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<SEC-DOCUMENT>0000724910-05-000017.txt : 20050720
<SEC-HEADER>0000724910-05-000017.hdr.sgml : 20050720
<ACCEPTANCE-DATETIME>20050720160905
ACCESSION NUMBER:		0000724910-05-000017
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20050630
FILED AS OF DATE:		20050720
DATE AS OF CHANGE:		20050720

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-12196
		FILM NUMBER:		05963983

	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>10-Q
<SEQUENCE>1
<FILENAME>tenq1-06.txt
<TEXT>
                              UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended  June 30, 2005

Commission File Number:  000-12196


                             NVE Corporation
          (Exact name of registrant as specified in its charter)



            Minnesota                                   41-1424202
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)


   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.                  [X] Yes  [ ] No

     Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).                 [ ] Yes  [X] No


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 - 4,570,104 shares outstanding as of
July 15, 2005


<PAGE>
                       PART I--FINANCIAL INFORMATION

Item 1. Financial Statements.

                                NVE CORPORATION
                                BALANCE SHEETS
                        JUNE 30, 2005 AND MARCH 31, 2005

<TABLE>
<CAPTION>
                                                  (Unaudited)          *
                                                 June 30, 2005   March 31, 2005
                                                --------------   --------------
<S>                                             <C>              <C>
ASSETS
Current assets
   Cash and cash equivalents                    $   1,462,601    $   1,240,205
   Short-term investments                             759,030          252,775
   Accounts receivable, net of allowance for
     uncollectible accounts of $15,000              2,207,720        2,285,472
   Inventories                                      1,660,158        1,572,759
   Deferred tax asset                                 783,395          756,074
   Prepaid expenses and other assets                  130,990          130,873
                                                --------------   --------------
Total current assets                                7,003,894        6,238,158
Fixed assets
   Machinery and equipment                          4,102,089        4,140,307
   Leasehold improvements                             413,482          413,482
                                                --------------   --------------
                                                    4,515,571        4,553,789
   Less accumulated depreciation                    2,927,035        2,826,227
                                                --------------   --------------
Net fixed assets                                    1,588,536        1,727,562
Long-term investments                               6,269,848        6,224,284
                                                --------------   --------------
Total assets                                    $  14,862,278    $  14,190,004
                                                ==============   ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                             $     280,426    $     319,427
   Accrued payroll and other                          506,061          465,930
   Deferred revenue                                   219,914          267,355
   Capital lease obligations                           84,392           67,430
                                                --------------   --------------
Total current liabilities                           1,090,793        1,120,142
Capital lease obligations, less current portion           -             33,281
                                                --------------   --------------
Total liabilities                                   1,090,793        1,153,423

Shareholders' equity:
   Common stock                                        45,701           45,698
   Additional paid-in capital                      14,307,683       14,064,625
   Accumulated other comprehensive loss               (53,034)        (132,228)
   Accumulated deficit                               (528,865)        (941,514)
                                                --------------   --------------
Total shareholders' equity                         13,771,485       13,036,581
                                                --------------   --------------
Total liabilities and shareholders' equity      $  14,862,278    $  14,190,004
                                                ==============   ==============
</TABLE>

*The March 31, 2005 Balance Sheet is from the audited financial statements
 contained in our Annual Report on Form 10-KSB for the year ended
 March 31, 2005.

                            See accompanying notes.


<PAGE>
                                NVE CORPORATION
                             STATEMENTS OF INCOME
                     QUARTERS ENDED JUNE 30, 2005 AND 2004
                                  (Unaudited)

<TABLE>
<CAPTION>
                                               Quarter Ended June 30
                                                2005           2004
                                            ------------   ------------
<S>                                         <C>            <C>
Revenue
  Product sales                             $ 1,784,250    $ 1,363,140
  Contract research and development           1,241,298      1,526,087
                                            ------------   ------------
Total revenue                                 3,025,548      2,889,227

Cost of sales                                 1,681,118      1,625,881
                                            ------------   ------------
Gross profit                                  1,344,430      1,263,346

Expenses
  Research and development                      376,800        361,259
  Selling, general, and administrative          409,594        484,596
                                            ------------   ------------
Total expenses                                  786,394        845,855
                                            ------------   ------------

Income from operations                          558,036        417,491

Interest income                                  68,319         54,869
Interest expense                                 (2,053)        (4,457)
Other income                                     30,815         15,768
                                            ------------   ------------
Income before taxes                             655,117    $   483,671

Provision for income taxes                      242,468            -
                                            ------------   ------------
Net income                                  $   412,649    $   483,671
                                            ============   ============

Net income per share - basic                $      0.09    $      0.11
                                            ============   ============
Net income per share - diluted              $      0.09    $      0.10
                                            ============   ============

Weighted average shares outstanding
  Basic                                       4,569,861      4,493,180
  Diluted                                     4,683,151      4,977,489
</TABLE>



                            See accompanying notes.


