-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 E29PTV5ukAOqjVzcycq6V0cUVfev8aqAu1bDTw5eDEynbS6QBOq/vSnPPoRdQCmj
 PLZtw5Ha2/6TGatXPcfCRA==

<SEC-DOCUMENT>0000724910-09-000005.txt : 20090506
<SEC-HEADER>0000724910-09-000005.hdr.sgml : 20090506
<ACCEPTANCE-DATETIME>20090506161853
ACCESSION NUMBER:		0000724910-09-000005
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20090331
FILED AS OF DATE:		20090506
DATE AS OF CHANGE:		20090506

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-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-12196
		FILM NUMBER:		09801735

	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-K
<SEQUENCE>1
<FILENAME>ten-k09.htm
<DESCRIPTION>ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2009
<TEXT>
<html><br>
<hr style="margin-top: -5px; color: black;" noshade size="3">
<hr style="margin-top: -14px; color: black;" noshade size="1">
<div align="center"><font style=" font-size: 12pt; font-family: Times New Roman;"><b>UNITED STATES
<br>SECURITIES AND EXCHANGE COMMISSION</b></font></div>
<div align="center"><font style="font-size: 10pt; font-family: Times New Roman;"><b>Washington, D.C.&nbsp;&nbsp;20549</b></font></div>
<div align="center"><font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">_______________</font></div>
<font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;</font>
<div align="center"><font style=" font-size: 12pt; font-family: Times New Roman;"><b>FORM 10-K</b></font></div>
<font style=" font-size: 8pt; font-family: Times New Roman;">(Mark One)<br>
</font><font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[X]&nbsp;&nbsp;ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font>
<font style="font-size: 10pt; font-family: Times New Roman;"><div align="right">For the fiscal year ended <b>March 31, 2009</b></div>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;</font><font style="font-size: 10pt; font-family: Times New Roman; letter-spacing: -.02em;">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font>
<font style="font-size: 10pt; font-family: Times New Roman;"><div align="right">For the transition period from _____________________to____________________</div>
Commission file number <b>000-12196</b><br>
</font>
<div align="center"><font style=" font-size: 10pt; font-family: Arial;">&nbsp;<img src="logo-10k.gif" alt="NVE Logo" width="132" height="26"><br><b>NVE CORPORATION</b></font><br>
<font style="font-size: 10pt; font-family: Times New Roman;">(Exact name of registrant as specified in its charter)</font><font style="line-height: 5pt;"><br>
&nbsp;<br></font></div>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr align="center">
<td width="50%">
<b>Minnesota</b>
</td>
<td>
<b>41-1424202</b>
</td>
</tr>
<tr align="center">
<td>
State or other jurisdiction of incorporation or organization
</td>
<td>
(I.R.S.Employer Identification No.)
</td>
</tr>
<tr>
<td colspan="2">&nbsp;</td>
</tr>
<tr align="center">
<td>
<b>11409 Valley View Road, Eden Prairie, Minnesota</b>
</td>
<td>
<b>55344</b>
</td>
</tr>
<tr align="center">
<td>(Address of principal executive offices)
</td>
<td>(Zip Code)
</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
Registrant&#146;s telephone number, including area code <b>(952) 829-9217</b><br>
<br>Securities registered pursuant to Section 12(b) of the Act:</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr><td width="50%">
<div align="center"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title
of each class&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></div>
</td>
<td>
<div align="center"><u>Name of each exchange on which registered</u></div>
</td>
</tr>
<tr>
<td>
<div align="center"><b>Common stock, $0.01 par value (&#147;Common Stock&#148;)</b></div>
</td>
<td>
<div align="center"><b>The NASDAQ Stock Market, LLC</b></div>
</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;<br></font>
<font style="font-size: 10pt; font-family: Times New Roman;"><div align="center">
Securities registered pursuant to Section 12(g) of the Act: <b>None</b></div><font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;<br></font>
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
</font>
<div align="right"><font style="font-size: 10pt; font-family: Times New Roman;">Yes&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;No [X]</font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
</font>
<div align="right"><font style="font-size: 10pt; font-family: Times New Roman;">Yes&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;No [X]</font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&nbsp;required&nbsp;to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
</font>
<div align="right"><font style="font-size: 10pt; font-family: Times New Roman;">Yes&nbsp;[X]&nbsp;&nbsp;No [&nbsp;&nbsp;&nbsp;]<br>
</font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
</font>
<div align="right"><font style="font-size: 10pt; font-family: Times New Roman;">Yes&nbsp;&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;No [&nbsp;&nbsp;&nbsp;]<br>
</font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant&#146;s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.&nbsp; [X]<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller
reporting company&#148; in Rule 12b-2 of the Exchange Act.</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td width="67%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Large accelerated filer [&nbsp;&nbsp;&nbsp;]</td>
<td>Accelerated filer [X]</td>
</tr>
<tr><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;(Do not check if a smaller reporting company)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>Smaller reporting company [&nbsp;&nbsp;&nbsp;]&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;
<br>
</font>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
<div align="right">Yes&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;No&nbsp;[X]</div>
&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate market value of the voting stock
held by non-affiliates of the Registrant, based on the closing price on September&nbsp;30, 2008, the last business day of the Registrant&#146;s most recently completed
second fiscal quarter, as reported on the NASDAQ Stock Market, was approximately $118&nbsp;million.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares of the registrant&#146;s Common
Stock (par value $0.01) outstanding as of May&nbsp;1, 2009 was 4,669,333.</font>
<div align="center"><font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">_______________</font></div>
<font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;</font><font style="font-size: 10pt; font-family: Times New Roman;">
<div align="center"><b>DOCUMENTS INCORPORATED BY REFERENCE</b></div>
</font>
<font style="font-size: 10pt; font-family: Times New Roman; line-height: 5pt;">&nbsp;</font><font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portions
of our Proxy Statement for our 2009 Annual Meeting of Stockholders are incorporated
by reference into Items 10,&nbsp;11,&nbsp;12, 13, and 14 of Part III hereof.<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<hr style="margin-top: -5px; color: black;" noshade size="1">
<hr style="margin-top: -15px; color: black;" noshade size="3">
</div>
<font style="font-size: 10pt; font-family: 'Arial','Helvetica';">&nbsp;<br>
<br>
<div align="center"><a name="TOC"></a><b>NVE CORPORATION<br>
INDEX TO FORM 10-K</b></div>
</font>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b><a href="#part1">PART I</a></b>
<div style="margin-left: 18pt;"><a href="#item1">Item 1. Business.</a></div>
<div style="margin-left: 36pt;"><a href="#strategy">Our Strategy</a>
<br>
<a href="#prodsandmkts">Our Products and Markets</a></div>
<div style="margin-left: 54pt;"><a href="#Sensors">Sensor Products and Markets</a><br>
<a href="#Couplers">Coupler Products and Markets</a><br>
<a href="#MRAM">MRAM Products and Markets</a></div>
<div style="margin-left: 36pt;"><a href="#mfg">Product Manufacturing</a><br>
<a href="#sales">Sales and Product Distribution</a><br>
<a href="#newproducts">New Product Status</a><br>
<a href="#competition">Our Competition</a><br>
<a href="#suppliers">Principal Suppliers and Raw Materials</a><br>
<a href="#IP">Intellectual Property</a><br>
<a href="#workingcap">Working Capital Items</a><br>
<a href="#majorcustomers">Major Customers</a><br>
<a href="#backlog">Backlog</a><br>
<a href="#seasonality">Seasonality</a><br>
<a href="#RandD">Research and Development Activities</a><br>
<a href="#regulations">Government Regulations</a><br>
<a href="#employees">Number of Employees</a><br>
<a href="#geographic">Financial Information About Geographical Areas</a><br>
<a href="#availinfo">Available Information</a></div>
<div style="margin-left: 18pt;"><a href="#item1a">Item 1A. Risk Factors.</a><br>
<a href="#item2">Item 2. Properties.</a><br>
<a href="#item3">Item 3. Legal Proceedings.</a></div>
<br><b><a href="#partII">PART II</a></b>
<div style="margin-left: 18pt;"><a href="#item5">Item 5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.</a></div>
<div style="margin-left: 36pt;"><a href="#Shareholders">Shareholders and Dividends</a><br>
<a href="#StockPricePerformanceGraph">Stock Price Performance Graph</a><br>
<a href="#StockBuyback">Stock Repurchase Program</a><br>
</div>
<div style="margin-left: 18pt;"><a href="#item6">Item 6. Selected Financial Data.</a><br>
<a href="#item7">Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.</a></div>
<div style="margin-left: 36pt;"><a href="#resultoperations">Results of Operations</a><br>
<a href="#liquidity">Liquidity and Capital Resources</a></div>
<div style="margin-left: 18pt;"><a href="#item7a">Item 7A. Quantitative and Qualitative Disclosures About Market Risk.</a><br>

<a href="#item8">Item 8. Financial Statements and Supplementary Data.</a><br>
<a href="#item9A">Item 9A. Controls and Procedures.</a></div>
<br>
<b><a href="#part3">PART III</a></b>
<div style="margin-left: 18pt;"><a href="#item10">Item 10. Directors, Executive Officers and Corporate Governance.</a><br>
<a href="#item11">Item 11. Executive Compensation.</a><br>
<a href="#item12">Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.</a><br>
<a href="#item13">Item 13. Certain Relationships and Related Transactions, and Director Independence.</a><br>
<a href="#item14">Item 14. Principal Accountant Fees and Services.</a><br>
</div>
<br>
<b><a href="#itemIV">PART IV</a></b>
<div style="margin-left: 18pt;"><a href="#item15">Item 15. Exhibits and Financial Statement Schedules.</a></div>
<br>
<b><a href="#signatures">SIGNATURES</a></b>
<br>
<br>
<b><a href="#financials">FINANCIAL STATEMENTS</a></b>
<div style="margin-left: 18pt;"><a href="#Report">Reports of Independent Registered Public Accounting Firm</a><br>
<a href="#BS">Balance Sheets</a><br>
<a href="#income">Statements of Income</a><br>
<a href="#SHE">Statements of Shareholders&#146; Equity</a><br>
<a href="#CF">Statements of Cash Flows</a><br>
<a href="#notes">Notes to Financial Statements</a><br>
</div>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<hr></div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><u><a name="part1">PART I</a></u></b></font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b>FORWARD-LOOKING STATEMENTS</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the statements made in this Report or in the documents incorporated by reference
in this Report and in other materials filed or to be filed by us with the Securities
and Exchange Commission (&#147;SEC&#148;) as well as information included in verbal
or written statements made by us constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These statements
are subject to the safe harbor provisions of the reform act. Forward-looking statements
may be identified by the use of the terminology such as may, will, expect, anticipate,
intend, believe, estimate, should, or continue, or the negatives of these terms
or other variations on these words or comparable terminology. To the extent that
this Report contains forward-looking statements regarding the financial condition,
operating results, business prospects or any other aspect of NVE, you should be
aware that our actual financial condition, operating results and business performance
may differ materially from that projected or estimated by us in the forward-looking
statements. We have attempted to identify, in context, some of the factors that
we currently believe may cause actual future experience and results to differ
from their current expectations. These differences may be caused by a variety
of factors, including but not limited to an uncertain economic environment, risks associated with our marketable securities, competition
including entry of new competitors, progress in research and development activities
by us and others, variations in costs that are beyond our control, adverse legal
proceedings, lower sales, failure of suppliers to meet our requirements, failure
to obtain new customers, inability to carry out marketing and sales plans, inability
to meet customer technical requirements, inability to consummate license agreements,
ineligibility for SBIR awards, loss of key executives, and other specific risks
that may be alluded to in this Report or in the documents incorporated by reference
in this Report. For further information regarding our risks and uncertainties,
see Item 1A &#147;Risk Factors&#148; of this Report.<br>
<br>
<b><a name="item1">ITEM 1. BUSINESS.</a></b><br>
<b>In General</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NVE Corporation, referred to as NVE, we, us, or
our, develops and sells devices that use spintronics, a nanotechnology that relies
on electron spin rather than electron charge to acquire, store and transmit information.
We manufacture high-performance spintronic products including sensors and couplers
that are used to acquire and transmit data. We have also licensed our spintronic
magnetoresistive random access memory technology, commonly known as MRAM.<br>
<br>
<b>NVE History and Background</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NVE is a Minnesota corporation headquartered
in a suburb of Minneapolis. We were founded in 1989 by James&nbsp;M. Daughton,
Ph.D., a recognized pioneer in spintronics. Our common stock became publicly traded
in 2000 through a reverse merger and became NASDAQ listed in 2003. Since our founding,
we have been awarded more than $50&nbsp;million in government research contracts, including
more than 30 MRAM development contracts. These contracts have helped us build
our intellectual property portfolio. Over the years our product sales have increased
and we have reduced our dependence on research contracts. Fiscal years referenced
in this report end March&nbsp;31.<br>
<br>
<b>Industry Background<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Much of the electronics industry is devoted
to the acquisition, storage, and transmission of information. We have focused
on three applications for our spintronic technology: magnetic sensors, couplers,
and memories. Sensors acquire information, couplers transmit information, and
memories store information. In that sense, our technology can provide the eyes,
nerves, and brains of electronic systems.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Magnetic sensors can be used for a number of purposes including detecting the position
or speed of robotics and mechanisms, or for communicating with implantable medical
devices. We believe our spintronic sensors are smaller, more precise, and more
reliable than competing devices.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Couplers are widely used in factory automation,
providing reliable digital communication between electronic subsystems in factories.
For example, couplers are used to send data between robots and central controllers
at very high speed. As manufacturing automation expands, there is a need for higher
speed data and more channel density. Because of their unique properties, we believe
our couplers transmit more data at higher speeds and over longer distances than
conventional devices.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Near-term potential MRAM applications include mission-critical
storage such as military, industrial, and anti-tamper applications. As its density
increases and cost per bit decreases, MRAM could replace semiconductor memories
in cellphones, computers, and other electronic devices enabling smaller, faster,
and more power-efficient electronics.<br>
<br>
<b>Our Enabling Technology<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our designs are generally based on either giant magnetoresistance or tunneling magnetoresistance. These structures
produce a large change in electrical resistance depending on the electron spin
orientation in a free layer.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">3</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In giant magnetoresistance (GMR) devices, resistance
changes due to conduction electrons scattering at interfaces within the devices.
The GMR effect is only significant if the layer thicknesses are less than the
mean free path of conduction electrons, which is approximately five nanometers.
Our critical GMR conductor layers may be less than two nanometers, or five
atomic layers, thick. Technological advances in recent years
have made it practical to manufacture such small dimensions.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The second type of spintronic structure we use is based on tunneling magnetoresistance (TMR). Such devices are known as Spin-Dependent Tunnel (SDT) junctions,
Magnetic Tunnel Junctions (MTJs), or Tunneling Magnetic Junctions (TMJs). SDT junctions use tunnel barriers that are so thin
that electrons can &#147;tunnel&#148; through a normally insulating material to
cause a resistance change. SDT barrier thicknesses can be in the range of one to
four nanometers (less than ten molecules).<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our products, the spintronic elements are connected
to integrated circuitry and packaged in much the same way as conventional integrated
circuits.<br>
<br>
<a name="strategy"></a><b>Our Strategy</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our vision is to become the leading developer
of practical spintronics technology and devices. We plan to do that by selling
the products described below and licensing our MRAM technology. To grow product sales,
we plan to broaden our sensor and coupler product lines, and longer-term to target
larger markets such as consumer electronics.<br>
<br>
<a name="prodsandmkts"></a><b>Our Products and Markets</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate in one reportable segment. For financial
information concerning this segment see &#147;Note&nbsp;8&nbsp;&#150; Segment Information&#148;
of the Financial Statements included elsewhere in this Report.<br>
<br>
<b><a name="Sensors"></a><i>Sensor Products and Markets</i><br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sensor products detect the presence of a
magnet or metal to determine position or speed. The GMR changes its electrical
resistance depending on the magnetic field. In our devices, GMR is combined with
conventional foundry integrated circuitry and packaged in much the same way as
conventional integrated circuits. We sell standard or catalog sensors, and custom
sensors designed to meet customers&#146; exact requirements. Our sensors are quite
small, very sensitive to magnetic fields, precise, and reliable.<br>
<br>
<i>Standard sensors<br>
</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our standard, or catalog, sensors are generally
used to detect the presence of a magnetic or metallic material to determine position or speed.
We believe our spintronic sensors are smaller, more precise, and more reliable
than competing devices. Our major market for standard sensors is factory automation.<br>
<br>
<i>Custom and medical sensors<br>
</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary custom products are sensors for
medical devices, which are customized to our customers&#146; requirements and
manufactured under stringent medical device quality standards. Most are used to
replace electromechanical magnetic switches. We believe our sensors have important
advantages in medical devices compared to electromechanical switches, including
no moving parts for inherent reliability, and being smaller, more sensitive, and
more precise. Our sensors can be customized using customer-specific integrated
signal processing and design variations that can include the range and sensitivity
to magnetic fields, electrical resistance, and multi-sensor elements configuration.
Future custom sensor target markets include consumer and automotive electronics.<br>
<br>
<b><i><a name="Couplers"></a>Coupler Products and Markets</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our spintronic couplers combine a GMR sensor element
and an &#147;IsoLoop&#148; integrated microscopic coil. The coil creates a small
magnetic field that is picked up by the spintronic sensor, transmitting data almost
instantly. Couplers are also known as &#147;isolators&#148; because they electrically
isolate the coupled systems. Our IsoLoop couplers are much faster than the fastest
optical couplers.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have four lines of coupler products: IL600-Series passive-input couplers; IL700/IL200-Series digital-input couplers; new, cost-effective IL500-Series couplers; and IL400/IL3000-Series isolated network signal couplers.<br>
<br>
<b><i><a name="MRAM"></a>MRAM Products and Markets</i></b> <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MRAM uses spintronics to store data, combining the
speed of semiconductor memory with the nonvolatility of magnetic disk drives.
MRAM is inherently nonvolatile, meaning the data remains even if power is removed.
MRAM has been called the ideal or universal memory because it has the potential
to combine the speed of SRAM, the density of DRAM, and the nonvolatility of flash
memory.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Data is stored in the spin of the electrons in thin
metal alloy films, and read with spin-dependent tunnel junctions. Unlike electrical
charge, the spin of an electron is inherently permanent. In MRAMs, the spin of
the electrons is set with tiny bursts of energy. We have invented several types
of MRAM memory cells and modes of operation.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">4</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advanced MRAM designs that we are developing or
have developed include Vertical transport MRAM (also known as VMRAM), magnetothermal
MRAM, and spin-momentum transfer MRAM. We believe such design approaches have
the potential to increase the scalability of MRAM.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the near term, MRAM could replace battery-backed-up
SRAMs in mission-critical systems such as military, factory control, point-of-sale
terminals, and gaming electronics. MRAM has the potential advantages of being
simpler, lower cost, and more reliable than battery/memory systems. Long term,
MRAM could address the market for ubiquitous high-density memory.<br>
<br>
<b><a name="mfg"></a>Product Manufacturing<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our fabrication facility is a clean-room area
with specialized equipment to deposit, pattern, etch, and process spintronic materials.
Most of our products are fabricated in our facility using either raw wafers or
foundry wafers. Foundry wafers contain conventional electronics that perform housekeeping
functions such as voltage regulation and signal conditioning in our products.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each wafer may include thousands of devices. We
build spintronics structures on wafers in our fabrication facility. We either
saw wafers to be sold in die form, or wafers are sent to Asia for dicing and packaging.
Packaged parts are returned to us to be tested, inventoried, and shipped.<br>
<br>
<b><a name="sales"></a>Sales and Product Distribution<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on distributors who stock and sell our
products in more than 75 countries. Distributors of our products include two
of the largest electronic component distributors in the world: Digi-Key Corporation and the Premier Farnell Group. Our
distributor agreements generally renew annually. In addition, Avago Technologies,
a leading supplier of solid-state couplers, distributes private-branded versions
of some of our couplers under an agreement that expires in June 2010.<br>
<br>
<b><a name="newproducts"></a>New Product Status<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past year we began marketing several
new products including:<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;the IL500-Series
of lower-priced spintronic couplers;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;integrated
spintronic current sensors; and<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;tunneling magnetoresistance angle sensors.<br>
<br>
<b><a name="competition"></a>Our Competition</b><br>
<b><i>Industrial Sensor Competition<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A limited number of other companies claim
to either make or have the capability to make GMR and TMR sensors. Also, several competitors
make solid-state industrial magnetic sensors including silicon Hall-effect sensors
and anisotropic magnetoresistive (AMR) sensors. We believe those types of sensors
are not as sensitive as our GMR or TMR sensors.<br>
<br>
<b><i>Medical Sensor Competition<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sensors for medical devices face competition
from other solid-state magnetic sensors and from electromechanical magnetic sensors.
Compared to other solid-state magnetic sensors, we believe our medical sensors
have small size, high sensitivity to small magnetic fields, simpler electrical
interfaces, and inherent reliability. Electromechanical magnetic sensors such
as reed switches have been in use for several decades. Electromechanical competitors
include Hermetic Switch, Inc., Meder Electronic&nbsp;AG (Engen/Welschingen, Germany),
and Memscap&nbsp;SA (Grenoble, France). Because our sensors have no moving parts,
we believe they are inherently more reliable than electromechanical magnetic sensors.
We also believe our sensors are smaller than the smallest electromechanical magnetic
sensors, more precise in their magnetic switch points, and more sensitive.<br>
<br>
<b><i>Coupler Competition<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competing digital coupler technologies include
optical couplers, inductive couplers (transformers), and capacitive couplers.
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to being a customer, Avago is a leading
producer of high-speed optical couplers. Other prominent optical coupler suppliers
are Fairchild Semiconductor International, NEC Corporation, Sharp Corporation,
Toshiba Corporation, and Vishay Intertechnology. We believe our couplers are faster
and have longer life than optical couplers.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inductive couplers are made by a number of companies
including Analog Devices, Inc. and Silicon Laboratories Inc. Unlike our IsoLoop
couplers, inductive couplers require special encoding to transmit logic signals.
Furthermore, IsoLoop couplers require much less board space than most optical
or inductive couplers. MEMS inductive couplers are smaller than other inductive
couplers, but we believe our devices generally have higher channel density per
area, higher speed, less signal distortion, and generate less noise. Manufacturers
of capacitive couplers include Texas Instruments Incorporated. We believe we have
a broader product line and higher channel density than is available for capacitive
couplers.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">5</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We make a number of isolated network signal couplers that combine
spintronics coupling with network protocol functions, such as <font style="white-space: nowrap;">RS-485</font> (also known
as TIA-485 or EIA-485), in a single package. Competitive network signal couplers
are available from Analog Devices; Linear Technology Corporation; Maxim Integrated
Products, Inc.; and Texas Instruments. Based on a comparison of published specifications,
we believe our devices have speed, miniaturization, and product-line breadth advantages
over other network signal couplers.<br>
<br>
<b><i>MRAM Competition<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most currently available memories are volatile,
meaning data is lost when power is removed. Memories in this category include
dynamic random access memory (DRAM) and static random access memory (SRAM). MRAM
has the potential to match or exceed the speed of such memories without the volatility.
Currently available nonvolatile memories include flash memory and ferroelectric
random access memory (FRAM). MRAM is potentially faster and uses less power than
existing nonvolatile memories. Furthermore, existing nonvolatile memories can
be written only a limited number of times before they wear out, while MRAM has
virtually unlimited life. Additionally, flash memory may be subject to scalability
limitations that could limit its density in coming years. We do not believe MRAM
is subject to those limitations.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Battery-backed-up SRAM uses stored energy to preserve
data after the main power has been removed. We believe that MRAM has the potential
of being simpler, lower cost, and more reliable than battery-backed-up SRAM. Battery-backed-up
SRAM manufacturers include Maxim.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Emerging technologies competing with MRAM include
carbon nanotubes, phase-change memory (PCM; also known as PRAM, chalcogenide,
CRAM, or Ovonic memory), and resistive RAM (RRAM). We believe
that MRAM has advantages over these technologies in either manufacturability, speed, or endurance. Companies developing carbon nanotube
memory include Nantero, Inc. , a number of companies are developing PCM, and several memory makers have been reported to be involved in RRAM research.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other companies that may compete with us for MRAM
research and development or service business, or that may be attempting to develop
MRAM intellectual property with the intention of licensing to others include Crocus
Technology&nbsp;SA (Grenoble, France), Grandis, Inc., MagSil Corporation, Spintec (Grenoble, France),
Spintron (Marseille, France), and Spintronics&nbsp;Plc (London,&nbsp;UK).<br>
<br>
<b><a name="suppliers"></a>Principal Suppliers and Raw Materials</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal suppliers include manufacturers
of semiconductor wafers that are incorporated into our products. These include
Advanced Semiconductor Manufacturing Corporation of Shanghai (China); Intersil Corporation; ON&nbsp;Semiconductor Corporation; Silicon Quest International, Inc.; Taiwan Semiconductor
Manufacturing Corporation; Texas Instruments Incorporated; and X-FAB Silicon Foundries Group. Other companies provide
device packaging services, including Circuit Electronics Industries (Ayutthaya,
Thailand); United Test and Assembly Center Ltd. (Singapore); and SPEL Semiconductor
Limited (Chennai, India).<br>
<br>
<b><a name="IP"></a>Intellectual Property<br>
<i>Patents<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were granted five U.S. patents assigned to us in the fiscal year ended March&nbsp;31, 2009. As of March&nbsp;31, 2009 we had a total of 50
issued U.S. patents assigned to us. We also have a number of foreign patents,
a number of U.S. and foreign patents pending, and we have licensed patents from
others. Our technology is protected by more than 100 patents worldwide either
issued, pending or licensed from others. We are continuing to develop inventions
and expect to add to our patent portfolio. There are no patents we regard as critical
to our business owned by us or licensed to us that expire in the next 12 months.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Much of our intellectual property has been developed
with U.S. Government support. Under federal legislation, companies normally may
retain the principal worldwide patent rights to any invention developed with U.S.
Government support.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our patents cover MRAM cells with transistor
selection for data retrieval, which we believe may be necessary for successful
high-density, high-performance MRAMs. We believe our 6,275,411 and 6,349,053 U.S.
patents, both titled &#147;Spin Dependent Tunneling Memory,&#148; are particularly
important. Both patents cover MRAMs using arrays of Spin Dependent Tunnel Junctions.
Based on their public disclosures, we believe several companies are pursuing the
approach described in these patents. The 6,275,411 patent expires in 2019 and
the 6,349,053 patent expires in 2021. We also have patents on advanced MRAM designs
that we believe are important, including patents that relate to magnetothermal
MRAM, spin-momentum MRAM, and synthetic antiferromagnetic storage.<br>
<br>
<b><i>Trademarks</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;NVE&#148; and &#147;IsoLoop&#148;
are our registered trademarks. Other trademarks include &#147;GMR
Switch&#148; and &#147;GT Sensor.&#148;<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">6</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b><i>Licenses</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have licensed certain of our MRAM intellectual
property to several companies, including Cypress, Honeywell, and Motorola, Inc.<br>
<br>
<i>Agreements with Honeywell</i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreements and amendments to agreements
with Honeywell dating back approximately to our founding. Under these agreements
we are not required to pay royalties to Honeywell for the use of their intellectual property,
and Honeywell has intellectual property rights to certain of our earlier-developed
MRAM technology.<br>
<br>
<i>Motorola License</i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We granted Motorola a non-exclusive, non-transferable,
and non-assignable license to our MRAM intellectual property and received advance
payments in conjunction with the agreement. Motorola has since separated Freescale.
