<SEC-DOCUMENT>0000724910-11-000011.txt : 20110504
<SEC-HEADER>0000724910-11-000011.hdr.sgml : 20110504
<ACCEPTANCE-DATETIME>20110504162847
ACCESSION NUMBER:		0000724910-11-000011
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20110331
FILED AS OF DATE:		20110504
DATE AS OF CHANGE:		20110504

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:		11810737

	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-k11.htm
<DESCRIPTION>ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 2011
<TEXT>
<html><font style="font-size: 10pt; font-family: Times New Roman">&nbsp;<br>
<a href="#TOC"><b>Table
of Contents</b></a><br>
<br>
</font>
<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, 2011</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 232.405 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,
2010, the last business day of the Registrant&#146;s most recently completed second
fiscal quarter, as reported on the NASDAQ Stock Market, was approximately $171&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 April&nbsp;29,
2011 was 4,776,198.</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 2011 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;"><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">Sources and Availability of Raw Materials</a><br> <a href="#IP">Intellectual Property</a>
<br><a href="#seasonality">Seasonality</a>
<br><a href="#workingcap">Working Capital Items</a><br> <a href="#majorcustomers">Dependence on Major Customers</a><br>
<a href="#backlog">Firm Backlog</a>
<br><a href="#RandD">Research and Development Activities</a><br> <a href="#environment">Environmental Matters</a>
<br><a href="#employees">Number
of Employees</a><br> <a href="#geographic">Financial Information About Geographic
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="#MarketInfo">Market
Information</a><br> <a href="#Shareholders">Shareholders, Dividends, and Securities
Authorized for Issuance Under Equity Compensation Plans</a><br> <a href="#StockGraph">Stock
Performance Graph</a><br> <a href="#buyback">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: 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 Accounting 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, Financial Statement Schedules.</a></div><br> <b><a href="#signatures">SIGNATURES</a></b>
<br><br><b><a href="#Report">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 risks associated with competition, progress
in research and development activities by us and others, variations in costs that
are beyond our control, decreased sales, failure of suppliers to meet our requirements,
failure to obtain new customers, inability to meet customer technical requirements,
inability to consummate license agreements, ineligibility for SBIR awards, 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>
<br>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 spintronics pioneer. 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</b>
<br>&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. Long term,
MRAM could address the market for ubiquitous high-density memory.<br>
<br><b>Our Enabling Technology</b>
<br>&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> &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>
<br></font>
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</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 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 in this Report.<br>
<br><a name="Sensors"></a><b><i>Sensor Products and Markets</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sensor products detect the strength or gradient of magnetic fields and are often
used 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</i><br>
&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</i>
<br>&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><a name="Couplers"></a><b><i>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: cost-effective IL500-Series couplers; IL600-Series
passive-input couplers; IL700/IL200-Series digital-input couplers; and IL400/IL3000-Series
isolated network couplers.<br>
<br><a name="MRAM"></a><b><i>MRAM Products and Markets</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MRAM uses spintronics to store
data. It has been called the ideal or universal memory because of its potential
to combine the speed of SRAM, the density of DRAM, and the nonvolatility of flash
memory. 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. We have invented several types of MRAM
memory cells including inventions related to advanced MRAM designs and MRAM for
tamper prevention or detection.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy
is to develop, manufacture, and sell low bit-density MRAM for applications such
as tamper prevention and detection. For high bit-density MRAM, our strategy is
to license our technology to companies with large-scale memories manufacturing
capabilities.<br><br><br></font>
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</div>
<font style="font-size: 10pt; font-family: Times New Roman"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>

<a name="mfg"></a><b>Product Manufacturing</b><br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our fabrication facility is a cleanroom area with
specialized equipment to deposit, pattern, etch, and process spintronic materials.
Most of our products are fabricated in our facility using either raw silicon 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. Other production operations include wafer-level inspection and
testing. Packaged parts are returned to us to be tested, inventoried, and shipped.<br>
<br>
<b><a name="sales"></a>Sales and Product Distribution</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on distributors who stock our products and sell them in more than 75 countries.
Distributors of our products include Digi-Key Corporation, HY-LINE Group, Premier Farnell plc companies, and Rhopoint Components Ltd.
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 2013.
<br>
<br>
<a name="newproducts"></a><b>New Product Status</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past year we began
marketing several new products including new couplers
designed for Controller Area Networks, which are networks used in automobiles
and factory automation, and extremely low-power miniature sensors. Long-term product
development programs in fiscal 2011 included spintronic
solid-state compasses applicable to consumer electronics and MRAM
designed for tamper prevention and detection.
<br>
<br>
<a name="competition"></a><b>Our Competition<br>
<i>Industrial Sensor Competition</i></b>
<br>
&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</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sensors for medical devices face competition from electromechanical magnetic sensors
and from other solid-state magnetic sensors. Electromechanical magnetic sensors
such as reed and micro-electromechanical system (MEMS) 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. Compared to other solid-state
sensors, our medical sensors may have advantages in size, sensitivity to small
magnetic fields, or electrical interface simplicity.<br>
<br>
<b><i>Coupler Competition</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competing coupler technologies include optical
couplers, inductive couplers (transformers), and capacitive couplers. Our strategy
is to compete based on product features rather than to compete solely on price.<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, Lite-On Technology Corporation,
Renesas Electronics Corporation, Toshiba Corporation, and Vishay Intertechnology. We believe our couplers are smaller,
faster, have less signal distortion, 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. IsoLoop
couplers are smaller and therefore require less circuit board space per channel
than most optical or inductive couplers. MEMS inductive couplers are smaller than
other inductive couplers, but we believe our devices have higher channel density
per area and have less signal distortion. Manufacturers of capacitive couplers
include Texas Instruments Incorporated. We believe we have a broader product line,
higher channel density, less signal distortion, longer product life, and lower
power consumption than capacitive couplers.
<br>
<br>
<b><i>MRAM Competition</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A number of companies compete or may compete
with us for MRAM research and development or service business, or may be attempting
to develop MRAM intellectual property for licensing to others. Emerging technologies
that could compete with MRAM include graphene and carbon nanotubes, phase-change
memory (PCM; also known as PRAM, PCRAM, chalcogenide, CRAM, or Ovonic memory),
resistive RAM (RRAM), memory resistors (memristors), and conductive metal oxide
(CMOx) memory. MRAM may have advantages over these technologies in either manufacturability,
speed, bit density, data retention, or endurance.<br>
 <br>
 <br>
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<br>
<b><a name="suppliers"></a>Sources and Availability of Raw Materials</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal sources of
raw materials include suppliers of raw silicon and semiconductor foundry wafers
that are incorporated into our products, and suppliers of device packaging services.
Our wafers sources are based around the world; our device packaging services are
primarily in Asia.<br>
<br>
<b><a name="IP"></a>Intellectual Property<br>
<i>Patents</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were granted four
U.S. patents assigned to us in the fiscal year ended March&nbsp;31, 2011. As of March&nbsp;31, 2011
we had more than 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. 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 we claim
include &#147;GMR Switch&#148; and &#147;GT Sensor.&#148;<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 Honeywell International Inc. 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,
nontransferable, and non-assignable license to our MRAM intellectual property
and received advance payments in conjunction with the agreement. Motorola has
since separated Freescale Semiconductor, Inc. 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 later announced the formation of Everspin,
an independent company that would take ownership of Freescale&#146;s MRAM manufacturing assets.<br>
<br>
<a name="seasonality"></a><b>Seasonality</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2009 our product sales were less in the quarter ended December&nbsp;31 than
the quarter ended September&nbsp;30. This sequential decrease did not occur in
fiscal 2010 or 2011, possibly due to the addition of new customers, increased
purchase volume by existing customers, or improved economic environments. We cannot
predict whether seasonal weakness in quarters ending December&nbsp;31 will return
in future fiscal years, and we cannot predict the possible impact of economic
conditions on future results of operations. Furthermore, in every
year since fiscal 2007 our product sales have increased in quarters ended March&nbsp;31
from the quarters ended December&nbsp;31, but we cannot predict whether this pattern
will continue in fiscal 2012.<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 finished products available from stock,
to receive more favorable pricing for raw materials, and to guard against raw
material shortages.<br>
<br><br>
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of Contents</b></a><br>
<br><a name="majorcustomers"></a><b>Dependence on Major Customers</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on several large customers
for a significant percentage of our revenue, including Avago Technologies; Phonak
AG; St. Jude Medical, Inc.; certain other medical device manufacturers; certain
distributors; and the U.S. Government. 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>Firm Backlog</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2011 we had $2,964,885 of
contract research and development backlog we believed to be firm, compared to
$1,527,621 as of March&nbsp;31, 2010. We expect the firm backlog as of March&nbsp;31,
2011 to be filled in fiscal 2012. Approximately 51%
of our backlog as of both March&nbsp;31, 2011 and March&nbsp;31, 2010 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 of additional contracts or follow-on contracts for expired or
completed U.S. Government or other contracts.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;Our product sales are made primarily under standard purchase orders. 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, therefore product order backlog is not included in &#147;firm backlog,&#148; and product sales backlog as of any
particular date may not be indicative of future results. We also 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. Based on semiconductor industry practice and our experience, we do not believe that
such agreements are meaningful for determining backlog amounts.<br>
<br>
<a name="RandD"></a><b>Research and Development Activities</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the past three fiscal years our research and development activities have included
development of new sensors, couplers, and memories.
We spent $1,062,694 for fiscal 2011, $872,673
for fiscal 2010, and $966,610 for fiscal 2009 in company-sponsored research and
development activities. Additionally, we spent $4,371,852
during fiscal 2011, $4,346,200 during fiscal 2010, and $3,085,726 during fiscal
2009 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 non-government entities.<br>
<br>
<a name="environment"></a><b>Environmental Matters</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to environmental
laws and regulations, particularly with respect to industrial waste and emissions.
Compliance with these laws and regulations has not had a material impact on our
capital expenditures, earnings, or competitive position to date. Existing and
future environmental laws and regulations could result in expenses related to
emission abatement or remediation, but we are currently unable to estimate such
expenses.
<br>
<br>
<a name="employees"></a><b>Number of Employees</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had 58 employees as of March&nbsp;31, 2011
compared to 52 as of March&nbsp;31, 2010. Our employment
can fluctuate due to a variety of factors. None of our employees are represented
by a labor union or are 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 Geographic Areas</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International sales accounted for approximately 55% of our
revenue in fiscal 2011, 49% in fiscal 2010, and 47% in fiscal 2009.
More information about geographic areas is contained in &#147;Note&nbsp;8&nbsp;&#150;
Segment Information&#148; of the Financial Statements included elsewhere in this
Report.<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 <font style="white-space: nowrap;">Form
10-K</font>, quarterly reports on <font style="white-space: nowrap;">Form 10-Q</font>,
current reports on <font style="white-space: nowrap;">Form 8-K</font>, and proxy
statements and additional proxy materials on Schedule&nbsp;14A, as well as any
amendments to those reports and schedules, are accessible at no cost through the
&#147;Investors&#148; section of our Website (www.nve.com). We make those filings
available as soon as reasonably practicable after filing. These filings are also
accessible through the SEC&#146;s Website (www.sec.gov).<br>
<br>
<br>
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of Contents</b></a><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></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on several large customers for a significant percentage of our revenue. These
large customers include Avago Technologies; Phonak AG; St. Jude Medical, Inc.;
certain other medical device manufacturers; certain distributors; and the U.S.
Government. Although we have agreements with certain large customers, these agreements
do not obligate customers to purchase from us and may not prevent price reductions.
Furthermore, orders from our large customers can generally be reduced, postponed,
or canceled. Any decreases in purchase quantities or purchase prices, or the loss
of any of our large customers, could have a significant impact on our revenue
and our profitability.
<br><br><i><b>We risk losing business to our competitors.</b></i>
<br>&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 have significantly greater
financial, technical, and marketing resources than us. We believe that our competition
is increasing as the technology and markets mature. 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 we may lose business to competitors or it may be necessary to significantly
reduce our prices in order to acquire or retain business. These factors could
cause a material adverse impact on our financial condition, revenue, gross profit
margins, or income.<br>
<br>
<b><i>We will lose revenue if government contract funding is reduced, delayed, or eliminated.</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although our revenue from agencies of the U.S. Government was less than 10% of our total
revenue in each of the past three fiscal years, a material decrease in U.S. Government
funded 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 Government funding, certain of our non-Government
customers depend on Government support to fund their contracts with us. Our direct and indirect Government
funding depends on adequate continued funding of the agencies and their programs.
Such funding is affected by Government spending priorities that can change and over which
we have no control, and delays in such funding can occur for a number of reasons. Deficit reduction initiatives may impact Department of Defense
budgets. Furthermore, a significant portion of our Government funding has been
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>If we were barred for any reason from U.S. government contracts there could
be a significant adverse impact on our revenue and our ability to make research
and development progress.</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we were to be charged with violation of certain laws or if the U.S. Government
were to determine that we are not a &#147;presently responsible contractor,&#148;
we could be temporarily suspended or, in the event of a violation, barred for
up to three years from receiving new U.S. Government contracts or government-approved
subcontracts. In addition, we could expend substantial amounts in defending against
such charges and in damages, fines and penalties if such charges are proven or
result in negotiated settlements. Being barred for any reason from U.S. Government
contracts could have a material adverse effect on our revenue, profits, and research
and development efforts.
<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.</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;We received approximately $2.35 million in
Small Business Innovation Research (SBIR) contract awards in fiscal 2011. 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>
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<br>
<br>
<b><i>Our backlog may not result in future revenue.</i></b>
<br>&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;We sell our products into the semiconductor market, which is highly cyclical.
Additionally, elements of U.S. healthcare system reform could have an adverse effect on the economic environment for the medical device industries we serve.
We cannot predict the timing, strength, or duration of any economic slowdown or subsequent recovery, worldwide or in the industries we serve.
The economic environment could have a material adverse impact on our business and revenue.<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 dimensional,
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 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 and certain medical device manufacturers,
have stringent technical and quality requirements that require our products to
meet certain test and qualification criteria. Failure to meet those criteria could
result in the loss of current sales revenue, customers, and future sales.<br>
<br>
<i><b>Some of 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 including 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>
<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.</b></i>
<br>
&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 we are unable to increase production capacity to meet market demand.</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our production process relies on resources such as equipment,
facilities, and personnel to meet the market demand for our products and services. If market demand increases, we may not be able to add production capacity fast enough to meet market demand. Furthermore, expansion of our production facilities caries risks of disruption. Failure to meet market demand could
result in the loss of current sales revenue, customers, and future sales.
<br>
<br>
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<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 foundry 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. Increased industry demand due to an economic
recovery or other factors beyond our control or ability to predict could cause
or exacerbate wafer supply shortages. Any wafer 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.</b></i>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are a number of critical chemicals and supplies that we require to make products.
These include certain gases, 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. Furthermore, current and future climate change regulations could
increase our costs or cause the loss of supply of critical chemicals. We use chemicals
such as sulfur hexafluoride in our manufacturing process that have been identified
as greenhouse gases. If such chemicals were restricted or prohibited we would
need to obtain substitutes that might be more expensive or less available. Supply
interruptions or shortages for any reason 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.</b></i>
<br>
&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.
Furthermore, an alternate vendor may not have sufficient capacity available to
meet our requirements. 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
55% of our revenue for fiscal 2011, 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; difficulties in enforcement of contractual obligations and intellectual
property rights; 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>
<b><i>Our business may suffer because we have limited influence over the rate of adoption of our MRAM 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 current or future licensees introducing MRAM products
using our technology. 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.</i></b>
<br>&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>
<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>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. Furthermore, others may independently
develop similar, superior, or parallel technologies to any technology developed
by us, or our technology may prove to infringe on patents or rights owned by others.
Thus the patents held by or licensed to us may not afford us any meaningful competitive
advantage. If technology we use infringes on patents or rights owned by others,
we may be prevented from selling products that use such technology, we might be
required to license the patents or rights owned by others, or we may be required
to indemnify our customers against expenses relating to possible infringement.
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 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>
<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;Employment
agreements with our Chief Executive Officer and Chief Financial Officer do not
prevent either from leaving the company, and we have no employment agreements
with any other employees. We have no key-person insurance covering employees.
Competition for highly qualified management and technical personnel can be 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>
<b><i>We could incur losses on our marketable securities.</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2011, we held $61,227,498
in short-term and long-term marketable securities, representing approximately
85% of our total assets. For the fiscal year
ended March&nbsp;31, 2011 we earned $2,021,426
in interest, virtually all of which was from those securities. During
the past two fiscal years a number of the securities we hold were downgraded by
Moody&#146;s or Standard and Poor&#146;s indicating a possible increase in default
risk. A credit crisis may have caused or contributed to many of these downgrades.
Conditions and circumstances beyond our control or ability to anticipate can cause
downgrades and increases in default risk. For example, in fiscal 2011 guaranteed
global notes issued by BP Capital Markets plc that we hold were downgraded due
to the impact of BP&#146;s Macondo oil spill on BP&#146;s financial profile. Downgrades
of any of our marketable securities are possible at any time for reasons beyond
our control. Additionally, the assignment of a high credit rating does
not preclude the risk of default on any marketable security. We could incur losses
on our marketable securities, which could have a material adverse impact on our
financial condition, income, or cash flows.<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><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 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 or our competitors;</td></tr> <tr> <td valign="top">&#149;</td><td>delays
in our introduction of new products or technologies or market acceptance of these
new products or technologies;</td></tr> <tr> <td valign="top">&#149;</td><td>changes
in demand for our customers&#146; products;</td></tr> <tr> <td valign="top">&#149;</td><td>the
announcement of changes in strategy or discontinuation of products by us or our
potential licensees;</td></tr> <tr> <td>&#149;</td><td>quarterly variations in
our operating results, 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;</td></tr>
<tr> <td valign="top">&#149;</td><td>speculation in the press or analyst community
about our business, potential revenue, or potential earnings;</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
economic conditions or market conditions specific to particular industries served
or potentially served by us or our customers.</td></tr> </table><font style="font-size: 10pt; font-family: Times New Roman"><b><br>
ITEM 1B. UNRESOLVED STAFF COMMENTS.</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
<br><br><b><a name="item2">ITEM 2. PROPERTIES.</a></b><br>
 &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
by the Barbara C. Gage Revocable Trust and leased under an agreement expiring December&nbsp;31,
2015, with a 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 space 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>
<b>ITEM 4. RESERVED.</b>
&nbsp;<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><a name="MarketInfo"></a><b>Market Information</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%" align="center"><b>Quarter Ended</b></td>
</tr><tr>
<td colspan="2" style="border-bottom: 1px solid black;" width="6%" align="center"><b>3/31/11</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>12/31/10</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>9/30/10</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>6/30/10</b></td>
<td></td>
<td colspan="2" style="border-bottom: 1px solid black;" width="6%" align="center"><b>3/31/10</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>12/31/09</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>9/30/09</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>6/30/09</b></td>
</tr><tr bgcolor="#ccdaef">
<td>High&nbsp;&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">63.49</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">58.65</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">48.10</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="8%">51.59</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="8%">48.61</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">53.49</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">63.64</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">49.49</td>
</tr><tr>
<td>Low</td>
<td>$</td>
<td align="right">51.01</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">42.17</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">38.00</td>
<td>&nbsp;</td>
<td>$</td>
<td align="right">42.84</td>
<td></td>
<td>$</td>
<td align="right">39.83</td>
<td></td>
<td>$</td>
<td align="right">35.51</td>
<td></td>
<td>$</td>
<td align="right">40.00</td>
<td></td>
<td>$</td>
<td align="right">28.02</td>
</tr></table>
<font style="font-size: 10pt; font-family: Times New Roman"><br><a name="Shareholders"></a><b>Shareholders,
Dividends, and Securities Authorized for Issuance Under Equity Compensation Plans</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had approximately 111 shareholders of record and 8,347
total shareholders as of April&nbsp;20, 2011. 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, the possible
defense of our intellectual property, or for use in unforeseen circumstances.
Information regarding our securities authorized for issuance under equity compensation
plans will be included in the section &#147;Equity Compensation Plan Information&#148;
of our Proxy Statement for our 2011 Annual Meeting of Shareholders, and is incorporated
by reference into Item 12 of this Report.<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">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="StockGraph"></a><b>Stock 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 Cedrus Nanotechnology Index&nbsp;&#150; Pure. NVE is included in
both indices. The NASDAQ Industrial Index includes NASDAQ domestic and international
based common-type stocks. The graph and table assume $100 was invested on March&nbsp;31,
2006 in each of our Common Stock, the NASDAQ Industrial Index, and the Cedrus Nanotechnology Index &#150; Pure, with reinvestment of dividends.<br>
&nbsp;
<div align="center"><img src="stkgraph.gif" alt="Stock Price Performance Graph" width="504" height="184"><br>
&nbsp;</div></font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="100%">
<tr> <td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>3/31/2006</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>3/31/2007</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>3/31/2008</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>3/31/2009</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>3/31/2010</b></td><td></td><td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>3/31/2011</b></td></tr>
<tr valign="bottom" bgcolor="#ccdaef">
<td>NVE Corporation</td><td width="1%">$</td><td width="7%" align="right">100.00</td><td width="3%"></td><td width="1%">$</td><td width="7%" align="right">170.29</td><td width="3%"></td><td width="1%">$</td><td width="7%" align="right">154.18</td><td width="3%"></td><td width="1%">$</td><td width="7%" align="right">179.84</td><td width="3%"></td><td width="1%">$</td><td width="7%" align="right">282.77</td><td width="3%"></td><td width="1%">$</td>
<td width="7%" align="right">351.69</td>
</tr>
<tr><td>Cedrus Nanotechnology Index &#150; Pure</td><td>$</td><td align="right">100.00</td><td></td><td>$</td><td align="right">111.27</td><td></td><td>$</td><td align="right">121.16</td><td></td><td>$</td><td align="right">73.82</td><td></td><td width="1%">$</td><td align="right">137.22</td><td></td><td>$</td>
<td align="right">158.75</td>
</tr>
<tr bgcolor="#ccdaef">
<td>NASDAQ Industrial Index</td><td>$</td><td align="right">100.00</td><td></td><td>$</td><td align="right">106.51</td><td></td><td>$</td><td align="right">95.08</td><td></td><td>$</td><td align="right">56.35</td><td></td><td width="1%">$</td><td align="right">93.56</td><td></td><td>$</td>
<td align="right">117.51</td>
</tr>
</table><font style="font-size: 10pt; font-family: Times New Roman">&nbsp;<br>
<a name="buyback"></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
31, 2011.<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;" align="center">
<b>Balance Sheet Data as of March 31</b></td></tr> <tr> <td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2011</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2010</b></td><td></td><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></tr>