<PAGE>
                                NVE CORPORATION
                           STATEMENTS OF CASH FLOWS
                     QUARTERS ENDED JUNE 30, 2005 AND 2004
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                       Quarter Ended June 30
                                                       2005            2004
                                                    ------------   ------------
<S>                                                 <C>            <C>
OPERATING ACTIVITIES
Net income                                          $   412,649    $   483,671
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization                       143,142        118,587
    Gain on sale of fixed assets                        (25,500)          -
    Deferred income taxes                               240,468           -
    Changes in operating assets and liabilities:
      Accounts receivable                                77,752       (211,486)
      Inventories                                       (87,399)        30,221
      Prepaid expenses and other                           (117)       (26,670)
      Accounts payable and accrued expenses               1,130        (76,442)
      Deferred revenue                                  (47,441)       (31,040)
                                                    ------------   ------------
Net cash provided by operating activities               714,684        286,841

INVESTING ACTIVITIES
Proceeds from the sale of fixed assets                   25,500           -
Purchases of fixed assets                                  -          (233,666)
Purchases of investment securities                     (504,063)       (19,922)
                                                    ------------   ------------
Net cash used in investing activities                  (478,563)      (253,588)

FINANCING ACTIVITIES
Net proceeds from sale of common stock                    2,594         50,003
Repayment of capital lease obligations                  (16,319)       (40,594)
                                                    ------------   ------------
Net cash (used in) provided by
  financing activities                                  (13,725)         9,409
                                                    ------------   ------------

Increase in cash and cash equivalents                   222,396         42,662
Cash and cash equivalents at beginning of period      1,240,205      1,055,796
                                                    ------------   ------------

Cash and cash equivalents at end of period          $ 1,462,601    $ 1,098,458
                                                    ============   ============
</TABLE>



                            See accompanying notes.


<PAGE>
                                NVE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                                 JUNE 30, 2005
                                  (Unaudited)

1.  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.

2.  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 Securities and Exchange Commission rules and
regulations. In the opinion of management, these financial statements reflect
all adjustments, consisting only of normal and recurring adjustments, necessary
for a fair presentation of the financial statements. Although we believe that
the disclosures are adequate to make the information presented not misleading,
it is suggested that these unaudited financial statements be read in
conjunction with the audited financial statements and the notes included in our
latest annual financial statements included in our Annual Report on Form 10-KSB
for the fiscal year ended March 31, 2005. The results of operations for the
quarter ended June 30, 2005 are not necessarily indicative of the results that
may be expected for the full fiscal year ending March 31, 2006.

NOTE 3. FINANCIAL INSTRUMENTS
     Our financial instruments consist of cash and cash equivalents,
investments, short-term trade receivables, and accounts payable. Because of
their short-term nature, carrying values of our financial instruments
approximate their fair value.

NOTE 4. COMPREHENSIVE INCOME
The components of comprehensive income are as follows:

<TABLE>
<CAPTION>
                                            Quarter ended June 30
                                             2005           2004
                                         ------------   ------------
<S>                                      <C>            <C>
Net income                               $   412,649    $   483,671
Unrealized gain (loss) from investments       79,194       (158,245)
                                         ------------   ------------
Comprehensive income                     $   491,843    $   325,426
                                         ============   ============
</TABLE>

NOTE 5. INVENTORIES
     Inventories consisted of the following:

<TABLE>
<CAPTION>
                                     June 30        March 31
                                       2005           2005
                                   ------------   ------------
<S>                                <C>            <C>
       Raw materials               $   852,590    $   754,456
       Work-in-process                 619,641        614,337
       Finished goods                  367,927        383,966
                                   ------------   ------------
                                     1,840,158      1,752,759
       Less obsolescence reserve      (180,000)      (180,000)
                                   ------------   ------------
                                   $ 1,660,158    $ 1,572,759
                                   ============   ============
</TABLE>


<PAGE>
NOTE 6. STOCK-BASED COMPENSATION
     We have adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) Nos. 123 and 148, Accounting for Stock-Based
Compensation, but apply Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for
our plans. Under APB Opinion 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. 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% to 3.1% for the three months ended June 30,
2005 and 2004; expected volatility of 55% to 99% for the three months ended
June 30, 2005 and 2004; a weighted-average expected life of the options of one
to five 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.