Motorola and Freescale asked us to consent to Motorola&#146;s assignment of the
Patent License Option Agreement to Freescale. We have declined to provide such
consent without additional consideration. We believe the Motorola agreement likely
terminated in 2005 because Motorola transferred manufacturing to Freescale. Freescale
since announced the formation of an independent company to take ownership
of Freescale&#146;s MRAM manufacturing assets.<br>
<br>
<i>Royalty Agreement<br>
</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have licensed rights to another organization&#146;s
GMR-related patent family, and that agreement calls for us to pay royalties on
our sales of certain products. Payments under this agreement have been less than
$5,000 for each of the most recent three fiscal years. The agreement remains in
force until the expiration of the last patent, which we believe will be June&nbsp;14,
2009.<br>
<br>
<i>Other Licenses</i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a technology exchange agreement with
Cypress Semiconductor Corporation. None of the rights we have under this agreement are currently important to our business.<br>
<br>
<a name="workingcap"></a><b>Working Capital Items</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Like other companies in the electronics industry,
we have historically invested in capital equipment for manufacturing and testing
our products, as well as research and development equipment. We have also
deployed significant capital in inventories to have our products available from stock,
to receive more favorable pricing for raw materials, and to guard against raw
material shortages.<br>
<br>
<a name="majorcustomers"></a><b>Major Customers</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on several customers for a large percentage
of our revenue. These include: Avago Technologies; Phonak AG; St. Jude Medical, Inc.; Starkey
Laboratories, Inc.; the U.S. Government; and certain distributors. The loss of
any one or more of these customers could have a material adverse effect on us.
For the purposes of this disclosure, all agencies of the U.S. Government are considered
a single customer.<br>
<br>
<a name="backlog"></a><b>Backlog</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2009 we had $2,198,545 of contract
research and development backlog we believed to be firm, compared to $898,101
as of March&nbsp;31, 2008. We expect most of the firm backlog as of March&nbsp;31,
2009 to be filled in fiscal 2010. Approximately 53% of our backlog as of March&nbsp;31,
2009 and 96% as of March&nbsp;31, 2008 was from agencies of the U.S. Government.
U.S. Government orders that are not yet funded, or contracts awarded but not yet
signed, are not included in firm backlog. The portion of orders already included
in operating revenues on the basis of percentage of completion or program accounting
are excluded. We do not believe any material portion of our business is subject
to renegotiation of profits or termination of contracts or subcontracts at the
election of the U.S. Government. There can be no assurance, however, of additional
contracts or follow-on contracts for expired or completed U.S. Government contracts.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe product sales backlog as of any
particular date is indicative of future results. Our product sales are made primarily
under standard purchase orders. We have certain agreements that require customers
to forecast purchases; however, these agreements do not generally obligate the
customer to purchase any particular quantity of products. Shipment schedules and
quantities actually purchased by customers are often revised to reflect changes
in customers&#146; needs. Based on semiconductor industry practice and our experience,
we do not believe that such agreements are meaningful for determining backlog
amounts. We believe that only a small portion of our product order backlog is
non-cancelable and that the dollar amount associated with the non-cancelable portion
is not significant.<br>
<br>
<a name="seasonality"></a><b>Seasonality</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In each of the three most recent fiscal years, our product sales have been less in quarters
ended December&nbsp;31 than the immediately preceding or subsequent quarters.
This may have been due in part to distributor ordering patterns or customer vacations
and shutdowns late in calendar years. We do not know if this pattern will continue.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">7</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br><a name="RandD"></a><b>Research and Development Activities</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We spent $966,610 for fiscal 2009, $1,202,504 for
fiscal 2008, and $1,789,844 for fiscal 2007 in company-sponsored research and
development activities. Over the past three fiscal years these activities have
included development of new sensors and couplers, and lower-cost product designs.
Additionally, we spent $3,085,726 during fiscal 2009, $2,139,059 during fiscal
2008, and $2,090,200 during fiscal 2007 on customer-sponsored research and development
contract activities. These research and development contracts were with various
agencies of the U.S. Government as well as with other companies.<br>
<br>
<a name="regulations"></a><b>Government Regulations</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various local, state, and
federal laws, regulations and agencies that affect businesses generally. These
include regulations promulgated by federal and state environmental and health
agencies, the federal Occupational Safety and Health Administration, and laws
pertaining to the hiring, treatment, safety, and discharge of employees. Compliance
with these laws and regulations has not had a material effect on our capital expenditures,
earnings, or competitive position.<br>
<br>
<b><a name="employees"></a>Number of Employees</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had 50 employees as of March&nbsp;31, 2009 and 2008.
Increased manufacturing productivity allowed us to increase our revenue per
employee for the year ended March&nbsp;31, 2009. Our employment can fluctuate due to a variety of factors. None of our
employees is represented by a labor union or is subject to a collective bargaining
agreement, and we believe we maintain good relations with our employees.<br>
<br>
<b><a name="geographic"></a>Financial Information About Geographical Areas</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International sales accounted for approximately
47% of our revenue in fiscal 2009, 47% in fiscal 2008, and 40% in fiscal 2007.
More information about geographical areas is contained in &#147;Note&nbsp;8&nbsp;&#150;
Segment Information&#148; of the Financial Statements included elsewhere in this
Report.<br>
<br>
<b>Environmental Matters</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to environmental laws and regulations,
particularly with respect to industrial waste. Compliance with these laws and
regulations has not had a material impact on our capital expenditures, earnings,
or competitive position.<br>
<br>
<a name="availinfo"></a><b>Available Information</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All reports we file with the SEC, including
our annual reports on Form&nbsp;10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and proxy statements on Schedule&nbsp;14A, as well as any
amendments to those reports, are accessible at no cost through the &#147;Investors&#148;
section of our Website (www.nve.com). These filings are also accessible through
the SEC&#146;s Website (www.sec.gov).<br>
<br>
<br>
<a name="item1a"></a><b>ITEM 1A. RISK FACTORS.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 that 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.<br>
<br>
<b> Risks Related to Our Business<br>
<i>We may lose revenue if any of our large customers cancel, postpone, or reduce
their purchases.</i><br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on several large customers for a large
percentage of our revenue. These large customers include Avago Technologies; Phonak AG; St.&nbsp;Jude
Medical, Inc.; Starkey Laboratories, Inc.; the U.S. Government; and certain distributors.
Orders from these large customers could be canceled, postponed, or reduced, and
the loss of any of these customers could have a significant impact on our revenue
and our profitability.<br>
<br>
<b><i>We may lose revenue if we are unable to renew agreements with large customers.</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Supplier Partnering Agreement with St.
Jude Medical expires December&nbsp;31, 2009, the agreement between Avago
Technologies, Inc. and us, as amended, expires June&nbsp;26, 2010, and our Phonak AG Supply Agreement expires May&nbsp;1, 2012. We cannot predict
if any of these agreements will be renewed, or if renewed, under
what terms. The inability to agree on mutually acceptable terms or the loss of
any of these large customers could have a significant adverse impact on our
revenue and our profitability.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">8</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b><i>We will lose
revenue if government contract funding is reduced or eliminated.<br>
</i></b> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our revenue from agencies of the
U.S. Government was less than 10% of our total revenue in fiscal 2009, a material
decrease in U.S. Government funding research or disqualification as a vendor to
the U.S. Government for any reason would likely hamper future research and development
activity and decrease related revenue. In addition to direct U.S. Government funding,
certain of our non-Government customers depend on Government support to fund their
contracts with us. U.S. Government funding is dependent upon adequate continued funding
of the agencies and their programs. Changes in policy by the new U.S. presidential administration
or new U.S. Congress could affect government spending priorities. Government
spending priorities over which we have no control, such as the wars in Iraq and
Afghanistan, may affect availability of U.S. Government funds. Furthermore, a significant portion
of our U.S. Government funding is through Small Business Innovation Research (SBIR)
contracts. SBIR budgets may be changed by legislation or by agencies such as the
Department of Defense.<br>
<br>
<b><i>Failure to qualify as a small business under federal regulations could make
us ineligible for some government-funded research contracts, which could have
a significant adverse impact on our revenue and our ability to make research and
development progress.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We received approximately $1.44 million
in Small Business Innovation Research (SBIR) contract awards in fiscal 2009. Federal regulations place a number of criteria for
a business to be eligible to compete for SBIR awards. Those criteria currently
include number of employees and ownership structure. While we believe we meet
the eligibility 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 material adverse effect on our revenue, profits, and research and development
efforts. In addition, SBIR eligibility requirements could be changed at any time.<br>
<br>
<b><i>Our backlog may not result in future revenue.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we evaluate each order to determine
qualification for inclusion in our firm backlog, there can be no assurance that
amounts included in our firm backlog ultimately will result in future revenue.
A reduction in our firm backlog during any particular period, or the failure of
our firm backlog to result in future revenue, could harm our business and revenue.<br>
<br>
<b><i>We face an uncertain economic environment in the industries we serve, which could adversely
affect our business.</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our product sales are into industries affected by the current worldwide economic downturn. This downturn has resulted in a significant decrease in the semiconductor market, which is the primary
market for our products. Industries we serve that have been affected by the economic downturn include industrial control, factory automation, scientific instruments, and certain medical industries. We cannot predict the timing, strength, or duration of any economic slowdown or subsequent recovery, worldwide or in the industries we serve. A material adverse
impact on our business and revenue is likely if the economy or industries we serve do not improve from their present levels.<br>
<br>
<i><b>Our reputation could be damaged and we could lose revenue if we fail to
meet technical challenges required to produce marketable products.</b></i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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&#146; requirements, which could cause damage to our reputation and loss
of revenue.<br>
<br>
<i><b>Our failure to meet stringent customer technical requirements could result
in the loss of key customers and potentially reduce our sales.</b></i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our customers, including Avago Technologies,
Phonak AG, St.&nbsp;Jude Medical, and Starkey Laboratories, 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.<br>
<br>
<i><b>Our sensors are incorporated into medical devices, which could expose us
to a risk of product liability claims and such claims could seriously harm our
business and financial condition.</b></i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our sensor products are used
in medical devices, including devices that help sustain human life. We are also
marketing our sensor technology to other manufacturers of cardiac pacemakers and
ICDs. Although we have indemnification agreements with certain customers with
provisions designed to limit our exposure to product liability claims, there can
be no assurance that we will not be subject to losses, claims, damages, liabilities,
or expenses resulting from bodily injury or property damage arising from the incorporation
of our products in devices sold by our customers. Existing or future laws or unfavorable
judicial decisions could limit or invalidate the provisions of our indemnification
agreements, or the agreements may not be enforceable in all instances. A successful
product liability claim could require us to pay, or contribute to payment of,
substantial damage awards, which would have a significant negative effect on our
business and financial condition.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">9</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b><i>Federal legislation may not protect us against liability for the use of
our sensors in medical devices and a successful liability claim could seriously
harm our business and financial condition.</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Biomaterials Access Assurance
Act of 1998 may provide us some protection against potential liability claims,
that Act includes significant exceptions to supplier immunity provisions, including
limitations relating to negligence or willful misconduct. A successful product
liability claim could require us to pay, or contribute to payment of, substantial
damage awards, which would have a significant negative effect on our business
and financial condition. Any product liability claim against us, with or without
merit, could result in costly litigation, divert the time, attention, and resources
of our management and have a material adverse impact on our business.<br>
<br>
<i><b>Any malfunction of our sensors in existing medical devices could lead to
the need to recall devices incorporating our sensors from the market, which may
be harmful to our reputation and cause a significant loss of revenue.<br>
</b></i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any malfunction of our sensors could lead
to the need to recall existing medical devices incorporating our sensors from
the market, which may be harmful to our reputation because it is dependent on
product safety and efficacy. Even if assertions that our sensors caused or contributed
to device failure do not lead to product liability or contract claims, such assertions
could harm our reputation and our customer relationships. Any damage to our reputation
and/or the reputation of our products, or the reputation of our customers or their
products could limit the market for our and our customers&#146; products and harm
our results of operations.<br>
<br>
<b><i>We may lose business and revenue if our critical production equipment fails.</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 an in-house maintenance
staff, maintenance agreements for certain equipment, some critical spare parts,
and back-ups for some of the equipment, we cannot be sure we could repair or replace
critical manufacturing equipment were it to fail.<br>
<br>
<b><i>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.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our critical suppliers include suppliers
of certain raw silicon and semiconductor wafers that are incorporated in our products.
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.
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.<br>
<br>
<i><b>The loss of supply of any critical chemicals or supplies could impact our
ability to produce and deliver products and cause loss of revenue.<br>
</b></i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 dependent 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.<br>
<br>
<i><b>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.<br>
</b></i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are dependent on our packaging vendors
including Circuit Electronic Industries Public Co., Ltd. (&#147;CEI&#148;) of
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 been
operating under voluntary debt rehabilitation under Thailand law since 2005. We
have identified potential alternate vendors for our most important products in
case CEI&#146;s ability to serve our needs becomes impaired, but
it could prove expensive, time-consuming, or technically challenging to convert
to an alternate vendor. If one of our packaging vendors were to become
insolvent we might not be able to recover work in process or finished goods in
their possession. Any supply interruptions or loss of inventory could seriously
jeopardize our ability to provide products that are critical to our business and
operations and may cause us to lose revenue.<br>
<br>
<b><i>We are subject to risks inherent in doing business in foreign countries
that could impair our results of operations.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign sales were approximately 47%
of our revenue for fiscal 2009, and we expect foreign sales to continue to represent a significant
portion of our revenue in the future. Furthermore, we rely on suppliers in China, India, Taiwan,
Thailand, and other foreign countries. Risks relating to or arising from operating
in foreign markets that could impair our results of operations include economic
and political instability; changes in regulatory requirements, tariffs, customs,
duties, and other trade barriers; transportation delays; acts of God, including
floods, typhoons, and earthquakes; and other uncertainties relating to the administration
of, or changes in, or new interpretation of, the laws, regulations, and policies
of the jurisdictions where we do business.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">10</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a>
<br>
<br>
<i><b>Because we are significantly smaller than the many of our competitors, we
may lack the financial resources needed to increase our market share and future
revenue.<br>
</b></i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our known product competitors include Avago
Technologies; Analog Devices, Inc.; Fairchild Semiconductor International; Hermetic
Switch, Inc.; Linear Technology Inc.; Maxim Integrated Products,&nbsp;Inc.; Meder
Electronic&nbsp;AG; Memscap&nbsp;SA; NEC Corporation; Sharp Corporation; Silicon
Laboratories,&nbsp;Inc.; Texas Instruments Incorporated; Toshiba Corporation; Vishay Intertechnology;
and others. Many of our competitors and potential competitors are established
companies that have significantly greater financial, technical, and marketing
resources than us. We believe that our competition is increasing as the technology
matures. This has meant more competitors and more severe pricing pressure. In
addition, our competitors may be narrowing or eliminating our performance advantages.
We expect these trends to continue, and our future competitiveness will depend
on our ability to develop new products and reduce our product costs. 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.<br>
<br>
<b><i>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.</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our future revenue and
profits may be dependent on our 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. Furthermore, competing technologies could prevent or supplant
MRAM from becoming an important memory technology.<br>
<br>
<b><i>Our future
business may suffer because we may not be able to consummate additional MRAM
license agreements.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
could also use their own or a third party&#146;s MRAM intellectual property
rather than ours.<br>
<br>
<i><b>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.<br>
</b></i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 products and 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 and 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.<br>
<br>
<i><b>We may not be able to negotiate a new MRAM licensing agreement with Freescale or EverSpin.</b></i>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Patent License Option Agreement
with Motorola provided for termination on December&nbsp;31, 2005 or on the
date Motorola ceases manufacturing MRAM Products, whichever is later. We believe
such a termination is likely to have occurred as a result of Motorola apparently
having eliminated its ability to manufacture MRAM Products through its spinoff
of Freescale. In June&nbsp;2008 Freescale announced that it had transferred its
MRAM technology and intellectual property to an independent company, EverSpin
Technologies. We believe we are free to negotiate a new agreement with Freescale or EverSpin,
or an assignment of the Motorola Patent License Option Agreement, but we have
said we would do so only with amendments thereto. We have notified Freescale
that we believe that MRAM products it has sold come within the scope of claims
of a number of our patents. There can be no assurance, however, that any agreement
can be reached with Freescale or EverSpin, or that any such agreement would
be on more favorable terms to NVE than our agreement with Motorola, or that
NVE would receive any value under the existing agreement with Motorola or
any value under any such further agreement with Freescale or EverSpin.<br>
<br>
<b><i>Our future business may suffer if we are unable to enforce our intellectual
property rights with existing licensees.<br>
</i></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our existing license agreements have
not generated royalties and may never become active or generate significant
royalties. Furthermore, 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.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">11</font></div><hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<i><b>Our business success may be adversely affected if we are unable to attract
and retain highly qualified management and technical employees.</b></i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have no employment agreements with any of
our management other than our Chief Executive Officer and Chief Financial
Officer, 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.<br>
<br>
<i><b>Our marketable securities are subject to risks which may affect the liquidity of these investments or cause losses.</b></i><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2009, we held $32,446,748 in long-term
marketable securities, which included government agency obligations,
municipal obligations, and corporate obligations. The ongoing credit crisis has
significantly affected issuer credit rating, insurer financial condition and credit rating,
liquidity, market, and interest rates for these and other types of obligations.
The financial market risks associated with our marketable securities may have an adverse
effect on our financial condition, results of operations, or cash flows.<br>
<br>
<b>Risks Related to Buying Our Stock<br>
<i>Our stock has been more volatile than other technology sector stocks.</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock has experienced
significant fluctuations and may continue to fluctuate in the future. Depending
on the metric used, we believe this volatility is more than the overall market
or some other technology-sector stocks.<br>
<br>
<b><i>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.
</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time our stock price has decreased
sharply, and could decline in the future. The market price of our common stock
may be significantly affected by many factors, some of which are beyond our control,
including:<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" width="100%" border="0" cellspacing="00" cellpadding="0">
<tr>
<td rowspan="10" width="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td width="1" valign="top">&#149;&nbsp;</td>
<td>technological innovations by us, our licensees, or our competitors;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>the announcement of new products, product enhancements, contracts, or license agreements by us, our licensees, or our competitors;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>the announcement of changes in strategy or discontinuation of products by us or licensees;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>changes in requirements or demands for our products or technology;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>changes in prices of our products and services or our competitors&#146; products and
services;</td>
</tr>
<tr>
<td>&#149;</td>
<td>quarterly variations in our operating results;</td>
</tr>
<tr>
<td>&#149;</td>
<td>changes in our revenue or revenue growth rates;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>changes in revenue estimates, earnings estimates, or market projections by market analysts,
speculation in the press or analyst community;</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>short selling and covering of short positions in our stock; and</td>
</tr>
<tr>
<td valign="top">&#149;</td>
<td>general market conditions or market conditions specific to particular industries served
by us, our customers, or our licensees.</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b><a name="item2">ITEM 2. PROPERTIES.</a><br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices and manufacturing
facility are located at 11409 Valley View Road, Eden Prairie, Minnesota, 55344.
The space consists of 21,362 square feet of offices, laboratories, and production
areas. The space is owned and managed by Carlson Real Estate Company, Inc. and
leased under an agreement expiring December&nbsp;31, 2015, with a one-time right
to cancel the lease at our option on December&nbsp;31, 2012. We believe the
facility is adequate to support our needed production capacity and plan to expand
our production clean room within the facility. We hold no investments in real estate.<br>
<br>
<b><a name="item3">ITEM 3. LEGAL PROCEEDINGS.</a></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the ordinary course of business we may become involved in litigation. At this time,
we are not aware of any material pending or threatened legal proceedings or other proceedings contemplated by
governmental authorities that we expect would have a material adverse impact on our future results of operation and
financial condition.<br>
<br>
</font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><u><a name="partII">PART II</a></u></b></font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br><b><a name="item5">ITEM 5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.</a></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Common Stock trades on the Capital Market tier of the NASDAQ Stock Market under the symbol NVEC. The following table shows the high and low sales
prices of our Common Stock as reported on the NASDAQ for each quarter within our two most recent fiscal years:<br><br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td colspan="23" style="border-bottom: 1px solid black;" width="55%">
<div align="center"><b>Quarter Ended</b></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-bottom: 1px solid black;" width="6%">
<div align="center"><b>3/31/09</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>12/31/08</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>9/30/08</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>6/30/08</b></div>
</td>
<td></td>
<td colspan="2" style="border-bottom: 1px solid black;" width="6%">
<div align="center"><b>3/31/08</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>12/31/07</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>9/30/07</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>6/30/07</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
High&nbsp;&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">
34.93</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">
29.35
</td>
<td width="2%">&nbsp;</td>
<td width="1%">
$
</td>
<td align="right" width="8%">
35.00
</td>
<td width="2%">&nbsp;</td>
<td width="1%">
$
</td>
<td align="right" width="8%">
39.60
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="8%">
31.73
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="8%">
32.70
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="8%">
41.95
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="8%">
37.67
</td>
</tr>
<tr>
<td>
Low
</td>
<td>
$
</td>
<td align="right">
20.11</td>
<td>&nbsp;</td>
<td>
$
</td>
<td align="right">
16.56
</td>
<td>&nbsp;</td>
<td>
$
</td>
<td align="right">
26.01
</td>
<td>&nbsp;</td>
<td>
$
</td>
<td align="right">
24.99
</td>
<td></td>
<td>
$
</td>
<td align="right">
19.50
</td>
<td></td>
<td>
$
</td>
<td align="right">
22.44
</td>
<td></td>
<td>
$
</td>
<td align="right">
29.44
</td>
<td></td>
<td>
$
</td>
<td align="right">
25.30
</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">12</font></div>
<hr></div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<a name="Shareholders"></a><b>Shareholders and Dividends<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had approximately 119 shareholders of record
and 8,184 total shareholders as of April&nbsp;27, 2009. We have never paid or declared
any cash dividends on our Common Stock. We do not anticipate paying dividends in
the foreseeable future, as we intend to retain any earnings we may generate if needed
to provide for the expansion of our business or for the possible defense of our intellectual property.<br>
<br>
<a name="StockPricePerformanceGraph"></a><b>Stock Price Performance Graph</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The graph below compares the performance of
our Common Stock to the cumulative five-year performance of the NASDAQ Industrial
Index and the Global Crown Capital Nanotechnology Index. NVE is included in both
indices. The NASDAQ Industrial Index includes NASDAQ domestic and international
based common-type stocks. The graph and table assume $100 was invested on March&nbsp;31,
2004 in each of our Common Stock, the NASDAQ Industrial Index, and the Global
Crown Capital Nanotechnology Index, with reinvestment of dividends.
<br>
&nbsp;
<div align="center"><img src="stkgraph.gif" alt="Stock Price Performance Graph" width="504" height="187"></div>
<br>
<a name="StockBuyback"></a><b>Stock Repurchase Program</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2009, we announced
that our Board of Directors authorized the repurchase of up to $2,500,000 of our Common Stock. The repurchase program may be modified or discontinued at any time without notice.
We did not repurchase any of our Common Stock during the quarter ended March&nbsp;31,&nbsp;2009.<br>
<br>
<a name="item6"></a><b>ITEM 6. SELECTED FINANCIAL DATA.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following balance sheet and income statement
selected financial data should be read in conjunction with our financial statements
and notes included in Item&nbsp;8 of this Report, and with &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operation&#148;
included in Item&nbsp;7 of this Report. The data are derived from our financial statements.<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr><td rowspan="2"></td>
<td colspan="14" style="border-bottom: 1px solid black;">
<div align="center"><b>Balance Sheet Data as of March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2008</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2007</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>2006</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">&nbsp;<b>2005</b></td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
Cash, cash equivalents,<br>
<div style="margin-left: 9pt;">
and marketable securities</div>
</td>
<td width="1%" bgcolor="#ccdaef">
$
</td>
<td width="10%" bgcolor="#ccdaef">
<div align="right">34,321,811</div>
</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" width="10%" bgcolor="#ccdaef">
24,736,874</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" width="10%" bgcolor="#ccdaef">
18,289,191</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" width="10%" bgcolor="#ccdaef">
10,891,326</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" width="10%" bgcolor="#ccdaef">
7,717,264</td>
</tr>
<tr>
<td>
Total assets</td>
<td>
$</td>
<td align="right">42,566,440</td>
<td></td>
<td>$</td>
<td align="right">32,768,128</td>
<td></td>
<td width="1%">$
</td>
<td align="right">25,010,494</td>
<td></td>
<td width="1%">$</td>
<td align="right">17,758,919</td>
<td></td>
<td width="1%">$
</td>
<td align="right">14,190,004</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Capital lease obligations, less current portion</td>
<td>$
</td>
<td align="right">-</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">-</td>
<td></td>
<td width="1%">
$</td>
<td align="right">-</td>
<td></td>
<td width="1%">
$</td>
<td align="right">33,281</td>
<td></td>
<td width="1%">
$
</td>
<td align="right">100,711</td>
</tr>
<tr>
<td>
Total shareholders&#146; equity</td>
<td>
$</td>
<td align="right">41,567,571</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">31,513,482</td>
<td></td>
<td width="1%">$</td>
<td align="right">23,888,255</td>
<td></td>
<td width="1%">$
</td>
<td align="right">16,778,111</td>
<td></td>
<td width="1%">$</td>
<td align="right">13,036,581</td>
</tr>
</table>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td colspan="14" style="border-bottom: 1px solid black;" align="center" width="55%"><b>&nbsp;<br>
Income Statement Data for Years Ended March 31</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2008</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2007</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>2006</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>2005</b></td>
</tr>
<tr>
<td colspan="15" bgcolor="#ccdaef">
Revenue</td>
</tr>
<tr>
<td>
<div style="margin-left: 18pt;">Product sales</div>
</td>
<td width="1%">
$</td>
<td align="right" width="10%">19,715,311</td>
<td width="2%"></td>
<td width="1%">
$</td>
<td align="right" width="10%">
18,505,650</td>
<td width="2%"></td>
<td width="1%">
$</td>
<td align="right" width="10%">
14,425,632</td>
<td width="2%"></td>
<td width="1%">
$</td>
<td align="right" width="10%">
8,345,967</td>
<td width="2%"></td>
<td width="1%">
$</td>
<td align="right" width="10%">
5,522,250</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 18pt;">Contract research and development</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right" bgcolor="#ccdaef">3,656,958</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right" bgcolor="#ccdaef">
2,023,162</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right" bgcolor="#ccdaef">
2,035,198</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right" bgcolor="#ccdaef">
3,824,559</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right" bgcolor="#ccdaef">6,093,320</td>
</tr>
<tr>
<td>
Total revenue</td>
<td>
$</td>
<td align="right">23,372,269</td>
<td></td>
<td>
$</td>
<td align="right">
20,528,812</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
16,460,830</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
12,170,526</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
11,615,570</td>
</tr>
<tr>
<td colspan="15" bgcolor="#ccdaef">&nbsp;</td>
</tr>
<tr>
<td>
Gross profit</td>
<td>
$</td>
<td align="right">16,648,027</td>
<td></td>
<td>
$</td>
<td align="right">
13,695,504</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
10,673,172</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
5,951,993</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
4,604,836</td>
</tr>
<tr>
<td bgcolor="#ccdaef">Income from operations</td>
<td bgcolor="#ccdaef">$</td>
<td align="right" bgcolor="#ccdaef">13,251,590</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
10,048,779</td>
<td bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
 6,545,569</td>
<td bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
2,471,026</td>
<td bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
 1,343,777</td>
</tr>
<tr>
<td>
Net income</td>
<td>
$</td>
<td align="right">9,782,895</td>
<td></td>
<td>
$</td>
<td align="right">
7,187,384</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
4,780,783</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
1,797,746</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
1,758,254</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Net income per share &#150; diluted
</td>
<td>
$</td>
<td align="right">2.04</td>
<td></td>
<td>
$</td>
<td align="right">
1.51</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
1.00</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
0.39</td>
<td></td>
<td width="1%">
$</td>
<td align="right">
0.37</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;"><br><br>
13</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b><a name="item7"></a>ITEM 7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read this discussion together with our
financial statements and notes included elsewhere in this Report. In addition
to historical information, the following discussion contains forward-looking information
that involves risks and uncertainties. Our actual future results could differ
materially from those presently anticipated due to a variety of factors, including
those discussed in Item&nbsp;1A of this Report.<br>
<br>
<b>General</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We develop and sell devices that use &#147;spintronics,&#148;
a nanotechnology that relies on electron spin rather than electron charge to acquire,
store, and transmit information. We manufacture high-performance spintronic products
including sensors and couplers to revolutionize data sensing and transmission.
