better or are less expensive than ours, or that would
render our products and technology obsolete or noncompetitive.


OUR LICENSE AGREEMENTS INCLUDE REVENUE MINIMUMS AND ROYALTY LIMITS WHICH COULD
LIMIT THE TOTAL AMOUNT OF REVENUE WE CAN DERIVE UNDER THESE AGREEMENTS.

Our existing license agreements do not provide for us to receive royalties
until revenue minimums are met by licensees. In addition, some of these
agreements place limits on future royalty and license payments. These
provisions could substantially delay our potential revenues and profits from
these licensing arrangements and could limit the total amount of revenue that
we can derive under these license agreements. Such limits are common practice
in our industry, but they could limit our potential MRAM revenues and profits
even if our intellectual property is widely adopted.


OUR BUSINESS MAY SUFFER BECAUSE WE HAVE LIMITED INFLUENCE OVER THE RATE OF
ADOPTION OF OUR TECHNOLOGY, AND MRAM TECHNOLOGY MAY NOT BUILD INTO A LARGE OR
SIGNIFICANT MARKET.

A significant portion of our future revenues and profits is dependent on our
licensees and manufacturing partners introducing MRAM products. Production
difficulties, technical barriers, high production costs, poor market reception
or other problems, almost all of which are outside our control, could prevent
the deployment of MRAM or limit its market potential. In addition, our
licensees and manufacturing partners may have other priorities that detract
attention and resources from introduction of MRAM products using our
technology. Furthermore, competing technologies could prevent or supplant MRAM
from becoming an important memory technology.


OUR LICENSEES MAY NOT BE ABLE TO MAKE COMMERCIALLY VIABLE MRAMS, WHICH WOULD
LIMIT OUR REVENUE FROM MRAM.

MRAM is a new technology, and we are almost completely dependent on our
licensees to convert our intellectual property into commercially viable MRAM.
While our licensees have made prototypes and samples, several technical and
manufacturing issues must be resolved before commercially viable devices can
be produced, and these problems may never successfully be solved. Cypress has
announced a self-imposed deadline of March 31, 2004 to produce fully-functional
samples. Cypress has missed several targets for the production of sample
devices, and further delays could have a material impact on our revenues from
MRAM. Motorola has announced plans for pilot production by late 2004, but
delays could have a material impact on our potential MRAM license revenues.


<PAGE>


WE ARE HIGHLY DEPENDENT ON MOTOROLA TO COMBINE OUR MRAM TECHNOLOGY WITH
CONVENTIONAL SEMICONDUCTORS AND WE MAY LOSE POTENTIAL REVENUE IF MOTOROLA IS
UNSUCCESSFUL

"Embedded" MRAM, that is, MRAM combined with conventional semiconductors, is a
major market for MRAM and the primary potential source of royalties from
Motorola. We are highly dependent on Motorola's success embedding MRAM into
processor and cell phone integrated circuits. Technical difficulties with
embedding, production difficulties, high production costs, or other problems,
almost all of which are outside our control, could limit our potential MRAM
royalties.


WE ARE HIGHLY DEPENDENT ON CYPRESS FOR POTENTIAL SUPPLY OF MRAM DEVICES USING
THEIR DESIGNS AND MAY LOSE REVENUE IF WE NEED TO REPLACE CYPRESS AS A SUPPLIER.

Although we have rights to Cypress' MRAM designs, mask works, and other
intellectual property, it could be difficult for us to fabricate devices at a
foundry other than Cypress. This is because other potential foundries might not
have the needed equipment, and Cypress' designs are tailored for their
factories. If Cypress is unable to manufacture devices for us for any reason,
it could be difficult for us to find another manufacturer for their designs.


CYPRESS COULD CANCEL THEIR MRAM DEVELOPMENT PROGRAM, WHICH WOULD REDUCE OUR
FUTURE REVENUE BECAUSE WE COULD NO LONGER SELL DEVICES BASED ON THEIR DESIGNS.

Cypress is not obligated to continue their MRAM development program
indefinitely. A cancellation of their MRAM program would likely eliminate our
opportunity to sell devices based on their designs.


OUR FUTURE BUSINESS MAY SUFFER BECAUSE WE MAY NOT BE ABLE TO CONSUMMATE
ADDITIONAL MRAM LICENSE AGREEMENTS.