     The pro forma information is as follows:

<TABLE>
<CAPTION>
                                                       Quarter Ended June 30
                                                        2005           2004
                                                    ------------   ------------
<S>                                                 <C>            <C>
   Net income applicable to common shares:
        As reported                                 $   412,649    $   483,671
        Pro forma adjustment for stock options          (10,319)      (132,564)
                                                    ------------   ------------
        Pro forma net income                        $   402,330    $   351,107
                                                    ============   ============
   Earnings per share:
     Basic - as reported                            $      0.09    $      0.11
     Basic - pro forma                              $      0.09    $      0.08

     Diluted - as reported                          $      0.09    $      0.10
     Diluted - pro forma                            $      0.09    $      0.07
</TABLE>

NOTE 7. 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.

     We do not expect to pay taxes in the near future because we have stock-
based compensation deductions. We began recognizing tax expenses for reporting
purposes in fiscal 2006, however, because under SFAS No. 109, Accounting for
Income Taxes, stock-based compensation deductions do not reduce provision for
income taxes reported for book purposes. Regardless of our expectations, there
can be no assurance that we will generate any specific level of continuing
earnings.


<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation.

Forward-looking statements
     Some of the statements made in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to the safe harbor provisions of the
reform act. Forward-looking statements may be identified by the use of the
terminology such as may, will, expect, anticipate, intend, believe, estimate,
should, or continue, or the negatives of these terms or other variations on
these words or comparable terminology. To the extent that this Report contains
forward-looking statements regarding the financial condition, operating
results, business prospects or any other aspect of NVE, you should be aware
that our actual financial condition, operating results and business performance
may differ materially from that projected or estimated by us in the forward-
looking statements. We have attempted to identify, in context, some of the
factors that we currently believe may cause actual future experience and
results to differ from their current expectations. These differences may be
caused by a variety of factors, including but not limited to 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 that may be
alluded to in this report and those discussed in Exhibit 99 to this Report, as
well as those discussed in Exhibit 99 to our Annual Report on Form 10-KSB for
the year ended March 31, 2005.

General
     We develop, manufacture, and sell devices using "spintronics," a
nanotechnology we helped pioneer, which utilizes electron spin rather than
electron charge to acquire, store and transmit information. We are a licensor
of spintronic magnetic random access memory technology, commonly referred to as
MRAM, which we believe has the potential to revolutionize electronic memory. We
also manufacture high-performance spintronic products including sensors and
couplers to revolutionize data sensing and transmission.


Quarter ended June 30, 2005 compared to the quarter ended June 30, 2004

     The table below summarizes certain summary information for various items
for the periods indicated:


<PAGE>
<TABLE>
<CAPTION>
                                     Percentage of Revenue            Period-
                                     Quarter Ended June 30           to-Period
                                     2005             2004            Change
                                    -------          -------         ---------
<S>                                 <C>              <C>             <C>
Revenue
  Product sales                      59.0 %           47.2 %           30.9 %
  Research and development           41.0 %           52.8 %          (18.7)%
                                    -------          -------
Total revenue                       100.0 %          100.0 %            4.7 %
Cost of sales                        55.6 %           56.3 %
                                    -------          -------
Gross profit                         44.4 %           43.7 %

Total expenses                       26.0 %           29.3 %           (7.0)%
                                    -------          -------
Income from operations               18.4 %           14.4 %           33.7 %
Net interest and other income         3.2 %            2.3 %           46.7 %
                                    -------          -------
Income before taxes                  21.6 %           16.7 %           35.4 %
Provision for income taxes            8.0 %              -                -
                                    -------          -------
Net income                           13.6 %           16.7 %          (14.7)%
                                    =======          =======
</TABLE>


     Total revenue for the quarter ended June 30, 2005 (the first quarter of
fiscal 2006) was $3,025,548, an increase of 5% from revenue of $2,889,227 for
the quarter ended June 30, 2004 (the first quarter of fiscal 2005). The
increase was due to a 31% increase in product sales to $1,784,250 from
$1,363,140, partially offset by a decrease in contract research and development
revenue.

     Gross profit margin increased to 44.4% for the first quarter of fiscal
2006 from 43.7% for fiscal 2005. The increase was due to a more favorable
revenue mix and higher product margins due to the deployment of lower-cost
coupler designs.

     Research and development expenses increased by 4% to $376,800 for the
quarter ended June 30, 2005 compared to $361,259 for the quarter ended June 30,
2004. The increase was due to a shift from government-funded to company-funded
research, an increase in efforts to secure new research contracts, and efforts
to develop new and improved commercial products.