<tr bgcolor="#ccdaef" valign="bottom">
<td height="27">Cash, cash equivalents,<br>
<div style="margin-left: 9pt;">and marketable securities</div></td>
<td width="1%" height="27">$</td>
<td width="10%" align="right" height="27">62,179,707</td>
<td width="2%" height="27"></td>
<td width="1%" height="27">$</td>
<td width="10%" align="right" height="27">49,543,766</td>
<td width="2%" height="27"></td>
<td width="1%" height="27">$</td>
<td width="10%" align="right" height="27">34,321,811</td>
<td width="2%" height="27"></td>
<td width="1%" height="27">$</td>
<td align="right" width="10%" height="27">24,736,874</td>
<td width="2%" height="27"></td>
<td width="1%" height="27">$</td>
<td align="right" width="10%" height="27">18,289,191</td>
</tr>
<tr> <td>Total assets</td><td>$</td>
<td align="right">71,836,225</td>
<td></td><td>$</td><td align="right">57,462,914</td><td></td><td>$</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></tr>
<tr bgcolor="#ccdaef">
<td>Total shareholders&#146; equity</td><td>$</td>
<td align="right">69,970,549</td>
<td></td><td>$</td><td align="right">55,953,294</td><td></td><td>$</td><td align="right">41,567,571</td><td></td><td>$</td><td align="right">31,513,482</td><td></td><td width="1%">$</td><td align="right">23,888,255</td></tr>
<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>2011</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2010</b></td><td></td><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></tr>

<tr bgcolor="#ccdaef">
<td colspan="15">Revenue</td>
</tr>
<tr> <td> <div style="margin-left: 18pt;">Product sales</div></td><td>$</td><td align="right">26,024,823</td><td></td><td>$</td><td align="right">22,665,860</td><td></td><td>$</td><td align="right">19,715,311</td><td></td><td>$</td><td align="right">
18,505,650</td><td></td><td>$</td><td align="right"> 14,425,632</td></tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Contract research and development</div></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,172,240</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,481,325</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">3,656,958</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
2,023,162</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
2,035,198</td>
</tr> <tr> <td>Total revenue</td><td>$</td>
<td align="right">31,197,063</td>
<td></td><td>$</td><td align="right">28,147,185</td><td></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%">$</td><td align="right">16,460,830</td></tr>
<tr bgcolor="#ccdaef">
<td colspan="15">&nbsp;</td>
</tr> <tr> <td>Gross profit</td><td>$</td>
<td align="right">21,413,365</td>
<td></td><td>$</td><td align="right">19,834,170</td><td></td><td>$</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></tr>
<tr bgcolor="#ccdaef">
<td>Income from operations</td><td>$</td>
<td align="right">17,669,770</td>
<td></td><td>$</td><td align="right">16,298,536</td><td></td><td>$</td><td align="right">13,251,590</td><td></td><td>$</td><td align="right">10,048,779</td><td></td><td width="1%">$</td><td align="right">6,545,569</td></tr>
<tr> <td>Net income</td><td>$</td>
<td align="right">13,360,945</td>
<td></td><td>$</td><td align="right">11,999,344</td><td></td><td>$</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></tr>
<tr bgcolor="#ccdaef">
<td>Net income per share &#150; diluted</td><td>$</td>
<td align="right">2.76</td>
<td></td><td>$</td><td align="right">2.47</td><td></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></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 revenues
and costs pro-rata as work progresses, which requires us to make estimates of
the percentage of completion. 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>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 inventory turnover, sales trends, competition
and other market factors, and we 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 reserves are made. Our
inventory reserve was $300,000 at March&nbsp;31,
2011 and 2010.<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, 2011
and 2010. 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, 2011 our net deferred tax liabilities were $146,693
compared to $102,138 as of March&nbsp;31, 2010. Deferred taxes included $117,800
in stock-based compensation deductions as of March&nbsp;31, 2011 and $162,869
as of March&nbsp;31, 2010. Utilization of certain of our deferred tax assets is
subject to limitations based on Internal Revenue Code Section&nbsp;382.<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" width="29%"></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>2011</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom"><b>2010</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2" valign="bottom"><b>2009</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>2010
to<br>
2011</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>2009
to<br>
2010</b></td>
</tr>
<tr>
<td bgcolor="#ccdaef" colspan="15">Revenue</td>
</tr>
<tr>
<td width="30%">
<div style="margin-left: 9pt;">Product sales</div>
</td>
<td align="right" width="9%">83.4</td>
<td width="2%">%</td>
<td width="2%"></td>
<td align="right" width="9%">80.5</td>
<td width="2%">%</td>
<td width="2%"></td>
<td align="right" width="9%">84.4</td>
<td width="2%">%</td>
<td width="4%"></td>
<td align="right" width="9%">14.8</td>
<td width="2%">%</td>
<td width="2%"></td>
<td align="right" width="9%">15.0</td>
<td width="7%">%</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" width="9%">16.6</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">19.5</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">15.6</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">(5.6</td>
<td>)%</td>
<td width="2%"></td>
<td align="right" width="9%">49.9</td>
<td>%</td>
</tr>
<tr>
<td>Total revenue</td>
<td align="right" width="9%">100.0</td>
<td>%</td>
<td></td>
<td align="right" width="9%">100.0</td>
<td>%</td>
<td></td>
<td align="right" width="9%">100.0</td>
<td>%</td>
<td></td>
<td align="right" width="9%">10.8</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">20.4</td>
<td>%</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Cost of sales</td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">31.4</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">29.5</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">28.8</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">17.7</td>
<td>%
</td>
<td width="2%"></td>
<td align="right" width="9%">23.6</td>
<td>% </td>
</tr>
<tr>
<td>Gross profit</td>
<td align="right" width="9%">68.6</td>
<td>%</td>
<td></td>
<td align="right" width="9%">70.5</td>
<td>%</td>
<td></td>
<td align="right" width="9%">71.2</td>
<td>
%</td>
<td></td>
<td align="right" width="9%">8.0</td>
<td> %
</td>
<td width="2%"></td>
<td align="right" width="9%">19.1</td>
<td> % </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" width="9%">7.9</td>
<td>%</td>
<td></td>
<td align="right" width="9%">8.6</td>
<td>%</td>
<td></td>
<td align="right" width="9%">9.3</td>
<td>
%</td>
<td></td>
<td align="right" width="9%"> 2.5</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">
10.9</td>
<td>%</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" width="9%">4.1</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">4.0</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">5.2</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">13.2</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">(8.0</td>
<td>)%</td>
</tr>
<tr>
<td>Total expenses</td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">12.0</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">12.6</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">14.5</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">5.9</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">4.1</td>
<td>%</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Income from operations</td>
<td align="right" width="9%">56.6</td>
<td>%</td>
<td></td>
<td align="right" width="9%">57.9</td>
<td>%</td>
<td></td>
<td align="right" width="9%">56.7</td>
<td>%</td>
<td></td>
<td align="right" width="9%">8.4</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">23.0</td>
<td>%</td>
</tr>