We also receive contracts for research and development and are a licensor of spintronic
magnetoresistive random access memory technology,
commonly known as MRAM.<br>
<br>
<b>Application of Critical Accounting Policies and Estimates</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with SEC guidance, those material
accounting policies that we believe are the most critical to an investor&#146;s
understanding of our financial results and condition and require complex management
judgment are discussed below.<br>
<br>
<b><i>Research and Development Contract Percentage of Completion Estimation</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize research and development contract
revenue and gross profit as work is performed, based on actual costs incurred.
We apply the percentage-of-completion method to firm-fixed-price contracts. This
requires us to make estimates of the percentage of completion of firm-fixed-price
contracts. If increases in projected costs-to-complete are sufficient to create
a loss contract, the entire estimated loss is charged to operations in the period
the loss first becomes known. This estimate has not affected our financial statements
in the past three fiscal years. Increases in projected costs to complete
contracts could materially impact our future results, however.<br>
<br>
<b><i>Product Warranty Estimation</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain a reserve for warranty claims based
on the trend in the historical ratio of claims to sales, releases of new products
and other factors. The warranty period for our products is generally one year.
Although we believe the likelihood to be relatively low, claims experience could
be materially different from actual results because of the introduction of new
products, manufacturing changes that could impact product quality, or as yet unrecognized
defects in products sold. As of March&nbsp;31, 2009 and 2008 our reserve for estimated
warranty claims was not material to our financial statements.<br>
<br>
<b><i>Inventory Valuation</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost
or net realizable value. Cost is determined by the first in, first out method. Where there is evidence that inventory could be disposed
of at less than carrying value, the inventory is written down to the net realizable
value in the current period. Additionally, we periodically examine our inventory
in the context of sales trends, turnover, competition, and other market factors,
and record provisions to inventory reserve when we determine certain inventory
is unlikely to be sold. If reserved inventory is subsequently sold, corresponding
reductions in inventory and inventory reserve are made. Our inventory reserve
was $300,000 at March&nbsp;31, 2009 and $280,000 at March&nbsp;31, 2008.<br>
<br>
<b><i>Allowance for Doubtful Accounts Estimation</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must make estimates of the uncollectibility
of our accounts receivable. The most significant risk is the risk of sudden unexpected
deterioration in financial condition of a significant customer that is not considered
in the allowance. We specifically analyze accounts receivable, historical bad
debts, and customer credit-worthiness when evaluating the adequacy of the allowance
for doubtful accounts. Our results could be materially impacted if the financial
condition of a significant customer deteriorated and related accounts receivable
are deemed uncollectible. Our allowance for doubtful accounts was $15,000
at March&nbsp;31, 2009 and 2008. Our allowance for doubtful accounts is a relatively
small percentage of our accounts receivable because our revenues are primarily
from large customers, distributors, and U.S. Government agencies, all of which
we consider generally credit-worthy. Our allowance for doubtful accounts could
increase in the future if larger portions of our sales come from small end-user
customers.<br>
<br>
<b><i>Deferred Tax Assets Estimation</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. We evaluate the realizability of the deferred assets
quarterly and assess the need for valuation allowances or reduction of existing
allowances quarterly.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2009 our deferred tax assets
were $667,729 compared to $453,405 as of March&nbsp;31, 2008. Deferred tax assets
included $136,587 in stock-based compensation deductions as of March&nbsp;31,
2009 and $106,681 as of March&nbsp;31, 2008. Our deferred tax assets are subject
to an Internal Revenue Code Section&nbsp;382 limitation.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">14</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a><b><a name="resultoperations">Results of Operations</a></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The following table summarizes the percentage of revenue and year-to-year changes for various items for the last three fiscal years:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="8"><b>Percentage of Revenue<br>
Year Ended March 31</b></td>
<td rowspan="2">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="center" colspan="5"><b>Year-to-Year&nbsp;Change<br>
Years&nbsp;Ended&nbsp;March&nbsp;31</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom"><b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom"><b>2008</b></td>
<td></td>
<td style="border-bottom: 1px solid black;"align="center" colspan="2" valign="bottom"><b>2007</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>2008 to<br>
2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>2007
to<br>
2008</b></td>
</tr>
<tr>
<td bgcolor="#ccdaef" colspan="15">Revenue</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Product sales</div>
</td>
<td align="right" width="9%">84.4</td>
<td width="1%">
%</td>
<td width="2%"></td>
<td align="right" width="9%">
90.1</td>
<td width="1%">
%</td>
<td width="2%"></td>
<td align="right" width="9%">
87.6</td>
<td width="1%">
%</td>
<td width="4%"></td>
<td align="right" width="9%">6.5</td>
<td width="1%">
<div align="right">%</div>
</td>
<td width="2%"></td>
<td align="right" width="9%">
28.3</td>
<td width="1%">
<div align="right">%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Contract&nbsp;research&nbsp;and&nbsp;development&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</div>
</td>
<td style="border-bottom: 1px solid black;" align="right">15.6</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
9.9</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
12.4</td>
<td style="border-bottom: 1px solid black;" width="\">
%</td>
<td></td>
<td align="right">80.8</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
(0.6</td>
<td>
<div align="right">)%</div>
</td>
</tr>
<tr>
<td>
Total revenue</td>
<td align="right">
100.0</td>
<td>
%</td>
<td></td>
<td align="right">
100.0</td>
<td>
%</td>
<td></td>
<td align="right">
100.0</td>
<td width="\">
%</td>
<td></td>
<td align="right">13.9</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
24.7</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Cost of sales</td>
<td style="border-bottom: 1px solid black;" align="right">
28.8</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
33.3</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
35.2</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td align="right">
(1.6</td>
<td>
<div align="right">)%</div>
</td>
<td></td>
<td align="right">
18.1</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr>
<td>
Gross profit</td>
<td align="right">
71.2</td>
<td>
%</td>
<td></td>
<td align="right">
66.7</td>
<td>
%</td>
<td></td>
<td align="right">
64.8</td>
<td width="\">
%</td>
<td></td>
<td align="right">21.6</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
28.3</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="15">Expenses</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Selling, general, and administrative</div>
</td>
<td align="right">9.3</td>
<td>
%</td>
<td></td>
<td align="right">
10.5</td>
<td>
%</td>
<td></td>
<td align="right">
11.9</td>
<td>
%</td>
<td></td>
<td align="right">
0.9</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
10.7</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" align="right">
5.2</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
7.2</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
13.2</td>
<td style="border-bottom: 1px solid black;" width="1%">
%</td>
<td></td>
<td align="right">
(18.1</td>
<td>
<div align="right">)%</div>
</td>
<td></td>
<td align="right">
(31.6</td>
<td>
<div align="right">)%</div>
</td>
</tr>
<tr>
<td>
Total expenses</td>
<td style="border-bottom: 1px solid black;" align="right">
14.5</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
17.7</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
25.1</td>
<td style="border-bottom: 1px solid black;" width="1%">
%</td>
<td></td>
<td align="right">
(6.9</td>
<td>
<div align="right">)%</div>
</td>
<td></td>
<td align="right">
(11.7</td>
<td>
<div align="right">)%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Income from operations</td>
<td align="right">56.7</td>
<td>
%</td>
<td width="2%"></td>
<td align="right">
49.0</td>
<td>
%</td>
<td width="2%"></td>
<td align="right">
39.8</td>
<td width="1%">
%</td>
<td></td>
<td align="right">31.9</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
53.5</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr>
<td>
Net interest and other income</td>
<td style="border-bottom: 1px solid black;" align="right">5.0</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
5.0</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
3.9</td>
<td style="border-bottom: 1px solid black;" width="1%">
%</td>
<td></td>
<td align="right">
14.0</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
59.6</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Income before taxes</td>
<td align="right">
61.7</td>
<td>
%</td>
<td width="2%"></td>
<td align="right">
54.0</td>
<td>
%</td>
<td width="2%"></td>
<td align="right">
43.7</td>
<td width="1%">
%</td>
<td></td>
<td align="right">30.2</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
54.1</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr>
<td>
Income tax provision</td>
<td style="border-bottom: 1px solid black;" align="right">
19.9</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
19.0</td>
<td style="border-bottom: 1px solid black;">
%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
14.7</td>
<td style="border-bottom: 1px solid black;" width="1%">
%</td>
<td></td>
<td align="right">
19.3</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
61.5</td>
<td>
<div align="right">%</div>
</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>
Net income</td>
<td style="border-bottom: 3px double black;" align="right">41.8</td>
<td style="border-bottom: 3px double black;">
%</td>
<td width="2%"></td>
<td style="border-bottom: 3px double black;" align="right">
35.0</td>
<td style="border-bottom: 3px double black;">
%</td>
<td width="2%"></td>
<td style="border-bottom: 3px double black;" align="right">
29.0</td>
<td style="border-bottom: 3px double black;" width="1%">
%</td>
<td></td>
<td align="right">
36.1</td>
<td>
<div align="right">%</div>
</td>
<td></td>
<td align="right">
50.3</td>
<td>
<div align="right">%</div>
</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue for fiscal 2009 increased 14% to $23,372,269
compared to $20,528,812 for fiscal 2008, and increased 25% in fiscal 2008 compared
to $16,460,830 for fiscal 2007. The increase in total revenue in fiscal 2009 was
due to a 7% increase in product sales and an 81% increase in research and development
revenue. The increase in total revenue in fiscal 2008 was due to increases in
product sales. In fiscal 2009, total revenue increased 15% in the U.S. and 36%
in Europe, partially offset by a 29% decrease in revenue from Asia. In fiscal 2008, total revenue increased 9% from the
U.S., 68% from Europe, and 27% from Asia.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product sales increased 7% to $19,715,311 compared
to $18,505,650 in fiscal 2008. Fiscal 2008 product sales increased 28% from $14,425,632
in fiscal 2007. The increases in both years were due to both the addition of new
customers and increased purchases by existing customers. Sales of parts for medical
devices increased in fiscal 2009, while sales into other markets such as industrial
control and factory automation decreased, in part, we believe, due to a worldwide
manufacturing slowdown.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract research and development revenue increased
81% for fiscal 2009 compared to fiscal 2008, following a decrease of less than
1% for fiscal 2008 compared to fiscal 2007. The increase for fiscal 2009 compared
to fiscal 2008 was due to new contracts. The increase in research and development
revenue in fiscal 2009 may not be representative of future trends and there can
be no assurance of additional or follow-on contracts for expired or completed
contracts. <br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit margin increased to 71% of revenue
for fiscal 2009 compared to 67% for fiscal 2008 and 65% for fiscal 2007. The increase
in gross profit margin in fiscal 2009 from fiscal 2008 was due to higher margins
on both product sales and research and development revenue as well as manufacturing
efficiencies and a more favorable product sales mix. The increase in gross profit
margin in fiscal 2008 from fiscal 2007 was due to a more profitable revenue mix
consisting of a higher percentage of product sales. Increases in gross profit
margin might not continue because we may not have additional opportunities to
increase prices or decrease product costs. Furthermore, successfully implementing
our long-term strategy of expanding into large markets such as consumer or automotive
might result in increased revenue but decreased gross profit margin.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general, and administrative expense increased
1% for fiscal 2009 and 11% for fiscal 2008 compared to fiscal 2007. The increase
for fiscal 2009 was primarily due to increased salaries and commissions,
partially offset by a $78,303 decrease in legal fees and a $82,934 decrease in
the effect of SFAS <font style="white-space: nowrap;">No. 123(R)</font>. The decrease in the effect of SFAS <font style="white-space: nowrap;">No. 123(R)</font>
for fiscal 2009 was primarily due to a decrease to 1,000 share options granted
to each non-employee director on their reelection compared to 2,000 shares in
the prior-year period in consideration of the addition of cash compensation for
non-employee directors. The increase for fiscal 2008 was primarily due to increased
expenses relating to commissions on product sales and incentive compensation,
and a $33,236 increase in the effect of SFAS <font style="white-space: nowrap;">No. 123(R)</font>. The increase in
the effect of SFAS <font style="white-space: nowrap;">No. 123(R)</font> for fiscal 2008 was primarily due to a higher market
stock price at the date of automatic grant of stock options to our non-employee
directors on their reelection to our Board compared to the market stock price
at the prior-year date of grant.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">15</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense decreased
18% for fiscal 2009 compared to fiscal 2008
due to the completion of certain research and development projects and an
increase in contract research and development obligations. Research and development
expense decreased 32% for fiscal 2008 compared to fiscal 2007 due to the completion
of certain research and development projects. These decreases may not be representative
of future expense trends. Our research and development expense can fluctuate significantly
depending on staffing, project requirements, and contract research and development
obligations.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest and other income increased 14% for
fiscal 2009 to $1,176,010 compared to $1,031,225 for fiscal 2008. Net interest
and other income increased 60% in fiscal 2008 compared to $646,234 for fiscal
2007. The increase for fiscal 2009 was primarily due to an increase in interest
income from a larger portfolio of marketable securities. The increase for fiscal
2008 was primarily due to an increase in interest income from a larger portfolio
of marketable securities and an increase in other income primarily due to $56,837 in
net gains on sales of marketable securities.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rate in fiscal 2009 was
32% of income before taxes compared to 35% in fiscal 2008 and 34% in fiscal 2007.
The decreased tax rate for fiscal 2009 compared to fiscal 2008 was primarily due to a larger portion of our interest income from federally tax-free securities
and a lower state effective tax rate. Our tax rate was higher in fiscal 2008 compared
to fiscal 2007 primarily due to our assessment for fiscal 2007 that it was more
likely than not that we would realize certain deferred tax assets. Our tax rate
can fluctuate due to a number of factors, including the mix between taxable and
tax-exempt securities in our marketable securities and deductions related to disqualifying
dispositions of our common stock. We did not pay significant cash taxes for fiscal
2007 because of stock-based compensation deductions. We exhausted our available
stock-based compensation deductions during fiscal 2008 and began accruing and
paying cash-tax obligations. The decrease in the effective tax rate in fiscal
2009 may not be representative of future trends because the effective tax rate
can fluctuate from year to year due to a number of factors, some of which are
outside our control.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income increased 36%
for fiscal 2009 compared to fiscal 2008 due to increases in revenue, gross
profit as a percentage of revenue, and interest income and decreases in total expenses and the effective income tax rate. Net income increased
50% in fiscal 2008 compared to fiscal 2007 due to increases in revenue, gross
profit as a percentage of revenue, interest income, and a decrease in total expenses.<br>
<br>
<b><a name="liquidity"></a>Liquidity and Capital Resources</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary source of working capital for fiscal
years 2007 through 2009 was cash provided by operating activities related to product
sales and research and development contract revenue. At March&nbsp;31, 2009 we
had $34,321,811 in cash plus long-term marketable securities compared to $24,736,874
at March&nbsp;31, 2008. The $9,584,937 increase in cash and marketable securities
was primarily due to $9,998,114 in net cash provided by operating activities.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of fixed assets decreased to $401,612 in fiscal 2009 compared to $817,596
in fiscal 2008. Purchases of fixed assets were $321,997 in fiscal 2007. Purchases in all three fiscal years were primarily
for capital equipment to increase our production capacity and were financed with
cash provided by operating activities. Our capital expenditures can vary significantly from year to year depending on our needs and equipment purchasing opportunities.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the past three fiscal years, after purchasing
fixed assets we invested excess cash provided by operating activities in long-term
marketable securities. As of March&nbsp;31, 2009 our marketable securities had
remaining maturities between 13 and 52 months (see &#147;Note&nbsp;4&nbsp;&#150;
Marketable Securities&#148; for additional information). As our marketable securities
mature, we currently plan to either use the proceeds to meet future capital needs
or reinvest the proceeds in other marketable securities.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides aggregate information
about our contractual payment obligations and the periods in which payments are
due:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td colspan="2" height="14"></td>
<td colspan="14" style="border-bottom: 1px solid black;" height="14">
<div align="center"><b>Payments Due by Period</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;">
<b>Contractual&nbsp;obligations</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>Total</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>&lt;1&nbsp;Year</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>1&#150;3 Years</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>3&#150;5 Years</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>&gt;5&nbsp;Years</b></td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Operating&nbsp;lease&nbsp;obligations</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">
$</td>
<td align="right" width="10%" bgcolor="#ccdaef">1,717,427</td>
<td width="2%" bgcolor="#ccdaef">&nbsp;</td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="10%" bgcolor="#ccdaef">244,387</td>
<td width="2%" bgcolor="#ccdaef">&nbsp;</td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="10%" bgcolor="#ccdaef">499,348</td>
<td width="2%" bgcolor="#ccdaef">&nbsp;</td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="10%" bgcolor="#ccdaef">775,506</td>
<td width="2%" bgcolor="#ccdaef">&nbsp;</td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="10%" bgcolor="#ccdaef">198,186</td>
</tr>
<tr>
<td>
Purchase&nbsp;obligations</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">269,995</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">269,995</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>
Total</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">1,987,422</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">514,382</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">499,348</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">775,506</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">198,186</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating lease obligations are primarily for our
facility lease. &#147;Note&nbsp;9&nbsp;&#150; Commitments and Contingencies&#148;
provides additional information about our lease obligations. Purchase obligations
as of March&nbsp;31, 2009 consisted of raw materials purchase commitments and
fixed asset purchase commitments to increase manufacturing capacity. We expect
to meet these contractual payment obligations from cash provided by operating
activities. We plan to evaluate capital expenditures as needs and opportunities
arise, and our future capital expenditures could vary significantly from expenditures
in the past.<br>
<br>
<br>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">16</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our working capital and cash generated
from operations will be adequate for our needs at least through fiscal 2010.<br>
<br>
<b>Foreign Currency Transactions</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have some limited revenue risks from fluctuations
in values of foreign currency due to product sales abroad. Foreign sales are generally
made in U.S. currency, and currency transaction gains or losses in the past three
fiscal years were not significant.<br>
<br>
<b>Inflation</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inflation has not had a significant impact on our
operations since our inception. Prices for our products and for the materials
and labor going into those products are governed by market conditions. It is possible
that inflation in future years could impact both materials and labor in the production
of our products.<br>
<br>
<b>Off-Balance-Sheet Arrangements</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our off-balance sheet arrangements
consist of purchase commitments and operating leases for our facility. We believe that our off-balance sheet arrangements
do not have a material current or anticipated future effect on our profitability, cash flows, or financial position.<br>
<br>
<b><a name="item7a">ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</a></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary objective of our investment activities
is to preserve principal while at the same time maximizing after-tax yields without
significantly increasing risk. To achieve this objective, we maintain our portfolio
of cash equivalents and marketable securities in a variety of securities including
government agency obligations, municipal obligations, corporate obligations, and
money market funds. Short-term and long-term marketable securities are generally
classified as available-for-sale and consequently are recorded on the balance
sheet at fair value with unrealized gains or losses reported as a separate component
of accumulated other comprehensive income or loss, net of estimated tax. All of
our marketable securities were long-term as of March&nbsp;31, 2009, with remaining
maturities between 13 and 52&nbsp;months. Marketable securities had a
market value of $32,446,748 at March&nbsp;31, 2009, representing approximately
76% of our total assets. We have not used derivative financial instruments in
our investment portfolio.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">17</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a><b><a name="item8"></a>ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial statements and accompanying notes are in this Report beginning on page F-1. <br>
<br>
<b>Quarterly Summary Information</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selected unaudited quarterly financial data for fiscal 2009 and 2008, presented as supplementary financial information, are as follows:<br>
&nbsp;<br></font>
<table style="font-size: 10pt; font-family: Times New Roman; border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;">
<div align="center"><b>Unaudited; Quarter Ended</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<div align="center"><b>March&nbsp;31,&nbsp;2009</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<div align="center"><b>Dec.&nbsp;31, 2008</b></div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Sept.&nbsp;30, 2008</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">&nbsp;<b>June&nbsp;30, 2008</b></td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">
Revenue</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Product sales</div>
</td>
<td width="1%">
$</td>
<td align="right" width="13%">
5,699,660</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="13%">
4,596,948</td>
<td width="2%"></td>
<td width="1%">
$</td>
<td align="right" width="13%">
4,871,381</td>
<td width="2%"></td>
<td width="2%">
$</td>
<td align="right" width="13%">
4,547,322</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Contract&nbsp;research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">1,196,920</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,287,165</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
856,409</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
316,464</td>
</tr>
<tr>
<td>
Total revenue</td>
<td></td>
<td align="right">6,896,580</td>
<td></td>
<td></td>
<td align="right">
5,884,113</td>
<td></td>
<td></td>
<td align="right">
5,727,790</td>
<td></td>
<td></td>
<td align="right">
4,863,786</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Cost of sales</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">1,806,102</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,763,090</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,747,618</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,407,432</td>
</tr>
<tr>
<td>Gross profit</td>
<td></td>
<td align="right">5,090,478</td>
<td></td>
<td></td>
<td align="right">4,121,023</td>
<td></td>
<td></td>
<td align="right">3,980,172</td>
<td></td>
<td></td>
<td align="right">3,456,354</td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">Expenses</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Selling,&nbsp;general,&nbsp;and&nbsp;administrative</div>
</td>
<td></td>
<td align="right">554,055</td>
<td></td>
<td></td>
<td align="right">508,953</td>
<td></td>
<td></td>
<td align="right">
585,373</td>
<td></td>
<td></td>
<td align="right">529,484</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">292,679</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
258,998</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
280,863</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">386,032</td>
</tr>
<tr>
<td>
Total expenses</td>
<td></td>
<td align="right">846,734</td>
<td></td>
<td></td>
<td align="right">
767,951</td>
<td></td>
<td></td>
<td align="right">
866,236</td>
<td></td>
<td></td>
<td align="right">
915,516</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Income from operations</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">4,243,744</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
3,353,072</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
3,113,936</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
2,540,838</td>
</tr>
<tr>
<td>
Income before taxes</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">4,577,231</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
3,660,686</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
3,391,010</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
2,798,673</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Net income</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">3,111,494</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
2,468,404</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
2,300,381</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,902,616</td>
</tr>
<tr>
<td>Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;basic</td>
<td>
$</td>
<td align="right">0.67</td>
<td></td>
<td>$
</td>
<td align="right">
0.53</td>
<td></td>
<td>
$</td>
<td align="right">
0.49</td>
<td></td>
<td>
$</td>
<td align="right">
0.41</td>
</tr>
<tr>
<td bgcolor="#ccdaef">Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;diluted</td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">0.65</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">$
</td>
<td align="right" bgcolor="#ccdaef">
0.52</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
0.48</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
0.40</td>
</tr>
<tr>
<td></td>
<td colspan="11" style="border-bottom: 1px solid black;" width="62%">
<div align="center"><br>
<b>Unaudited; Quarter Ended</b></div>
</td>
</tr>
<tr>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<div align="center"><b>March 31,&nbsp;2008</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<div align="center"><b>Dec.&nbsp;31, 2007</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Sept.&nbsp;30, 2007</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">&nbsp;<b>June&nbsp;30, 2007</b></td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">
Revenue</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Product sales</div>
</td>
<td width="1%">
$
</td>
<td align="right" width="13%">
5,674,879
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="13%">
4,249,809
</td>
<td width="2%"></td>
<td width="1%">
$
</td>
<td align="right" width="13%">
4,311,862
</td>
<td></td>
<td width="2%">
$
</td>
<td align="right" width="13%">
4,269,100
</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Contract&nbsp;research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
374,505
</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
515,716
</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
692,758</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
440,183</td>
</tr>
<tr>
<td>
Total revenue</td>
<td width="1%"></td>
<td align="right">
6,049,384
</td>
<td width="2%"></td>
<td></td>
<td align="right">
4,765,525
</td>
<td></td>
<td width="1%"></td>
<td align="right">
5,004,620</td>
<td></td>
<td></td>
<td align="right">
4,709,283</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Cost of sales</td>
<td style="border-bottom: 1px solid black;" width="1%" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,876,335</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,663,045</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" width="1%" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,850,960</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,442,968</td>
</tr>
<tr>
<td>Gross profit</td>
<td width="1%"></td>
<td align="right">
4,173,049</td>
<td width="2%"></td>
<td></td>
<td align="right">
3,102,480</td>
<td></td>
<td width="1%"></td>
<td align="right">
3,153,660</td>
<td></td>
<td></td>
<td align="right">
3,266,315</td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">
Expenses</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Selling,&nbsp;general,&nbsp;and&nbsp;administrative</div>
</td>
<td></td>
<td align="right">
526,882</td>
<td width="2%"></td>
<td></td>
<td align="right">492,771</td>
<td></td>
<td></td>
<td align="right">
575,422</td>
<td></td>
<td></td>
<td align="right">
563,743</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" width="1%" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
318,889</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" width="1%" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
347,344
</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
314,037</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
507,637</td>
</tr>
<tr>
<td>
Total expenses</td>
<td></td>
<td align="right">
845,771</td>
<td></td>
<td></td>
<td align="right">
840,115</td>
<td></td>
<td></td>
<td align="right">
889,459</td>
<td></td>
<td></td>
<td align="right">
1,071,380</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Income from operations</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
3,327,278</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
2,262,365</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
2,264,201</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">2,194,935</td>
</tr>
<tr>
<td>
Income before taxes</td>
<td style="border-bottom: 1px solid black;" width="1%">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
3,564,330</td>
<td></td>
<td style="border-bottom: 1px solid black;" width="1%">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
2,585,160</td>
<td></td>
<td style="border-bottom: 1px solid black;" width="1%">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
2,511,058</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
2,419,456</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Net income</td>
<td style="border-bottom: 1px solid black;" width="1%" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
2,252,982</td>
<td width="2%" bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,702,293</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,644,774</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">
$</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">
1,587,335</td>
</tr>
<tr>
<td>Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;basic</td>
<td width="1%">
$</td>
<td align="right">
0.49</td>
<td></td>
<td>
$</td>
<td align="right">
0.37</td>
<td></td>
<td>
$</td>
<td align="right">
0.35</td>
<td></td>
<td>
$</td>
<td align="right">
0.34</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;diluted</td>
<td width="1%">
$</td>
<td align="right">
0.47</td>
<td width="2%"></td>
<td>
$</td>
<td align="right">
0.36</td>
<td></td>
<td>
$</td>
<td align="right">
0.34</td>
<td></td>
<td>
$</td>
<td align="right">
0.33</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b><a name="item9">
</a>ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND&nbsp;FINANCIAL&nbsp;DISCLOSURE.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.<br>
<br>
<b><a name="item9A"></a>ITEM 9A. CONTROLS AND PROCEDURES.<br>
Disclosure Controls and Procedures</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management, with the participation of the Chief
Executive Officer and Chief Financial Officer, has performed an evaluation of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act) as of the end of the period covered by this
Report. This evaluation included consideration of the controls, processes, and
procedures that are designed to ensure that information required to be disclosed
by us in the reports we file under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC&#146;s
rules and forms and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. Based
on such evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of March&nbsp;31, 2009, our disclosure controls and procedures
were effective.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the quarter ended March&nbsp;31, 2009, there was no change in our internal control over financial reporting that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">18</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>Management&#146;s Report on Internal Control Over Financial Reporting</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Exchange Act. Our management,
including our Chief Executive Officer and Chief Financial Officer, assessed
the effectiveness of our internal control over financial reporting as of March&nbsp;31, 2009. In making this assessment, management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in <i>Internal Control&nbsp;&#150; Integrated Framework</i>.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on our assessment using the criteria set
forth by COSO in <i>Internal Control&nbsp;&#150; Integrated Framework</i>, management
concluded that our internal control over financial reporting was effective as
of March&nbsp;31, 2009. Our internal control over financial reporting as of
March&nbsp;31, 2009 has been audited by Ernst&nbsp;& Young&nbsp;LLP, an independent
registered public accounting firm, as stated in their report.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management, including our Chief Executive
Officer and Chief Financial Officer, does not expect that our internal control
over financial reporting will prevent all errors and all fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within NVE have been detected. Our internal controls over
financial reporting, however, are designed to provide reasonable assurance that
the objectives of internal control over financial reporting are met.<br>
<br>
<b>ITEM 9B. OTHER INFORMATION.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.<br>
<br>
</font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><u><a name="part3">PART III</a></u></b></font></div>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b><a name="item10">ITEM 10. </a>DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.</b><br>
<b>Directors and Executive Officers<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each NVE director is elected annually and serves
for a term of approximately one year or until his or her successor is duly elected
and qualified. The section titled &#147;Proposal&nbsp;1. Election of Board of Directors&#148;
to be included in our Proxy Statement for our 2009 Annual Meeting of Shareholders
sets forth certain information regarding our directors required by Item&nbsp;10,
and the section titled &#147;Executive Officers of the Company&#148; sets forth
information regarding our executive officers required by Item&nbsp;10. Both sections
are incorporated by reference into this section.<br>
<br>
<b>Audit Committee Financial Experts<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has determined that Terrence&nbsp;W.