     Selling, general and administrative expenses for the quarter ended June
30, 2005 decreased by 15% to $409,594 compared to $484,596 for the quarter
ended June 30, 2004. The decrease was due to a shift to distributors to sell
our products rather than manufacturers' representatives. This shift reduced
commissions we paid and expenses associated with supporting the manufacturers'
representatives.

     Pre-tax income increased 35% to $655,117 for the quarter ended June 30,
2005 from $483,671 for the quarter ended June 30, 2004. The increase was due to
an increase in revenue, an increase in gross profit margin, and a decrease in
selling, general and administrative expenses. These changes were partially
offset by an increase in research and development expense.

     The provision for income taxes for the quarter ended June 30, 2005 is due
to the exhaustion of our net operating losses in fiscal 2005. We do not expect
to pay cash taxes in the near future, however, because we have significant
stock-based compensation deductions.


<PAGE>
     Net income totaled $412,649 for the quarter ended June 30, 2005 compared
to $483,671 for the quarter ended June 30, 2004. The decrease in net income was
due to the provision for income taxes.

Liquidity and capital resources
     At June 30, 2005 we had $8,491,479 in cash and investments compared to
$7,717,264 at March 31, 2005. The increase was due to cash generated from
operations.

     Accounts receivable decreased to $2,207,720 at June 30, 2005 from
$2,285,472 at March 31, 2005. The decrease was primarily due to payments for
product shipments weighted toward late in fiscal 2005 as product sales
recovered from a downturn in the quarter ended December 31, 2004. We expect
accounts receivable in the future to approximately track revenue.

     Inventory increased to $1,660,158 at June 30, 2005 from $1,572,759 at
March 31, 2005. The increase was primarily due to purchases of foundry wafers
either to secure more favorable pricing or to guard against a possible supply
shortage. The risk of a foundry wafer supply shortage appears to have since
abated.

     We currently have no material commitments for capital expenditures. We
believe our working capital is adequate for our needs at least for the next 12
months.

Our Outlook
     Electronic component industry conditions appeared to improve in the first
half of calendar 2005 after a weak second half of calendar 2004, as excess
inventories in the electronic component distribution channel were burned off.
We are therefore cautiously optimistic for product sales in fiscal 2006
compared to fiscal 2005.

     We expect research and development revenue to continue to decline in
fiscal 2006 due to more limited availability of government research funds, our
shift in emphasis from government-funded to company-funded research,
particularly new product development, and our focus of contract research on
certain strategic areas.

     We expect gross profit margin to continue to tend to increase in fiscal
2006 due to a continued shift in our revenue mix to product sales from research
and development revenue, and as a result of lower-cost product designs
completed in fiscal 2005. These increases could be offset, however, by
competitive pressures that could cause us to decrease our product selling
prices, and by our shift from sales representatives to distributors.

     Selling, general and administrative expenses could increase as we attempt
to acquire additional MRAM license agreements or if we need to enforce existing
MRAM license agreements.

     We expect research and development expenses to increase in fiscal 2006 as
we develop new products and continue to shift from government-funded to
company-funded research and development. A shortage of budget funds in the last
quarter of the government fiscal year could also lead to a decrease in
government revenue in the quarter ending September 30, 2005.

     We do not expect to pay any significant income taxes in fiscal 2006 due to
our stock based compensation deductions, however we expect to recognize
provisions for income taxes at an effective rate of approximately 37% percent
of net income. Unlike net operating loss carryforwards, stock based
compensation deductions do not reduce taxes reported for book purposes when
realized.


<PAGE>
     Although we anticipate being profitable in fiscal 2006, no assurance can
be given that we will be successful in achieving this goal.

     We are not currently planning any significant capital expenditures in
fiscal 2006, although we evaluate capital investments as needs and
opportunities arise. We would likely fund any capital expenditures from
operating profits, our cash and cash equivalents, or from the sale of a portion
of our investments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
     Our interest income is subject to interest rate risks on cash, cash
equivalents, and investments. Our investments in fixed-rate debt securities,
which were classified as available-for-sale as of June 30, 2005, have remaining
maturities from one to 60 months, and are exposed to the risk of fluctuating
interest rates. Available-for-sale securities had a market value of $7,028,878
at June 30, 2005, representing 47% of our total assets. The primary objective
of our investment activities is to preserve capital. We have not used
derivative financial instruments in our investment portfolio.