<tr>
<td>Interest and other income</td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">6.5</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">5.7</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">5.0</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">24.9</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">37.6</td>
<td>%</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Income before taxes</td>
<td align="right" width="9%">63.1</td>
<td>%</td>
<td></td>
<td align="right" width="9%">63.6</td>
<td>%</td>
<td></td>
<td align="right" width="9%">61.7</td>
<td>%</td>
<td></td>
<td align="right" width="9%">9.9</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">24.2</td>
<td>%</td>
</tr>

<tr>
<td>Income tax provision</td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">20.3</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">21.0</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" width="9%">19.9</td>
<td style="border-bottom: 1px solid black;">%</td>
<td></td>
<td align="right" width="9%">7.0</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">27.4</td>
<td>%</td>
</tr>

<tr valign="top" bgcolor="#ccdaef">
<td>Net income</td>
<td style="border-bottom: 3px double black;" align="right" width="9%">42.8</td>
<td style="border-bottom: 3px double black;">%</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right" width="9%">42.6</td>
<td style="border-bottom: 3px double black;">%</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right" width="9%">41.8</td>
<td style="border-bottom: 3px double black;">%</td>
<td></td>
<td align="right" width="9%">11.3</td>
<td>%</td>
<td width="2%"></td>
<td align="right" width="9%">22.7</td>
<td>%</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman">&nbsp;
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total revenue for fiscal 2011 increased 11%
to $31,197,063 compared to $28,147,185 for fiscal 2010, and increased 20% in
fiscal 2010 compared to $23,372,269 for fiscal 2009. The increase in total revenue
in fiscal 2011 was due to a 15% increase in
product sales, partially offset by a 6% decrease
in research and development revenue. The increase in fiscal 2010 was due to a
15% increase in product sales and a 50% increase in research and development revenue.
In fiscal 2011, total revenue increased 29% in Europe, 11%
in Asia, and 12% in other areas, partially offset by a 1% decrease
in the U.S.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product sales increased
15% for fiscal 2011 to $26,024,823 compared to $22,665,860 in fiscal 2010. Fiscal 2010 product sales also increased 15%,
from $19,715,311 in fiscal 2009. The increases in both
years were due to both the addition of new customers and increased purchases by
existing customers. Increased product sales in fiscal 2011 were driven by strong sales into
industrial control and factory automation markets.
In fiscal 2010, strong sales of components for medical devices
more than offset weak sales into other markets such as industrial control and
factory automation. We believe the weakness in the industrial control and factory
automation markets in fiscal 2010 was due to a worldwide manufacturing slowdown.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract research and development revenue
decreased 6% for fiscal 2011 compared to
fiscal 2010 due to completion of certain
contracts and contract activities. Contract research and development revenue increased
50% for fiscal 2010 compared to fiscal 2009 due to new contracts and increased
activity on certain contracts. Contract research and development activities can fluctuate
for a number of reasons, some of which are beyond our control, 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 decreased
to 69% of revenue for fiscal 2011 from 70%
for fiscal 2010 due to a less favorable product sales mix. Gross profit margin decreased to 70% for fiscal 2010
from 71% for fiscal 2009 due to a higher percentage of total revenue from contract
research and development, which generally is less profitable than product sales.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general, and administrative expense increased 2% for fiscal 2011 compared
to fiscal 2010 and 11% for fiscal 2010 compared to fiscal 2009. The increase for fiscal 2010 was primarily due to increased
salaries and commissions.
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and
development expense increased 13%
for fiscal 2011 compared to fiscal 2010 due to increased product development activities, and a decrease in contract research and development activities, which caused
resources to be reallocated to expensed research and development activities. Research
and development expense decreased 8% for fiscal 2010 compared to fiscal 2009 due
to an increase in contract research and development activities, which caused resources
to be reallocated from expensed research and development activities. Research and development expense can
fluctuate significantly depending on staffing, project requirements, and contract
research and development activities.<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;Interest and other
income increased 25% to $2,021,426 for fiscal 2011 compared to $1,617,880 for fiscal 2010, and increased 38% for
fiscal 2010 compared to $1,176,010 for fiscal 2009. The increases for both fiscal
years were due to increases in interest-bearing marketable securities.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax rate in fiscal 2011 was
32% of income before taxes compared to 33%
in fiscal 2010 and 32% in fiscal 2009. The decreased tax rate for fiscal 2011
compared to fiscal 2010 was primarily due to a lower state effective tax rate. The increased tax rate for fiscal 2010
compared to fiscal 2009 was primarily due to higher Federal and state effective
tax rates. Our tax rate can fluctuate from year to year due to a number of factors,
including Federal and state tax rates and regulations, the mix between taxable
and tax-exempt securities in our marketable securities, and other factors, some of which
are outside our control.
<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income increased
11% in fiscal 2011 compared to fiscal 2010
due to increases in product sales and interest income. Net income increased
23% in fiscal 2010 compared to fiscal 2009 due to increases in product sales,
contract research and development revenue, and interest income.<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 2009 through 2011 was cash provided by operating
activities related to product sales and research and development contract revenue.
At March&nbsp;31, 2011 we had $62,179,707
in cash plus short-term and long-term marketable securities compared to $49,543,766
at March&nbsp;31, 2010. All of our marketable securities were classified as available
for sale. The $12,635,941 increase in cash plus marketable securities was primarily due to $12,808,807
in net cash provided by operating activities.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $6,403,692 increase in short-term marketable securities in fiscal 2011 was primarily due to marketable securities previously classified as long-term approaching maturity.
<br><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Receivable decreased by $625,325 due to the timing of payments by our customers.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories increased by $1,637,430
due to raw material purchase timing and to support an increased rate of product
sales.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchases of fixed assets were $732,800 in fiscal 2011
compared to $305,862 in fiscal 2010 and $401,612 in fiscal 2009. 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, equipment purchasing opportunities, and
production expansion plans.<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, 2011 our marketable securities had remaining maturities between two
 and 59&nbsp;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"></td><td colspan="14" style="border-bottom: 1px solid black;" align="center">
<b>Payments Due by Period</b></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 bgcolor="#ccdaef">
<td>Operating&nbsp;lease&nbsp;obligations</td><td width="2%"></td><td width="1%">$</td>
<td align="right" width="10%">1,237,359</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="10%">254,053</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="10%">519,055</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="10%">464,251</td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="10%">-</td>
</tr>
<tr> <td> Purchase&nbsp;obligations</td><td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">454,972</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">454,972</td>
<td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">
-</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">
-</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">
-</td></tr> <tr valign="top" bgcolor="#ccdaef">
<td>Total</td><td></td><td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,692,331</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">709,025</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">519,055</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">464,251</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">-</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman"><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; to the Financial Statements, included elsewhere in this report, provides additional information about our
lease obligations. Purchase obligations as of March&nbsp;31, 2011 consisted of raw materials purchase commitments and fixed asset
purchase obligations. We expect to meet these contractual
payment obligations from cash provided by operating activities or proceeds from maturities of marketable securities. We plan to evaluate
raw materials purchases based on a variety of factors including forecasted requirements
and anticipated supply leadtimes, and our obligations could vary significantly
in the future. We had approximately $156,154 of fixed asset
purchase obligations as of March&nbsp;31, 2011, for production equipment. We plan to evaluate
capital expenditures as needs and opportunities arise, and our future capital
expenditures and purchase obligations could vary significantly from expenditures
in the past.<br>
<br>
&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 2012.<br>
<br>
&nbsp;<br>
</font>
<div id="PN" style="page-break-after: always;">
<font style="font-size: 10pt; font-family: Times New Roman"> <div style="width: 100%; text-align: center;">16</div></font>
<hr>
</div>
<font style="font-size: 10pt; font-family: Times New Roman"><a href="#TOC"><b>Table of Contents</b></a><br>
<br>
<b>Inflation</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inflation has not had a significant impact on our operations in any of our three most recent
fiscal years. Prices for our products and for the materials and labor costs for
those products are governed by market conditions. It is possible that inflation
in future years could impact both materials and labor used for 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;We are exposed to financial market risks, primarily marketable securities and, to
a lesser extent, changes in currency exchange rates.<br>
<br>
<b>Marketable Securities</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. Our marketable
securities as of March&nbsp;31, 2011 had remaining maturities between two and 59&nbsp;months.
Marketable securities had a market value of $61,227,498
at March&nbsp;31, 2011, representing approximately 85%
of our total assets. We have not used derivative financial instruments in our
investment portfolio.<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>
&nbsp;<br>
<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 included in this Report beginning on page F-1.<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>Quarterly Summary Information</b><br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selected
unaudited quarterly financial data for fiscal 2011 and 2010, 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;" align="center"><b>Unaudited;
Quarter Ended</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>March
31,&nbsp;2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>Dec.&nbsp;31, 2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Sept.&nbsp;30,
2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>June&nbsp;30,
2010</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="2%">$</td>
<td align="right" width="13%">6,733,984</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">6,686,451</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">6,410,512</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">6,193,876</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Contract&nbsp;research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,449,117</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,277,057</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,398,648</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,047,418</td>
</tr>

<tr>
<td>Total revenue</td>
<td>&nbsp;</td>
<td align="right">8,183,101</td>
<td></td>
<td></td>
<td align="right">7,963,508</td>
<td></td>
<td></td>
<td align="right">7,809,160</td>
<td></td>
<td></td>
<td align="right">7,241,294</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Cost of sales</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,641,170</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,461,798</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,604,926</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,075,804</td>
</tr>

<tr>
<td>Gross profit</td>
<td></td>
<td align="right">5,541,931</td>
<td></td>
<td></td>
<td align="right">5,501,710</td>
<td></td>
<td></td>
<td align="right">5,204,234</td>
<td></td>
<td></td>
<td align="right">5,165,490</td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">Expenses</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Selling,&nbsp;general,&nbsp;and&nbsp;administrative</div>
</td>
<td></td>
<td align="right">573,312</td>
<td></td>
<td></td>
<td align="right">638,223</td>
<td></td>
<td></td>
<td align="right">634,547</td>
<td></td>
<td></td>
<td align="right">628,386</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;" colspan="2" align="right">286,910</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">330,681</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">309,873</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">341,663</td>
</tr>

<tr>
<td> Total expenses</td>
<td></td>
<td align="right">860,222</td>
<td></td>
<td></td>
<td align="right">968,904</td>
<td></td>
<td></td>
<td align="right">944,420</td>
<td></td>
<td></td>
<td align="right">970,049</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Income from operations</td>
<td></td>
<td align="right">4,681,709</td>
<td></td>
<td></td>
<td align="right">4,532,806</td>
<td></td>
<td></td>
<td align="right">4,259,814</td>
<td></td>
<td></td>
<td align="right">4,195,441</td>
</tr>

<tr>
<td>Income before taxes</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,217,471</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,045,009</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,757,545</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,671,171</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Net income</td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">3,669,919</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">3,383,919</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">3,206,010</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">3,101,097</td>
</tr>