Glarner, James&nbsp;D. Hartman, and Patricia&nbsp;M. Hollister qualify as &#147;audit
committee financial experts&#148; as that term is defined under Section&nbsp;407
of the Sarbanes-Oxley Act of 2002 and the rules promulgated by the SEC in furtherance
of Section&nbsp;407. Furthermore, Ms.&nbsp;Hollister, Mssrs.&nbsp;Glarner and
Hartman, and Robert&nbsp;H. Irish are &#147;independent&#148; as that term is
defined under the corporate governance rules of the NASDAQ Stock Market.<br>
<br>
<b>Audit Committee<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion under the section titled &#147;Board
Committees&nbsp;&#150; Corporate Governance&nbsp;&#150; Audit Committee&#148; to be included
in our Proxy Statement for our 2009 Annual Meeting of Shareholders is incorporated
by reference into this section.<br>
<br>
<b>Code of Ethics<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a Policy on Ethics and Business
Conduct that applies to all officers, directors, and employees of the Company.
The Policy is available from the &#147;Investors&#148; section of our Website
(www.nve.com). We intend to disclose future amendments to the Policy, or waivers
of such provisions granted to executive officers and directors, on our Website
within four business days following the date of such amendment or waiver.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">19</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a><b>Section 16(a) Beneficial Ownership Reporting Compliance<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion under the section titled &#147;Security
Ownership&nbsp;&#150; Section&nbsp;16(a) Beneficial Ownership Reporting Compliance&#148;
to be included in our Proxy Statement for our 2009 Annual Meeting of Shareholders
is incorporated by reference in this section.<br>
<br>
<b><a name="item11">ITEM 11.</a> EXECUTIVE COMPENSATION.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information appearing under the sections &#147;Executive Compensation,&#148; &#147;Compensation
Discussion and Analysis,&#148; &#147;Corporate Governance&nbsp;&#150; Board Committees&nbsp;&#150;
Compensation Committee Interlocks and Insider Participation,&#148; &#147;Compensation
Committee Report,&#148; and &#147;Directors Compensation&#148; to be included
in our Proxy Statement for our 2009 Annual Meeting of Shareholders is incorporated
by reference into this section.<br>
<br>
<b><a name="item12">ITEM 12. </a>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information to be included in our Proxy Statement
for our 2009 Annual Meeting of Shareholders in the section titled &#147;Security
Ownership&#148; is incorporated by reference into this section.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes Common Stock that
may be issued as of March&nbsp;31, 2009 on the exercise of options under our 2000
Stock Option Plan, as amended. Information regarding the material features of
the Plan is contained in Note&nbsp;6 to the Financial Statements included elsewhere
in this Report.<br>
<br>
</font>
<table border="0" style=" font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td style="border-bottom: 1px solid black;" width="36%" valign="bottom"><b>Plan Category</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" width="21%"><b>Number
of<br>
Securities to be<br>
Issued Upon<br>
Exercise of<br>
Outstanding Options,<br>
Warrants,&nbsp;and&nbsp;Rights<br>
(A)
</b></td>
<td colspan="2">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="center">
<b>&nbsp;<br>
Weighted-Average<br>
Exercise Price of<br>
Outstanding<br>
Options,&nbsp;Warrants,<br>
and Rights<br>
(B)
</b></td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="center" width="21%"><b>Number of Securities<br>
Remaining Available for<br>
Future Issuance Under<br>
Equity&nbsp;Compensation&nbsp;Plans<br>
(Excluding Securities<br>
Reflected in Column (A))<br>
(C)
</b></td>
</tr>
<tr>
<td colspan="8" bgcolor="#ccdaef">
Equity compensation plans</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">approved by security holders</div>
</td>
<td></td>
<td>
<div align="center">281,750</div>
</td>
<td width="3%">&nbsp;</td>
<td colspan="2">
<div align="center">$17.10</div>
</td>
<td width="3%">&nbsp;</td>
<td><div align="center">174,230</div>
</td>
</tr>
<tr>
<td colspan="8">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="8">
Equity compensation plans not</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">approved by security holders</div>
</td>
<td></td>
<td><div align="center">-</div>
</td>
<td>&nbsp;</td>
<td colspan="2"><div align="center">-</div>
</td>
<td>&nbsp;</td>
<td><div align="center">-</div></td>
</tr>
<tr>
<td colspan="2">&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>
Total at March 31, 2009</td>
<td></td>
<td style="border-bottom: 3px double black;">
<div align="center">281,750</div>
</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;" colspan="2">
<div align="center">$17.10</div>
</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">
<div align="center">174,230</div>
</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b><a name="item13"></a>ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information to be included in our Proxy Statement
for our 2009 Annual Meeting of Shareholders in the sections titled &#147;Security
Ownership&nbsp;&#150; Transactions With Related Persons, Promoters, and Certain Control
Persons&#148; and Corporate Governance&nbsp;&#150; Board Composition, Independence,
and Meeting Attendance&#148; is incorporated by reference into this section.<br>
<br>
<b><a name="item14">ITEM 14. </a>PRINCIPAL ACCOUNTANT FEES AND SERVICES.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information to be included in our Proxy
Statement for our 2009 Annual Meeting of Shareholders in the sections titled &#147;Audit
Committee Disclosure&nbsp;&#150; Fees Billed to Us by Ernst&nbsp;& Young During Fiscal
2009 and 2008&#148; and &#147;Audit Committee Disclosure&nbsp;&#150; Audit Committee
Pre-Approval Policy&#148; is incorporated by reference into this section.<br>
<br></font>
<div align="center"><font style="font-size: 10pt; font-family: Arial, Helvetica;"><b><u><a name="itemIV">PART IV</a></u></b><br>
&nbsp;<br>
</font></div>
<font style="font-size: 10pt; font-family: Times New Roman;"><b><a name="item15">ITEM 15. </a>EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.<br>
(a) Financial Statements and Schedules</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements are provided pursuant to
Item&nbsp;8 of this Report. Financial statement schedules have been omitted since
they are either not required or not applicable, or the required information is
shown in the financial statements or notes.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">20</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><b><a href="#TOC">Table of Contents</a><br>
<br>
(b) Exhibits</b></font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr valign="top">
<td style="border-bottom: 1px solid black;"><b>Exhibit&nbsp;#</b></td>
<td style="border-bottom: 1px solid black;">
<div align="center"><b>Description</b></div>
</td>
</tr>
<tr valign="top">
<td width="27 pt" bgcolor="#ccdaef">&nbsp;&nbsp;3.1</td>
<td bgcolor="#ccdaef">Amended and Restated Articles of Incorporation of the company as amended by the
Board of Directors effective November&nbsp;21, 2002 (incorporated by reference
to our Quarterly Report on Form 10-QSB for the period ended December 31, 2002).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;3.2</td>
<td>Bylaws of the company as amended by the Board of Directors effective December
18, 2007 (incorporated by reference to our Current Report on Form 8-K
filed December 19, 2007).</td>
</tr>
<tr valign="top">
<td style="width: 27pt;" bgcolor="#ccdaef">&nbsp;&nbsp;4</td>
<td bgcolor="#ccdaef">Form of Common Stock Certificate (incorporated by reference to our Registration Statement on Form S-8 filed July&nbsp;20, 2001).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;10.1</td>
<td>
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).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">
&nbsp;&nbsp;10.2</td>
<td bgcolor="#ccdaef">
First amendment to lease between the company and Glenborough Properties,
LP dated September&nbsp;18, 2002 (incorporated by reference to our Quarterly
Report on Form 10-QSB for the period ended September&nbsp;30, 2002).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;10.3</td>
<td>Second amendment to lease between the company and Glenborough Properties, LP dated December 1, 2003 (incorporated by reference to our Quarterly
Report on Form 10-QSB for the period ended December 31, 2003).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">
&nbsp;&nbsp;10.4</td>
<td bgcolor="#ccdaef">
Notification from Glenborough Properties, LP relating to change in building ownership
(incorporated by reference to our Current Report on Form 8-K filed October&nbsp;11, 2005).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;10.5</td>
<td>
Notification from Carlson Real Estate Company, Inc. relating to change in building ownership (incorporated by reference to our Current
Report on Form 8-K filed October&nbsp;11, 2005).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">
&nbsp;&nbsp;10.6</td>
<td bgcolor="#ccdaef">
Third amendment to lease between the company and Carlson Real Estate Company, Inc. dated December 17, 2007
(incorporated by reference to our Current Report on Form 8-K/A filed December 20, 2007).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;10.7*</td>
<td>Employment Agreement between the company and Daniel A. Baker dated January&nbsp;29,
2001 (incorporated by reference to our Annual Report on Form 10-KSB for the year ended March&nbsp;31, 2001).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">
&nbsp;&nbsp;10.8*</td>
<td bgcolor="#ccdaef">NVE Corporation 2000 Stock Option Plan as Amended July&nbsp;19, 2001 by the
shareholders (incorporated by reference to our Registration Statement on Form S-8 filed July&nbsp;20, 2001).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;10.9+</td>
<td>Agreement between the company and Agilent Technologies,&nbsp;Inc. dated September&nbsp;27, 2001 (incorporated by reference to our Quarterly
Report on Form 10-QSB for the period ended September&nbsp;30, 2001).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">
&nbsp;&nbsp;10.10</td>
<td bgcolor="#ccdaef">Amendment dated October 18, 2002 to Agreement between the company and Agilent
Technologies, Inc. (incorporated by reference to our Quarterly Report on
Form 10-QSB for the period ended December&nbsp;31, 2002).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;10.11</td>
<td>Notification from Agilent Technologies of planned sale of Agilent&#146;s Semiconductor
Product Group (incorporated by reference to our Current Report on Form 8-K filed October&nbsp;19, 2005).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;10.12</td>
<td bgcolor="#ccdaef">Report of completion of the divestiture of Agilent&#146;s Semiconductor Products
business (incorporated by reference to our Current Report on Form 8-K/A filed December&nbsp;6, 2005).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;10.13</td>
<td>Amendment Number 2 to OEM Purchase Agreement dated September 10, 2007 to Agreement between Agilent
Technologies, Inc. (and subsequently assigned to Avago Technologies, Inc.) and the company (incorporated by
reference to our Exhibit 10.5 filed with our Current Report on Form 8-K/A filed September 11, 2007).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;10.14*</td>
<td bgcolor="#ccdaef">Amendment No.&nbsp;1 dated March&nbsp;28, 2005 to Stock Option Agreement dated May&nbsp;7, 2004
between the Company and Daniel&nbsp;A. Baker (incorporated by reference to our Current Report on Form 8-K filed March&nbsp;30, 2005).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;10.15</td>
<td>Amendment No.&nbsp;1 dated March&nbsp;28, 2005 to Stock Option Agreement dated August&nbsp;17, 2004
between the Company and Patricia&nbsp;M. Hollister (incorporated by reference
to our Current Report on Form 8-K filed March&nbsp;30, 2005).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;10.16</td>
<td bgcolor="#ccdaef">Indemnification Agreement by and between Pacesetter, Inc., a St. Jude Medical Company,
d.b.a. St. Jude Medical Cardiac Rhythm Management Division (&#147;St. Jude&#148;), and the company (incorporated by reference to our Current
Report on Form 8-K filed September&nbsp;27, 2005).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;10.17+</td>
<td>Supplier Partnering Agreement by and between St.&nbsp;Jude and
the company (incorporated by reference to our Current Report on Form 8-K
filed January&nbsp;4, 2006).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;10.18+</td>
<td bgcolor="#ccdaef">Amendment Number 1 to Supplier Partnering Agreement dated September 6, 2007 between St.&nbsp;Jude and the company
(incorporated by reference to our Current Report on Form 8-K/A filed September 10, 2007).</td>
</tr>

<tr valign="top">
<td>&nbsp;&nbsp;10.19*</td>
<td>Verbal agreement with Curt A. Reynders (incorporated by reference to Item&nbsp;1.01 of our Current Report on <font style="white-space: nowrap;">Form 8-K</font> filed January 18, 2006).</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>&nbsp;&nbsp;10.20</td>
<td>Supply Agreement by and between the company and Phonak AG (incorporated by reference to our Current Report on Form 8-K filed May&nbsp;6, 2009).</td>
</tr>
<tr valign="top">
<td>&nbsp;&nbsp;23</td>
<td>Consent of Ernst &amp; Young LLP.</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;31.1</td>
<td bgcolor="#ccdaef">Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).</td>
</tr>
<tr valign="top">
<td>
&nbsp;&nbsp;31.2</td>
<td>Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a).</td>
</tr>
<tr valign="top">
<td bgcolor="#ccdaef">&nbsp;&nbsp;32</td>
<td bgcolor="#ccdaef">Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</td>
</tr>
</table>
<table style="font-size:4pt;" width="80" border="0" cellspacing="00" cellpadding="0">
<tr style="page-break-inside:avoid;">
<td style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;" align="center">&nbsp;
</td>
</tr>
<tr style="page-break-inside:avoid;">
<td style="padding:0pt .7pt 0pt 0pt;">&nbsp;</td>
</tr>
</table>
<table style="font-size: 10pt; font-family: Times New Roman;" width="100%" border="0" cellspacing="00" cellpadding="0">
<tr>
<td width="1" valign="top">*</td>
<td>Indicates a management contract or compensatory plan or arrangement.<font style="line-height: 3pt;"><br>
&nbsp;</font></td>
</tr>
<tr>
<td valign="top">+</td>
<td>Confidential portions of this exhibit have been deleted and filed separately with the SEC under a request for confidential
treatment pursuant to Rule 24b-2 or Rule 406.<font style="line-height: 3pt;"><br>
&nbsp;</font></td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">Copies of documents filed as exhibits to our Form 10-K
may be accessed from the &#147;Investors&#148; section of our Website (www.nve.com),
or obtained by making a written request to Curt&nbsp;A. Reynders, our Chief Financial Officer.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">21</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><a name="signatures">SIGNATURES</a></b></font></div>
&nbsp;<br>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 its behalf by
the undersigned, thereunto duly authorized.
<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellspacing="00" cellpadding="0">
<tr>
<td rowspan="8" width="144"></td>
<td><b><u>NVE CORPORATION</u></b></td>
</tr>
<tr>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Registrant)</td>
</tr>
<tr>
<td>&nbsp;</td>
</tr>
<tr>
<td><u>/s/Daniel A. Baker</u></td>
</tr>
<tr>
<td>by Daniel A. Baker</td>
</tr>
<tr>
<td>President and Chief Executive Officer</td>
</tr>
<tr>
<td>&nbsp;</td>
</tr>
<tr>
<td>Date&nbsp;&nbsp;&nbsp;&nbsp;May 6, 2009</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="5" cellspacing="0" width="100%">
<tr>
<td valign="top" width="33%">
<div align="center"><b><u>Name</u></b></div>
</td>
<td valign="top" width="34%">
<div align="center">&nbsp;<b><u>Title</u></b></div>
</td>
<td width="33%">
<div align="center"><b><u>Date</u></b></div>
<div align="center">&nbsp;</div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/Terrence W. Glarner</u><br>
Terrence W. Glarner</div>
</td>
<td valign="top">
<div align="center">Director and<br>
Chairman of the Board<br>
&nbsp;
<br>
&nbsp;
</div>
</td>
<td valign="top">
<div align="center"><u>May 6, 2009</u></div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/Daniel A. Baker</u><br>
Daniel A. Baker</div>
</td>
<td valign="middle">
<div align="center">Director,<br>
President &amp; Chief Executive Officer<br>
(Principal Executive Officer)<br>
&nbsp;
</div>
</td>
<td valign="top">
<div align="center"><u>May 6, 2009</u></div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/Curt A. Reynders</u><br>
Curt A. Reynders</div>
</td>
<td valign="top">
<div align="center">Treasurer and<br>
Chief Financial Officer<br>
(Principal Financial and<br>
Accounting Officer)</div>
</td>
<td valign="top">
<div align="center"><u><u>May 6, 2009</u></u></div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/James D. Hartman</u><br>
James D. Hartman<br>
&nbsp;
<br>
&nbsp;
</div>
</td>
<td valign="top">
<div align="center">Director</div>
</td>
<td valign="top">
<div align="center"><u>May 6, 2009</u></div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/Patricia M. Hollister</u><br>
Patricia M. Hollister<br>
&nbsp;<br>

&nbsp;</div>
</td>
<td valign="top">
<div align="center">Director</div>
</td>
<td valign="top">
<div align="center"><u>May 6, 2009</u></div>
</td>
</tr>
<tr>
<td valign="top">
<div align="center"><u>/s/Robert H. Irish</u><br>
Robert H. Irish</div>
</td>
<td valign="top">
<div align="center">Director</div>
</td>
<td valign="top">
<div align="center"><u>May 6, 2009</u></div>
</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style="font-size: 10pt; font-family: Times New Roman;"><br>
<br>
22</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><a name="financials"></a><b>NVE CORPORATION<br>
INDEX TO<br>
FINANCIAL STATEMENTS</b><br>
&nbsp;<br>
&nbsp;<br>
</font></div>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="top"><a href="#Report">Reports of Independent Registered Public Accounting Firm</a></td>
<td align="right">F-2<br>
</td>
</tr>
<tr>
<td valign="top"><a href="#BS">Balance Sheets</a></td>
<td align="right">F-4<br>
</td>
</tr>
<tr>
<td valign="top"><a href="#income">Statements of Income</a></td>
<td align="right">F-5<br>
</td>
</tr>
<tr>
<td valign="top"><a href="#SHE">Statements of Shareholders&#146; Equity</a></td>
<td align="right">F-6<br>
</td>
</tr>
<tr>
<td valign="top"><a href="#CF">Statements of Cash Flows</a></td>
<td align="right">F-7<br>
</td>
</tr>
<tr>
<td valign="top"><a href="#notes">Notes to Financial Statements</a></td>
<td align="right">F-8<br>
</td>
</tr>
</table>
<br>
<br>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-1</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
</font>
<font style="font-size: 10pt; font-family: Arial, Helvetica;"><a name="Report"><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></a></font><font style="font-size: 10pt; font-family: Times New Roman, Times, serif;"><br>
&nbsp;<br>
The Board of Directors and Shareholders
of NVE Corporation<br>
<br>
We have audited NVE Corporation&#146;s internal control over financial reporting
as of March&nbsp;31, 2009, based on criteria established in <i>Internal Control&nbsp;&#150;
Integrated Framework</i> issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). NVE Corporation&#146;s management
is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying report of management entitled </font><font style="font-size: 10pt; font-family: Times New Roman;">&#147;</font><font style="font-size: 10pt; font-family: Times New Roman, Times, serif;">Management&#146;s
 Report on Internal Control Over Financial Reporting.</font><font style="font-size: 10pt; font-family: Times New Roman;">&#148;</font><font style="font-size: 10pt; font-family: Times New Roman, Times, serif;"> Our responsibility
is to express an opinion on NVE Corporation&#146;s internal control over financial
reporting based on our audit.<br>
<br>
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.<br>
<br>
A company&#146;s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company&#146;s internal control
over financial reporting includes those policies and procedures that (1)&nbsp;pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)&nbsp;provide
reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3)&nbsp;provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company&#146;s assets that could have
a material effect on the financial statements.<br>
<br>
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.<br>
<br>
In our opinion, NVE Corporation maintained, in all material respects, effective
internal control over financial reporting as of March&nbsp;31, 2009, based on the COSO criteria.<br>
<br>
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the balance sheets of NVE Corporation as of March&nbsp;31,
2009 and 2008, and the related statements of income, shareholders&#146; equity,
and cash flows for each of the three years in the period ended March&nbsp;31, 2009, and our report dated May&nbsp;5, 2009
expressed an unqualified opinion thereon.<br>
&nbsp;<br>
&nbsp;<br>
<div align="right">/s/ Ernst &amp; Young LLP</div>
&nbsp;<br>
&nbsp;<br>
Minneapolis, Minnesota<br>
May 5, 2009<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-2</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
</font><font style="font-size: 10pt; font-family: Arial, Helvetica;"><a name="Report"></a><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b><br>
&nbsp;<br>
</font><font style="font-size: 10pt; font-family: Times New Roman;">The Board of Directors and Shareholders
of NVE Corporation<br>
<br>
We have audited the accompanying balance sheets of NVE Corporation as of March&nbsp;31,
2009 and 2008, and the related statements of income, shareholders&#146; equity,
and cash flows for each of the three years in the period ended March&nbsp;31,
2009. These financial statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these financial statements
based on our audits.<br>
<br>
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.<br>
<br>
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NVE Corporation at March&nbsp;31,
2009 and 2008, and the results of its operations and its cash flows for each of
the three years in the period ended March&nbsp;31, 2009, in conformity with U.S.