     We performed a sensitivity analysis assuming a hypothetical 10% adverse
movement in interest rates applicable to fixed rate instruments maturing during
the next 12 months that are subject to reinvestment risk. As of June 30, 2005,
the analysis indicated that these hypothetical market movements would not have
a material effect on our financial position, results of operations, or cash
flow.

Item 4. Controls and Procedures.
     As of the end of the period covered by this Report, we conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of our disclosure controls
and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms. There was no change
in our internal control over financial reporting during our most recently
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.


<PAGE>
                          PART II--OTHER INFORMATION


Item 6. Exhibits.

  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      Certification by Daniel A. Baker and 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      Cautionary statements for purposes of the "safe harbor" provisions of
          The Private Securities Litigation Reform Act.


<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                                NVE CORPORATION
                                                                  (Registrant)


        July 20, 2005                                       /s/ Daniel A. Baker
        -------------                     -------------------------------------
            Date                                                Daniel A. Baker
                                          President and Chief Executive Officer


        July 20, 2005                                     /s/ Richard L. George
        -------------                     -------------------------------------
            Date                                              Richard L. George
                                                        Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>dabex31.txt
<DESCRIPTION>CERTIFICATION BY DANIEL A. BAKER PURSUANT TO RULE 13A-14(A)/15D-14(A)
<TEXT>
                                                                   Exhibit 31.1
                               CERTIFICATION

I, Daniel A. Baker, certify that:

   1. I have reviewed this Quarterly Report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

   4. The registrant'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 registrant
      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
            registrant, 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 registrant'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 registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

   5. The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant'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 registrant'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 registrant's
            internal control over financial reporting.


Date: July 20, 2005

                                  /s/ Daniel A. Baker
                                  -------------------
                                  Daniel A. Baker
                                  President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>rlgex31.txt
<DESCRIPTION>CERTIFICATION BY RICHARD L. GEORGE PURSUANT TO RULE 13A-14(A)/15D-14(A)
<TEXT>
                                                                   Exhibit 31.2
                               CERTIFICATION

I, Richard L. George, certify that:

   1. I have reviewed this Quarterly Report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

   4. The registrant'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 registrant
      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
            registrant, 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 registrant'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 registrant's internal
            control over financial reporting that occurred during the
            registrant's most recent fiscal quarter (the registrant's fourth
            fiscal quarter in the case of an annual report) that has materially
            affected, or is reasonably likely to materially affect, the
            registrant's internal control over financial reporting; and

   5. The registrant's other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial
      reporting, to the registrant's auditors and the audit committee of the
      registrant'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 registrant'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 registrant's
            internal control over financial reporting.


Date: July 20, 2005

                                  /s/ Richard L. George
                                  -----------------------
                                  Richard L. George
                                  Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>ex32.txt
<DESCRIPTION>CERTIFICATION BY DANIEL A. BAKER AND RICHARD L. GEORGE PURSUANT TO 18 U.S.C. SECTION 1350
<TEXT>
                                                                     Exhibit 32

                     CERTIFICATION PURSUANT TO SECTION 906
           OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

The undersigned certify pursuant to 18 U.S.C. Section 1350, that:

           1. The accompanying Quarterly Report of NVE Corporation (the
              "Company") on Form 10-Q for the quarter ended June 30, 2005,
              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: July 20, 2005

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



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


A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to
the Securities and Exchange Commission or its staff upon request.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>risk1q06.txt
<DESCRIPTION>CAUTIONARY STATEMENTS FOR PURPOSES OF THE ???SAFE HARBOR??? PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
<TEXT>
                                                                     Exhibit 99

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

NVE Corporation is filing this Exhibit 99 to its Quarterly Report on Form 10-Q
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-Q,
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

WE RELY ON GOVERNMENT CONTRACTS FOR A LARGE PERCENTAGE OF OUR REVENUE AND WE
WILL LOSE REVENUE IF GOVERNMENT FUNDING IS REDUCED OR ELIMINATED.
During fiscal 2005 United States government contracts accounted for the
majority of our revenue. A shortage of budget funds in the last quarter of the
government fiscal year ending September 30, 2005 could lead to a decrease in
our government revenue in our quarter ending September 30, 2005. Certain
federal budget proposals for the next government fiscal year ending September
30, 2006 have included less than an inflationary increase for overall research
and development funding, and a reduction in dollar terms in the National
Nanotechnology Initiative. Furthermore, government research and development
funding may move away from basic research, which is the area where most of our
contracts are classified, toward near-term development. A material decrease in
government funding research or disqualification as a vendor to the U.S.
government for any reason would cause serious setbacks and would likely hamper
both future research and development activity, as well as related revenue.