<tr>
<td>Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;diluted</td>
<td>$</td>
<td align="right">0.75</td>
<td></td>
<td>$</td>
<td align="right">0.70</td>
<td></td>
<td>$</td>
<td align="right">0.66</td>
<td></td>
<td>$</td>
<td align="right">0.64</td>
</tr>
<tr>
<td rowspan="2"></td>
<td colspan="11" style="border-bottom: 1px solid black;" align="center"><b><br>
Unaudited;
Quarter Ended</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>March
31,&nbsp;2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>Dec.&nbsp;31, 2009</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Sept.&nbsp;30,
2009</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>June&nbsp;30,
2009</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="2%">$</td>
<td align="right" width="13%">6,662,150</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">5,292,228</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">5,177,445</td>
<td width="2%"></td>
<td width="2%">$</td>
<td align="right" width="13%">5,534,037</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Contract&nbsp;research&nbsp;and&nbsp;development</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,517,145</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,332,629</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,331,056</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,300,495</td>
</tr>
<tr>
<td>Total revenue</td>
<td>&nbsp;</td>
<td align="right">8,179,295</td>
<td></td>
<td>&nbsp;</td>
<td align="right">6,624,857</td>
<td></td>
<td>&nbsp;</td>
<td align="right">6,508,501</td>
<td></td>
<td>&nbsp;</td>
<td align="right">6,834,532</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Cost of sales</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,333,637</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,102,855</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,985,100</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,891,423</td>
</tr>
<tr>
<td>Gross profit</td>
<td>&nbsp;</td>
<td align="right">5,845,658</td>
<td></td>
<td>&nbsp;</td>
<td align="right">4,522,002</td>
<td></td>
<td>&nbsp;</td>
<td align="right">4,523,401</td>
<td></td>
<td>&nbsp;</td>
<td align="right">4,943,109</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Expenses</td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Selling,&nbsp;general,&nbsp;and&nbsp;administrative</div>
</td>
<td>&nbsp;</td>
<td align="right">607,534</td>
<td></td>
<td>&nbsp;</td>
<td align="right">548,973</td>
<td></td>
<td>&nbsp;</td>
<td align="right">622,354</td>
<td></td>
<td>&nbsp;</td>
<td align="right">635,723</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;" colspan="2" align="right">310,564</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">251,625</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">291,540</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">267,321</td>
</tr>
<tr>
<td> Total expenses</td>
<td>&nbsp;</td>
<td align="right">918,098</td>
<td></td>
<td>&nbsp;</td>
<td align="right">
800,598</td>
<td></td>
<td>&nbsp;</td>
<td align="right">913,894</td>
<td></td>
<td>&nbsp;</td>
<td align="right">903,044</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Income from operations</td>
<td>&nbsp;</td>
<td align="right">4,927,560</td>
<td></td>
<td>&nbsp;</td>
<td align="right">3,721,404</td>
<td></td>
<td>&nbsp;</td>
<td align="right">3,609,507</td>
<td></td>
<td>&nbsp;</td>
<td align="right">
4,040,065</td>
</tr>
<tr>
<td>Income before taxes</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,367,548</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,136,073</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,002,705</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,410,090</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Net income</td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">3,598,746</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">2,767,483</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">2,694,183</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">2,938,932</td>
</tr>
<tr>
<td>Net&nbsp;income&nbsp;per&nbsp;share&nbsp;&#150;&nbsp;diluted</td>
<td>$</td>
<td align="right">0.74</td>
<td></td>
<td>$</td>
<td align="right">0.57</td>
<td></td>
<td>$</td>
<td align="right">0.55</td>
<td></td>
<td>$</td>
<td align="right">0.61</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 <font style="white-space: nowrap;">Rules 13a-15(e)</font> and <font style="white-space: nowrap;">15d-15(e)</font>
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,
2011, our disclosure controls and procedures were effective.<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 <font style="white-space: nowrap;">Rule
13a-15(f)</font> 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, 2011. 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><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>&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, 2011. Our internal control
over financial reporting as of March&nbsp;31, 2011 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>Changes in Internal Controls</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the quarter ended March&nbsp;31, 2011, 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>
</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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The sections titled &#147;Proposal&nbsp;1. Election
of Board of Directors&#148; and &#147;Certain Relationships and Related Person
Transactions&nbsp;&#150; Section 16(a) Beneficial Ownership Reporting Compliance&#148;
to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholders
set forth certain information regarding our directors and executive officers required
by Item&nbsp;10, the section titled &#147;Executive Officers of the Company&#148;
sets forth information regarding our executive officers required by Item&nbsp;10,
and the section titled &#147;Corporate Governance&#148; sets forth information
regarding our corporate governance and code of ethics required by Item&nbsp;10.
The information in these sections to be included in our Proxy Statement for our
2011 Annual Meeting of Shareholders are incorporated by reference into this section.<br>
<br><b><a name="item11">ITEM 11.</a> EXECUTIVE COMPENSATION.</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information in 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;Director Compensation&#148; to be included in
our Proxy Statement for our 2011 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 in the sections
&#147;Equity Compensation Plan Information&#148; and &#147;Security Ownership&#148;
to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholders
is incorporated by reference into this section. Information regarding the material
features of our 2000 Stock Option Plan, as amended, is contained in Note&nbsp;6
to the Financial Statements included elsewhere in this Report.<br>
<br><b><a name="item13">ITEM 13.</a> CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information in the sections &#147;Security Ownership&nbsp;&#150;
Transactions With Related Persons, Promoters, and Certain Control Persons&#148;
and &#147;Corporate Governance&nbsp;&#150; Board Composition and Independence&#148;
to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholders
is incorporated by reference into this section.
<br><br><b><a name="item14">ITEM 14.</a> PRINCIPAL ACCOUNTING FEES AND SERVICES.</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information in the sections &#147;Audit Committee Disclosure&nbsp;&#150; Fees
Billed to Us by Ernst&nbsp;& Young During Fiscal 2011 and 2010&#148; and &#147;Audit
Committee Disclosure&nbsp;&#150; Audit Committee Pre-Approval Policy&#148; to
be included in our Proxy Statement for our 2011 Annual Meeting of Shareholders
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, FINANCIAL STATEMENT SCHEDULES.
<br>
(a) Financial Statements and Schedules</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial statements are provided
pursuant to Item&nbsp;8 of this Report. Certain financial statement schedules
have been omitted because they are not required, not applicable, or the required
information is provided in other financial statements or the notes to the financial
statements.<br>
<br>
<b>(b) Exhibits</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A list of exhibits is on the following page.<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"><b><a href="#TOC">Table
of Contents</a><br>
<br></b></font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td style="border-bottom: 1px solid black;"><b>Exhibit&nbsp;#</b></td>
<td style="border-bottom: 1px solid black;" align="center">
<b>Description</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td width="27 pt" valign="top">&nbsp;&nbsp;3.1</td>
<td>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 the Form 10-QSB for the period ended December 31, 2002).</td>
</tr>
<tr>
<td valign="top">&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 the Form 8-K filed December 19, 2007).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">
&nbsp;&nbsp;10.1</td>
<td> Lease dated October 1, 1998 between the company and
Glenborough Properties, LP (incorporated by reference to the Form 10-QSB for the period ended September 30, 2002).</td>
</tr>
<tr>
<td valign="top"> &nbsp;&nbsp;10.2</td>
<td>First amendment to lease between the
company and Glenborough Properties, LP dated September&nbsp;18, 2002 (incorporated
by reference to the Form 10-QSB for the period ended September&nbsp;30,
2002).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top"> &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 the Form 10-QSB for the
period ended December 31, 2003).</td>
</tr>
<tr>
<td valign="top">
&nbsp;&nbsp;10.4</td>
<td> Notification from Glenborough Properties, LP relating
to change in building ownership (incorporated by reference to the Form 8-K filed October&nbsp;11, 2005).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top"> &nbsp;&nbsp;10.5</td>
<td>
Notification from Carlson Real Estate Company, Inc. relating to change in building
ownership (incorporated by reference to the Form 8-K filed October&nbsp;11,
2005).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.6</td>
<td>
Third amendment to lease between the company and Carlson Real Estate Company,
Inc. (incorporated by reference to the Form 8-K/A filed December
20, 2007).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top"> &nbsp;&nbsp;10.7</td>
<td><font size="2" face="Times New Roman, Times, serif">Letter from Carlson Real Estate Services, LLC relating to transfer of building
title (incorporated by reference to the Form 8-K/A filed April 15, 2011).</font></td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.8*</td>
<td>Employment Agreement between the company and Daniel A. Baker dated January&nbsp;29, 2001
(incorporated by reference to the Form 10-KSB for the year ended
March&nbsp;31, 2001).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top"> &nbsp;&nbsp;10.9*</td>
<td>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>
<td valign="top"> &nbsp;&nbsp;10.10+</td>
<td>Agreement between
the company and Agilent Technologies,&nbsp;Inc. dated September&nbsp;27, 2001
(incorporated by reference to the Form 10-QSB for the period
ended September&nbsp;30, 2001).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.11</td>
<td>Amendment
dated October 18, 2002 to Agreement between the company and Agilent Technologies,
Inc. (incorporated by reference to the Form 10-QSB for the
period ended December&nbsp;31, 2002).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.12</td>
<td>Notification from Agilent Technologies of planned sale of Agilent&#146;s Semiconductor Product
Group (incorporated by reference to the Form 8-K filed October&nbsp;19,
2005).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.13</td>
<td>Report of completion of the divestiture of Agilent&#146;s Semiconductor Products business
(incorporated by reference to the Form 8-K/A filed December&nbsp;6,
2005).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.14</td>
<td>Amendment No. 2 to OEM Purchase Agreement between Agilent Technologies, Inc. and the company (incorporated by reference
to the Form 8-K/A filed September 11, 2007).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.15</td>
<td>Amendment No. 3 to Agreement between
the company and Agilent Technologies, Inc. (incorporated by reference to the Form 8-K/A filed June&nbsp;28, 2010.</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.16*</td>
<td>Amendment No.&nbsp;1
to Stock Option Agreement dated May&nbsp;7, 2004 between the Company and Daniel&nbsp;A.
Baker (incorporated by reference to the Form 8-K filed March&nbsp;30,
2005).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.17</td>
<td>Amendment No.&nbsp;1
to Stock Option Agreement dated August&nbsp;17, 2004 between the Company and Patricia&nbsp;M.
Hollister (incorporated by reference to the Form 8-K filed March&nbsp;30,
2005).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.18</td>
<td>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 the Form 8-K filed
September&nbsp;27, 2005).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.19+</td>
<td>Supplier
Partnering Agreement by and between St.&nbsp;Jude and the company (incorporated
by reference to the Form 8-K filed January&nbsp;4, 2006).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.20+</td>
<td>Amendment No. 1 to Supplier Partnering Agreement between St.&nbsp;Jude and the company (incorporated
by reference to the Form 8-K/A filed September 10, 2007).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.21+</td>
<td>Amendment No. 2 to Supplier Partnering
Agreement between St.&nbsp;Jude and the company (incorporated by reference to
the Form 8-K/A filed December&nbsp;18, 2009).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.22+</td>
<td>Amendment Number 3 to Supplier Partnering Agreement between St. Jude and the company (incorporated
by reference to the Form 8-K/A filed September&nbsp;16, 2010).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.23</td>
<td>Amendment No. 4 to Supplier Partnering
Agreement between St.&nbsp;Jude and the company (incorporated by reference to
the Form 8-K/A filed February&nbsp;7, 2011). </td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;10.24</td>
<td>Supply Agreement by and between the
company and Phonak AG (incorporated by reference to the Form
8-K filed May&nbsp;6, 2009).</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;10.25+</td>
<td>Amendment to Supply Agreement by and between the company and Phonak AG (incorporated by
reference to the Form 8-K/A filed January&nbsp;12, 2011).</td>
</tr>
<tr>
<td valign="top">&nbsp;&nbsp;23</td>
<td>Consent of Ernst &amp; Young LLP.</td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="top">&nbsp;&nbsp;31.1</td>
<td>Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).</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).</td>
</tr>
<tr bgcolor="#ccdaef">
<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.</td>
</tr>
</table>
<table style="font-size:4pt;" width="80" border="0" cellspacing="00" cellpadding="0">
<tr>
<td style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;">&nbsp;
</td>
</tr>
<tr>
<td style="padding:0pt .7pt 0pt 0pt;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman">
*Indicates a management contract or compensatory plan or arrangement.<br>
+Confidential portions deleted and filed separately with the SEC.<br>
&nbsp;<br>
&nbsp;<br>
</font>
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<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"><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><div style="margin-left: 144pt;"><b><u>NVE CORPORATION</u></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Registrant)
<br><br><u>/s/Daniel A. Baker</u> <br> by Daniel A. Baker
<br>President and Chief Executive Officer<br>
<br>Date&nbsp;&nbsp;&nbsp;&nbsp;May 4, 2011</div><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%" align="center"> <b><u>Name</u></b></td>
<td valign="top" align="center">
&nbsp;<b><u>Title</u></b></td>
<td width="33%" align="center"> <b><u>Date</u></b>&nbsp;</td></tr>
<tr> <td valign="top" align="center"> <u>/s/Terrence W. Glarner</u><br> Terrence
W. Glarner</td><td valign="top" align="center"> Director and<br> Chairman of the
Board<br> &nbsp; <br> &nbsp; </td><td valign="top" align="center"> <u>May 4, 2011</u></td></tr>
<tr> <td valign="top" align="center"> <u>/s/Daniel A. Baker</u><br> Daniel A.
Baker</td><td valign="middle" align="center"> Director,<br> President &amp; Chief
Executive Officer<br> (Principal Executive Officer)<br> &nbsp; </td><td valign="top" align="center">
<u>May 4, 2011</u></td></tr> <tr> <td valign="top" align="center"> <u>/s/Curt
A. Reynders</u><br> Curt A. Reynders</td><td valign="top" align="center"> Treasurer
and<br> Chief Financial Officer<br> (Principal Financial and<br> Accounting Officer)</td><td valign="top" align="center">
<u>May 4, 2011</u></td></tr> <tr> <td valign="top" align="center"> <u>/s/James D. Hartman</u>
<br>James D. Hartman<br> &nbsp; <br> &nbsp; </td><td valign="top" align="center">
Director</td><td valign="top" align="center"> <u>May 4, 2011</u></td></tr> <tr>
<td valign="top" align="center"> <u>/s/Patricia M. Hollister</u>
<br>Patricia M. Hollister<br>
&nbsp;<br>&nbsp;</td><td valign="top" align="center"> Director</td><td valign="top" align="center">
<u>May 4, 2011</u></td></tr> <tr> <td valign="top" align="center"> <u>/s/Robert
H. Irish</u><br> Robert H. Irish</td><td valign="top" align="center"> Director</td><td valign="top" align="center">
<u>May 4, 2011</u></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> 21</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<br>
NVE Corporation<br>
<br>We have audited NVE Corporation&#146;s internal control over financial reporting
as of March&nbsp;31, 2011, 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 titled &#147;Management&#146;s
Report on Internal Control Over Financial Reporting.&#148; 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,
2011, 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, 2011 and 2010, 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, 2011, and our report
dated May 4, 2011 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 4, 2011<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">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>
&nbsp;<br>
</font>
<font style="font-size: 10pt; font-family: Arial, Helvetica;"><a name="Report"></a><b>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></font><br>
&nbsp;<br>
The Board of Directors and Shareholders
<br>NVE Corporation<br>
<br>We have audited the accompanying balance sheets of NVE Corporation (the Company) as of March&nbsp;31,
2011 and 2010, 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,
2011. 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, 2011 and 2010, and the results of its operations
and its cash flows for each of the three years in the period ended March&nbsp;31,
2011, 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, 2011, 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
4, 2011, 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 4, 2011<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><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" align="center"><b>March 31</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2010</b></td>
</tr>