generally accepted accounting principles.<br>
<br>
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), NVE Corporation&#146;s internal control over
financial reporting as of March&nbsp;31, 2009, based on criteria established in<i>
Internal Control&nbsp;&#150; Integrated Framework</i> issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated May 5,
2009, expressed an unqualified opinion thereon.<br>
&nbsp;<br>
&nbsp;<br>
<div align="right">/s/ Ernst &amp; Young LLP</div>
&nbsp;<br>
&nbsp;<br>
Minneapolis, Minnesota<br>
May 5, 2009<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-3</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><a name="BS">NVE CORPORATION</a><br>
BALANCE SHEETS</b><br>
&nbsp;<br>
</font></div>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" colspan="7">
<div align="center"><b>March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2009</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2008</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="8">ASSETS</td>
</tr>
<tr>
<td colspan="8">Current assets</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Cash and cash equivalents</div>
</td>
<td width="1%">
$</td>
<td align="right" width="11%">1,875,063</td>
<td width="1%"></td>
<td></td>
<td width="1%">
$</td>
<td align="right" width="11%">
1,885,867</td>
<td width="1%"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Marketable securities, short term</div>
</td>
<td></td>
<td align="right" width="11%">
- -</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
795,728</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Accounts receivable, net of allowance for uncollectible accounts of $15,000</div>
</td>
<td></td>
<td align="right" width="11%">3,366,698</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
3,226,027</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Inventories</div>
</td>
<td></td>
<td align="right" width="11%">2,247,621</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
2,456,804</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Deferred tax assets</div>
</td>
<td></td>
<td align="right" width="11%">667,729</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
453,405</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Prepaid expenses and other assets</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">669,307</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
529,616</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Total current assets</td>
<td width="1%"></td>
<td align="right" width="11%">8,826,418</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
9,347,447</td>
<td></td>
</tr>
<tr>
<td colspan="8">Fixed assets</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Machinery and equipment&nbsp;</div>
</td>
<td></td>
<td align="right" width="11%">5,328,237</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
5,205,288</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Leasehold improvements</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">450,546</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
436,794</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>&nbsp;</td>
<td></td>
<td align="right" width="11%">5,778,783</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
5,642,082</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Less accumulated depreciation&nbsp;</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">4,485,509</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
4,276,680</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Net fixed assets</td>
<td></td>
<td align="right" width="11%">1,293,274</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
1,365,402</td>
<td></td>
</tr>
<tr>
<td>Marketable securities, long term</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">32,446,748</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
22,055,279</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Total assets</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">42,566,440</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
32,768,128</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr>
<td colspan="8">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="8">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</td>
</tr>
<tr>
<td colspan="8">Current liabilities</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Accounts payable</div>
</td>
<td>
$</td>
<td align="right" width="11%">257,239</td>
<td></td>
<td></td>
<td width="1%">
$</td>
<td align="right" width="11%">
434,808</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Accrued payroll and other&nbsp;</div>
</td>
<td></td>
<td align="right" width="11%">637,463</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
632,338</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Deferred revenue</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">104,167</td>
<td></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
187,500</td>
<td></td>
</tr>
<tr>
<td>
Total current liabilities</td>
<td></td>
<td align="right" width="11%">998,869</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
1,254,646</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="8">&nbsp;</td>
</tr>
<tr>
<td colspan="8">Shareholders&#146; equity</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Common stock</div>
</td>
<td width="1%"></td>
<td align="right" width="11%">46,693</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right" width="11%">
46,387</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Additional paid-in capital</div>
</td>
<td width="1%"></td>
<td align="right" width="11%">19,166,524</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right" width="11%">
18,539,538</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td><div style="margin-left: 9pt;">Accumulated other comprehensive (loss) income</div>
</td>
<td width="1%"></td>
<td align="right" width="11%">(252,940</td>
<td>)</td>
<td></td>
<td width="1%"></td>
<td align="right" width="11%">
103,158</td>
<td>&nbsp;
</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Retained earnings</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">22,607,294</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
12,824,399</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Total shareholders&#146; equity</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">41,567,571</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" width="11%">
31,513,482</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr valign="top">
<td>Total liabilities and shareholders&#146; equity</td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right" width="11%">42,566,440</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right" width="11%">
32,768,128</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<div align="center">
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
See accompanying notes.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-4</font></div>
<hr>
</div>
<div align="left"><font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
</font>
</div>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><a name="income">NVE CORPORATION</a><br>
STATEMENTS OF INCOME</b><br>
&nbsp;<br>
</font></div>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;" width="41%">
<div align="center">&nbsp;<b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<div align="center"><b>2009</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<div align="center"><b>2008</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3">&nbsp;<b>2007</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Revenue</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Product sales</div>
</td>
<td width="1%">$</td>
<td align="right" width="11%">19,715,311</td>
<td width="1%"></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">18,505,650</td>
<td width="1%"></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">14,425,632</td>
<td width="1%"></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Contract research and development</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">3,656,958</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
2,023,162</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
2,035,198</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td>Total revenue</td>
<td width="1%"></td>
<td align="right">23,372,269</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
20,528,812</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
16,460,830</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Cost of sales</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
6,724,242</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
6,833,308</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
5,787,658</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td>Gross profit</td>
<td width="1%"></td>
<td align="right">
16,648,027</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
13,695,504</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
10,673,172</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Expenses</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Selling, general, and administrative</div>
</td>
<td width="1%"></td>
<td align="right">
2,177,865</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
2,158,818</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
1,950,999</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Research and development</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
1,218,572</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
1,487,907</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
2,176,604</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td>Total expenses</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
3,396,437</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
3,646,725</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
4,127,603</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Income from operations </td>
<td width="1%"></td>
<td align="right">
13,251,590</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
10,048,779</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
6,545,569</td>
<td></td>
</tr>
<tr>
<td>Interest income</td>
<td width="1%"></td>
<td align="right">1,171,810</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
974,990</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
621,577</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Interest expense</td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td></td>
<td align="right">
(589</td>
<td>
)</td>
</tr>
<tr>
<td>Other income</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">4,200</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
56,235</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
25,246</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Income before taxes</td>
<td></td>
<td align="right">14,427,600</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
11,080,004</td>
<td></td>
<td></td>
<td width="1%"></td>
<td align="right">
7,191,803</td>
<td></td>
</tr>
<tr>
<td>
Provision for income taxes</td>
<td width="1%" style="border-bottom: 1px solid black;">&nbsp;</td>
<td align="right" style="border-bottom: 1px solid black;">4,644,705</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td width="1%" style="border-bottom: 1px solid black;">&nbsp;</td>
<td align="right" style="border-bottom: 1px solid black;">
3,892,620</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td width="1%" style="border-bottom: 1px solid black;">&nbsp;</td>
<td align="right" style="border-bottom: 1px solid black;">
2,411,020</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Net income</td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">9,782,895</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
7,187,384</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right" width="11%">
4,780,783</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr valign="top">
<td>Net income per share &#150; basic</td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
2.10</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
1.55</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
1.03</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Net income per share &#150; diluted</td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
2.04</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
1.51</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
1.00</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr>
<td colspan="12">Weighted average shares outstanding</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Basic</div>
</td>
<td></td>
<td align="right">4,659,486</td>
<td></td>
<td></td>
<td></td>
<td align="right">
4,635,470</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
4,620,371</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Diluted</div>
</td>
<td></td>
<td align="right">4,785,565</td>
<td></td>
<td></td>
<td></td>
<td align="right">
4,763,101</td>
<td></td>
<td></td>
<td></td>
<td align="right" width="11%">
4,771,297</td>
<td></td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
See accompanying notes.<br>
<br>
<br>
</font></div>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-5</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><a name="SHE">NVE CORPORATION</a>
<br>
STATEMENTS OF SHAREHOLDERS&#146; EQUITY</b><br>
&nbsp;<br>
</font></div>
<table style="font-size: 10pt; font-family: Times New Roman; cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="3"></td>
<td colspan="4">&nbsp;<br>
&nbsp;<br>
&nbsp;</td>
<td rowspan="3" style="border-bottom: 1px solid black;">&nbsp;</td>
<td colspan="2" rowspan="3" align="center" style="border-bottom: 1px solid black;" valign="bottom"><b>Additional<br>
Paid-In<br>
Capital</b></td>
<td rowspan="3" style="border-bottom: 1px solid black;">&nbsp;</td>
<td colspan="3" rowspan="3" align="center" style="border-bottom: 1px solid black;" valign="bottom"><b>Accumulated<br>
Other<br>
Comprehen-<br>
sive Income<br>
(Loss)</b></td>
<td style="border-bottom: 1px solid black;" rowspan="3" >&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="center" rowspan="3" colspan="3" valign="bottom"><b>Retained<br>
Earnings<br>
(Deficit)</b></td>
<td rowspan="3" style="border-bottom: 1px solid black;">&nbsp;</td>
<td colspan="3" rowspan="2"></td>
</tr>
<tr>
<td colspan="4" style="border-bottom: 1px solid black;" align="center"><b>Common Stock</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" ><b>Shares</b></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>Amount</b></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>Total</b></td>
</tr>
<tr>
<td>
Balance at March 31, 2006</td>
<td align="right">
4,614,953</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="7%">
46,150</td>
<td width="2%"></td>
<td width="1%"></td>
<td align="right" width="9%">
16,042,637</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="7%">
(166,908</td>
<td width="1%">
)</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="7%">
856,232</td>
<td width="1%"></td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="9%">
16,778,111</td>
<td width="1%"></td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Exercise of stock<br>
</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right" bgcolor="#ccdaef">
12,430</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
124</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
26,355</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
26,479</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 27pt;">Unrealized gain on</div>
<div style="margin-left: 36pt;">marketable securities</div>
</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
82,626</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
82,626</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Net income</div>
</td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td></td>
<td align="right">
4,780,783</td>
<td></td>
<td></td>
<td></td>
<td align="right">
4,780,783</td>
<td></td>
</tr>
<tr>
<td colspan="17" bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
4,863,409</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right"></td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td align="right">
136,370</td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td></td>
<td align="right">
136,370</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Tax benefit of stock-</div>
<div style="margin-left: 18pt;">based compensation</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="6" valign="bottom">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
2,083,886</td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="9" valign="bottom">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
2,083,886</td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
</tr>
<tr>
<td>
Balance at March 31, 2007</td>
<td align="right">
4,627,383</td>
<td></td>
<td>&nbsp;
</td>
<td align="right">
46,274</td>
<td></td>
<td>&nbsp;
</td>
<td align="right">
18,289,248</td>
<td></td>
<td>&nbsp;
</td>
<td align="right">
(84,282</td>
<td>
)</td>
<td></td>
<td>&nbsp;
</td>
<td align="right">
5,637,015</td>
<td></td>
<td></td>
<td>&nbsp;
</td>
<td align="right">
23,888,255</td>
<td>&nbsp;</td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Exercise of stock</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right" bgcolor="#ccdaef">
11,300</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
113</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
46,911</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
47,024</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 27pt;">Unrealized gain on</div>
<div style="margin-left: 36pt;">marketable securities</div>
</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
187,440</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
187,440</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Net income</div>
</td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td></td>
<td align="right">
7,187,384</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
7,187,384</td>
<td></td>
</tr>
<tr>
<td colspan="17" bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
7,374,824</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right"></td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td align="right">
169,606</td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td></td>
<td align="right">
169,606</td>
<td></td>
</tr>
<tr>
<td valign="bottom" bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Tax benefit of stock-</div>
<div style="margin-left: 18pt;">based compensation</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="6" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom" bgcolor="#ccdaef">
33,773</td>
<td style="border-bottom: 1px solid black;" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="9" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom" bgcolor="#ccdaef">
33,773</td>
<td style="border-bottom: 1px solid black;" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
</tr>
<tr>
<td>
Balance at March 31, 2008</td>
<td align="right">
4,638,683</td>
<td>&nbsp;</td>
<td>&nbsp;
</td>
<td align="right">
46,387</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
18,539,538</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
103,158</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td align="right">
12,824,399</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
31,513,482</td>
<td></td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Exercise of stock</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right" bgcolor="#ccdaef">30,650</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
306</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">269,901</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">270,207</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>
<tr valign="bottom">
<td bgcolor="#ccdaef">
<div style="margin-left: 27pt;">Unrealized (loss) on</div>
<div style="margin-left: 36pt;">marketable securities</div>
</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
(356,098</td>
<td bgcolor="#ccdaef">)</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">
(356,098</td>
<td bgcolor="#ccdaef">)</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Net income</div>
</td>
<td align="right">
- -</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
- -</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
- -</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
- -</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">9,782,895</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">9,782,895</td>
<td></td>
</tr>
<tr>
<td colspan="17" bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td align="right" bgcolor="#ccdaef">9,426,797</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">86,672</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">86,672</td>
<td></td>
</tr>
<tr>
<td valign="bottom" bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Tax benefit of stock-</div>
<div style="margin-left: 18pt;">based compensation</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="6" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom" bgcolor="#ccdaef">270,413</td>
<td style="border-bottom: 1px solid black;" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="9" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom" bgcolor="#ccdaef">270,413</td>
<td style="border-bottom: 1px solid black;" valign="bottom" bgcolor="#ccdaef">&nbsp;</td>
</tr>
<tr valign="top">
<td>Balance at March 31, 2009</td>
<td style="border-bottom: 3px double black;" align="right">4,669,333</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">46,693</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">19,166,524</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
(252,940</td>
<td style="border-bottom: 3px double black;">)
</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">22,607,294</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">41,567,571</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
<div style="width: 100%; text-align: center;">See accompanying notes.<br>
<br>
<br>
</div>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-6</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
</font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b><a name="CF">NVE CORPORATION</a><br>
STATEMENTS OF CASH FLOWS</b><br>
&nbsp;<br>
</font></div>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2009</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2008</b></div>
</td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2007</b></div>
</td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">
OPERATING ACTIVITIES</td>
</tr>
<tr>
<td>
Net income</td>
<td width="1%">
$</td>
<td align="right" width="11%">9,782,895</td>
<td width="1%"></td>
<td></td>
<td width="1%">
$</td>
<td align="right" width="11%">
7,187,384</td>
<td width="1%"></td>
<td></td>
<td width="1%">
$</td>
<td align="right" width="11%">
4,780,783</td>
<td width="1%"></td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">
Adjustments to reconcile net income to net cash
<div style="margin-left: 9pt;">provided by operating activities:</div>
</td>
</tr>
<tr>
<td><div style="margin-left: 18pt;">Depreciation</div>
</td>
<td colspan="2" align="right">473,740</td>
<td></td>
<td></td>
<td colspan="2" align="right">
560,528</td>
<td></td>
<td></td>
<td colspan="2" align="right">
530,050</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Stock-based compensation</div>
</td>
<td colspan="2" align="right">86,672</td>
<td></td>
<td></td>
<td colspan="2" align="right">
169,606</td>
<td></td>
<td></td>
<td colspan="2" align="right">
136,370</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 18pt;">Excess tax benefits</div>
</td>
<td colspan="2" align="right">(270,413</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(33,773</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(2,083,886</td>
<td>)</td>
</tr>
<tr bgcolor="#ccdaef">
<td><div style="margin-left: 18pt;">(Gain) loss on sale of fixed assets</div>
</td>
<td colspan="2" align="right">(4,200</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
601</td>
<td></td>
<td></td>
<td colspan="2" align="right">
- -</td>
<td> </td>
</tr>
<tr>
<td>
<div style="margin-left: 18pt;">Gain on marketable securities, net</div>
</td>
<td colspan="2" align="right">-</td>
<td>&nbsp;</td>
<td></td>
<td colspan="2" align="right">(56,837</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">-</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Deferred income taxes</div>
</td>
<td colspan="2" align="right">256,376</td>
<td></td>
<td></td>
<td colspan="2" align="right">
806,307</td>
<td></td>
<td></td>
<td colspan="2" align="right">
2,289,687</td>
<td></td>
</tr>
<tr>
<td colspan="12">
<div style="margin-left: 18pt;">Changes in operating assets and liabilities</div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 36pt;">Accounts receivable</div>
</td>
<td colspan="2" align="right">(140,671</td>
<td>
)</td>
<td></td>
<td colspan="2" align="right">
(1,221,022</td>
<td>
)</td>
<td></td>
<td colspan="2" align="right">
(337,976</td>
<td>
)</td>
</tr>
<tr>
<td>
<div style="margin-left: 36pt;">Inventories</div>
</td>
<td colspan="2" align="right">209,183</td>
<td>&nbsp;</td>
<td></td>
<td colspan="2" align="right">
(439,946</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
132,911</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td height="16">
<div style="margin-left: 36pt;">Prepaid expenses and other assets</div>
</td>
<td colspan="2" height="16" align="right">(139,691</td>
<td height="16">
)</td>
<td height="16"></td>
<td height="16" colspan="2" align="right">
(196,029</td>
<td height="16">
)</td>
<td height="16"></td>
<td height="16" colspan="2" align="right">
(102,175</td>
<td height="16">
)</td>
</tr>
<tr>
<td>
<div style="margin-left: 36pt;">Accounts payable and accrued expenses</div>
</td>
<td colspan="2" align="right">(172,444</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(25,736</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
222,728</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 36pt;">Deferred revenue</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(83,333</td>
<td style="border-bottom: 1px solid black;">)</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
158,143</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
(48,016</td>
<td style="border-bottom: 1px solid black;">)</td>
</tr>
<tr>
<td>
Net cash provided by operating activities</td>
<td colspan="2" align="right">9,998,114</td>
<td></td>
<td></td>
<td colspan="2" align="right">
6,909,226</td>
<td></td>
<td></td>
<td colspan="2" align="right">
5,520,476</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">&nbsp;</td>
</tr>
<tr>
<td colspan="12">
INVESTING ACTIVITIES</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="2">
Purchases of fixed assets</td>
<td align="right" width="11%">(401,612</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(817,596</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(321,997</td>
<td>)</td>
</tr>
<tr>
<td>
Proceeds from sale of fixed assets</td>
<td colspan="2" align="right">4,200</td>
<td> </td>
<td></td>
<td colspan="2" align="right">
1,500</td>
<td> </td>
<td></td>
<td colspan="2" align="right">
- -</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Purchases of marketable securities</td>
<td colspan="2" align="right">(12,137,160</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(16,518,287</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
(9,506,521</td>
<td>)</td>
</tr>
<tr>
<td>
Proceeds from maturities and sales of marketable securities</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,985,034</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
11,832,804</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
1,340,019</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Net cash used in investing activities</td>
<td colspan="2" align="right">(10,549,538</td>
<td>
)</td>
<td></td>
<td colspan="2" align="right">
(5,501,579</td>
<td>
)</td>
<td></td>
<td colspan="2" align="right">
(8,488,499</td>
<td>
)</td>
</tr>
<tr>
<td colspan="12">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">
FINANCING ACTIVITIES</td>
</tr>
<tr>
<td>
Net proceeds from sale of common stock</td>
<td colspan="2" align="right">270,207</td>
<td></td>
<td></td>
<td colspan="2" align="right">
47,024</td>
<td></td>
<td></td>
<td colspan="2" align="right">
26,479</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td height="14">
Excess tax benefits</td>
<td height="14" colspan="2" align="right">270,413</td>
<td height="14"></td>
<td height="14"></td>
<td height="14" colspan="2" align="right">
33,773</td>
<td height="14"></td>
<td height="14"></td>
<td height="14" colspan="2" align="right">
2,083,886</td>
<td height="14"></td>
</tr>
<tr>
<td>Repayment of capital lease obligations</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
- -</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
- -</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
(33,281</td>
<td style="border-bottom: 1px solid black;">)</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Net cash provided by financing activities</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">540,620</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
80,797</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
2,077,084</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td colspan="12">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>(Decrease) increase in cash and cash equivalents</td>
<td colspan="2" align="right">
(10,804</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">
1,488,444</td>
<td></td>
<td></td>
<td colspan="2" align="right">
(890,939</td>
<td>
)</td>
</tr>
<tr>
<td>
Cash and cash equivalents at beginning of year</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
1,885,867</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
397,423</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
1,288,362</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">&nbsp;</td>
</tr>
<tr valign="top">
<td>Cash and cash equivalents at end of year</td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">1,875,063</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
1,885,867</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" width="1%">
$</td>
<td style="border-bottom: 3px double black;" align="right">
397,423</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr>
<td colspan="12" bgcolor="#ccdaef">&nbsp;</td>
</tr>
<tr>
<td colspan="12">
Supplemental disclosures of cash flow information:</td>
</tr>
<tr>
<td colspan="12">
<div style="margin-left: 18pt;">Cash paid during the year for:</div>
</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 36pt;">Interest</div>
</td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
- -</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef">
$</td>
<td align="right" bgcolor="#ccdaef">
589</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 36pt;">Income taxes</div>
</td>
<td>
$</td>
<td align="right">4,356,000</td>
<td></td>
<td></td>
<td>
$</td>
<td align="right">
3,254,313</td>
<td></td>
<td></td>
<td>
$</td>
<td align="right">
44,300</td>
<td></td>
</tr>
</table>
<div align="center"><font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<br>
See accompanying notes.<br>
<br>
<br>
</font>
</div>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-7</font></div>
<hr>
</div>
<b><font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC">Table of Contents</a><br>
<br>
</font>
<div align="center"><a name="notes"></a><font style="font-size: 10pt; font-family: Arial;">NVE CORPORATION<br>
NOTES TO FINANCIAL STATEMENTS</font></div>
</b><font style="font-size: 10pt; font-family: Times New Roman;">
&nbsp;<br>
<b>NOTE 1. DESCRIPTION OF BUSINESS</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We develop and sell devices that use spintronics,
a nanotechnology that relies on electron spin rather than electron charge to acquire,
store, and transmit information.<br>
<br>
<b>NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br>
Cash and Cash Equivalents</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider all highly-liquid investments with maturities
of three months or less when purchased to be cash equivalents.<br>
<br>
<b>Fair Value of Financial Instruments</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amount of cash and cash equivalents,
accounts receivable, and accounts payable approximates fair value because of the
short maturity of these instruments. Fair values of marketable securities are
based on quoted market prices.<br>
<br>
<b>Marketable Securities</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We classify and account for marketable securities
in accordance with Financial Accounting Standards Board (FASB) Statement of Financial
Accounting Standards (SFAS) No.&nbsp;115, Accounting for Certain Investments in
Debt and Equity Securities. Securities with original maturities greater than three
months and remaining maturities less than one year are classified as short-term
marketable securities; securities with remaining maturities greater than one year
are classified as long-term marketable securities. Securities not due at a single
maturity date are classified by their average life.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We classify all of our marketable securities 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&#146; equity, &#147;Accumulated other comprehensive income.&#148;
We use a specific-identification cost basis to determine gains and losses.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We determine whether our marketable securities have
other than temporary impairments in accordance with SFAS&nbsp;115 Paragraph&nbsp;16,
which indicates that an other-than-temporary impairment exists if it is probable
that the investor will be unable to collect all amounts due according to the contractual
terms of a debt security. If we judged a decline in fair value for any security
to be other than temporary, the cost basis of the individual security would be
written down. In accordance with SAB Topic&nbsp;5M, we consider a number of factors
in determining whether other-than-temporary impairment exists, including: credit
market conditions; the credit ratings of the securities; historical default rates
for securities of comparable credit rating; the presence of insurance of the securities
and, if insured, the financial condition of the insurer; the effect of market
interest rates on the value of the securities; and the duration and extent of
any unrealized losses. We also consider our ability to hold the securities to
maturity based on our financial condition and anticipated cash flows. We have
determined that no write-downs were required on available-for-sale securities
during fiscal 2009, 2008, or 2007.<br>
<br>
<b>Concentration of Risk and Financial Instruments</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments potentially subject to significant
concentrations of credit risk consist principally of cash equivalents, marketable
securities, and accounts receivable.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We invest our excess cash in U.S. Government agency
securities, corporate-backed and municipal-backed bonds, and other money market
instruments. Our investment policy prescribes investment only in high-grade securities,
and limits the amount of credit exposure to any one issuer.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers include Agencies of the U.S. Government
and other customers throughout the world. We generally do not require collateral
from our customers, but we perform ongoing credit evaluations of their financial
condition. More information on accounts receivable is contained in the section
titled &#147;Accounts Receivable and Allowance for Doubtful Accounts&#148; of
this Note.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, we are dependent on critical suppliers
including our packaging vendors and suppliers of certain raw silicon and semiconductor
wafers that are incorporated in our products.<br>
<br>
<b>Accounts Receivable and Allowance for Doubtful Accounts</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable are recorded net of an allowance
for doubtful accounts. We make estimates of the uncollectibility of accounts receivable.
We specifically analyze accounts receivable, historical bad debts, and customer
creditworthiness when evaluating the adequacy of the allowance. Charges and provisions
to our allowance for doubtful accounts were $175 in fiscal 2009. We had no charges
or provisions to our allowance for doubtful accounts in fiscal 2008 or fiscal
2007.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-8</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>Inventories</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or net
realizable value. Cost is determined by the first in, first out method. We record
inventory reserves when we determine certain inventory is unlikely to be sold
based on sales trends, turnover, competition, and other market factors.<br>
<br>
<b>Product Warranty</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general we warrant our products to be free from
defects in material and workmanship for one year. We maintain a reserve for the
estimated cost of maintaining product warranties.<br>
<br>
<b>Fixed Assets</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fixed assets are stated at cost. Depreciation of
machinery and equipment, and furniture and fixtures is recorded over the estimated
useful lives of the assets, generally five years, using the straight-line method.
Amortization of leasehold improvements is recorded using the straight-line method
over the lesser of the lease term or five-year useful life. We record losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets&#146; carrying amount.<br>
<br>
<b>Revenue Recognition</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize product revenue in accordance with
SAB No.&nbsp;101, Revenue Recognition in Financial Statements, as amended by SAB
No.&nbsp;104 and codified in SAB Topic&nbsp;13, Revenue Recognition.<br>
<br>
<b>Product Revenue Recognition</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize product revenue on shipment because
the terms of our sales are FOB shipping point, meaning that our customers (end
users and distributors) take title and assume the risks and rewards of ownership
upon shipment. Our customers may return defective products for refund or replacement
under warranty, and have other very limited rights of return. We maintain reserves
based on historical returns.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping charges billed to customers are included
in product sales and the related shipping costs are included in selling, general,
and administrative expense. Such shipping costs were $33,483 for fiscal 2009,
$28,930 for fiscal 2008, and $18,219 for fiscal 2007.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments from our distributors are not contingent
on resale or any other matter other than the passage of time, and delivery of
products is not dependent on the number of units resold to the ultimate customer.
There are no other significant acceptance criteria, pricing or payment terms that
would affect revenue recognition.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our agreement dated September&nbsp;27, 2001
with Agilent Technologies, Inc. to distribute our couplers under its brand, Agilent
provided a refundable prepayment of $500,000. In accordance with SAB No.&nbsp;101
and SAB Topic&nbsp;13A as amended by SAB No.&nbsp;104, we classified this prepayment
as &#147;Deferred revenue.&#148; In accordance with the agreement, we recognized
the prepayment as revenue at a rate equal to a percentage of the sale price to
Agilent when we shipped products to Agilent or Avago Technologies, Inc., and reduced
deferred revenue by a corresponding amount. Inventory costs associated with amortization
of the prepayment were recognized as &#147;Costs of sales&#148; as revenue was
recognized. The 2001 prepayment was fully satisfied during fiscal 2007. We executed
Amendment No.&nbsp;2 to the Agreement between us and Agilent effective as of June&nbsp;27,
2007. Among other provisions, Amendment No.&nbsp;2 provided for a nonrefundable
payment of $250,000 by Avago to us. In accordance with SAB No.&nbsp;101 and SAB
Topic&nbsp;13A as amended by SAB No.&nbsp;104, we are recognizing revenue from
the $250,000 payment over the Amendment term ending June&nbsp;27, 2010.<br>
<br>
<b>Accounting for Commissions and Discounts</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sometimes utilize independent sales representatives
that provide services relating to promoting our products and facilitating product
sales but do not purchase our products. We pay commissions to sales representatives
based on the amount of revenue facilitated, and such commissions are recorded
as selling, general, and administrative expenses.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stocking distributors take title and assume
the risks and rewards of product ownership. We recognize discounts to our distributors
in accordance with Emerging Issues Task Force Issue No.&nbsp;01-09, Accounting
for Consideration Given by a Vendor to a Customer. EITF&nbsp;01-09 addresses
whether a vendor should recognize consideration given to a customer as an expense
or as an offset to revenue being recognized from that same customer. We presume
consideration given to a customer is a reduction in revenue unless both of the
following conditions are met: (i)&nbsp;we receive an identifiable benefit in exchange
for the consideration and the identifiable benefit is sufficiently separable from
the customer&#146;s purchase of our products such that we could have purchased
the products or services from a third party; and (ii)&nbsp;we can reasonably estimate
the fair value of the benefit received. Under EITF&nbsp;01-09 we recognize
discounts provided to our distributors as reductions in revenue.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under certain limited circumstances, our distributors
may earn commissions for activities unrelated to their purchases of our products,
such as for facilitating the sale of custom products or research and development
contracts with third parties. We recognize any such commissions as selling, general,
and administrative expenses.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-9</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>Research and Development Contract Revenue Recognition</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize government contract revenue in accordance
with Accounting Research Bulletin No.&nbsp;43, Chapter&nbsp;11, Government Contracts.
Revenue and gross profit are recognized as work is performed, based on actual
costs incurred.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our government research and development contracts
may be either firm-fixed-price or cost-plus-fixed-fee. Cost-plus-fixed-fee contracts
are cost-reimbursement contracts that also provide for payment to us of a negotiated
fee that is fixed at the inception of the contract. Cost-plus-fixed-fee contracts
normally require us to complete and deliver the specified end product (such as
a final report of research accomplishing the goal or target) within the estimated
cost, if possible, as a condition for payment of the entire fixed fee. Our research
and development contracts do not contain post-shipment obligations.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial research and development contracts
are generally firm-fixed-price contracts. Firm-fixed-price contracts provide for
a price that is not subject to any adjustment based on our cost in performing
the contract. We apply the percentage-of-completion method to these contracts
for revenue recognition.<br>
<br>
<b>Revenue Recognition of Up-Front Fees</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for nonrefundable up-front fees from
licensing and technology development programs in accordance with SAB Topic&nbsp;13A.
Revenue from upfront fees is deferred and recognized over the periods that the
fees are earned. We recognize revenue from licensing and technology development
programs which is refundable, recoupable against future royalties, or for which
future obligations exist over the term of the agreement.<br>
<br>
<b>Income Taxes</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for income taxes using the liability
method. Deferred income taxes are provided for temporary differences between the
financial reporting and tax bases of assets and liabilities. We provide valuation
allowances against deferred tax assets if we determine that it is less likely
than not that we will be able to utilize the deferred tax assets.<br>
<br>
<b>Research and Development Expense Recognition</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs are expensed as they
are incurred.<br>
<br>
<b>Stock-Based Compensation</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for stock-based compensation in accordance
with SFAS No.&nbsp;123 (revised 2004), <i>Share-Based Payment</i>. Under the fair
value recognition provisions of SFAS <font style="white-space: nowrap;">No. 123(R)</font>, we measure stock-based compensation
cost at the grant date based on the fair value of the award and recognize the
compensation expense over the requisite service period, which is generally the
vesting period. We estimate pre-vesting option forfeitures at the time of grant
by analyzing historical data and revise those estimates in subsequent periods
if actual forfeitures differ from those estimates. Ultimately, the total expense
recognized over the vesting period will only be for those awards that vest. We
elected the modified-prospective method of adopting SFAS <font style="white-space: nowrap;">No. 123(R)</font> so that
prior periods are not retroactively revised. The valuation provisions of SFAS
<font style="white-space: nowrap;">No. 123(R)</font> apply to awards granted after the April&nbsp;1, 2006 effective
date. Stock-based compensation expense for awards that were granted prior to the
effective date but remain unvested on the effective date is being recognized over
the remaining service period using the compensation cost estimated for our SFAS
No.&nbsp;123 pro forma disclosures.<br>
<br>
<b>Net Income Per Share</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We calculate our net income per share in accordance
with SFAS No.&nbsp;128, <i>Earnings per Share</i>. Basic earnings per share are
computed based on 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 and warrants).