FAILURE TO QUALIFY AS A SMALL BUSINESS UNDER FEDERAL REGULATIONS COULD MAKE US
INELIGIBLE FOR SOME GOVERNMENT-FUNDED RESEARCH GRANTS WHICH COULD HAVE A
SIGNIFICANT IMPACT ON OUR REVENUE AND OUR ABILITY TO MAKE RESEARCH AND
DEVELOPMENT PROGRESS.
Federal regulations place a number of criteria for a business to be eligible to
compete for Small Business Innovation Research (SBIR) awards. Those criteria
include number of employees and ownership structure. While we believe we meet
the criteria, changes in our ownership beyond our control could cause us to
lose our eligibility to compete for SBIR awards, which in turn could have a

<PAGE>
material adverse effect on our revenue, 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 revenue; these
include Agilent Technologies, Inc., St. Jude Medical, Inc., the United States
Government, Digi-Key Corporation, and certain other distributors. In the
quarter ended June 30, 2005 we reduced our number of manufacturer's
representatives, which increased our dependence on Digi-Key to distribute our
products in North America. Orders from these large 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 revenue and our profitability.

WE FACE AN UNCERTAIN ECONOMIC ENVIRONMENT IN OUR INDUSTRY THAT COULD ADVERSELY
AFFECT OUR BUSINESS AND OPERATIONS.
Industry reports indicated a sudden downturn in the semiconductor market in the
final months of calendar 2004. Economic conditions appear to have improved in
calendar 2005, but conditions could change suddenly. Any future downturn in the
economic environment would likely have a material adverse impact on our
business and revenue.

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 revenue.

OUR FAILURE TO MEET STRINGENT CUSTOMER TECHNICAL REQUIREMENTS COULD RESULT IN
THE LOSS OF KEY CUSTOMERS AND POTENTIALLY REDUCE OUR 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.

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.

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.

<PAGE>
THE LOSS OF SUPPLY FROM ANY OF OUR KEY SINGLE-SOURCE WAFER SUPPLIERS COULD
IMPACT OUR ABILITY TO PRODUCE AND DELIVER PRODUCTS AND CAUSE LOSS OF REVENUE.
Critical suppliers include our suppliers of certain semiconductor wafers that
are incorporated in our products. These critical suppliers include Advanced
Semiconductor Manufacturing Corporation of Shanghai (China), AMI Semiconductor,
Inc., Intersil Corporation, Taiwan Semiconductor Manufacturing Corporation, and
Texas Instruments 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.

THE LOSS OF SUPPLY OF ANY CRITICAL CHEMICALS OR SUPPLIES COULD IMPACT OUR
ABILITY TO PRODUCE AND DELIVER PRODUCTS AND CAUSE LOSS OF REVENUE.
There are a number of critical chemicals and supplies that we require to make
products. These include certain photoresists, polymers, metals, and alloys. We
maintain inventory of critical chemicals and materials, but in many cases we
are dependant on single sources, and some of the materials could be
discontinued by their suppliers at any time. Any supply interruptions could
seriously jeopardize our ability to provide products that are critical to our
business and operations and may cause us to lose revenue.

THE LOSS OF SUPPLY FROM ANY OF OUR SINGLE-SOURCE PACKAGING VENDORS COULD IMPACT
OUR ABILITY TO PRODUCE AND DELIVER PRODUCTS AND CAUSE LOSS OF REVENUE.
We are dependent on our packaging vendors including NS Electronics Bangkok
(Thailand), Ltd., and Circuit Electronic Industries Public Co., Ltd. ("CEI,"
Ayutthaya, Thailand). 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.
CEI has notified us that it has entered voluntary debt rehabilitation under
Thailand law, which we understand to be roughly analogous to a reorganization
proceeding under Chapter 11 of the U.S. Bankruptcy Code. CEI has told us that
the rehabilitation process will not affect their ability to support their
customers in any way. We have identified alternate vendors in case CEI's
ability to serve our needs becomes impaired, however it could prove expensive
or time-consuming to convert to an alternate vendor. Any supply interruptions
could seriously jeopardize our ability to provide products that are critical to
our business and operations and may cause us to lose revenue. Higher packaging
costs with an alternate vendor could have a significant impact on our
profitability.