<tr>
<td colspan="8" bgcolor="#ccdaef">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%">$</td>
<td align="right" width="11%">952,209</td>
<td width="1%"></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">1,389,288</td>
<td width="1%"></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Marketable securities, short term</div>
</td>
<td></td>
<td align="right">7,970,358</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,566,666</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">3,596,239</td>
<td></td>
<td></td>
<td></td>
<td align="right">4,221,564</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Inventories</div>
</td>
<td></td>
<td align="right">3,343,857</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,706,427</td>
<td></td>
</tr>


<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Prepaid expenses and other assets</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,185,306</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">781,294</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Total current assets</td>
<td></td>
<td align="right">17,047,969</td>
<td></td>
<td></td>
<td></td>
<td align="right">9,665,239</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="8" bgcolor="#ccdaef">Fixed assets</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Machinery
and equipment&nbsp;</div>
</td>
<td></td>
<td align="right">6,178,207</td>
<td></td>
<td></td>
<td></td>
<td align="right">5,617,136</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Leasehold improvements</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">612,682</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">450,546</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td></td>
<td align="right">6,790,889</td>
<td></td>
<td></td>
<td></td>
<td align="right">6,067,682</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Less accumulated depreciation&nbsp;</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,259,773</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,857,819</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Net fixed assets</td>
<td></td>
<td align="right">1,531,116</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,209,863</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>Marketable securities, long term</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">53,257,140</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">46,587,812</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr valign="top">
<td>Total assets</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">71,836,225</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">57,462,914</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>

<tr>
<td colspan="8" bgcolor="#ccdaef">&nbsp;</td>
</tr>

<tr>
<td colspan="8">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="8" bgcolor="#ccdaef">Current liabilities</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Accounts payable</div>
</td>
<td>$</td>
<td align="right">731,580</td>
<td></td>
<td></td>
<td>$</td>
<td align="right">665,782</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Accrued payroll and other&nbsp;</div>
</td>
<td></td>
<td align="right">987,403</td>
<td></td>
<td></td>
<td></td>
<td align="right">720,867</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Deferred taxes</div>
</td>
<td colspan="2" align="right">146,693</td>
<td></td>
<td></td>
<td colspan="2" align="right">102,138</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">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">20,833</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Total current liabilities</td>
<td></td>
<td align="right">1,865,676</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,509,620</td>
<td></td>
</tr>

<tr>
<td colspan="8" bgcolor="#ccdaef">&nbsp;</td>
</tr>

<tr>
<td colspan="8">Shareholders&#146; equity</td>
</tr>

<tr bgcolor="#ccdaef">
<td valign="bottom">
<div style="text-indent: -9pt; margin-left: 18pt;">Common stock, $0.01 par value, 6,000,000 shares authorized; 4,776,198 issued and
outstanding (4,700,583 issued and outstanding in 2010)</div>
</td>
<td></td>
<td align="right" valign="bottom">47,762</td>
<td></td>
<td></td>
<td></td>
<td align="right" valign="bottom">47,006</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Additional paid-in
capital</div>
</td>
<td></td>
<td align="right">20,894,766</td>
<td></td>
<td></td>
<td></td>
<td align="right">20,169,924</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Accumulated other comprehensive income
</div>
</td>
<td></td>
<td align="right">1,060,438</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,129,726</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Retained earnings</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">47,967,583</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">34,606,638</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;" colspan="2" align="right">69,970,549</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">55,953,294</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;">$</td>
<td style="border-bottom: 3px double black;" align="right">71,836,225</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">57,462,914</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-3</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;" align="center"><b>Year
Ended March 31</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>2009</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%">$</td>
<td align="right" width="11%">26,024,823</td>
<td width="1%"></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">22,665,860</td>
<td width="1%"></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">19,715,311</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;" colspan="2" align="right">5,172,240</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,481,325</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">3,656,958</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Total revenue</td>
<td>&nbsp;</td>
<td align="right">31,197,063</td>
<td></td>
<td></td>
<td></td>
<td align="right">28,147,185</td>
<td></td>
<td></td>
<td></td>
<td align="right">23,372,269</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>Cost of sales</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">9,783,698</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">8,313,015</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">6,724,242</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Gross profit</td>
<td colspan="2" align="right">21,413,365</td>
<td></td>
<td></td>
<td colspan="2" align="right">19,834,170</td>
<td></td>
<td></td>
<td colspan="2" align="right">16,648,027</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>&nbsp;</td>
<td align="right">2,474,468</td>
<td></td>
<td></td>
<td></td>
<td align="right">2,414,584</td>
<td></td>
<td></td>
<td></td>
<td align="right">2,177,865</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;" colspan="2" align="right">1,269,127</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,121,050</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">
1,218,572</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Total
expenses</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">3,743,595</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">3,535,634</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">3,396,437</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Income from operations </td>
<td>&nbsp;</td>
<td align="right">17,669,770</td>
<td></td>
<td></td>
<td></td>
<td align="right">16,298,536</td>
<td></td>
<td></td>
<td></td>
<td align="right">13,251,590</td>
<td></td>
</tr>

<tr>
<td>Interest income</td>
<td>&nbsp;</td>
<td align="right">2,021,426</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,617,880</td>
<td></td>
<td></td>
<td></td>
<td align="right">1,171,810</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>Other income</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">4,200</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Income before taxes</td>
<td>&nbsp;</td>
<td align="right">19,691,196</td>
<td></td>
<td></td>
<td></td>
<td align="right">17,916,416</td>
<td></td>
<td></td>
<td></td>
<td align="right">14,427,600</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>Provision for income taxes</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">6,330,251</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">5,917,072</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">4,644,705</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td valign="top">Net income</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">13,360,945</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">11,999,344</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">9,782,895</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td valign="top">Net income per share &#150; basic</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">
2.83</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2.56</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2.10</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>

<tr>
<td valign="top">Net income per share &#150; diluted</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2.76</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2.47</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">2.04</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">Weighted average shares outstanding</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Basic</div>
</td>
<td colspan="2" align="right">4,729,035</td>
<td colspan="4" align="right">4,692,496</td>
<td colspan="4" align="right">4,659,486</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Diluted</div>
</td>
<td colspan="2" align="right">4,844,266</td>
<td colspan="4" align="right">4,857,044</td>
<td colspan="4" align="right">4,785,565</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-4</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>
<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>
</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 bgcolor="#ccdaef">
<td>Balance at March 31, 2008</td>
<td align="right" width="8%">4,638,683</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="7%">46,387</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="10%">18,539,538</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">103,158</td>
<td width="1%"></td>
<td width="2%"></td>
<td width="1%">$</td>
<td align="right" width="10%">12,824,399</td>
<td width="1%">&nbsp;</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="10%">31,513,482</td>
<td width="1%"></td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 9pt;">Exercise of stock</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right">30,650</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
306</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">269,901</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">-</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">
-</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">270,207</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>
<tr valign="bottom" bgcolor="#ccdaef">
<td>
<div style="margin-left: 27pt;">Unrealized (loss) on</div>
<div style="margin-left: 36pt;">marketable
securities,<br>
 net of tax </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">(356,098</td>
<td>)</td>
<td colspan="7" align="right">(356,098</td>
<td>)</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></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 bgcolor="#ccdaef">
<td colspan="17">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td>&nbsp;</td>
<td align="right">9,426,797</td>
<td></td>
</tr>
<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right" colspan="7">86,672</td>
<td colspan="11" align="right">86,672</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td valign="bottom">
<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="7" valign="bottom" align="right">270,413</td>
<td style="border-bottom: 1px solid black;" valign="bottom" colspan="11" align="right">270,413</td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
</tr>
<tr valign="top">
<td>Balance at March 31, 2009</td>
<td align="right">4,669,333</td>
<td>&nbsp;</td>
<td>&nbsp;
</td>
<td align="right">46,693</td>
<td>&nbsp;</td>
<td>&nbsp; </td>
<td align="right">19,166,524</td>
<td>&nbsp;</td>
<td>&nbsp;
</td>
<td align="right">(252,940</td>
<td>)</td>
<td>&nbsp;</td>
<td>&nbsp; </td>
<td align="right">22,607,294</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;
</td>
<td align="right">41,567,571</td>
<td>&nbsp;</td>
</tr>
<tr valign="bottom" bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Exercise of stock</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right">31,250</td>
<td></td>
<td></td>
<td align="right">313</td>
<td></td>
<td></td>
<td align="right">622,110</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">622,423</td>
<td></td>
</tr>
<tr>
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left: 27pt;">Unrealized gain on</div>
<div style="margin-left: 36pt;">marketable securities,<br>
net of tax</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></td>
<td></td>
<td align="right">1,382,666</td>
<td></td>
<td colspan="7" align="right">1,382,666</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<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></td>
<td></td>
<td align="right">-</td>
<td></td>
<td></td>
<td></td>
<td align="right">11,999,344</td>
<td></td>
<td></td>
<td></td>
<td align="right">11,999,344</td>
<td></td>
</tr>
<tr>
<td colspan="18">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td align="right">13,382,010</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right" colspan="7">100,842</td>
<td></td>
<td colspan="10" align="right">100,842</td>
<td></td>
</tr>
<tr>
<td valign="bottom">
<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="7" valign="bottom" align="right">280,448</td>
<td style="border-bottom: 1px solid black;" valign="bottom" colspan="11" align="right">280,448</td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Balance at March 31, 2010</td>
<td align="right">4,700,583</td>
<td></td>
<td></td>
<td align="right">47,006</td>
<td></td>
<td></td>
<td align="right">20,169,924</td>
<td></td>
<td></td>
<td align="right">1,129,726</td>
<td></td>
<td></td>
<td></td>
<td align="right">34,606,638</td>
<td></td>
<td></td>
<td></td>
<td align="right">55,953,294</td>
<td></td>
</tr>

<tr valign="bottom">
<td>
<div style="margin-left: 9pt;">Exercise of stock</div>
<div style="margin-left: 18pt;">options and warrants</div>
</td>
<td align="right">75,615</td>
<td></td>
<td></td>
<td align="right">756</td>
<td></td>
<td></td>
<td align="right">417,949</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">418,705</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="20">
<div style="margin-left: 9pt;">Comprehensive income:</div>
</td>
</tr>

<tr bgcolor="#ccdaef" valign="bottom">
<td>
<div style="margin-left: 27pt;">Unrealized
(loss) on</div>
<div style="margin-left: 36pt;">marketable securities,<br>
net of tax</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">(69,288</td>
<td>)</td>
<td colspan="7" align="right">(69,288</td>
<td>)</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">13,360,945</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right">13,360,945</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="18">
<div style="margin-left: 9pt;">Total comprehensive income</div>
</td>
<td align="right">13,291,657</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Stock-based compensation</div>
</td>
<td align="right" colspan="7">76,720</td>
<td>&nbsp;</td>
<td colspan="10" align="right">76,720</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td valign="bottom">
<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="7" valign="bottom" align="right">230,173</td>
<td style="border-bottom: 1px solid black;" valign="bottom" colspan="11" align="right">230,173</td>
<td style="border-bottom: 1px solid black;" valign="bottom">&nbsp;</td>
</tr>

<tr valign="top">
<td>Balance at March 31, 2011</td>
<td style="border-bottom: 3px double black;" align="right">4,776,198</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">47,762</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">20,894,766</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,060,438</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">47,967,583</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">69,970,549</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><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></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;" align="center">
<b>Year Ended March 31</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center">
<b>2009</b></td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">OPERATING ACTIVITIES</td>
</tr>

<tr>
<td>Net income</td>
<td width="1%">$</td>
<td align="right" width="11%">13,360,945</td>
<td></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">11,999,344</td>
<td></td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">9,782,895</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">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">411,547</td>
<td></td>
<td></td>
<td colspan="2" align="right">389,273</td>
<td></td>
<td></td>
<td colspan="2" align="right">473,740</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Stock-based compensation</div>
</td>
<td colspan="2" align="right">76,720</td>
<td></td>
<td></td>
<td colspan="2" align="right">100,842</td>
<td></td>
<td></td>
<td colspan="2" align="right">86,672</td>
<td></td>
</tr>

<tr>
<td>
<div style="margin-left: 18pt;">Excess tax benefits</div>
</td>
<td colspan="2" align="right">(230,173</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(280,448</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(270,413</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Gain on sale of fixed assets</div>
</td>
<td colspan="2" align="right">-</td>
<td></td>
<td></td>
<td colspan="2" align="right">-</td>
<td></td>
<td></td>
<td colspan="2" align="right">(4,200</td>
<td>)</td>
</tr>