Stock options and warrants totaling 60,000 for fiscal 2009; 56,000 for fiscal
2008; and 48,000 for fiscal 2007 were not included in the computation of diluted
earnings per share because the exercise prices were greater than the market price
of the common stock. The following table reflects the components of common shares
outstanding in accordance with SFAS No.&nbsp;128:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman; cellpadding="0" cellspacing="0" width="100%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="5" style="border-bottom: 1px solid black;" align="center"><b>Year Ended March 31</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center"><b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center">
<b>2008</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center">
<b>2007</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Weighted average common shares outstanding &#150; basic</td>
<td align="right" width="11%">4,659,486</td>
<td width="2%"></td>
<td align="right" width="11%">4,635,470
</td>
<td></td>
<td align="right" width="11%">4,620,371</td>
</tr>
<tr>
<td colspan="6">
Effect of dilutive securities:</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Stock options</div></td>
<td align="right">121,135</td>
<td></td>
<td align="right">123,195</td>
<td></td>
<td align="right">146,154</td>
</tr>
<tr>
<td><div style="margin-left: 9pt;">Warrants</div></td>
<td style="border-bottom: 1px solid black;" align="right">4,944</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
4,436</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
4,772</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Shares used in computing net income per share &#150; diluted</td>
<td style="border-bottom: 3px double black;" align="right">4,785,565</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right">4,763,101</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right">4,771,297</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br><b>Use of Estimates</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with accounting principles
generally accepted in the U.S. requires us to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from those estimates.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-10</font></div>
<hr>
</div>
<p><font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>Recent Accounting Pronouncements</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April 2009, FASB released FASB Staff Position
(FSP) SFAS <font style="white-space: nowrap;">Nos. 107-1</font>, <font style="white-space: nowrap;">115-2</font>,
and <font style="white-space: nowrap;">157-4</font>. FSP <font style="white-space: nowrap;">SFAS No. 107-1</font> requires publicly-traded companies to include disclosures about
the fair value of their financial instruments when issuing summarized financial
information for interim reporting purposes. FSP SFAS <font style="white-space: nowrap;">No. 115-2</font> amends the other-than-temporary impairment guidance for debt securities
to make the guidance more operational and to improve the presentation and disclosure
of other-than-temporary impairments of debt and equity securities in the financial
statements. FSP SFAS <font style="white-space: nowrap;">No. 157-4</font> provides
additional guidance for estimating fair value in accordance with SFAS No.&nbsp;157,
<i>Fair Value Measurements</i>, when the volume and level of activity for the
asset or liability have significantly decreased and includes guidance on identifying
circumstances that indicate a transaction is not orderly. We adopted the
Staff Positions at the beginning of fiscal 2010 and do not expect the
adoption to have a significant impact on our financial statements.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2006, the FASB issued SFAS No.&nbsp;157,
<i>Fair Value Measurements</i>. SFAS No.&nbsp;157 establishes a framework for
measuring fair value, clarifies the definition of fair value, and requires additional
disclosures about fair-value measurements. SFAS No.&nbsp;157 applies only to
fair value measurements that are already required or permitted by other accounting
standards (except for measurements of share-based payments) and is expected
to increase the consistency of those measurements. SFAS No.&nbsp;157, as issued,
was effective for fiscal years beginning after November&nbsp;15, 2007. In February
2008, the FASB issued FSP SFAS No.&nbsp;<font style="white-space: nowrap;">157-2</font>,
<i>Effective Date of FASB Statement No.&nbsp;157</i>, that deferred the effective
date of SFAS No.&nbsp;157 for one year for certain nonfinancial assets and nonfinancial
liabilities. Accordingly, we adopted certain parts of SFAS No.&nbsp;157 at the
beginning of fiscal 2009 and the remaining parts at the
beginning of fiscal 2010. Partial adoption of SFAS No.&nbsp;157 in fiscal 2009 did not result
in a material impact to our financial statements, and we do not expect adoption
of the remaining parts to have a significant impact on our financial statements.<br>
<br>
<b>NOTE 3. FAIR VALUE MEASUREMENTS</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As discussed in Note&nbsp;2, we adopted the provisions
of SFAS No.&nbsp;157 at the beginning of fiscal 2009. The adopted provisions
of SFAS No.&nbsp;157 apply to all financial assets and liabilities that are being
measured at fair value on a recurring basis. We adopted the remaining provisions
of SFAS No.&nbsp;157 at the
beginning of fiscal 2010, which apply to all non-financial assets
and liabilities that are being measured at fair value on a non-recurring basis.
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS No. 157 establishes a framework for measuring fair value, clarifies the definition of
fair value and expands disclosures about fair-value measurements. SFAS No. 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability. Fair value is a market-based measurement that should
be determined using assumptions that market participants would use in pricing
an asset or liability. SFAS No. 157 establishes a valuation hierarchy for disclosure
of fair value measurements. The categorization within the valuation hierarchy
is based on the lowest level of input that is significant to the fair value
measurement. The categories within the valuation hierarchy are described below:
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Level 1 &#150; Financial instruments with quoted prices in active markets for identical
assets or liabilities. Our Leve1&nbsp;1 financial instruments consist of publicly-traded
marketable debt securities that are classified as available-for-sale. On the balance sheets, available-for-sale securities are classified
as &#147;Marketable securities, short term&#148; and &#147;Marketable securities,
long term.&#148; The fair value of our available-for-sale securities was $32,446,748
at March&nbsp;31, 2009 and $22,851,007 at March&nbsp;31, 2008.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Level 2 &#150; Financial instruments with quoted prices in active markets for similar
assets or liabilities. Level&nbsp;2 fair value measurements are determined using
either prices for similar instruments or inputs that are either directly or
indirectly observable, such as interest rates. We do not have any financial
assets or liabilities being measured at fair value that are classified as Level&nbsp;2 financial instruments.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Level 3 &#150; Inputs to the fair value measurement are unobservable inputs or valuation
techniques. We do not have any financial assets or liabilities being measured
at fair value that are classified as Level&nbsp;3 financial instruments.<br>
<br>
<b>NOTE 4. MARKETABLE SECURITIES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable securities with remaining maturities
less than one year are classified as short-term, and those with remaining maturities
greater than one year are classified as long-term. The maturities of our marketable
securities as of March 31, 2009 were as follows:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>Total</b></div>
</td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>&lt;1 Year</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>1&#150;3 Years</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>3&#150;5 Years</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>&gt;5 Years</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td width="1%">$</td>
<td width="11%" align="right">
32,446,748</td>
<td>&nbsp;</td>
<td width="1%">
$</td>
<td align="right" width="11%">-
</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="11%">9,561,007</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="11%">22,885,741</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="11%">-
</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;"><br><br>F-11</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table
of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2009 and 2008 our marketable
securities were as follows: <br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="12"><b>As of March&nbsp;31, 2009</b></td>
<td style="border-bottom: 1px solid black;" rowspan="2" width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="12"><b>As of March&nbsp;31, 2008</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom">
<div align="center"><b>Adjusted<br>
Cost</b></div>
</td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Gross<br>
Unrealized<br>
Gains</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Estimated<br>
Fair&nbsp;Market<br>
Value</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom">
<div align="center"><b>Adjusted<br>
Cost</b></div>
</td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Gross<br>
Unrealized<br>
Gains</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Estimated<br>
Fair&nbsp;Market<br>
Value</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="bottom">
U.S. agency<br>
<div style="margin-left: 9pt;">securities</div>
</td>
<td valign="bottom">
$</td>
<td valign="bottom" align="right">955,827</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">30,647</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">-</td>
<td valign="bottom">&nbsp; </td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">986,474</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">
2,435,145</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">
8,018</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">
(11,308</td>
<td valign="bottom">
)</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">
$</td>
<td align="right" valign="bottom">
2,431,855</td>
</tr>
<tr>
<td valign="bottom">
Corporate&nbsp;bonds</td>
<td></td>
<td align="right" valign="bottom">13,983,202</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right" valign="bottom">54,085</td>
<td></td>
<td>&nbsp;</td>
<td align="right" valign="bottom">(942,514</td>
<td valign="bottom">)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right" valign="bottom">13,094,773</td>
<td></td>
<td></td>
<td align="right" valign="bottom">
7,094,793</td>
<td></td>
<td valign="bottom"></td>
<td align="right" valign="bottom">
58,702</td>
<td></td>
<td></td>
<td align="right" valign="bottom">
(9,157</td>
<td valign="bottom">
)</td>
<td></td>
<td></td>
<td align="right" valign="bottom">
7,144,338</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="bottom">
Municipal&nbsp;bonds&nbsp;&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">17,902,196</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">489,802</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">(26,497</td>
<td style="border-bottom: 1px solid black; valign="bottom valign="bottom"">)</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">18,365,501</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
13,159,161</td>
<td></td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
149,104</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
(33,451</td>
<td style="border-bottom: 1px solid black; valign="bottom valign="bottom"">
)</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
13,274,814</td>
</tr>
<tr>
<td valign="top">Total</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">32,841,225</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">574,534</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">(969,011</td>
<td style="border-bottom: 3px double black;">)</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">32,446,748</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
22,689,099</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
215,824</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
(53,916</td>
<td style="border-bottom: 3px double black;">
)</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
22,851,007</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;"><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the gross unrealized losses
and fair value of our investments with unrealized losses, aggregated by investment
category and length of time that individual securities had been in a continuous
unrealized loss position as of March&nbsp;31, 2009 and 2008:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%" align="center">
<tr>
<td rowspan="2" colspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<div align="center"><b>Less Than 12 Months</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<div align="center"><b>12 Months or Greater</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<div align="center"><b>Total</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
</tr>
<tr>
<td colspan="22">As of March 31, 2009</td>
</tr>
<tr bgcolor="#ccdaef">
<td width="9pt"></td>
<td>U.S.&nbsp;agency&nbsp;securities&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%">&nbsp; </td>
<td width="4%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%">&nbsp; </td>
<td width="4%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%">&nbsp; </td>
</tr>
<tr>
<td>&nbsp;</td>
<td>Corporate&nbsp;bonds</td>
<td>&nbsp;</td>
<td align="right">7,278,810</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">(796,441</td>
<td>)</td>
<td colspan="3" align="right">1,902,698</td>
<td colspan="3" align="right">(146,073</td>
<td width="1%">)</td>
<td colspan="3" align="right">9,181,508</td>
<td colspan="3" align="right">(942,514</td>
<td width="1%">
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td>&nbsp;</td>
<td width="122">Municipal&nbsp;bonds</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">901,213</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">(6,436</td>
<td style="border-bottom: 1px solid black; valign="bottom>)</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">947,043</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">(20,061</td>
<td style="border-bottom: 1px solid black; valign="bottom>)&nbsp;
</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">1,848,256</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">(26,497</td>
<td style="border-bottom: 1px solid black; valign="bottom>
)</td>
</tr>
<tr>
<td>&nbsp;</td>
<td width="122" valign="top">Total</td>
<td style="border-bottom: 3px double black;" valign="top">$
</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">8,180,023</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(802,877</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2,849,741</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(166,134</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">11,029,764</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(969,011</td>
<td style="border-bottom: 3px double black;" width="248" valign="top">
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="22">As of March 31, 2008</td>
</tr>
<tr>
<td></td>
<td>U.S.&nbsp;agency&nbsp;securities&nbsp;</td>
<td>$</td>
<td align="right">
847,586</td>
<td></td>
<td>$</td>
<td align="right">
(6,193</td>
<td>
)</td>
<td></td>
<td>$</td>
<td align="right">
494,885</td>
<td></td>
<td>$</td>
<td align="right">
(5,115</td>
<td>
)</td>
<td></td>
<td>$</td>
<td align="right">
1,342,471</td>
<td></td>
<td>$</td>
<td align="right">
(11,308</td>
<td>
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td>&nbsp;</td>
<td>Corporate&nbsp;bonds</td>
<td>&nbsp;</td>
<td align="right">
3,506,909</td>
<td></td>
<td></td>
<td align="right">
(9,157</td>
<td>
)</td>
<td colspan="3" align="right">-</td>
<td colspan="3" align="right">&nbsp;-</td>
<td width="1%"></td>
<td colspan="3" align="right">3,506,909</td>
<td colspan="3" align="right">(9,157</td>
<td width="1%">
)</td>
</tr>
<tr>
<td>&nbsp;</td>
<td width="122">Municipal&nbsp;bonds</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
3,323,926</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
(33,451</td>
<td style="border-bottom: 1px solid black; valign="bottom>
)</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td style="border-bottom: 1px solid black; valign="bottom>&nbsp;
</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
3,323,926</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
(33,451</td>
<td style="border-bottom: 1px solid black; valign="bottom>
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td>&nbsp;</td>
<td width="122" valign="top">Total</td>
<td style="border-bottom: 3px double black;" valign="top">$
</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">7,678,421</td>
<td valign="top"></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
(48,801</td>
<td style="border-bottom: 3px double black;" valign="top">
)</td>
<td valign="top"></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
494,885</td>
<td valign="top"></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
(5,115</td>
<td style="border-bottom: 3px double black;" valign="top">
)</td>
<td valign="top"></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
8,173,306</td>
<td valign="top"></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
(53,916</td>
<td style="border-bottom: 3px double black;" width="248" valign="top">
)</td>
</tr>







</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;<br>
</font><font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;&nbsp;&nbsp; Gross unrealized losses were attributable to our corporate
and municipal bonds. The gross unrealized losses were primarily due to credit
rating downgrades, interest rate fluctuations and market-price movements in an
unstable bond market environment. Although a number of our bonds were downgraded
during fiscal 2009, all of the bonds that were rated by Moody&#146;s or Standard
and Poor&#146;s had investment-grade credit ratings, and a substantial majority
were rated A3/A- or better. For each bond with an unrealized loss, we determined
that it was not probable that we would not collect all amounts due. In reaching
this determination, we considered factors including the credit ratings of the
bonds, the underlying rating of insured bonds, whether the bonds were prefunded,
and historical default rates for securities of comparable credit rating. Because
we determined that it was not probable that we would not collect all amounts due,
and because we have the ability and intent to hold our bonds until a recovery
of fair value, which may be maturity, we did not consider our any of our investments
to be other-than temporarily impaired at March&nbsp;31, 2009.<br>
<br>
<b>NOTE 5. INVENTORIES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consisted of the following:<br>
<br></font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="7" style="border-bottom: 1px solid black;">
<div align="center"><b>March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="3">
<div align="center"><b>2008</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Raw materials</td>
<td width="1%">$</td>
<td align="right" width="22%">564,630</td>
<td width="1%"></td>
<td width="4%"></td>
<td width="1%">
$</td>
<td align="right" width="22%">741,361</td>
<td width="1%"></td>
</tr>
<tr>
<td> Work-in-process</td>
<td></td>
<td align="right">1,082,290</td>
<td></td>
<td></td>
<td></td>
<td align="right">
1,184,062</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Finished goods</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">900,701</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
811,381</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td></td>
<td></td>
<td align="right">2,547,621</td>
<td></td>
<td></td>
<td></td>
<td align="right">
2,736,804</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Less inventory reserve</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">(300,000</td>
<td style="border-bottom: 1px solid black;">
)</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
(280,000</td>
<td style="border-bottom: 1px solid black;">)</td>
</tr>
<tr valign="top">
<td>
Total inventories</td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">2,247,621</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">
$</td>
<td style="border-bottom: 3px double black;" align="right">
2,456,804</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;"><br><br>F-12</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>NOTE 6. STOCK-BASED COMPENSATION</b><br>
<b>Stock Option Plan</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2000 Stock Option Plan, as amended, provides
for issuance to employees, directors, and certain service providers of incentive
stock options and nonstatutory stock options. Generally, the options may be
exercised at any time prior to expiration, subject to vesting based on terms
of employment. The period ranges from immediate vesting to vesting over a five-year
period. The options have exercisable lives ranging from one year to ten years
from the date of grant, and are generally not eligible to vest early in the
event of retirement, death, disability, or change in control. Exercise prices
are not less than fair market value of the underlying Common Stock at the date
the options are granted.<br>
<br>
<b>Valuation assumptions</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use the Black-Scholes standard option-pricing
model to determine the fair value of stock options. The following assumptions
were used to estimate the fair value of options granted:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="8" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2009</b></div>
</td>
<td width="4%"></td>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2008</b></div>
</td>
<td width="4%"></td>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2007</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Risk-free interest rate</td>
<td align="right" width="11%">3.2</td>
<td width="2%">%</td>
<td></td>
<td align="right" width="11%">
4.2</td>
<td width="2%">%</td>
<td></td>
<td align="right" width="11%">
4.9</td>
<td width="2%">
%</td>
</tr>
<tr>
<td>
Expected volatility</td>
<td align="right">68</td>
<td>%</td>
<td></td>
<td align="right">
70</td>
<td>%</td>
<td></td>
<td align="right">
81</td>
<td>
%</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Expected life (years)</td>
<td align="right">3.7</td>
<td>&nbsp;</td>
<td></td>
<td align="right">
3.5</td>
<td></td>
<td></td>
<td align="right">
6.5</td>
<td></td>
</tr>
<tr>
<td>
Dividend yield</td>
<td align="right">0</td>
<td>
%</td>
<td></td>
<td align="right">
0</td>
<td>%</td>
<td></td>
<td align="right">
0</td>
<td>
%</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The determination of the fair value of the
awards on the date of grant using the Black-Scholes model is affected by our
stock price as well as assumptions of other variables, including projected employee
stock option exercise behaviors, risk-free interest rate, and expected volatility
of our stock price in future periods. Our estimates and assumptions affect the
amounts reported in the financial statements and accompanying notes.<br>
<br><b><i>Expected life</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We analyze historical employee exercise and termination
data to estimate the expected life assumption. We believe historical data currently
represents the best estimate of the expected life of a new employee option.
Prior to adopting SFAS <font style="white-space: nowrap;">No. 123(R)</font>, we estimated that the expected life
was equal to the option term. For determining the fair value of options under
SFAS <font style="white-space: nowrap;">No. 123(R)</font> we use different expected lives for officers and directors
than we use for our general employee population. We examined the historical
pattern of option exercises to determine if there was a discernible pattern
as to how different classes of employees exercised their options. Our analysis
showed that officers and directors held their stock options for a longer period
of time before exercising compared to the rest of our employee population.<br>
<br>
<b><i>Risk-free interest rate</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The risk-free rate is based on the yield of U.S.
Treasury securities on the grant date for maturities similar to the expected
lives of the options.<br>
<br>
<b><i>Volatility</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use historical volatility to estimate the expected
volatility of our common stock.<br>
<br>
<b><i>Dividend yield</i></b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We assume a dividend yield of zero because we
do not anticipate paying dividends in the foreseeable future.<br>
<br>
<b>Expenses related to share-based payments</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the effect of our adoption
of SFAS <font style="white-space: nowrap;">No. 123(R)</font> on our net income and earning per share for fiscal 2009
and 2008. Expenses and costs related to share-based payments are presented in
the same line or lines as cash compensation paid to the same employees. The
effect of <font style="white-space: nowrap;">SFAS No. 123(R)</font> is included in &#147;Selling, general, and administrative
expenses&#148; and presented in the line titled &#147;Stock-based compensation&#148;
on our Statements of Cash Flows:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" colspan="11">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td colspan="3" style="border-bottom: 1px solid black;">
<div align="center"><b>2009</b></div>
</td>
<td width="2%"></td>
<td colspan="3" style="border-bottom: 1px solid black;">
<div align="center"><b>2008</b></div>
</td>
<td width="2%"></td>
<td colspan="3" style="border-bottom: 1px solid black;">
<div align="center"><b>2007</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Effect of SFAS No. 123(R) on net income</td>
<td width="1%">$</td>
<td align="right" width="11%">(86,672</td>
<td width="1%">
)</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">
(169,606</td>
<td width="1%">
)</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="11%">
(136,370</td>
<td width="1%">
)</td>
</tr>
<tr>
<td>
Effect of SFAS No. 123(R) on net income per share:</td>
<td></td>
<td align="right">&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
<td></td>
<td></td>
<td align="right"></td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Basic</div>
</td>
<td>$</td>
<td align="right">(0.02</td>
<td>)</td>
<td></td>
<td>$</td>
<td align="right">(0.04</td>
<td>)</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">(0.03</td>
<td>)</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Diluted</div>
</td>
<td>$</td>
<td align="right">(0.02</td>
<td>)</td>
<td></td>
<td>$</td>
<td align="right">(0.04</td>
<td>)</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">(0.03</td>
<td>)</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b>Tax effects of stock-based compensation</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation increased deferred taxes
by $31,098 for fiscal 2009 and $60,599 for fiscal 2008.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-13</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>General stock option information</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of the status of our nonvested shares
at March&nbsp;31, 2009 and changes during fiscal 2009 is presented below:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td style="border-bottom: 1px solid black;" valign="bottom">
<b>Nonvested Shares</b></td>
<td width="8%" valign="bottom"></td>
<td style="border-bottom: 1px solid black;" align="right" colspan="2" valign="bottom">
<div align="center"><b>Shares</b></div>
</td>
<td width="8%" valign="bottom">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" colspan="2" valign="bottom">
<div align="center"><b>Weighted&nbsp;Average<br>
Grant-Date<br>
Fair Value</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Nonvested at March 31, 2008</td>
<td></td>
<td align="right" width="20%">
3,000</td>
<td align="right" width="1%">&nbsp;</td>
<td></td>
<td align="right" width="20%">
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.12</td>
<td width="1%"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Granted</div>
</td>
<td></td>
<td align="right">
4,000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31.27</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Vested</div>
</td>
<td></td>
<td align="right">(5,500</td>
<td>)</td>
<td>&nbsp;</td>
<td align="right">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28.23</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Forfeited</div>
</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;" align="right">&nbsp;
</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;" align="right">&nbsp;
</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Nonvested at March 31, 2009</td>
<td></td>
<td style="border-bottom: medium double black;" align="right">1,500</td>
<td style="border-bottom: medium double black;" align="right">&nbsp;
</td>
<td>&nbsp;</td>
<td align="right">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.12</td>
<td></td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information about
options outstanding and options exercisable at March&nbsp;31, 2009:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td colspan="8" style="border-bottom: 1px solid black;" width="69%">
<div align="center"><b>Options Outstanding</b></div>
</td>
<td rowspan="2">&nbsp;</td>
<td colspan="5" style="border-bottom: 1px solid black;" align="right" width="23%">
<div align="center"><b>Options Exercisable</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" valign="bottom">
<div align="center"><b>Ranges of<br>
&nbsp;&nbsp;Exercise&nbsp;Prices&nbsp;&nbsp;</b></div>
</td>
<td valign="bottom"></td>
<td style="border-bottom: 1px solid black;" valign="bottom">
<div align="center"><b>Number<br>
Outstanding</b></div>
</td>
<td valign="bottom"></td>
<td style="border-bottom: 1px solid black;" colspan="2" valign="bottom">
<div align="center"><b>Weighted<br>
Average<br>
Exercise<br>
Price</b></div>
</td>
<td valign="bottom"></td>
<td style="border-bottom: 1px solid black;" valign="bottom">
<div align="center"><b>Weighted<br>
Remaining<br>
Contractual&nbsp;Life<br>
(years)</b></div>
</td>
<td style="border-bottom: 1px solid black;" align="right" valign="bottom">
<div align="center"><b>Number<br>
Outstanding</b></div>
</td>
<td valign="bottom"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center" valign="bottom">
<b>Weighted<br>
Average<br>
Exercise<br>
Price</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td width="11%">
<div align="right">$&nbsp;&nbsp;&nbsp;&nbsp;5.10&nbsp;-&nbsp;&nbsp;&nbsp;7.35</div>
</td>
<td width="3%">&nbsp;</td>
<td align="right" width="9%">72,000</td>
<td width="3%">&nbsp;</td>
<td width="2%">$</td>
<td align="right" width="9%">6.56</td>
<td width="3%">&nbsp;</td>
<td align="right" width="9%">1.8</td>
<td width="3%">&nbsp;</td>
<td align="right" width="9%">72,000</td>
<td width="3%">&nbsp;</td>
<td width="2%">$</td>
<td align="right" width="9%">6.56</td>
<td width="1%"></td>
</tr>
<tr>
<td>
<div align="right">10.01&nbsp;-&nbsp;20.12</div>
</td>
<td>&nbsp;</td>
<td align="right">147,750</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">16.13</td>
<td>&nbsp;</td>
<td align="right">6.0</td>
<td>&nbsp;</td>
<td align="right">146,250</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">16.09</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div align="right">21.99&nbsp;-&nbsp;58.27</div>
</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">62,000</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">31.62</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">5.8</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">62,000</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">31.62</td>
<td style="border-bottom: 1px solid black;" align="right">&nbsp;
</td>
</tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;" align="right">281,750</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">17.10</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px solid rgb(255, 255, 255);" align="right">4.9</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;" align="right">280,250</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">17.08</td>
<td></td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors, and certain service providers of incentive stock options and nonstatutory stock options. Generally, the options may be exercised at any time prior to expiration, subject to vesting based on terms of employment. The period ranges from immediate vesting to vesting over a five-year period. The options have exercisable lives ranging from one year to ten years from the date of grant. Exercise prices are not less than fair market value as determined by our Board at the date the options are granted.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of our incentive stock options and warrants are shown in the following table:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td valign="bottom"></td>
<td colspan="2" style="border-bottom: 1px solid black;" width="8%" valign="bottom">
<div align="center"><b>Option&nbsp;Shares Reserved</b></div>
</td>
<td width="2%" valign="bottom"></td>
<td style="border-bottom: 1px solid black;" align="right" colspan="2" valign="bottom">
<div align="center"><b>Options<br>
Outstanding</b></div>
</td>
<td width="2%" valign="bottom"></td>
<td colspan="2" style="border-bottom: 1px solid black;" align="center" valign="bottom"><b>Weighted&nbsp;Average<br>
Option Exercise<br>
Price per Share</b></td>
<td width="2%" valign="bottom"></td>
<td style="border-bottom: 1px solid black;" align="right" colspan="2" valign="bottom">
<div align="center"><b>Warrants<br>
Outstanding</b></div>
</td>
<td width="2%" valign="bottom"></td>
<td style="border-bottom: 1px solid black;" colspan="3" valign="bottom">
<div align="center"><b>Weighted&nbsp;Average<br>
Warrant Exercise<br>
Price per Share</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Balance at March 31, 2006</td>
<td align="right">
198,230</td>
<td></td>
<td></td>
<td align="right">
312,130</td>
<td width="1%"></td>
<td></td>
<td>$</td>
<td align="right">
14.47</td>
<td width="1%"></td>
<td align="right">
12,597</td>
<td width="1%"></td>
<td></td>
<td>$</td>
<td align="right">
13.51</td>
<td width="1%"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Granted</div>
</td>
<td align="right">
(12,000</td>
<td>
)</td>
<td></td>
<td align="right">
12,000</td>
<td width="1%"></td>
<td></td>
<td>$</td>
<td align="right">
20.12</td>
<td></td>
<td align="right">-</td>
<td></td>
<td></td>
<td></td>
<td align="right">-</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Exercised</div>
</td>
<td align="right">
- -</td>
<td></td>
<td></td>
<td align="right">
(12,430</td>
<td width="1%">
)</td>
<td></td>
<td>
$</td>
<td align="right">
2.13</td>
<td></td>
<td align="right">
- -</td>
<td></td>
<td colspan="2"></td>
<td align="right">
- -</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Terminated</div>
</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">
- -</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">
(2,597</td>
<td style="border-bottom: 1px solid black;">
)</td>
<td style="border-bottom: 3px solid white;"></td>
<td style="border-bottom: 1px solid black;">
$</td>
<td style="border-bottom: 1px solid black;" align="right">
2.86</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Balance at March 31, 2007</td>
<td align="right">
186,230</td>
<td></td>
<td></td>
<td align="right">
311,700</td>
<td width="1%"></td>
<td></td>
<td>$</td>
<td align="right">15.18</td>
<td></td>
<td align="right">10,000</td>
<td colspan="2"></td>
<td>$</td>
<td align="right">16.28</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Granted</div>
</td>
<td align="right">(8,000</td>
<td>)</td>
<td></td>
<td align="right">8,000</td>
<td width="1%"></td>
<td></td>
<td>$</td>
<td align="right">34.71</td>
<td></td>
<td align="right">-</td>
<td></td>
<td></td>
<td></td>
<td align="right">-</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td style="border-bottom: 1px none white;">
<div style="margin-left: 9pt;">Exercised</div>
</td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td style="border-bottom: 1px none white;"></td>
<td style="border-bottom: 1px none white;"></td>
<td style="border-bottom: 1px none white;" align="right">(11,300</td>
<td style="border-bottom: 1px none white;" width="1%">)</td>
<td style="border-bottom: 1px none white;"></td>
<td style="border-bottom: 1px none white;">$</td>
<td style="border-bottom: 1px none white;" align="right">4.16</td>
<td style="border-bottom: 1px none white;"></td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td style="border-bottom: 1px none white;"></td>
<td style="border-bottom: 1px none white;" colspan="2"></td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td style="border-bottom: 1px none white;"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Terminated</div>
</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 3px solid white;"></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
Balance at March 31, 2008</td>
<td align="right">178,230</td>
<td></td>
<td></td>
<td align="right">308,400</td>
<td></td>
<td></td>
<td>$</td>
<td align="right">16.09</td>
<td></td>
<td align="right">10,000</td>
<td></td>
<td></td>
<td>$</td>
<td align="right">16.28</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Granted</div>
</td>
<td align="right">(4,000</td>
<td>)</td>
<td>&nbsp;</td>
<td align="right">4,000</td>
<td width="1%">&nbsp;</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">31.27</td>
<td>&nbsp;</td>
<td align="right">-</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp; </td>
<td align="right">-</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td style="border-bottom: 1px none white;">
<div style="margin-left: 9pt;">Exercised</div>
</td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td style="border-bottom: 1px none white;">&nbsp;</td>
<td style="border-bottom: 1px none white;">&nbsp;</td>
<td style="border-bottom: 1px none white;" align="right">(30,650</td>
<td style="border-bottom: 1px none white;" width="1%">)</td>
<td style="border-bottom: 1px none white;">&nbsp;</td>
<td style="border-bottom: 1px none white;">$</td>
<td style="border-bottom: 1px none white;" align="right">8.82</td>
<td style="border-bottom: 1px none white;">&nbsp;</td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td style="border-bottom: 1px none white;">&nbsp;</td>
<td style="border-bottom: 1px none white;" colspan="2">&nbsp;</td>
<td style="border-bottom: 1px none white;" align="right">-</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Terminated</div>
</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 3px solid white;">&nbsp;</td>
<td style="border-bottom: 1px solid black;">&nbsp;
</td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>
Balance at March 31, 2009</td>
<td style="border-bottom: 3px double black;" align="right">174,230</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;" align="right">281,750</td>
<td style="border-bottom: 3px double black;" width="1%">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">17.10</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;" align="right">10,000</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">16.28</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercisable options were outstanding covering 280,250
shares at March&nbsp;31, 2009; 305,400 shares at March&nbsp;31, 2008; and 305,450
shares at March&nbsp;31, 2007 at weighted-average exercise prices of $17.08, $16.05,
and $15.16 per share. The remaining weighted-average exercisable life was 4.9,
5.6, and 6.3 years.<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No warrants were issued in the past three fiscal years.