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 Advanced Micro Devices,
Inc., Agilent Technologies, Inc., Allegro Microsystems, Inc., Analog Devices,
Inc., Coatue, Cypress Semiconductor Corporation, Elpida Memory, Inc., Fairchild
Semiconductor International, Fujitsu Limited, Grandis, Inc., IBM Corporation,
Infineon Technologies AG, Intel Corporation, Linear Technology Inc., Macronix
International Co., Ltd., Maxim Integrated Products, Inc., Nantero, Inc., NEC
Corporation, Ovonyx, Inc., Ramtron International Corporation, Renesas
Technology Corporation, Royal Philips Electronics, Samsung Electronics, Ltd.,
Sensitec GmbH, Simtek Corporation, Spintec, Spintron, STMicroelectronics NV,
Texas Instruments Inc., Thin Film Electronics ASA, Toshiba Corporation, Vishay
Intertechnology, and others. We believe that we face particularly aggressive
competition in our coupler business, and we believe that our competition is
increasing as the technology matures. This has meant more competitors and more
severe pricing pressure. Furthermore, our competitors are narrowing or
eliminating performance advantages we may have had. We expect these trends to
continue, and our future competitiveness will depend on our ability to develop
new products and reduce our product costs. Most of our competitors and
potential competitors are established companies that have significantly greater

<PAGE>
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 revenue 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 revenue 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 revenue and profits is dependent on our
current and future licensees 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 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 AND LIKELY CAUSE OUR STOCK PRICE TO DECLINE.
MRAM is a new technology, and we are almost completely dependent on licensees
to convert our intellectual property into commercially viable MRAM. While our
licensees have made samples, there may be technical and manufacturing issues to
be resolved before commercially viable devices can be produced, and these
problems may never successfully be solved.

WE ARE HIGHLY DEPENDENT ON MOTOROLA OR FREESCALE TO COMBINE OUR MRAM TECHNOLOGY
WITH CONVENTIONAL SEMICONDUCTORS AND WE MAY LOSE POTENTIAL REVENUE IF MOTOROLA
OR FREESCALE ARE UNSUCCESSFUL.
Embedded MRAM, that is, MRAM combined with conventional semiconductors, is a
major market for MRAM and our primary potential source of royalties from
Motorola, Inc. We are highly dependent on the success of Motorola or Freescale
Semiconductor, Inc. embedding MRAM into cellphone and system 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 under our license agreement
with Motorola.

FREESCALE COULD CANCEL ITS MRAM DEVELOPMENT PROGRAM AT ANY TIME, WHICH WOULD
REDUCE OUR FUTURE REVENUE POTENTIAL.
Freescale could cancel its MRAM development programs at any time because of
financial or other considerations. Such a cancellation would likely eliminate
our opportunity to negotiate a license agreement with Freescale or receive
royalties from the sale of devices under our agreements with Motorola.
Furthermore, we believe Royal Philips Electronics and STMicroelectronics NV are
dependent on Freescale for their MRAM designs. Therefore a cancellation or lack
of success of Freescale's MRAM programs would likely hamper or eliminate any
opportunity to negotiate license agreements with Philips or STMicroelectronics.

<PAGE>
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, 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, based on their public disclosures, that devices
Freescale and Motorola have described use our intellectual property at least to
some extent, our licensees could circumvent or find alternatives to all or some
of our technology, and our license agreements require royalty payments 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.

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 OR INCREASE THE COST OF SUCH SALES.
We protect our proprietary technology and intellectual property by seeking
patents, trademarks, and copyrights, and by maintaining trade secrets through
entering into confidentiality agreements with employees, suppliers, customers,
and prospective customers depending on the circumstances. We hold patents or
are the licensee of others owning 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. At least several potential MRAM competitors have
described designs that we believe would infringe on our patents if such designs
were to be commercialized. Efforts to legally enforce patent rights can involve
substantial expense which we may not be able to afford and in any case may not
be successful. Further, others may independently develop similar, superior, or
parallel technologies to 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 FUTURE BUSINESS MAY SUFFER IF WE ARE UNABLE TO ENFORCE OUR INTELLECTUAL
PROPERTY RIGHTS WITH EXISTING LICENSEES.
Our success in enforcing our intellectual property rights may be dependent on
our ability to enforce our contract rights under existing license agreements.
Our existing licensees could claim without merit that they do not use our
intellectual property or claim that one or more of our patents are invalid. In
2000 we were forced to resort to litigation to enforce our intellectual
property rights with Motorola, and we plan to continue to vigorously defend our
intellectual property rights. Our limited capital resources could put us at a
disadvantage if we take legal action to enforce our intellectual property
rights.