<tr>
<td>
<div style="margin-left: 18pt;">Deferred income taxes</div>
</td>
<td colspan="2" align="right">294,384</td>
<td></td>
<td></td>
<td colspan="2" align="right">271,651</td>
<td></td>
<td></td>
<td colspan="2" align="right">256,376</td>
<td></td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">
<div style="margin-left: 18pt;">Changes in operating assets and liabilities</div>
</td>
</tr>

<tr>
<td>
<div style="margin-left: 36pt;">Accounts
receivable</div>
</td>
<td colspan="2" align="right">625,325</td>
<td>&nbsp;
</td>
<td></td>
<td colspan="2" align="right">(854,866</td>
<td> )</td>
<td></td>
<td colspan="2" align="right">(140,671</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 36pt;">Inventories</div>
</td>
<td colspan="2" align="right">(1,637,430</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">541,194</td>
<td></td>
<td></td>
<td colspan="2" align="right">209,183</td>
<td>&nbsp;</td>
</tr>

<tr>
<td>
<div style="margin-left: 36pt;">Prepaid expenses and other assets</div>
</td>
<td colspan="2" align="right">(404,012</td>
<td>
)</td>
<td></td>
<td colspan="2" align="right">(111,987</td>
<td> )</td>
<td></td>
<td colspan="2" align="right">(139,691</td>
<td>
)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 36pt;">Accounts payable and accrued expenses</div>
</td>
<td colspan="2" align="right">332,334</td>
<td></td>
<td></td>
<td colspan="2" align="right">491,947</td>
<td></td>
<td></td>
<td colspan="2" align="right">(172,444</td>
<td>)</td>
</tr>

<tr>
<td>
<div style="margin-left: 36pt;">Deferred revenue</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(20,833</td>
<td style="border-bottom: 1px solid black;">)</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(83,334</td>
<td style="border-bottom: 1px solid black;">)</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(83,333</td>
<td style="border-bottom: 1px solid black;">)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Net cash provided by operating activities</td>
<td colspan="2" align="right">12,808,807</td>
<td></td>
<td></td>
<td colspan="2" align="right">12,463,616</td>
<td></td>
<td></td>
<td colspan="2" align="right">9,998,114</td>
<td></td>
</tr>

<tr>
<td colspan="12">&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td colspan="12">INVESTING ACTIVITIES</td>
</tr>
<tr>
<td colspan="2">Purchases of fixed assets</td>
<td align="right">(732,800</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(305,862</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(401,612</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Proceeds from sale of fixed assets</td>
<td colspan="2" align="right">-</td>
<td></td>
<td></td>
<td colspan="2" align="right">-</td>
<td></td>
<td></td>
<td colspan="2" align="right">4,200</td>
<td></td>
</tr>

<tr>
<td>Purchases of marketable securities</td>
<td colspan="2" align="right">(14,742,032</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(13,804,629</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(12,137,160</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Proceeds from maturities and sales of marketable securities</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,580,068</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">258,229</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></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>
</tr>

<tr>
<td>Net cash used in investing activities</td>
<td colspan="2" align="right">(13,894,764</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(13,852,262</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(10,549,538</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">418,705</td>
<td></td>
<td></td>
<td colspan="2" align="right">622,423</td>
<td></td>
<td></td>
<td colspan="2" align="right">270,207</td>
<td></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Excess tax benefits</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">230,173</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">280,448</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">270,413</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Net cash provided by financing activities</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">648,878</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">902,871</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">540,620</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td colspan="12">&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Decrease in cash and cash equivalents</td>
<td colspan="2" align="right">(437,079</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(485,775</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(10,804</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">1,389,288</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,875,063</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></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>
</tr>
<tr>
<td colspan="12">&nbsp;</td>
</tr>
<tr valign="top" bgcolor="#ccdaef">
<td>Cash and cash equivalents at end of year</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">952,209</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,389,288</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,875,063</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
<tr>
<td colspan="12">&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td colspan="12">Supplemental disclosures of cash flow information:</td>
</tr>
<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 18pt;">Cash
paid during the year for income taxes</div>
</td>
<td>$</td>
<td align="right">6,303,598</td>
<td></td>
<td></td>
<td>$</td>
<td align="right">5,587,438</td>
<td></td>
<td></td>
<td>$</td>
<td align="right">4,356,000</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-6</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 securities with original maturities greater than three months and remaining
maturities less than one year as short-term marketable securities, and securities
with remaining maturities greater than one year as long-term marketable securities.
Securities not due at a single maturity date are classified by their average life. 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 (loss).&#148; We use a specific-identification cost basis
to determine gains and losses. The amortized cost of marketable
securities is adjusted for amortization of premiums and accretion of discounts to maturity,
both of which are included in interest income.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider an other-than-temporary impairment of our marketable securities to exist if we
determine it is probable that we 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 and a charge recognized in net income. 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 credit rating and 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 the likelihood
that we will be required to sell the securities prior to maturity based on our
financial condition and anticipated cash flows. We determined that no write-downs
were required on available-for-sale securities during fiscal 2011, 2010, or 2009.<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 paragraph 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. We had no charges or provisions
to our allowance for doubtful accounts in fiscal 2011
or 2010, and $175 in charges and provisions in fiscal 2009.<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>
<br>
</font>
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</div><font style="font-size: 10pt; font-family: Times New Roman"><a href="#TOC"><b>Table of Contents</b></a><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>
<b><i>Product Revenue Recognition</i></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 $39,427 for fiscal 2011, $34,694 for
fiscal 2010, and $33,483 for fiscal 2009.
<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><b><i>Accounting for Commissions and Discounts</i></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 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. We recognize discounts provided to our distributors as reductions
in revenue. 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>
<b><i>Research and Development Contract Revenue Recognition</i></b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize contract revenues and costs pro-rata as work progresses. Our research
and development contracts do not contain post-shipment obligations. Contracts
may be either firm-fixed-price or cost-plus-fixed-fee. Firm-fixed-price contracts
provide for a price that is not subject to any adjustment based on our cost in
performing the contract.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. The costs
for which we earn reimbursement are the actual costs incurred and are recorded
in the period in which they are incurred. We recognize the contract fees pro-rata
as work progresses.<br><br>
<b><i>Revenue Recognition of Upfront Fees</i></b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from nonrefundable upfront fees from development
programs is deferred and recognized over the periods that the fees are earned.
We recognize revenue from development programs which is refundable, recoupable
against future royalties, or for which future obligations exist, over the term
of the agreement.<br>
&nbsp;<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><br></font>
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<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>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 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.<br><br>
<b>Net Income Per Share</b>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income per basic share is computed based on the weighted-average number of common
shares issued and outstanding during each year. Net income per diluted share amounts
assume conversion, exercise or issuance of all potential common stock instruments
(stock options and warrants). Stock options and warrants totaling 1,000
for fiscal 2011; 5,000 for fiscal 2010; and 60,000 for fiscal 2009 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:</font><br>
 <br>
<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" width="11%"><b>2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" width="11%"><b>2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" align="center" width="11%"><b>2009</b></td>
</tr>

<tr bgcolor="#ccdaef">
<td> Weighted average common shares outstanding &#150; basic</td>
<td align="right" width="11%">4,729,035</td>
<td colspan="2" align="right">4,692,496</td>
<td colspan="2" align="right">4,659,486</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">108,121</td>
<td colspan="2" align="right">158,142</td>
<td colspan="2" align="right">121,135</td>
</tr>

<tr>
<td height="14">
<div style="margin-left: 9pt;">Warrants</div>
</td>
<td style="border-bottom: 1px solid black;" align="right" height="14">7,110</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" height="14">6,406</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" height="14">4,944</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">4,844,266</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right">4,857,044</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right">4,785,565</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 U.S. generally accepted accounting principles 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>
<b>Recent Accounting Pronouncements</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted all recently issued accounting pronouncements. The adoption of the
accounting pronouncements, including those not yet effective, is not anticipated
to have a material effect on our financial position or results of operations.<br>
<br>
<b>NOTE 3. FAIR VALUE MEASUREMENTS</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally accepted accounting principles establish a framework for measuring fair value,
provide a definition of fair value and prescribe required disclosures about fair-value
measurements. Generally accepted accounting principles define 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. Generally
accepted accounting principles utilize 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 as follows:
<br><br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Level 1 &#150; Financial instruments with quoted
prices in active markets for identical assets or liabilities. Our Level&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 $61,227,498 at March&nbsp;31, 2011 and $48,154,478 at March&nbsp;31, 2010.<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><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"><b><a href="#TOC">Table
of Contents</a></b><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 fair value of our marketable securities as of March&nbsp;31, 2011, by maturity,
were as follows:<br><br></font>
<table style="font-size: 10pt; font-family: Times New Roman" border="0" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr>
<td style="border-bottom: 1px solid black;" colspan="2" align="center"><b>Total</b></td><td width="4%"></td><td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>&lt;1 Year</b></td>
<td width="4%"></td><td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>1&#150;3 Years</b></td><td width="4%"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>3&#150;5 Years</b></td></tr><tr>
<td width="1%">$</td><td width="12%" align="right">61,227,498</td><td></td><td width="1%">$</td>
<td align="right" width="12%">7,970,358</td>
<td></td><td width="1%">$</td>
<td align="right" width="12%">28,391,106</td>
<td width="2%"></td><td width="1%">$</td>
<td align="right" width="12%">24,866,034</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman">&nbsp;
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2011 and 2010 our marketable securities were as follows:<br><br></font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="100%">
<tr>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="12"><b>As of March&nbsp;31, 2011</b></td>
<td style="border-bottom: 1px solid black;" rowspan="2" width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="12"><b>As of March&nbsp;31, 2010</b></td>
</tr><tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b><br>
Adjusted<br>
Cost</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Gross<br>
Unrealized<br>
Gains</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>
Value</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b><br>
Adjusted<br>
Cost</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Gross<br>Unrealized<br>
Gains</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>Unrealized<br>
Losses</b></td>
<td width="1"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>Value</b></td>
</tr><tr bgcolor="#ccdaef">
<td valign="bottom">U.S. agency<br>
<div style="margin-left: 9pt;">securities</div>
</td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">83,358</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">1,200</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">-</td>
<td valign="bottom">&nbsp;
</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">84,558</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">702,992</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">19,240</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">-</td>
<td valign="bottom">&nbsp;
</td>
<td>&nbsp;&nbsp;</td>
<td valign="bottom">$</td>
<td align="right" valign="bottom">722,232</td>
</tr><tr>
<td valign="bottom">Corporate&nbsp;bonds</td>
<td></td>
<td align="right" valign="bottom">37,884,146</td>
<td></td>
<td></td>
<td align="right" valign="bottom">1,231,743</td>
<td></td>
<td></td>
<td align="right" valign="bottom">(147,443</td>
<td valign="bottom">)</td>
<td></td>
<td></td>
<td align="right" valign="bottom">38,968,446</td>
<td></td>
<td></td>
<td align="right" valign="bottom">23,807,375</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right" valign="bottom">1,029,273</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right" valign="bottom">(23,601</td>
<td valign="bottom">)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align="right" valign="bottom">24,813,047</td>
</tr><tr bgcolor="#ccdaef">
<td valign="bottom">Municipal&nbsp;bonds&nbsp;&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">21,582,084</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">602,457</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(10,047</td>
<td style="border-bottom: 1px solid black; valign="bottom valign="bottom"">)</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">22,174,494</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">21,877,258</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">747,483</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(5,542</td>
<td style="border-bottom: 1px solid black; valign="bottom valign="bottom"">)</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">22,619,199</td>
</tr>
<tr>
<td valign="top">Total</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">59,549,588</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,835,400</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">(157,490</td>
<td style="border-bottom: 3px double black;">)</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">61,227,498</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">46,387,625</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">1,795,996</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">(29,143</td>
<td style="border-bottom: 3px double black;">)</td>
<td>&nbsp;</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">48,154,478</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman"><br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the gross unrealized losses and fair value of our investments
with unrealized losses, aggregated by investment category and length of time that
individual securities had been in a continuous unrealized loss position as of
March&nbsp;31, 2011 and 2010:<br><br></font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="100%" align="center"><tr>
<td rowspan="2" colspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<b>Less Than 12 Months</b></td>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<b>12 Months or Greater</b></td>
<td rowspan="2"></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="6">
<b>Total</b></td>
</tr><tr>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>
Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>
Unrealized<br>
Losses</b></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="2"><b>Fair<br>Market<br>
Value</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" align="center" colspan="3"><b>Gross<br>Unrealized<br>
Losses</b></td>
</tr>
<tr>
<td colspan="22">As of March 31, 2011</td>
</tr>
<tr bgcolor="#ccdaef">
<td width="9pt"></td>
<td>U.S.&nbsp;agency&nbsp;securities&nbsp;</td>
<td width="1%">$</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%">$</td>
<td align="right" width="8%">-</td>
<td width="1%">&nbsp;
</td>
</tr>
<tr>
<td></td>
<td>Corporate bonds</td>
<td colspan="2" align="right">9,146,952</td>
<td colspan="3" align="right">(147,443</td>
<td>)</td>
<td colspan="3" align="right">-</td>
<td colspan="3" align="right">-</td>
<td>&nbsp;</td>
<td colspan="3" align="right">9,146,952</td>
<td colspan="3" align="right">(147,443</td>
<td>
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td></td>
<td width="122">Municipal bonds</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,178,225</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(10,047</td>
<td style="border-bottom: 1px solid black; valign="bottom>)</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td>
<td style="border-bottom: 1px solid black; valign="bottom>&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">2,178,225</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(10,047</td>
<td style="border-bottom: 1px solid black; valign="bottom>
)</td>
</tr>
<tr>
<td></td>
<td width="122" valign="top">Total</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">11,325,177</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(157,490</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">-</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">-</td>
<td style="border-bottom: 3px double black;" valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">11,325,177</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(157,490</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
</tr><tr>
<td colspan="22">As of March 31, 2010</td>
</tr><tr bgcolor="#ccdaef">
<td width="9pt"></td>
<td>U.S.&nbsp;agency&nbsp;securities&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%"></td>
<td width="4%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%"></td>
<td width="4%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="9%">-</td>
<td width="2%">&nbsp;</td>
<td width="1%">$</td>
<td align="right" width="8%">-</td>
<td width="1%">&nbsp;
</td>
</tr>
<tr>
<td></td>
<td>Corporate bonds</td>
<td colspan="2" align="right">2,032,306</td>
<td colspan="3" align="right">(23,601</td>
<td>)</td>
<td colspan="3" align="right">-</td>
<td colspan="3" align="right">-</td>
<td>&nbsp;</td>
<td colspan="3" align="right">2,032,306</td>
<td colspan="3" align="right">(23,601</td>
<td>
)</td>
</tr>
<tr bgcolor="#ccdaef">
<td></td>
<td width="122">Municipal bonds</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,564,416</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(5,542</td>
<td style="border-bottom: 1px solid black; valign="bottom>)</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td>
<td style="border-bottom: 1px solid black; valign="bottom>&nbsp;</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">1,564,416</td>
<td>&nbsp;</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(5,542</td>
<td style="border-bottom: 1px solid black; valign="bottom>
)</td>
</tr>
<tr>
<td></td>
<td width="122" valign="top">Total</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">3,596,722</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">(29,143</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">-</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">-</td>
<td style="border-bottom: 3px double black;" valign="top">&nbsp;</td>
<td valign="top">&nbsp;</td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">3,596,722</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">(29,143</td>
<td style="border-bottom: 3px double black;" valign="top">)</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman"><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross unrealized losses totaled $157,490 as of March&nbsp;31,
2011, and were attributable to six corporate and two municipal bonds out of a portfolio of 57 bonds.
Corporate bonds accounted for $147,443 of the total gross unrealized losses. The gross unrealized losses were due to market-price
decreases after the bonds were purchased. All of the bonds with an unrealized loss were rated investment grade by Moody&#146;s
or Standard and Poor&#146;s, and none had been in a continuous unrealized loss position for 12 months or more. For
each bond with an unrealized loss, we expect to recover the entire cost basis
of each security based on our consideration of factors including their credit
ratings, the underlying ratings of insured bonds, and historical default rates
for securities of comparable credit rating. Because we expect to recover the entire
cost basis of the securities, and because we do not intend to sell the securities
and it is not more likely than not that we will be required to sell the securities
before recovery of the cost basis, which may be maturity, we did not consider
any of our marketable securities to be other-than-temporarily impaired at March&nbsp;31,
2011.<br>
<br><b>NOTE 5. INVENTORIES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consisted of the following:<br>
&nbsp;<br></font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="50%" align="center">
<tr> <td rowspan="2"></td><td colspan="7" style="border-bottom: 1px solid black;" align="center">
<b>March 31</b></td></tr> <tr> <td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2011</b></td><td></td><td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2010</b></td></tr>
<tr bgcolor="#ccdaef">
<td>Raw materials</td><td width="1%">$</td>
<td align="right" width="22%">2,083,730</td>
<td width="1%"></td><td width="4%"></td><td width="1%">$</td><td align="right" width="22%">595,032</td><td width="1%"></td></tr>
<tr>
<td>Work in process</td><td></td>
<td align="right">1,109,270</td>
<td></td><td></td><td></td><td align="right">794,091</td><td></td></tr>
<tr bgcolor="#ccdaef"> <td>Finished goods</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">450,857</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">617,304</td><td style="border-bottom: 1px solid black;">&nbsp;</td></tr>
<tr>
<td></td><td></td>
<td align="right">3,643,857</td>
<td></td><td></td><td></td><td align="right">2,006,427</td><td></td></tr>
<tr bgcolor="#ccdaef">
<td>Less inventory reserve</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(300,000</td>
<td style="border-bottom: 1px solid black;">
)</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">(300,000</td><td style="border-bottom: 1px solid black;">
)</td></tr> <tr valign="top"> <td> Total inventories</td><td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">3,343,857</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">1,706,427</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">&nbsp;<br>
<br>F-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>
<b>NOTE
6. STOCK-BASED COMPENSATION<br>
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="center">
<b>Year Ended March 31</b></td></tr> <tr> <td colspan="2" style="border-bottom: 1px solid black;" align="center">
<b>2011</b></td><td width="4%"></td><td colspan="2" style="border-bottom: 1px solid black;" align="center">
<b>2010</b></td><td width="4%"></td><td colspan="2" style="border-bottom: 1px solid black;" align="center">
<b>2009</b></td></tr>