Although there are potential licensees for our MRAM intellectual property in
addition to our current licensees and partners, we may never be able to
consummate additional license agreements. Potential licensees for our MRAM
intellectual property might not be interested unless and until the commercial
viability of the technology is demonstrated. Potential licensees could also use
their own or a third party's MRAM intellectual property rather than ours. In
addition, our existing agreements place restrictions on future license
agreements. Specifically, one of our agreements allows one of our licensees to
approve licenses with certain other potential licensees. Each of these
limitations could hinder our ability to consummate additional MRAM license
agreements.


WE WILL NOT RECEIVE ROYALTIES IF OUR LICENSEES DO NOT USE OUR INTELLECTUAL
PROPERTY.

Our license agreements do not require our licensees to use our intellectual
property. Although we believe the devices that Motorola, Inc. and Cypress
Semiconductor Corporation have demonstrated would use our intellectual
property, our licensees could circumvent or find alternatives to our
technology, and our license agreements apply only if our licensees use our
intellectual property in their devices. It is possible that our licensees might
make MRAM devices without using our technology or infringing on our patents,
and we would not receive royalties on such devices.


<PAGE>


WE MAY NOT BE ABLE TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS OR OUR
TECHNOLOGY MAY PROVE TO INFRINGE UPON PATENTS OR RIGHTS OWNED BY OTHERS WHICH
MAY PREVENT THE FUTURE SALE OF OUR PRODUCTS.

We protect our proprietary technology and intellectual property by seeking
patents and maintaining trade secrets, which we implement by entering into
confidentiality agreements with employees and suppliers, depending on the
circumstances. We hold patents or are the licensee of patented technology
covering certain aspects of our sensor, coupler, and MRAM technology. These
patent rights may be challenged, rendered unenforceable, invalidated or
circumvented. In addition, rights granted under the patents or under licensing
agreements may not provide a competitive advantage to us. Efforts to legally
enforce patent rights can involve substantial expense and may not be
successful. Further, others may independently develop similar or superior
technologies or duplicate any technology developed by us, or our technology may
prove to infringe upon patents or rights owned by others. Thus the patents held
by or licensed to us may not afford us any meaningful competitive advantage.
Also, our confidentiality agreements may not provide meaningful protection of
our proprietary information. Our inability to maintain our proprietary rights
could have a material adverse effect on our business, financial condition and
results of operations.


OUR BUSINESS SUCCESS MAY BE ADVERSELY AFFECTED IF WE ARE UNABLE TO ATTRACT AND
RETAIN HIGHLY-QUALIFIED MANAGEMENT AND TECHNICAL EMPLOYEES.

We have no employment agreements with any of our management other than our
Chief Executive Officer, Dr. Baker, and have no key-person insurance covering
employees. Competition for highly-qualified management and technical personnel
is generally intense and we may not be able to attract and retain the personnel
necessary for the development and operation of our business. The loss of the
services of key personnel could have a material adverse effect on our business,
financial condition and results of operations. Our Chief Technology Officer,
Dr. Daughton, may decide to retire at any time in the next several years, and
we may not be able to replace his technical or contract development expertise.


RISKS RELATED TO BUYING OUR STOCK

OUR STOCK MAY BE SUBJECT TO VOLATILITY BECAUSE IT IS NOT LISTED ON A NATIONAL
MARKET.

Our common stock is traded on the NASDAQ SmallCap Market, which has less daily
trading volume on average than the average trading market for companies quoted
on the NASDAQ National Market or the New York Stock Exchange. A public trading
market having the desired characteristics of depth, liquidity and orderliness
depends on the presence in the marketplace of willing buyers and sellers of our
common stock at any given time. This presence depends on the individual
decisions of investors and general economic and market conditions over which we
have no control.

THE PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY SIGNIFICANT PRICE
FLUCTUATIONS DUE TO A NUMBER OF FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL.

The market price of our common stock has experienced significant fluctuations
and may continue to fluctuate in the future. The market price of the common
stock may be significantly affected by many factors, including:

<PAGE>


     *  changes in requirements or demands for our products;

     *  the announcement of new products or product enhancements by us or our
        competitors;

     *  technological innovations by us or our competitors;

     *  quarterly variations in our or our competitors' operating results;

     *  changes in prices of our or our competitors' products and services;

     *  changes in our revenue and revenue growth rates;

     *  changes in earnings estimates by market analysts, speculation in the
        press or analyst community; and

     *  general market conditions or market conditions specific to particular
        industries.

The stock prices for many companies in the technology sector have experienced
wide fluctuations that often have been unrelated to their operating
performance. Such fluctuations may adversely affect the market price of our
common stock.

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