<PAGE>
WE MAY NOT BE ABLE TO NEGOTIATE A NEW MRAM LICENSING AGREEMENT WITH FREESCALE.
Our Patent License Option Agreement with Motorola provides for termination
December 31, 2005 or on the date Motorola ceases manufacturing MRAM Products
whichever is later. Such a termination appears likely as a result of Motorola
apparently having eliminated its ability to manufacture MRAM Products through
its spinoff of Freescale. We are free to negotiate a new agreement with
Freescale or an assignment of the Motorola Patent License Option Agreement to
Freescale, but would do so only with amendments thereto. There can be no
assurance, however, that any such agreement can be reached with Freescale, or
that any such agreement with Freescale would be on more favorable terms to NVE
than the present agreement with Motorola, or that NVE would receive any value
under the existing Patent License Option Agreement or any value under any such
further agreement with Freescale.

MOTOROLA MAY ATTEMPT TO HAVE MRAM MANUFACTURED BY FREESCALE FOR MOTOROLA UNDER
OUR AGREEMENT WITH MOTOROLA, WHICH COULD BE UNDER LESS FAVORABLE TERMS FOR US
THAN AN AGREEMENT WITH FREESCALE.
Motorola has indicated to us that it may attempt to have MRAMs manufactured by
Freescale for Motorola under the so-called "have made" rights in our agreement
with Motorola. We believe Motorola will likely have terminated this agreement
and so relinquish its have-made rights at the end of 2005, as a result of
having transferred its MRAM manufacturing capability to Freescale. If Freescale
commences MRAM production, we hope to, before the termination of the Motorola
agreement, negotiate a new agreement with Freescale, or an assignment of the
Motorola agreement to Freescale, though only with amendments thereto, but there
can be no assurances that we will complete such an agreement or assignment.

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, could decide to retire in Fiscal 2006 and we may not be able to
replace his technical or contract development expertise.

WHILE WE BELIEVE THAT WE CURRENTLY HAVE ADEQUATE INTERNAL CONTROL OVER
FINANCIAL REPORTING IN PLACE, IN THE FUTURE OUR MANAGEMENT WILL BE REQUIRED TO
EVALUATE OUR INTERNAL CONTROL OVER FINANCIAL REPORTING UNDER SECTION 404 OF THE
SARBANES-OXLEY ACT OF 2002 AND ANY ADVERSE RESULTS FROM SUCH EVALUATION COULD
RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND HAVE AN
ADVERSE AFFECT ON OUR FINANCIAL RESULTS AND THE MARKET PRICE OF OUR COMMON
STOCK.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"),
the SEC adopted rules requiring each public company to include a management
report assessing the effectiveness of its internal control over financial
reporting in Annual Reports on Form 10-KSB or 10-K, and the independent
registered public accounting firm auditing such company's financial statements
must attest to and report on management's assessment of the effectiveness of
the internal control over financial reporting. This requirement will apply to
our Annual Report for the fiscal year ending March 31, 2007. While we currently
anticipate being able to fully implement the requirements relating to
compliance with Section 404 in a timely fashion, we cannot be certain as to the
timing of completion of our evaluation, testing and remediation actions or the
impact of such activities on our operations due in large part to the lack of
precedent available by which to measure compliance with such requirements. If
we are not able to implement the requirements of Section 404 in a timely manner

<PAGE>
or with adequate compliance, investors could lose confidence in the reliability
of our financial statements, which could result in a decrease in the market
price of our common stock. In addition, to the extent we or our independent
registered public accounting firm identify a significant deficiency in our
internal control over financial reporting, the resources and costs required to
remediate such deficiency could have a material adverse impact on our future
results of operations.

RISKS RELATED TO BUYING OUR STOCK

OUR STOCK HAS BEEN MORE VOLATILE THAN OTHER TECHNOLOGY SECTOR STOCKS.
The market price of our common stock has experienced significant fluctuations
and may continue to fluctuate in the future. We believe these fluctuations have
been greater on a percentage basis than other technology sector stocks.

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.
Our stock price declined significantly in the past fiscal year, and could
continue to decline. In the past, securities class-action litigation has often
been brought against a company following periods of decline in the market price
of its securities. In the future we could be the target of this type of
litigation. Securities litigation may result in substantial costs and divert
management's attention and resources, which can seriously harm our business.

The market price of our common stock may be significantly affected by many
factors, some of which are beyond our control, including:

     * technological innovations by us, our licensees, or our competitors;

     * the announcement of new products, product enhancements, contracts, or
       license agreements by us, our licensees, or our competitors;

     * changes in requirements or demands for our products;

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

     * quarterly variations in our operating results;

     * changes in our revenue and revenue growth rates;

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

     * short selling and covering of short positions in our stock; and

     * general market conditions or market conditions specific to particular
       industries.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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