<tr bgcolor="#ccdaef"> <td> Risk-free interest rate</td>
<td align="right" width="11%">1.6</td>
<td width="2%">%</td><td></td><td align="right" width="11%">2.7</td><td width="2%">%</td><td></td><td align="right" width="11%">3.2</td><td width="2%">%</td></tr>
<tr> <td> Expected volatility</td>
<td align="right">56</td>
<td>%</td><td></td><td align="right">55</td><td>%</td><td></td><td align="right">68</td><td>%</td></tr>
<tr bgcolor="#ccdaef"> <td> Expected life (years)</td>
<td align="right">4.2</td>
<td>&nbsp;</td><td></td><td align="right">4.1</td><td>&nbsp;</td><td></td><td align="right">3.7</td><td>&nbsp;</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. 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. Therefore we use different expected lives
for officers and directors than we use for our general employee population for
determining the fair value of options.
<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.<b><i><br>
<br>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 stock-based compensation</b>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the effect of stock-based compensation on our net income
and earning per share for fiscal 2009 through 2011. Stock-based compensation expenses
and costs are included in the same line or lines as cash compensation paid to
the same employees. Therefore the effect of stock-based compensation 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" align="center">
<b>Year Ended March 31</b></td></tr> <tr> <td colspan="3" style="border-bottom: 1px solid black;" align="center">
<b>2011</b></td><td width="2%"></td><td colspan="3" style="border-bottom: 1px solid black;" align="center">
<b>2010</b></td><td width="2%"></td><td colspan="3" style="border-bottom: 1px solid black;" align="center">
<b>2009</b></td></tr>
<tr bgcolor="#ccdaef">
<td>Effect of stock-based compensation on net income</td><td width="1%">$</td>
<td align="right" width="11%">(76,720</td>
<td width="1%">)</td><td></td><td width="1%">$</td><td align="right" width="11%">(100,842</td><td width="1%">)</td><td></td><td width="1%">$</td><td align="right" width="11%">(86,672</td><td width="1%">)</td></tr>
<tr> <td colspan="12">Effect of stock-based compensation on net income per share:</td></tr>
<tr bgcolor="#ccdaef"> <td> <div style="margin-left: 9pt;">Basic</div></td><td>$</td>
<td align="right">(0.02</td>
<td>)</td><td></td><td>$</td><td align="right">(0.02</td><td>)</td><td></td><td>$</td><td align="right">(0.02</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">(0.02</td><td>)</td><td></td><td>$</td><td align="right">(0.02</td><td>)</td></tr>
</table>
<br><font style="font-size: 10pt; font-family: Times New Roman"><b>Tax effects of stock-based compensation</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation increased deferred taxes by $28,233
for fiscal 2011 and $36,364 for fiscal 2010.<br>
</font>
<div id="PN" style="page-break-after: always;">
<div style="width: 100%; text-align: center;"><font style="font-size: 10pt; font-family: Times New Roman"><br><br>
F-11</font></div><hr> </div><font style="font-size: 10pt; font-family: Times New Roman"><a href="#TOC"><b>Table
of Contents</b></a><br>
</font>
<font style="font-size: 10pt; font-family: Times New Roman">&nbsp;<br>
<b>General stock option information</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had no nonvested shares as of March&nbsp;31, 2011 or 2010.<br>
&nbsp;
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information about
options outstanding at March&nbsp;31, 2011, all of which were exercisable:<br>
<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman" border="0" cellpadding="0" cellspacing="0" width="67%" align="center">
<tr>
<td style="border-bottom: 1px solid black;" valign="bottom" align="center">
<b>Ranges of<br>Exercise&nbsp;Prices</b></td><td width="4%">&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" valign="bottom" align="center">
<b>Number<br> Outstanding</b></td><td width="4%">&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" colspan="2" valign="bottom" align="center">
<b>Weighted&nbsp;Average<br> Exercise&nbsp;Price</b></td><td width="4%">&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" valign="bottom" align="center">
<b>Weighted&nbsp;Remaining<br> Contractual&nbsp;Life&nbsp;(years)</b></td></tr>
<tr bgcolor="#ccdaef">
<td width="10%" align="right">$&nbsp;&nbsp;15.08&nbsp;-&nbsp;16.93</td>
<td></td>
<td align="right" width="10%">122,000</td>
<td></td><td width="1%">$</td>
<td align="right" width="9%">16.33</td>
<td></td>
<td align="right" width="10%">4.3</td>
</tr>
<tr>
<td align="right"> 29.65&nbsp;-&nbsp;31.27</td>
<td></td>
<td align="right">38,000</td>
<td></td><td></td>
<td align="right">29.78</td>
<td></td>
<td align="right">3.4</td>
</tr>
<tr bgcolor="#ccdaef">
<td align="right"> 34.71&nbsp;-&nbsp;58.27</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">15,000</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">43.06</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">7.1</td>
</tr>
<tr> <td></td><td></td>
<td style="border-bottom: 3px double black;" align="right" valign="top">175,000</td>
<td></td><td valign="top">$</td>
<td align="right" valign="top">21.54</td>
<td></td>
<td style="border-bottom: 3px solid rgb(255, 255, 255);" align="right" valign="top">4.3</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 stock options and warrants 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></td><td colspan="2" style="border-bottom: 1px solid black;" width="8%" align="center"><b>Option&nbsp;Shares<br>
Reserved</b></td><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" align="center" colspan="2">
<b>Options<br> Outstanding</b></td><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td><td colspan="2" style="border-bottom: 1px solid black;" align="center"><b>Weighted
Average<br> Option&nbsp;Exercise&nbsp;Price</b></td><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" align="center">
<b>Warrants
<br>Outstanding</b></td><td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>Weighted Average<br> Warrant&nbsp;Exercise&nbsp;Price</b></td></tr>
<tr bgcolor="#ccdaef">
<td>At March 31, 2008</td><td align="right">178,230</td><td width="1%"></td><td></td><td align="right" width="10%">308,400</td><td width="1%"></td><td></td><td width="1%">$</td><td align="right" width="18%">16.09</td><td></td><td align="right" width="10%">10,000</td><td></td><td width="1%">$</td><td align="right" width="18%">16.28</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>&nbsp;</td><td>&nbsp;</td><td>$</td><td align="right">31.27</td><td>&nbsp;</td><td align="right">-</td><td>&nbsp;</td><td>&nbsp;
</td><td align="right">-</td></tr> <tr bgcolor="#ccdaef"> <td> <div style="margin-left: 9pt;">Exercised</div></td><td style="border-bottom: 1px solid black;" align="right">-</td><td style="border-bottom: 1px solid black;">&nbsp;</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;" align="right">(30,650</td><td style="border-bottom: 1px solid black;">)</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;">$</td><td style="border-bottom: 1px solid black;" align="right">8.82</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;" align="right">-</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td></tr><tr>
<td>At March 31, 2009</td><td align="right" valign="top">174,230</td><td valign="top">&nbsp;</td><td valign="top">&nbsp;</td><td align="right" valign="top">281,750</td><td valign="top">&nbsp;</td><td valign="top">&nbsp;</td><td valign="top">$</td><td align="right" valign="top">17.10</td><td valign="top">&nbsp;</td><td align="right" valign="top">10,000</td><td valign="top">&nbsp;</td><td valign="top">$</td><td align="right" valign="top">16.28</td></tr><tr bgcolor="#ccdaef">
<td> <div style="margin-left: 9pt;">Granted</div></td><td align="right">(4,000</td><td>)</td><td></td><td align="right">4,000</td><td>&nbsp;</td><td></td><td>$</td><td align="right">51.04</td><td>&nbsp;</td><td align="right">-</td><td>&nbsp;</td><td>&nbsp;</td><td align="right">-</td></tr>
<tr> <td> <div style="margin-left: 9pt;">Exercised</div></td><td style="border-bottom: 1px solid black;" align="right">-</td><td style="border-bottom: 1px solid black;">&nbsp;</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;" align="right">(31,250</td><td style="border-bottom: 1px solid black;" width="1%">)</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;">$</td><td style="border-bottom: 1px solid black;" align="right">19.92</td><td>&nbsp;</td><td style="border-bottom: 1px solid black;" align="right">-</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td></tr><tr bgcolor="#ccdaef">
<td valign="top">At&nbsp;March&nbsp;31,&nbsp;2010&nbsp;&nbsp;&nbsp;&nbsp;</td><td style="border-bottom: 3px double black;" align="right" valign="top">170,230</td><td style="border-bottom: 3px double black;" valign="top">&nbsp;</td><td>&nbsp;</td><td style="border-bottom: 3px double black;" align="right" valign="top">254,500</td><td style="border-bottom: 3px double black;" valign="top">&nbsp;</td><td>&nbsp;</td><td style="border-bottom: 3px double black;" valign="top">$</td><td style="border-bottom: 3px double black;" align="right" valign="top">17.28</td><td>&nbsp;</td><td style="border-bottom: 3px double black;" align="right" valign="top">10,000</td><td>&nbsp;</td><td style="border-bottom: 3px double black;" valign="top">$</td><td style="border-bottom: 3px double black;" align="right" valign="top">16.28</td></tr>
<tr> <td> <div style="margin-left: 9pt;">Granted</div></td>
<td align="right">(4,000</td>
<td>)</td>
<td></td>
<td align="right">4,000</td>
<td></td><td></td>
<td>$</td>
<td align="right">42.45</td>
<td></td>
<td align="right">-</td>
<td></td><td></td>
<td align="right">-</td>
</tr>
<tr bgcolor="#ccdaef"> <td> <div style="margin-left: 9pt;">Exercised</div></td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">(83,500</td>
<td style="border-bottom: 1px solid black;">)</td>
<td></td>
<td style="border-bottom: 1px solid black;">$</td>
<td style="border-bottom: 1px solid black;" align="right">9.56</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right">-</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">-</td>
</tr>
<tr> <td valign="top">At&nbsp;March&nbsp;31,&nbsp;2011&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">166,230</td>
<td style="border-bottom: 3px double black;" valign="top">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right" valign="top">175,000</td>
<td style="border-bottom: 3px double black;" valign="top">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">21.54</td>
<td></td>
<td style="border-bottom: 3px double black;" align="right" valign="top">10,000</td>
<td></td>
<td style="border-bottom: 3px double black;" valign="top">$</td>
<td style="border-bottom: 3px double black;" align="right" valign="top">16.28</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman">&nbsp;
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remaining weighted-average exercisable life
was 4.3 years at March&nbsp;31, 2011; 4.0 years at March&nbsp;31, 2010; and 4.9 years at March&nbsp;31, 2009.
All outstanding options were exercisable as of March&nbsp;31, 2011
and 2010. Exercisable options were outstanding covering 280,250 shares at March&nbsp;31,
2009 at a weighted-average exercise price of $17.08. The total intrinsic value
of options exercised during fiscal 2011 was $3,337,511
based on the difference between the exercise price and stock price at the time
of exercise for in-the-money options. The total intrinsic value of options outstanding
March&nbsp;31, 2011, based on our closing stock price for that day, was $6,091,740,
all of which were exercisable. The total fair
value of option grants was $76,720 in fiscal
2011. There was no unrecognized stock-based
compensation at March&nbsp;31, 2011.
<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No warrants were issued in the past three fiscal years. Remaining weighted-average
exercisable warrant life was 1.9 years at
March&nbsp;31, 2011; 2.9 years at March&nbsp;31, 2010; and 3.9 years at March&nbsp;31,
2009.<br>
<br>
<b>NOTE 7. INCOME TAXES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
tax provisions for fiscal 2009 through 2011 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;" align="center">
<b>Year Ended March 31</b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2011</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2010</b></td>
<td width="3%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2009</b></td>
</tr>