Exercisable warrants covering 10,000 shares with a weighted-average exercise
price of $16.28 were outstanding at March&nbsp;31, 2009, 2008 and 2007. Remaining
weighted-average exercisable life was 3.9, 4.9, and 5.9 years at March&nbsp;31,
2009, 2008, and 2007.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-14</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total intrinsic value of options exercised during
fiscal 2009 was $788,587. At March&nbsp;31, 2009 the total intrinsic value of
options outstanding was $3,501,688, of which $3,478,213 were exercisable. Intrinsic
value is based on our closing stock price on the last trading day of the fiscal
year for in-the-money options.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total fair value of grants was $64,280 in fiscal
2009. At March&nbsp;31, 2009, there was $8,282 of total unrecognized stock-based
compensation expense, adjusted for estimated forfeitures, which is expected to
be recognized over a weighted-average period of five&nbsp;months and will be adjusted
for any future changes in estimated forfeitures.<br>
<br>
<b>NOTE 7. INCOME TAXES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax provisions for fiscal 2007 through 2009
consisted of the following:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;" width="40%">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"> <b>2009</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"> <b>2008</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3">
<b>2007</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Current taxes</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Federal</div>
</td>
<td width="1%">$</td>
<td align="right" width="16%">4,304,330</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">2,808,433</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">2,338,592</td>
<td width="1%"></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">State</div>
</td>
<td></td>
<td align="right">351,625</td>
<td></td>
<td></td>
<td></td>
<td align="right">
314,904</td>
<td></td>
<td></td>
<td></td>
<td align="right">278,309</td>
<td></td>
</tr>
<tr>
<td colspan="12">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Deferred taxes</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Federal</div>
</td>
<td></td>
<td align="right">(17,880</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">
719,197</td>
<td></td>
<td></td>
<td></td>
<td align="right">(188,476</td>
<td>)</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">State</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">6,630</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
50,086</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">(17,405</td>
<td style="border-bottom: 1px solid black;">)</td>
</tr>
<tr valign="top">
<td>Income tax provision</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">4,644,705</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">
3,892,620</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">2,411,020</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of income tax provisions at the
U.S. statutory rate for fiscal 2007 through 2009 is as follows:<br>
&nbsp;</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;" width="40%">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"> <b>2009</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"> <b>2008</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3">
<b>2007</b></td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Tax expense at U.S. statutory rate</td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="11%" bgcolor="#ccdaef">4,905,384</td>
<td width="1%" bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="11%" bgcolor="#ccdaef">3,767,201</td>
<td width="1%" bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td width="1%" bgcolor="#ccdaef">$</td>
<td align="right" width="11%" bgcolor="#ccdaef">2,445,214</td>
<td width="1%" bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
State income taxes, net of Federal benefit</td>
<td></td>
<td align="right">271,307</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td align="right">
238,861</td>
<td></td>
<td></td>
<td></td>
<td align="right">
179,984</td>
<td></td>
</tr>
<tr>
<td bgcolor="#ccdaef">Domestic manufacturing deduction</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">(238,679</td>
<td bgcolor="#ccdaef">)</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">-</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">-</td>
<td bgcolor="#ccdaef">&nbsp;</td>
</tr>
<tr>
<td>Municipal interest</td>
<td></td>
<td align="right">(197,065</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">-</td>
<td></td>
<td></td>
<td></td>
<td align="right">-</td>
<td>&nbsp;</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Other</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">(96,242</td>
<td bgcolor="#ccdaef">)</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
87,512</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">
(50,311</td>
<td bgcolor="#ccdaef">)</td>
</tr>
<tr>
<td>
Benefit of tax credits</td>
<td></td>
<td align="right">-</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td align="right">-</td>
<td></td>
<td></td>
<td></td>
<td align="right">(61,302</td>
<td>)</td>
</tr>
<tr>
<td bgcolor="#ccdaef">
Change in valuation allowance</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">-</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">(200,954</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">)</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right" bgcolor="#ccdaef">(102,565</td>
<td style="border-bottom: 1px solid black;" bgcolor="#ccdaef">)</td>
</tr>
<tr valign="top">
<td>Income tax provision</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">4,644,705</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;"></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">3,892,620</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;"></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">2,411,020</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of our deferred tax assets and liabilities as of March&nbsp;31,
2009 and 2008 were as follows:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="7" style="border-bottom: 1px solid black;" width="27%">
<div align="center"><b>March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2009</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2008</b></td>
</tr>
<tr>
<td colspan="8" bgcolor="#ccdaef">Deferred tax assets</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Deferred revenue</div>
</td>
<td width="1%">$</td>
<td align="right" width="16%">37,375</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">68,035</td>
<td width="1%"></td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Vacation accrual</div>
</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">107,517</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">95,301</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Inventory reserve</div>
</td>
<td></td>
<td align="right">107,640</td>
<td></td>
<td></td>
<td></td>
<td align="right">101,598</td>
<td></td>
</tr>
<tr>
<td bgcolor="#ccdaef"><div style="margin-left: 9pt;">Depreciation</div>
</td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">67,901</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">68,668</td>
<td bgcolor="#ccdaef"></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation deductions</div></td>
<td></td>
<td align="right">136,587</td>
<td></td>
<td></td>
<td></td>
<td align="right">106,681</td>
<td></td>
</tr>
<tr>
<td bgcolor="#ccdaef">
<div style="margin-left: 9pt;">Unrealized loss (gain)</div></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">141,538</td>
<td bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef"></td>
<td bgcolor="#ccdaef"></td>
<td align="right" bgcolor="#ccdaef">(58,748</td>
<td bgcolor="#ccdaef">)</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Other</div>
</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">69,171</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">71,870</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>
<tr>
<td bgcolor="#ccdaef">Net deferred tax assets</td>
<td style="border-bottom: 3px double black;" width="1%" bgcolor="#ccdaef">$</td>
<td style="border-bottom: 3px double black;" align="right" bgcolor="#ccdaef">667,729</td>
<td style="border-bottom: 3px double black;" bgcolor="#ccdaef">&nbsp;</td>
<td bgcolor="#ccdaef"></td>
<td style="border-bottom: 3px double black;" bgcolor="#ccdaef">$</td>
<td style="border-bottom: 3px double black;" align="right" bgcolor="#ccdaef"> 453,405</td>
<td style="border-bottom: 3px double black;" bgcolor="#ccdaef">&nbsp;</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;"><br>
<br>
F-15</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Realizations of stock-based compensation deductions
are credited to &#147;Additional paid-in capital&#148; and included in &#147;Tax
benefit of stock-based compensation&#148; on our statements of shareholders&#146;
equity. Credits of $270,413 in fiscal 2009 were attributed to stock-based compensation
deductions. Credits of $33,773 in fiscal 2008, and $2,083,886 in fiscal 2007 to
&#147;Additional paid-in capital&#148; were due principally to the reversal of
valuation allowances against deferred tax assets for carryforwards of net operating
losses that were attributable to stock-based compensation deductions. The reversals
occurred as a result of the actual utilization of such net operating loss carryforwards
in those respective years. The &#147;Additional paid-in capital&#148; credits
also included the tax benefit of stock-based compensation deductions in those
years. The amounts credited to &#147;Additional paid-in capital&#148; were the
tax benefits of the deductions to the extent they exceeded the corresponding compensation
expense recognized for financial reporting purposes, in accordance with paragraph&nbsp;62
of SFAS <font style="white-space: nowrap;">No. 123(R)</font> &#147;Tax benefit
of stock-based compensation&#148; represented: (i)&nbsp;in accordance with paragraph&nbsp;62
of SFAS <font style="white-space: nowrap;">No. 123(R)</font>, the tax benefits
of deductions for stock-based compensation to the extent they exceeded the corresponding
compensation expense recognized for financial reporting purposes, and (ii)&nbsp;reversals
of valuation allowances against deferred tax assets for net operating loss carryforwards
attributable to stock-based compensation deductions. Cash we received from the
exercise of stock options related to excess tax benefits is included in &#147;Net
proceeds from sale of common stock&#148; in the statement of cash flows for the
year in which the option was exercised and cash received by us.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2007 we reversed a $1,855,848 valuation
allowance due to our assessment that it was more likely than not that we would
earn sufficient operating income to realize the remaining deferred tax assets.
We exhausted our stock-based compensation deductions during fiscal 2008.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have $311,584 of Federal net operating losses
and $255,433 of state net operating losses. These net
operating losses expire in fiscal 2020 and are subject to limitation including limitation under Section&nbsp;382 of the Internal
Revenue Code.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;We record all income tax accruals in accordance with Financial
Accounting Standards Board Interpretation No.&nbsp;48, <i>Accounting for Uncertainty
in Income Taxes&nbsp;&#150; an interpretation of FASB Statement No.&nbsp;109</i>.
At March&nbsp;31, 2009 we had no unrecognized tax benefits, and we do not believe
unrecognized tax benefits will significantly change within 12 months of the reporting
date. We recognize interest and penalties related to income tax matters in income
tax expense. As of March&nbsp;31, 2009 we had no accrued interest related to uncertain
tax positions. The tax years 1999 through 2008 remain open to examination by the
major taxing jurisdictions to which we are subject.<br>
<br>
<b>NOTE 8. SEGMENT INFORMATION</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate in one reportable segment. We manufacture
and sell spintronic products, and we receive contracts for research and development.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes customers comprising
10% or more of revenue for fiscal 2009, 2008, and 2007:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="8" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>% of Revenue for<br>
Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2009</b></div>
</td>
<td width="4%"></td>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2008</b></div>
</td>
<td width="4%"></td>
<td colspan="2" style="border-bottom: 1px solid black;" align="right">
<div align="center"><b>2007</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
U.S. Government agencies</td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;</td>
<td></td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;</td>
<td></td>
<td align="right" width="11%">
10</td>
<td width="2%">
%</td>
</tr>
<tr>
<td> Customer A</td>
<td align="right">19</td>
<td>%</td>
<td></td>
<td align="right">
17</td>
<td>%</td>
<td></td>
<td align="right">
23</td>
<td>
%</td>
</tr>
<tr bgcolor="#ccdaef">
<td bgcolor="#ccdaef"> Customer B </td>
<td align="right">*</td>
<td>&nbsp; </td>
<td></td>
<td align="right">
10</td>
<td>%</td>
<td></td>
<td align="right">
11</td>
<td>
%</td>
</tr>
<tr>
<td> Customer C</td>
<td align="right" width="11%">11</td>
<td width="2%">%</td>
<td></td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;</td>
<td></td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Customer D</td>
<td align="right" width="11%">
10</td>
<td width="2%">%</td>
<td></td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;</td>
<td></td>
<td align="right" width="11%">
*</td>
<td width="2%">&nbsp;
</td>
</tr>

</table>

<table style="font-size:4pt;" width="50%" border="0" cellspacing="00" cellpadding="0" align="center">
<tr style="page-break-inside:avoid;">
<td style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;" align="center" width="80">&nbsp;
</td>
<td></td>
</tr>
<tr style="page-break-inside:avoid;">
<td style="padding:0pt .7pt 0pt 0pt;">&nbsp;</td>
<td style="padding:0pt .7pt 0pt 0pt;">&nbsp;</td>
</tr>
</table>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="50%" align="center">







<tr>
<td colspan="9">*Less than 10%</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;"><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue by geographic region was as follows:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td rowspan="2"></td>
<td colspan="8" style="border-bottom: 1px solid black;" width="40%">
<div align="center"><b>Year Ended March 31</b></div>
</td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2009</b></div>
</td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2008</b></div>
</td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2007</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td>United States</td>
<td width="1%">$</td>
<td align="right" width="16%">12,445,164</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="16%">10,792,550</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="16%">9,901,667</td>
</tr>
<tr>
<td>Europe</td>
<td></td>
<td align="right">8,154,261</td>
<td></td>
<td></td>
<td align="right">5,981,940</td>
<td></td>
<td></td>
<td align="right">3,568,014</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Asia</td>
<td></td>
<td align="right">2,314,626</td>
<td></td>
<td></td>
<td align="right">3,274,700</td>
<td></td>
<td></td>
<td align="right">2,577,961</td>
</tr>
<tr>
<td>Other</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">458,218</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">479,622</td>
<td></td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td style="border-bottom: 1px solid black;" align="right">
413,188</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>
Total Revenue</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">23,372,269</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">20,528,812</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">16,460,830</td>
</tr>
</table>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;"><br>
<br>
F-16</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><b><a href="#TOC">Table of Contents</a><br>
<br>
NOTE 9. COMMITMENTS AND CONTINGENCIES<br>
Leases</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease payments were $234,368 for fiscal 2009, $224,712
for fiscal 2008, and $193,010 for fiscal 2007. In fiscal 2008 we executed a third
amendment extending the operating lease for our facility through December&nbsp;31,
2015. We pay operating expenses including maintenance, utilities, real estate
taxes, and insurance in addition to rental payments. We also lease a piece of
office equipment under an operating lease expiring July 2014 with payments due
quarterly. Our future minimum lease payments are shown in the following table:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman;" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td colspan="20" style="border-bottom: 1px solid black;" width="55%">
<div align="center"><b>Year Ending March 31</b></div>
</td>
<td colspan="3"></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2010</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2011</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2012</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2013</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2014</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2015</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>2016</b></div>
</td>
<td width="1%"></td>
<td style="border-bottom: 1px solid black;" colspan="2">
<div align="center"><b>Total</b></div>
</td>
</tr>
<tr bgcolor="#ccdaef">
<td width="1%">$</td>
<td align="right" width="5%">244,387</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">247,858</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">251,490</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">255,121</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">258,806</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">261,579</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">198,186</td>
<td>&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="5%">1,717,427</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman;">&nbsp;<br>
<b>NOTE 10. COMMON STOCK</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our authorized stock is stated as six million
shares of common stock, $0.01 par value, and ten million shares of all types.
Our Board may designate any series and fix any relative rights and preferences
to authorized but undesignated stock. <br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<b></b>We have an outstanding authorization from our Board to purchase up to $2,500,000 of our common stock, all of which remains available.<br>
<br>
<b>NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our employees are eligible to participate
in our 401(k) savings plan the first quarter after reaching age&nbsp;21. Employees
may contribute up to the Internal Revenue Service maximum. We make matching contributions
of 100% of the first 3% of participants&#146; salary deferral contributions. Our
matching contributions were $95,289 for fiscal 2009, $94,585 for fiscal 2008,
and $97,674 for fiscal 2007.<br>
<br>
<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style=" font-size: 10pt; font-family: Times New Roman;">F-17</font></div>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman;"><a href="#TOC"><b>Table of Contents</b><br>
<br>
</a></font>
<div align="center"><font style="font-size: 10pt; font-family: 'Arial','Helvetica';"><b>EXHIBIT INDEX</b></font></div>
<br>
<table style="font-size: 10pt; font-family: Times New Roman;" align="center" border="0" cellpadding="0" cellspacing="0" width="100%">
<tr valign="top">
<td style="border-bottom: 1px solid black;"><b>Exhibit&nbsp;#</b></td>
<td style="border-bottom: 1px solid black;">
<div align="center"><b>Description</b></div>
</td>
</tr>
<tr>
<td colspan="2">&nbsp;
</td>
</tr>
<tr>
<td style="width: 27pt;" valign="top">
&nbsp;&nbsp;23</td>
<td>Consent of Ernst &amp; Young LLP.<br>
&nbsp;
</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;31.1</td>
<td>Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).<br>
&nbsp;
</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;31.2</td>
<td>Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a).<br>
&nbsp;
</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;32</td>
<td>Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</td>
</tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<hr>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>2
<FILENAME>ex23.htm
<DESCRIPTION>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
<TEXT>
<html>
<div>
<p align="right"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 23</font></b></p>
<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</font></b><p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">We
consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the NVE Corporation 2000 Stock Option Plan (as amended
by the shareholders on July 19, 2001) and the NVE Corporation 2001 Employee
Stock Purchase Plan of our reports dated May 5, 2009, with respect to the financial statements of NVE Corporation, and the effectiveness of internal control over financial reporting
of NVE Corporation, included in the Annual Report (Form 10-K) for the year
ended March 31, 2009.</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  <table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
    <tr>
      <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
        <p style="margin:0in 0in .0001pt;" align="right"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;/s/
          ERNST &amp; YOUNG LLP</font></p>
      </td>
    </tr>
    <tr>
      <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font>
	  </td>
    </tr>
    <tr>
      <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
        <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Minneapolis,
          Minnesota</font></p>
      </td>
    </tr>
    <tr>
      <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">May 5, 2009</font></p>
      </td>
    </tr>
  </table>
</div>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>ex31-dab.htm
<DESCRIPTION>CERTIFICATION BY DANIEL A. BAKER PURSUANT TO RULE 13A-14(A)/15D-14(A)
<TEXT>
<html>
<div style="font-size: 10pt; font-family: Times New Roman;">
<p align="right"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 31.1</font></b>
<p align="center"><b>CERTIFICATION</b>
<p>I, Daniel A. Baker, certify that:<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">1.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> I have reviewed this Annual Report
on Form 10-K of NVE Corporation;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">2.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> 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;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">3.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> 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;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">4.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>&#160;&#160;&#160;&#160;&#160; </font>
    The registrant&#146;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)) and internal control over financial
    reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
    registrant and have:
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(a)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    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;
  <br>
<br>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(b)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    Designed such internal control over financial reporting, or caused such internal control
    over financial reporting to be designed under our supervision, to provide
    reasonable assurance regarding the reliability of financial reporting and
    the preparation of financial statements for external purposes in accordance
    with generally accepted accounting principles;&nbsp;
  <br>
<br>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(c)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>Evaluated the effectiveness of the registrant&#146;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
  <br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(d)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    Disclosed in this report any change in the registrant&#146;s internal
    control over financial reporting that occurred during the registrant&#146;s
    most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
    the case of an annual report) that has materially affected, or is reasonably
    likely to materially affect, the registrant&#146;s internal control over financial
    reporting; and
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">5.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> The registrant&#146;s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing
the equivalent functions):
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(a)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font> 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&#146;s ability to record, process, summarize and report financial
information; and
<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(b)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrant&#146;s internal control over financial reporting.
<p>Date: May 6, 2009
<p>&nbsp;
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td valign="top" style="padding:0in 0in 0in 0in;width:50%;">
  </td>
  <td valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:25%;">
/s/ DANIEL A. BAKER
  </td>
  <td valign="top" style="padding:0in 0in 0in 0in;">
  </td>
 </tr>
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.62%;">
  </td>
  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">
Daniel A. Baker
  </td>
 </tr>
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.62%;">
  </td>
  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">
President and Chief Executive Officer
  </td>
 </tr>
</table>
</div>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>ex31-car.htm
<DESCRIPTION>CERTIFICATION BY CURT A. REYNDERS PURSUANT TO RULE 13A-14(A)/15D-14(A)
<TEXT>
<html>
<div style="font-size: 10pt; font-family: Times New Roman;">
<p align="right"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 31.2</font></b>
<p align="center"><b>CERTIFICATION</b>
<p>I, Curt A. Reynders, certify that:<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">1.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> I have reviewed this Annual Report
on Form 10-K of NVE Corporation;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">2.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> 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;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">3.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> 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;
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">4.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>&#160;&#160;&#160;&#160;&#160; </font>
    The registrant&#146;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)) and internal control over financial
    reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
    registrant and have:
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(a)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    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;
  <br>
<br>

<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(b)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    Designed such internal control over financial reporting, or caused such internal control
    over financial reporting to be designed under our supervision, to provide
    reasonable assurance regarding the reliability of financial reporting and
    the preparation of financial statements for external purposes in accordance
    with generally accepted accounting principles;&nbsp;
  <br>
<br>

<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(c)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>Evaluated the effectiveness of the registrant&#146;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
  <br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(d)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    </font>
    Disclosed in this report any change in the registrant&#146;s internal
    control over financial reporting that occurred during the registrant&#146;s
    most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
    the case of an annual report) that has materially affected, or is reasonably
    likely to materially affect, the registrant&#146;s internal control over financial
    reporting; and
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;">5.<font size="1" style="font-size:3.0pt;"><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>&#160;&#160;&#160;&#160;&#160; </font> The registrant&#146;s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant&#146;s auditors and the
audit committee of the registrant&#146;s board of directors (or persons performing
the equivalent functions):
<br>
<br>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(a)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font> 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&#146;s ability to record, process, summarize and report financial
information; and
<p style="margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">&nbsp;
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.5in;text-indent:-.5in;">(b)<font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>Any fraud, whether or not material,
that involves management or other employees who have a significant role in the
registrant&#146;s internal control over financial reporting.
<p>Date: May 6, 2009
<p>&nbsp;
<table style="font-size: 10pt; font-family: Times New Roman;" border="0" cellspacing="0" cellpadding="0" width="100%">
 <tr>
  <td valign="top" style="padding:0in 0in 0in 0in;width:50%;">
  <p>&nbsp;
  </td>

<td valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:25%;">
/s/ CURT A. REYNDERS</td>
  <td valign="top" style="padding:0in 0in 0in 0in;">
  </td>
 </tr>
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.62%;">
  </td>
  <td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">
Curt A. Reynders
  </td>
 </tr>
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.62%;">
  </td>
<td width="45%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:45.38%;">
Chief Financial Officer</td>
 </tr>
</table>
</div>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>5
<FILENAME>ex32.htm
<DESCRIPTION>CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
<TEXT>
<html>
<div style="font-family:Times New Roman;">
<p align="right"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 32</font></b>
<p align="center"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">CERTIFICATION PURSUANT TO SECTION 906</font></b>
<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C.
SECTION 1350)</font></b></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The undersigned certify pursuant to
18 U.S.C. Section 1350, that to the undersigned&#146;s knowledge:</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font>The accompanying Annual Report of NVE Corporation (the &#147;Company&#148;)
on Form 10-K for the year ended March 31, 2009, fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and</p>
<p style="margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="font-size:10.0pt;margin:0in 0in .0001pt 1.0in;text-indent:-.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.</font><font size="1" style="font-size:3.0pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font>The information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.</p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date: May 6, 2009</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
<tr>
<td valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:25%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ DANIEL A. BAKER</font></p>
</td>
<td valign="top" style="padding:0in 0in 0in 0in;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
</td>
</tr>
<tr>
<td colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Daniel A. Baker</font></p>
</td>
</tr>
<tr>
<td colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">President and
Chief Executive Officer</font></p>
</td>
</tr>
</table>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
<tr>
<td valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:25%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/
CURT A. REYNDERS</font></p>
</td>
<td wvalign="top" style="padding:0in 0in 0in 0in;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
</td>
</tr>
<tr>
<td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Curt A. Reynders</font></p>
</td>
</tr>
<tr>
<td width="100%" colspan="2" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
</td>
</tr>
</table>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">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.</font></div>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>6
<FILENAME>logo-10k.gif
<DESCRIPTION>NVE CORPORATION LOGO
<TEXT>
begin 644 logo-10k.gif
M1TE&.#EAA``:`+,``,[8[][G]P!&K5*"QEJ)SM;@[S]XPF*1SIVZX/#U_'*?