<tr>
<td colspan="12" bgcolor="#ccdaef">Current taxes</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">Federal</div>
</td>
<td width="1%">$</td>
<td align="right" width="16%">5,761,632</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">5,375,724</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">4,304,330</td>
<td width="1%"></td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">State</div>
</td>
<td colspan="2" align="right">504,408</td>
<td></td>
<td></td>
<td colspan="2" align="right">550,146</td>
<td></td>
<td></td>
<td colspan="2" align="right">351,625</td>
<td></td>
</tr>

<tr>
<td colspan="12">Deferred taxes</td>
</tr>

<tr bgcolor="#ccdaef">
<td>
<div style="margin-left: 9pt;">Federal</div>
</td>
<td colspan="2" align="right">56,996</td>
<td>&nbsp;</td>
<td></td>
<td colspan="2" align="right">(6,109</td>
<td>)</td>
<td></td>
<td colspan="2" align="right">(17,880</td>
<td>)</td>
</tr>

<tr>
<td>
<div style="margin-left: 9pt;">State</div>
</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">7,215</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">(2,689</td>
<td style="border-bottom: 1px solid black;">)</td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">6,630</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr valign="top" bgcolor="#ccdaef">
<td>Income tax provision</td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">6,330,251</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">5,917,072</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">4,644,705</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">&nbsp;<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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of income tax provisions at the U.S. statutory rate for fiscal
2009 through 2011 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;" align="center">
<b>Year Ended March 31</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2011</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2010</b></td>
<td width="2%"></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2009</b></td>
</tr><tr bgcolor="#ccdaef">
<td>Tax expense at U.S. statutory rate</td>
<td width="1%">$</td>
<td align="right" width="11%">6,809,003</td>
<td width="1%">&nbsp;</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">6,091,581</td>
<td width="1%">&nbsp;</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="11%">4,905,384</td>
<td width="1%">&nbsp;</td>
</tr><tr>
<td>State income taxes, net of Federal benefit</td>
<td></td>
<td align="right">345,213</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td align="right">369,754</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td align="right">271,307</td>
<td>&nbsp;</td>
</tr>
<tr bgcolor="#ccdaef">
<td>Domestic manufacturing deduction</td>
<td></td>
<td align="right">(549,123</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">(309,222</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">(238,679</td>
<td>)</td>
</tr>

<tr>
<td>Municipal interest</td>
<td></td>
<td align="right">(239,636</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">(225,695</td>
<td>)</td>
<td></td>
<td></td>
<td align="right">(197,065</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Other</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td align="right" style="border-bottom: 1px solid black;">(35,206</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">(9,346</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">(96,242</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;">$</td>
<td style="border-bottom: 3px double black;" align="right">6,330,251</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
<td style="border-bottom: 3px double black;"></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">5,917,072</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">4,644,705</td>
<td style="border-bottom: 3px double black;">&nbsp;</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman"><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 liabilities as of March&nbsp;31, 2011 and 2010 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;" align="center"><b>March
31</b></td>
</tr>

<tr>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2011</b></td>
<td></td>
<td style="border-bottom: 1px solid black;" colspan="3" align="center"><b>2010</b></td>
</tr>

<tr bgcolor="#ccdaef">
<td>Deferred revenue</td>
<td width="1%">$</td>
<td align="right" width="16%">-</td>
<td width="1%"></td>
<td width="3%"></td>
<td width="1%">$</td>
<td align="right" width="16%">7,513</td>
<td width="1%">&nbsp;</td>
</tr>

<tr>
<td>Vacation accrual</td>
<td colspan="2" align="right">135,724</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">121,788</td>
<td>&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Inventory reserve</td>
<td colspan="2" align="right">110,400</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">108,180</td>
<td>&nbsp;</td>
</tr>

<tr>
<td>Depreciation</td>
<td colspan="2" align="right">36,053</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">65,443</td>
<td>&nbsp;</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Stock-based compensation deductions</td>
<td colspan="2" align="right">117,800</td>
<td>&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="right">162,869</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>Unrealized gain on marketable securities</td>
<td colspan="2" align="right">(617,471</td>
<td>)</td>
<td colspan="3" align="right">(637,127</td>
<td>)</td>
</tr>

<tr bgcolor="#ccdaef">
<td>Other</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">70,801</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
<td></td>
<td style="border-bottom: 1px solid black;" align="right" colspan="2">69,196</td>
<td style="border-bottom: 1px solid black;">&nbsp;</td>
</tr>

<tr>
<td>Net deferred tax liabilities</td>
<td style="border-bottom: 3px double black;" width="1%">$</td>
<td style="border-bottom: 3px double black;" align="right">(146,693</td>
<td style="border-bottom: 3px double black;">)</td>
<td></td>
<td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">(102,138</td>
<td style="border-bottom: 3px double black;">)</td>
</tr>

</table>
<font style="font-size: 10pt; font-family: Times New Roman"><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 $230,173
in fiscal 2011, $280,448 in fiscal 2010, and $270,413 in fiscal 2009 were attributed
to stock-based compensation deductions. The &#147;Additional paid-in capital&#148;
credits also included the tax benefit of stock-based compensation deductions in
those years.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. &#147;Tax benefit of stock-based compensation&#148; represented (i)&nbsp;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.
<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had $203,384 of Federal net operating losses and $166,729
of state net operating losses at March&nbsp;31, 2011. These net operating losses
expire in fiscal 2020 and are subject to limitation
including limitation under the Internal Revenue Code.<br>
<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had no unrecognized tax benefits as of March&nbsp;31, 2011, and we do not expect any
significant unrecognized tax benefits within 12&nbsp;months of the reporting date.
We recognize interest and penalties related to income tax matters in income tax
expense. As of March&nbsp;31, 2011 we had no
accrued interest related to uncertain tax positions. The tax years 1999 through 2010 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 receive research and
development contracts.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table
summarizes customers comprising 10% or more of revenue for fiscal 2011, 2010,
and 2009:<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="5" style="border-bottom: 1px solid black;" align="center">
<b><font style="white-space: nowrap;">% of Revenue for Year Ended March 31</font></b></td>
</tr>
<tr>
<td style="border-bottom: 1px solid black;" align="center"> <b>2011</b></td>
<td width="4%"></td>
<td style="border-bottom: 1px solid black;" align="center">
<b>2010</b></td>
<td width="4%"></td>
<td style="border-bottom: 1px solid black;" align="center">
<b>2009</b></td>
</tr>
<tr bgcolor="#ccdaef">
<td>Customer A</td>
<td align="center" width="11%">14%</td>
<td></td>
<td align="center" width="11%">15%</td>
<td></td>
<td align="center" width="11%">10%</td>
</tr>
<tr>
<td>Customer B</td>
<td align="center" width="12%">11%</td>
<td></td>
<td align="center" width="12%">16%</td>
<td></td>
<td align="center" width="12%">19%</td>
</tr>
<tr>
<td bgcolor="#ccdaef">Customer C</td>
<td align="center" width="11%" bgcolor="#ccdaef">11%</td>
<td bgcolor="#ccdaef"></td>
<td align="center" width="11%" bgcolor="#ccdaef">11%</td>
<td bgcolor="#ccdaef"></td>
<td align="center" width="11%" bgcolor="#ccdaef">11%</td>
</tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman">&nbsp;<br>
&nbsp;<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>
</font><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%" align="center"><b>Year
Ended March 31</b></td></tr> <tr> <td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2011</b></td><td width="3%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2010</b></td><td width="3%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2009</b></td></tr>

<tr bgcolor="#ccdaef">
<td>United States</td><td width="1%">$</td>
<td align="right" width="16%">14,169,952</td>
<td></td><td width="1%">$</td><td align="right" width="16%">14,283,819</td><td></td><td width="1%">$</td><td align="right" width="16%">12,445,164</td></tr>
<tr> <td>Europe</td><td></td>
<td align="right">12,009,294</td>
<td></td><td></td><td align="right">9,334,742</td><td></td><td></td><td align="right">8,154,261</td></tr>
<tr bgcolor="#ccdaef"> <td>Asia</td><td></td>
<td align="right">4,576,270</td>
<td></td><td></td><td align="right">4,133,251</td><td></td><td></td><td align="right">2,314,626</td></tr>
<tr> <td>Other</td>
<td style="border-bottom: 1px solid black;" colspan="2" align="right">441,547</td>
<td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">395,373</td><td></td><td style="border-bottom: 1px solid black;" colspan="2" align="right">458,218</td></tr>
<tr valign="top" bgcolor="#ccdaef"> <td>Total Revenue</td><td style="border-bottom: 3px double black;">$</td>
<td style="border-bottom: 3px double black;" align="right">31,197,063</td>
<td></td><td style="border-bottom: 3px double black;">$</td><td style="border-bottom: 3px double black;" align="right">28,147,185</td><td></td><td style="border-bottom: 3px double black;">$</td><td style="border-bottom: 3px double black;" align="right">23,372,269</td></tr>
</table>
<font style="font-size: 10pt; font-family: Times New Roman"><br>
<b>NOTE 9. COMMITMENTS AND CONTINGENCIES</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease payments
were $245,220 for fiscal 2011, $237,317 for
fiscal 2010, and $234,368 for fiscal 2009. The operating lease for our facility
expires December&nbsp;31, 2015. We pay operating expenses including maintenance,
utilities, real estate taxes, and insurance in addition to rental payments. We
also lease a piece of office equipment under an operating lease expiring July&nbsp;2014
with payments due quarterly. Our future minimum lease payments are shown in the
following table:<br>
&nbsp;<br>
</font>
<table style="font-size: 10pt; font-family: Times New Roman" cellpadding="0" cellspacing="0" width="67%" align="CENTER">
<tr>
<td colspan="14" style="border-bottom: 1px solid black;" align="center"><b>Year Ending March 31</b></td><td colspan="3"></td></tr><tr>
<td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2012</b></td><td width="2%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2013</b></td><td width="2%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2014</b></td><td width="2%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2015</b></td><td width="2%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>2016</b></td><td width="2%"></td><td style="border-bottom: 1px solid black;" colspan="2" align="center">
<b>Total</b></td></tr> <tr bgcolor="#ccdaef"> <td width="1%">$</td>
<td align="right" width="9%">254,053</td>
<td></td><td width="1%">$</td>
<td align="right" width="9%">257,685</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="9%">261,370</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="9%">264,142</td>
<td></td>
<td width="1%">$</td>
<td align="right" width="9%">200,109</td>
<td></td>
<td width="4%">$</td>
<td align="right" width="5%">1,237,359</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. We have an outstanding
authorization from our Board to purchase up to $2,500,000 of our common stock,
all of which remained available as of March&nbsp;31, 2011.<br>
<br>
<b>NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS</b>
<br>&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 Code maximum.
We make matching contributions of 100% of the first 3% of participants&#146; salary
deferral contributions. Our matching contributions were $110,268
for fiscal 2011, $103,038 for fiscal 2010, and $95,289 for fiscal 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-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></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>
<td style="border-bottom: 1px solid black;"><b>Exhibit&nbsp;#</b></td><td style="border-bottom: 1px solid black;" align="center">
<b>Description</b></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><br>
<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.<br>
<br><br><br>
</td></tr></table><hr>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>2
<FILENAME>ex23.htm
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<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 4, 2011, 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, 2011.</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 4, 2011</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 4, 2011
<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 4, 2011
<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 18 U.S.C. SECTION 1350
<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&nbsp;31, 2011, 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 4, 2011</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>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