MU<78[];G]\[@[________R'Y!`$```\`+`````"$`!H```3_T,D9FK5A:I<N
MEIZUC4X52D"HKDU6LG`LS\F("#B^D,Z2XPB)X2>H\20%HD%";#IQ"LGM2:U:
MK2[-@3C@*8A&`G%W=`Q_M<#U21ZLWW#G<G3^-4CNW-SQ_06/4SE_@7$"+H6(
M<`<C"4Z+(T2/#H0"43R-/WM]A7,^B9]5?QJ>348327X42D>;.A-U.`.RL[2T
ME@NUN;J[O+VU9!JMJ1J4`!I-/*@Y71*8:&70T=+3TWE->Q);SQ/6.%D:W883
MI#C8U.?HZ1M5P&:9&\+M$N25Q$26ZOGZT0U5S!SW-E#"]PJ,!C$_Y.U;R)!2
M.!?T1($@0D`@$8GN$B[8R+'C1E,-_SR*'$FRI$F/)+0)"CB)"(,-SLIIB"G`
MG!I$IE2"VJF'!*PEL(HX0)C#IT$)\2P6^N>`I],<DE3]B$(I")>41(R5H#A"
MV!I\-Y_RQ-CC(L!,8:&0J"J!J+<1X=8`\RH6T1UX1%SHK#2&!+TH?QDU(4"X
ML.'"61`H6,RXL>/'D"-+=FR*V[N)/]R*$_RC2U`2_2XS'+V09D7+3\QI",K6
M!DO2L-6%%F3O2=0-FE=A'1:[-S5*\JB0G4`WQUTZ1`KX7BYM;V4^;([0^W%[
M`DT!!;)KW[[=2`/NX,.+'T^>N]&>,)\\UY#VZ(CI;^X&K;MT1'N"$_;6A/9D
M.-)/$K1'7TDA9+6V`0!-X`?7-67$M08SE`P8AT(/\<`:-%XI)!4BEC@HX1KK
F(7#`B".N%R")(RI7Q@(H'J`@>RW&*..(9(@XXXTXYHBC@A$``#L_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>7
<FILENAME>stkgraph.gif
<DESCRIPTION>STOCK PRICE PERFORMANCE GRAPH
<TEXT>
begin 644 stkgraph.gif
M1TE&.#EA^`&[`,0``#<U-6EH:'9T=.XV._)K;^].4@";52"G:C]`DV]OKE!1
MG%!05$.U@GS,J%NRBIN:FHB'AZ^NKO62E?BML):7P[&QT[SETIG6NLW,S,#`
MP/O,S=/3X?____7R].WKZ]COY2P`````^`&[```(_@`Y"!Q(L*#!@P@3*ES(
ML*'#AQ`C2IQ(L:+%BQ@S:MS(L:/'CPDW8"#H86`'#!@Z"!P)LJ7+ES!CRIQ)
MLZ;-FS`#>%@@<`.`@1$>1."PX0&'"!MP*EW*M*G3IU"C2OV95&``@1X@E.0@
M0"4'"%+#BAU+MJS9LRT%;+6Z$@*`D0(&QD5+MZ[=NWCSPLP`0"O;@1MX7OUK
M$$*`PX@3*U[,N+'CQY`C2YY,N;+ERY@S:][,N;/GSZ!#B\Z\-N+("#PY#!YX
M=2Y7A!Y0+HB`LK;MV[ASZ][-N[?OW\"#"Q].O+CQX\B3*U_.O+GSY\)33S3:
M`:SJ@D,?),5@5&$`EGK#_HL?3[Y\QM42(63(H-*#@)%"4PK,@"$#P^_F\^O?
MSU\\^HA>;81??P06:."!./VWU(`(-NC@@Q!*I*!2#$9HX848-CAA@N!EZ.&'
M((:WX4T5AFCBB2A&-:)-):;HXHLPOK1B32W&:*-,'UA`T`<F\3B0C@=]H)*0
M-Y8U(TTU%JGD1PQ\<(!`3@ID00,.-""0`QQ82="4/#;0P`$^+JDB5$F*:29&
M3X;)`)0"/<G!DU@.=(&6'?`XYYEDDMDAGGQ:Y$"8'*Q)D)94:LE!!W\"*26@
M?2:H9Z.04F3!`7\*)*B40'[``)@"S?F!ICX:&BF)CXYJ:D,Z7N#FI1U<,!"6
M_U%R<`&04\K*Z*DR'3E3F;CB:B6BE@K4ZJ$\Q@GK!UI>D"./M_;JDJZY[NGL
M2P$ZZ(`%%@QY;98,=`LEML5R@"VXW3+@ZK0Q09NNM.B"U,`%YR(+I0,.J-3!
MN`-IVBV0K2HZ5K7MTJ5N3NP&S)&FLD(IJ*L78%FOK+2JU`"S#QO<Z\`R%FQQ
M1AVL&:"@7M4;9P>B<H!EQP#GI6^Y36[LZ%.\NNQG`Q]OB:VAEW+P`<,-3.DO
M7A88(/30/\N<;JE&<S3E`4#F;*6\5Q*D;*`#M:Q7T$,+7732SR+--48YZASG
MI1>$+.6Y46<9:K-0W6O!G`UT>T#6=!_`P+O9XI6RB?X8/ZOQUQ&]C2R/';A9
MI9<0DUSGT_'2#/52;L/M0+=T5V[YY7;CO;=4\-(9YZ&?"R1JOUZ]G5_?+<4,
M^$-3?RODN#[6F>^AU5K`]D?C>CGYII?3W>WAL]):^:Q4SEUYYK/>KM23\;JI
ML_/B0A^\JZV6[)_7J_>7XY14RMU[UG8#C^WF.[+<+:,Y=G\Y`U7:WM23-5>=
MKP4Y-SRKE-:+B'WV>&WO9=R\^Y[0['8WO+FO)NF;W/K:ISQW52I8\NL4U0CB
M`$Z)*W]Z01U(5,<_BVP/=A+9'MR\)T`#$/!_X#)+`@-8-P;"Y&T'T%+.%N:E
M`Z`-49/B4:W,H\&/<+"#%/YI@.\.$CG=L?![!#Q<"O-SKSD=<6B4PIM'J+<J
M@@AJ>Q:$F*RLM,/R]-`C/P2B1(0(/B,RH(1"^YV7\(6A)L;->'6[V_TN4B]X
MM2E`!ZB6H&!EI:EUD3Q?[$@8Q?@0^J'1`&HT(/E2]+8W6@YY>8,(MN;GHV7M
MB$U2*ETD`;D_0H:P87"LFY>"U\`^-?*)`Y3C)L\42(X,TI/?BMOQ0HE(P"60
MEJE<8RGYUDE8&N1M%8QCSR0V1""N<($]V^6%6BF@O]EED>/9V9<J)T=E^E)G
M4U*@Y=B7S()4#H/\8:9&7DF6S@GK<_@BV0.EEBT+5(DI]W(D^!PPQVM>)'WR
M;/]AS[[I('&>QYEU81Z4W-0SG0TS5N?TD:OH:1-@TC)SJ[2G1]R(2KJ!<S_^
MQ`@YQP*_"'ZN8J%[8.G0YA)IXK*:$L4)1?FI(:1512]44A,$)SBL>;T-;64#
M23R?2*EZIO0IEJ,9@C)Z$08)X`&IP<!/.)"5##S``TU]ZD`>L)[L5)4F,)1A
MVDS6J0`5-$NNVEE''"K,B/X4*IB[J!>1]I.A"&2I`4B*!PXCU\%L8#`"R`!>
M7PH3*D)P9%@ZX-G.5M-[.O%X[[+F697RO_^I:H`DQ2A;"[)4Z03`L@(1RGP`
MX%:GSJ2.Y\JC0=76,"^%:V(DT]0H);+3A])S:XN]RV/^$0G;\1#5(@QZ``"Z
MPX&E+K6WOUVJ>C9K'PYDP#HQF:3K?H0IY5:262!$%2C+"LW8WH5DQELG#Y%&
MGP7X5B#264!X,^O6"'!6($'1WF%%V3KK$@A10Q/J=F$&'NM\5S4EN:M.B&+7
MN00@`_[EJWA:VT*?NA=!FAJ@?&V+M-D\8"0^L4]3M3+ADOR$JI[%,&^O-EWP
MW<VL!W[0I"#+2?H"!D32/"-[%1OB`\V6:=<S<8/,9RYA9=.U7VWQBZ:)2!;G
MB2+5C<A&\T+-8/JNFSHN$LF&5C&[]#`"Z3T4<NE37"HOI`,*J`!YQL5E[C46
MB?3T<9)#]`$'*#C(/YY(6['^DIH',_4!;O;`AK=D``38>6XRZ7+N&OL_&E/N
MD&B,86W';"9#FC"R1JH(3P*$UX%`P#7(+8@%[$QIZ#6WRWSNLY\!S>G>$=!\
MF68IH4_UXD&G62(/\,M?5G,8UA`Q`92N=*=GC40_-P#.N(8S?8Q3.0=`Y]?`
M#K:PATWL8BM'Q8C<M;&+(QV)8``UW6FT0`3@&M>01`&QMK,"0OEI/YM/`*,)
M-XW#3>YRF_O<Z$ZWNC&#;`,L8-V7`0":#3*4#J1&VAV@MK"L31`,9!L!`1A`
M`22@@5$;_""E*:F93;C@,5$$`AV`,GA54A0.:*?BVD&(!@9`:05PW.,#$/@$
M$G[_\#%+8`(2$`C!"TZ`EA>`)`0H^$`(7D@5VS`L/:3/0&+ST@[]30,G5T`"
M)"`!;".@`"$/.0$F,&]3D;SD%M$``3A0<*!S@``=L%?*"4)S@4A=YH4T'HQ/
MS90!>0#6"$C`!`B0]`%T?6,GGSH')J"!"0B$[G8W2<OMOG:L>RCK_)'[H0HP
M@;S/'>PJEWD'4(YXUAG/:DVY;44J1`%M;\`#$T!ZR`?>^&D-@.H"F;K<14\0
MI@NKX"?W$-'Y(X&8WWW@,S=(U^W^=@"1T0#:?9E32K0!HU/`ZQ+0O,`E\'13
M"?[J*`]]\@?"=L-3O?,/\H#`FXX6#6@`]BE??0>VSO6J_A>```5X>47*?.8%
M[:\#E4_[2X$N?,)3OTB9S[L'PM\>^I.D`&#G?GX\8/W^$_W_+>=R2?=]+?=_
M*V=]=X&`'D!P*=<!4T=WLH=XM2<I-H=HN])+&(!M6580:]=VKG<JUM=R'"`!
MBS=U)+AV!6%USU<6_6=]*`>``0A^;3>#-%B#-GB#,?A_=&=][_<10%=W*G&`
M([AS#4@`^C>!%3%B)F1J!2%F!R%Y%%$F'8!V"0`PB]=^2(@G>4=Z5]>%7C@0
M"(B`U4*"$]6"0&>`,<AV-[B&,TB``6B`!RAU'FA]:"B`;%B#;JB#+?@2Q:<4
ML\4`3'A!#_0V.H(M)+4SIC,O_X01><Y4`9:'<,$W@,37*#$'@3M8<)=X=0L8
MA@3(?1/@=@IAAB\(@W9XAVSHAD9H@)>(@!$A?6U7`-7%?RY(BFIHBJ_XAO^W
MAQX!?3"!74*3>P8!B/>R1?*38X*2B'&SB&4'4!N`=K^G<9&X>2.')WTH$?,G
M<&EHBW>8AG!HACTX$;+8@M^H<?Y'BL*GC:BHASSH$)DWCO>T<`;0<`7Q564V
M*%22+X:")64C*%`X$1R$?G:6``*6@K4X`$OGCF=2=S)HBNFHBF:X)"U8APNI
MC9N'BR?7?TBG?S:18(>&$$Y",WB#.&]B05W4)#K"C[UT$!EH9UJF$"4HB;PX
M*OS7>O]KV(+52!?;IP'MP8H+2'(=H`$E87TW"1/A.(HQ2)$"%Y-Y)G86."<'
MX#Q_DCRB!36(LCLWUX\2`E`$,84!&8N9!Y.FHI#G.'PH-X,:.1X$EXD]27>P
M6'ID.(G3>!8_68Y$UW(S^(%^^'C^$C95$BK`HC9I8T<0A)5"II4%X8@(H`"&
MR7X#&)<>,91Z\9,T>9<$%R"MEX;Z07,+.',R]W8JZ(6;*1Z?2(-X>1.^B'L*
M!2_9$CPZ@H@+]2FS0E(H*6,1T8QV1@'SQIC2B)`%L8"IQU25V7_.)Q#BAW=1
M47?1.(!+IY0%@G)!V)F=21#XMX/<=WQY,9;M-YPU`5]"(U3_3F@0A`D10\8!
MZ2>0$/&225>:%K%Z5>=WK%A[F1=Z7ZA20%>02D=PD'D@X$>"*R=^K$AU6[=V
MU3D>9LB#T4AX2\&1,20@*=D0O<>2K/65FY>%$/&9?C>",E=W8"AURG>6,8&<
MV+F<*/*3'8!_=V=WBT<2U2EWG[D?VZ=Y`\>;2<B4Y]&@#<&5:=>#"XB%^7D0
M`S>3R"EU09AW*2IW\]>6O5B?V'ER/1HA!JIR#2B$.DF&=%@2DV@@$AJC>9E&
M@>@=-NH0%:"!AGD0NBER[U=WWR=SA2>+%WJ9V%>"+0&B;6B$S&DB=5=PF+<5
M9SB).OE\&0J4#B*A;M>D''&:P/@0_^&)J&.Z$+:)`+@9=05YD`Z!@"B7=^_9
M>:,GGQRAI&W(I%`W%G(8<E=J$]R)>SV8J`XQG@>1?@HPD``BJ)S'$(6GH3O(
M=(QWHLQW=_V'$9B7G!59F9]:?;6HGC.AH/)X'U]:F[Z7$9B'A4I)J)O:>DL*
M@<&*%T"7GG4*$H9V<XB:K`!"A=`*C=D9KATQDV-ID,!:K>.Q@(V)$Z66JMXJ
M$6&:F(O*$&4JJ30AEIU*K>JJ'SLJC3C!8Y"7$*C:$*JZ$&=WFS)J$AV(K2XQ
MD_:)KGW:KP;RHA.ZL.=Y>TWVA/%*$:SJJA?1K&"I$7)ZB_Q*L0YRA1>[D0L7
M0YM3L/=1K_\3\:"."A+_.J'A*ID12Z?DBK+YD:6C.A/;:H$PNQ`'ZQ`XF@`]
M:Z_)Z7XF`7TEJYPGZ[,ATK"#:A/O2A!%ZQTR6Q'SNH$N$:I*1WMMJ;-+"JC7
MM`$OU0%JVP$>H+8;4"UQ2Q(068L4ZA)_&"9;2[!=6Q$)FZ/4`JM(%WYS>K>>
MI+0)(!`50`%:1@&.JP`$\;@E@7[/6+<.2Q-+ED:4TRUJM2XV\;$Q<;.OZ*GN
M!;ER10%;X165Z[8<L+@]4;EBPJY*EZT'`X]9DS,<<A,T"[LN4:+I.69*^[JM
M"A@MV6]5L0&\&[L'JIT)L;0_0DNX2R)]BQ$`F7;.VQ`2\(H8RS7_&8BZ/0&Y
M`O&H!5&YR`LI%FNF"X$!CGN\%3`2%2`2`G9V1$$!YIDEQ;0@TYL1*PFV+3&6
MS!M;21&F`Y&XX6L0%;`6Y7L7&(#`:KMS!L%7(&L1YZNE""&0;-NZSU@!+4G`
M`T&_'`!A!'Q[:<2(3/&W54BU&/%[Z#<0+;D!Q5L2&)`4QYN\9H&\KNL!ZWLH
MCCN^Y#F_K1O!%@&T3T<!52&_X:NZ:U$!4QBYHG._%)*_&P&Z*%P1%(`2Z/>^
M7J'$'=R,"9``+;FXVPL3KIL454P0"3S`')"X)]S#("&H0<M4"H";C(N\'AR^
MQYL4''S`^/,EJ[6,3[&[4PQD$7+&%"!T_X#!N_3[>QS,P2`AMD&[N(8<OFOL
MO6G<Q1O8`<4[$,.[>U!<J.4)Q(%L(@G`OU[\N@71C*VZR!\ZK`77P#E,GNTK
M$(PLRX>B9=52>9OLQU&QOYD<RBYR>:7LP\+<P401R6D\$[)KD`^@P2G1OB+Q
MP^]+GFM1A5W<Q1W<<:#LN5*1M&%,M8"7'PT<S1^\%0D,>`2<PV<L$\F,H!>!
MO-F6R[DK%H@)S[[,6EW<S4J!`<Z,PPVLN(^*$D01P]OQS*:YO`SQMNI+OUW\
M;[$VRRS2R2W1J#1<SPS!S4PT8`=*?&KKN`K-T.^,=I2VQD]<%M5;OQ1]HR`-
MN-G#MB[\N$;GT?_:UL6.^[Y\E7XJC;]GP<LG7=$I'=+5S-$TW<^1HK:+J]`O
M#=,*H``!,,=SVQ"5)](X+9=4B,])Y@$5,,HPG=6Q)G0R#=1P>[WC0=2.:\E:
MG78)P-%J&Y1V2Z@!0-5961?S#-&$AKPI+72QAIMP6]1C3=9E_6_5?-9H#;>D
M*M=JF]#57-8_7<5"'8JLW*VTB182[=829=4][<55D7X3'1)YS=%_W=<,_==>
M+=C4"VN]K!!O2\<=K=5</=.+71'7.KL&NQ$1$"`H0<[5=;2?&Y#9;'`G4<A;
M7<4IL\,1#;<<K=`+[=E;G=BLW;8(@:,(D,DL7=3'G=6KS=2AF[UC:[3_&D%5
M$#`23O4`60=QSV:T<ET3-%O:)>?"E:W'<KG9G,W7R!V0/UW96*W574W3DNT0
M-\O.')L1[T$47%$5$5!<D?:$Y;V=4UURF.S;(4W$!0*W+;W7TQW?9AW88$TM
MRYLRXB1Q3.460^$:&<>WXO&U!_XU=)W<[&TB<*N^1ZU^NVT6*CM\U2).'0``
M`V)O<S55["(``-#C/O[C0![D0C[D1%[D1E[DE.9=1[[D3-[D3O[D4![E4O[D
M"\#02C[E6)[E6A[EV;;E7O[E"S"#/KX`%XX2`+`5#Z9J$,>UY2'%/W7B'<>X
M^<T?#PK5^N'&&^>ASC82:WX4'UQO_`:>):X4_X#L(!<>NE>=;98-*<TXYTPA
MMM.'$5`6`1[@5`N\$O4!3;C]%$E[Z&7!N"I,OR.!?@FP)R[LOO#;NRS^V_*Q
MTQ/AR!Q35(/.%"1^(,WXP0`NOW+%R*[;NAO\$>JMZ"GNZA6!W9&NR_[JC(ZN
M%+-\$B8!'D9,GDBL$0M^U&<]Z_7LBDFGYTB"[4WAYOQ!OU6!?EY![AW\OF.]
MQ>U,ORCNZ4FVID\[@D2'>$#H=?]I[)M'P@12Z.E,'B)QUDPEW#A<N1Q,O]-N
MC5=M[0Y.[`/!>(8W[WAG>"XX=1KZG\H8U>]%A2N9V7?1P#A,S"#_P^$;R\<,
M$7"N;7+NAWQF@5@A`/_6<5?C'FGT$0$Z<53/!@$OU>='01L<?B@/H!8'$1@(
M6Q"JQF8F\?-/)_0SD7Q;47B>N!9;P85#J+4=JQ?S>M?E@;SZC'XB41)$?.DX
MC,DQC.KBC+")WM!EOQ3M5DL)H51NQ5NH0?5^[F9$L0!>,1OHQ5M4-1#<0;`N
M6>#]O1)S)O?J3`!;(8O<YZ$I)WC6N;<(L>EFX6_91L1-K1?N7A"]?=1QW.H;
MJ6=*"$6>#R3U`0!)H?<+4%Q<`7$J0?>JX=T0<&\O=5=\;Q1WI5=$`64_@0%M
MG1KK$<,+L`$1\/H8T&9]CQY]7_M7`?SF113'11N<E6_=''S\B9SMH9W3R/C^
M!>'X!MX@+<[07`W8BMW:"!+L:'_Y@4-K6>,J*.$3'=`=RH]<'7!9I0\>F@46
M9]Y;!2$=?7\=5V$=@P$0`3@(Y``!@X>!'#!`X)"00P0."QPVQ/"@H4"!#!,R
M["#QP8(''1J.)%G2Y,F1'31PD#!!PDL"""<@)*EA)0<"(W.2)(C2YT^@0`-@
M"%K4Z%&D1S<H0-"T:0*H3J5.G0HU`06L%39L3=K5:]<.%2@P=7J5Z%>T/C\P
M8-N6[0$#<>,><.OV@T*B$4`V9.@!@$@.(B,(?'!VX$&($!@&V#!R0\^*%Q,2
MI.QPPX+%"BTF[!`A@\2>FB5CE+P`P^G``$*G+6G^DR5-#1(:RFYH,[9-#ZXG
MW!RYFC7KH;^%#P>ZU&D%DULW8,!*P2I9JM$1*+#:7#E-XL,W.)=*O0+V[.%'
M,I`;E\%/U`4%=BB,00#$APT%<"C<\/+#TY\?;J8/7_3DB$2JC*#&!,!`H,@2
MF@_`D1(D;0$!(T(HKPX@\(\X#78#C(/<:AO))I=>JLVUDGP3[ZC@3E21->.0
M\ZH#Y9IS+BKIHJ,.JN:TXBJ[I1HKR8,*$H`.@:M\7%%%\LH[#R7V0N*KPK,B
M`("H`#S+P(/W,,@`@@X6$JDC+A^(`(,(^&-/``\N\V"!#3*HTC0.WF.LH`P@
M"J!.`3I8\T`(/M/KK#/_TUQ@S3;?/&V!]R*`R"_#COS-1$=]2C%22HM:SE'E
MQ,+*JAJEJRXKY38LCBD%?-PN@>XHJ$#42EMU-;``('QU5EI[J_6D26_5M=8T
MEVONN4ZINO$JK##8*DWHJ!LR`:UV=7;%#![(X%EJPX.4UERK]0J#9CG\SKX=
M'?,11@Q8U17&K32=$=5@.U6`@G*UE7=>>IV]=M9LZRU*`0XH"*P"#/A=52$7
M.0!X@U5=I,!<?3G(]%>HAG3*WX8KMOABXNY]-5^,3>(7(<#\I;C?D2H`V&0?
MT^OXIPJF&GEEF&.663)J.99959)@Y"`!P!)(2<BP*-YN9I1:;NIEHI-6>EZ-
M_EVU.>8-A"2J@ZL<IF`YGT?:M`-XHS9RZ89:1AILLLO&M]JG829JJ8:H)NGJ
MDHG"V6JS':O[;KPC;;K5M%?V=[N0VX8W;(>1,U:AA?-6?''&'T6[T:2[QLO4
M@0EW>*NPOFY\<=Z`\HQ,C>H\C2!%M=2(/5FQG/8H\'[<>\VNL'0R.8DZWKO2
MOC?7?7,-!FC])(-&@BC!ASRHKR'^.`!`H^2#VN!"DVZ_O:3C<5UY>KTAWWW[
MW0D8@+:?`(C^ZP[$3XFD!ZJDKR'/'O#`0@/QVK(S"#SP+,\,%D)H*`@]X+^#
M#N1/3`E9SD(:8SKZ]$\C]%G;G03R/"DY;$MC`D`$_CJ0)WEASU&YXUX'8=:[
M`810A",D80D'H`'8->0S?BG)@7P2$M-L)C$5.8U%-K,E&D[+0A8Y'&&HQ$`+
M-@1"A&F;1!9#%`A=:23'(XU&,A(8CX"$8;O2X)$XZ$$L6LP#!3!A%TM8@)68
M;S2MJ]U)+'(9C7C&(.TI#'^&\@`QG28""TQ(?7S8D\*09C1Q8I^BT'<6TE3&
M-*@I7Q4I94@573&+BUP9"$7X.Y)8R%9E2@F6#/,U&8J/2PQD8P<(TIF*S)$B
M$.I2'7_8QM59!".`L8B%X-.1U2$/D`F1E4`&I9"'5`AZST+DB13)2&!6S'LC
M!!]*XA@MY(WI<+H\#78R_H`FOM#G/8IQ)9?*I"4],08"F.D,9CC$IO<0ZCT5
MRM]!3+,!@QQN`0%07T%((CL8#8I-;OH3!A"EJ$5-*8./"V8_DV8;@')O=O#9
M9=EZ*9Y?^E.A"[T5!.!X$`%L,F\'M9;V&'I1C&84H?S4:$<]^E&O4#0["05I
M24VJ4)%FS*(G96E+%YK2X9#4I3.EJ>)@*AR9UE2G.U7:31^U4IX&5:A@\REP
M@#I4I!8M*%C2R&.>IT_Z/.`RIR%>4KM2U+3DU*HUI0`"QF82#%00>1>)$LTX
MM-60<A2M0^V5<F(T,;>ZE29:`D!C9)A&LQYUK=:KF5[W>M(-M"M8AC/67_CS
M_Q<E.D1E?PT*5M&B5<8NU`-6H2R-RE)9JTPH+WM!W@#)2B:_1G8B]@JM:&=J
M-`04#"7I@4!/UA3+T$#2M+;JZVRWVC+5GJ1)@*$C?RY33HG:-GIJ%2Y;B^LT
MXAY7N<M-BF,#<]72,E>ZS'7L!N"HV0Q,L3?1G6YWA>M8`Q5P,W3$%7>]>][(
M.C9X%:))<,N+7OA.U[$'^J$L3Q*MCS@4COOE;W_]^U\`!UC``R9P@0U\8`0G
M6,$+9G"#'?Q@"$=8PA.F<(4/7,;PM#8`"Z*/YM@'1\Q86,03WN:(30QA`)Q8
MQ0QFYXI=?.`2OUC&`X93>#Q`E(C.\B>0C9D+MR=&W?[!<7L^WAV/3S*F:%4H
M@`7EB7F51F3=`7ES0MX=E#=G9)/8;T,;T.X299LWXW&/O(W+0"PW%^;MN2^^
M:V9SF]W\9CC'6<YSIG.=[7QG/.=9SWOF<Y_];%K/C,0#'NB,D0[2((4$D4/I
MN7&C-O#E6=D/.T0A$V`"2))RC:EMI_D2IS]LYET5&M&2%AZF'^*?9E+DT&U+
M[+,JC>A`-^3&@AZTFA=]ED9S:+\>OA6I*9)H2YLYTX#R=)?BA1=YQ9I#A(Z`
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M*[U](DN'^YB<3E`R><;DL[IYRJENW\"<74$C@0"'%4-XH^#:,(8Y7G:7.)$'
MB+$]QB.ZN7WD'R[3-C[LHSQ%H$K#;4K]56=Q?&",U!/_V(]X*>Z-:91-K<QO
M'I?^99<UXR$O^:F!_5R7=\R&4/_PXX7U+!7IB*RTI7A$`[[TZ^L).UL/F+UE
M```(B>4VETCZA]]^B7-<R-ZG'H#0V6<!L+4/33K#0,\/?S.>I9;UX=XV\&L^
MECP\[&'3V#Q=_=9A-)'^7&_HF&G!(]Q[B(RK%4\*/X<9/]IZM+:!B.#[O%;Z
M"-&KE/Y[/[XHH\;+ON9K/G32$@[S'(BX$`'PD?JX-`E"'A\1@+6+$^-)']TS
M0(E8O@W@,-(1GK[[,+RC".^;E1$T02BBK=++@!2TCP=8$'1:H`]TEAF4O5.C
MO<T[OPZ3CQ6<-WGI"+C;,AK,-O:YP?W`NT!COV?Q(Q'_),&I69TVD8^1$``.
M,[P"/)^!2Y/G6A_[,D.#R#J+(+@[7*#J";OU61V1L!\@Y(O\T2$TU(@\$;@)
MC!16LL!%I)G5*1T'1(CZ4;/ZV20M<3L.@0@_+![:@T,H::8\##.*JQ!M6<1-
M!$1'%,1+-,2VFP^<RQ],?,/&:$3THT,M\8`R>X@RFY9`(Z>@`"6$,)4QL30_
MNKS]JCW%:Y15<Y8R.XO+DS;-(+1@W*^I*39.8X]C0[AA=!@5@D59JX]9W"_X
M2#6\X#]H=)8QF<6J6T9%T1FXVZ^58S1&@[19:4;[8!]HK`AI=!AJ#`QK/+;E
E:$-7`49N=)AM##R(,$8J"\AH$&N,YTG$/XM(B9Q(BFRI@```.S\_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
