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What changed in NVE CORP /NEW/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NVE CORP /NEW/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+83 added−69 removedSource: 10-K (2024-05-01) vs 10-K (2023-05-03)

Top changes in NVE CORP /NEW/'s 2024 10-K

83 paragraphs added · 69 removed · 62 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeNew Product Status In the past year, we began marketing a number of new and improved products, including: • additional ultraminiature isolated DC-to-DC convertor models; • an ultraminiature TMR magnetic sensor; • an ultrahigh-sensitivity TMR magnetic sensor; and • more products combining data couplers with isolated DC-to-DC convertors to transmit power as well as data.
Biggest changeNew Product Status In the past year, we began marketing several new and improved products, including: · more products combining data couplers with isolated DC-to-DC convertors to transmit power as well as data; · ultra-high isolation data couplers; · extended temperature isolated network transceivers · new MRAM products for antitamper applications; and · new product evaluation boards.
Packaged parts are returned to us to be tested, inventoried, and shipped. 4 Table of Contents Our facility has been certified under the ISO 9001:2015 quality management standard and is an Approved Place of Manufacture under ECS/CIG 021-024: 2014. We believe having our own U.S. wafer production and test capabilities are an advantage over competitors that outsource such operations.
Packaged parts are returned to us to be tested, inventoried, and shipped. 4 Table of Contents Our facility has been certified under the ISO 9001:2015 quality management standard and is an Approved Place of Manufacture under ECS/CIG 021-024: 2014. We believe having our own U.S. wafer production and test capabilities is an advantage over competitors that outsource such operations.
Government Regulations We are subject to government regulations including, but not limited to, regulations related to environmental matters, tax matters, securities, conflict minerals, ethics and foreign corrupt practices, import and export controls, product safety and liability, workplace health and safety, labor and employment, and data privacy.
Government Regulations We are subject to government regulations including, but not limited to, regulations related to environmental matters, tax matters, securities regulations, conflict minerals, ethics and foreign corrupt practices, import and export controls, product safety and liability, workplace health and safety, labor and employment, and data privacy.
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 current business owned by us or licensed to us that expire in the next 12 months.
We also have a number of foreign patents, several U.S. and foreign patents pending, and we have licensed patents from others. There are no patents we regard as critical to our current business owned by us or licensed to us that expire in the next 12 months.
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. Couplers are widely used in factory automation, providing reliable digital communication between electronic subsystems in factories.
Magnetic sensors can be used for many 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. Couplers are widely used in factory automation, providing reliable digital communication between electronic subsystems in factories.
Trademarks “NVE” and “IsoLoop” are our registered trademarks. Other trademarks we claim include “GMR Switch” and “GT Sensor.” Dependence on Major Customers We rely on several large customers for a significant percentage of our revenue, including Abbott Laboratories, Sonova AG, certain other medical device manufacturers, and certain distributors.
Trademarks “NVE” and “IsoLoop” are our registered trademarks. Other trademarks we claim include “GMR Switch” and “GT Sensor.” Dependence on Major Customers We rely on several large customers for a significant percentage of our revenue, including Abbott Laboratories, Sonova AG, certain distributors, and certain other customers.
Our wafers sources are based around the world; most of our packaging services take place in Asia. 5 Table of Contents Intellectual Property Patents As of March 31, 2023, we had more than 50 issued U.S. patents assigned to us.
Our wafer sources are based around the world; most of our packaging services take place in Asia. 5 Table of Contents Intellectual Property Patents As of March 31, 2024, we had more than 50 issued U.S. patents assigned to us.
These filings are also accessible through the SEC’s Website ( www.sec.gov ). 6 Table of Contents
These filings are also accessible through the SEC’s Website ( www.sec.gov ). 8 Table of Contents
We offer employees excellent fringe benefits, including medical insurance coverage paid for mostly by the Company, dental insurance, Company-paid life and accidental death and dismemberment insurance, Company-paid long-term disability insurance, free wellness programs, Company-funded Health Savings Accounts, generous 401(k) matches, ample holidays and Paid Time Off, tuition reimbursement, and free coffee.
Employee Benefits We offer employees excellent fringe benefits, including medical insurance coverage paid for mostly by the Company, dental insurance, Company-paid life and accidental death and dismemberment insurance, Company-paid long-term disability insurance, generous 401(k) matches, Company-funded Health Savings Accounts, Dependent Care Flexible Spending Accounts, ample holidays and Paid Time Off, tuition reimbursement, and free coffee.
We take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their gender, race, disability, ethnicity, nationality, religion, sexual orientation, gender identity, or gender expression. We also take affirmative action to employ and advance veterans in employment.
We take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their gender, race, disability, ethnicity, nationality, religion, sexual orientation, gender identity, or gender expression. We also take affirmative action to employ and advance veterans in employment. We have a number of initiatives to maintain and increase our diversity.
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.
Compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, or competitive position to date.
Long-term product development programs in fiscal 2023 focused on even higher sensitivity TMR sensors and Magnetoresistive Random Access Memory (MRAM) for antitamper applications. Our Competition Industrial Sensor Competition Several other companies either make or may have the capability to make GMR or TMR sensors.
Long-term product development programs in fiscal 2024 included: · extremely sensitive TMR sensors; · next-generation sensors for hearing aids and implanted medical devices; · wafer-level chip-scale devices; and · next-generation MRAM for antitamper applications. Our Competition Industrial Sensor Competition Several other companies either make or may have the capability to make GMR or TMR sensors.
In the past fiscal year, we significantly increased average pay and fringe benefit expenditures to attract, retain, and motivate top-performing employees. 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.
We are committed to hiring and promoting employees based on their acquired skills. Employee Relations None of our employees are represented by a labor union or are subject to a collective bargaining agreement. Based on periodic employee surveys, we believe we have good relations with our employees.
Human Capital Resources We had 56 employees as of March 31, 2023, 51 of whom were full-time. We have policies to prevent discrimination based on gender, race, disability, ethnicity, nationality, religion, sexual orientation, gender identity, or gender expression.
Employee Diversity, Equity, Inclusion, and Accessibility Our goal is to promote diversity, equity, inclusion, and accessibility in our recruitment of directors, managers, and other employees. We have policies to prevent discrimination based on gender, race, disability, ethnicity, nationality, religion, sexual orientation, gender identity, or gender expression.
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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. 6 Table of Contents Human Capital Resources Employee Headcount We had 54 employees as of March 31, 2024, 46 of whom were full-time. We had no contingent workers.
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Workforce Demographics We assessed our demographics using the data collection procedures for U.S. Equal Employment Opportunity Commission form EEO-1. Specifically, we conducted a voluntary survey for self-identification and supplemented those data with personnel data and observer identification. Minnesota data are from U.S. Census Bureau data for the latest quarter available.
Added
Gender Demographics The gender demographics of our workforce compared to those of all Minnesota workers were as follows as of March 31, 2024: Gender NVE Minnesota Male 67% 50% Female 33% 50% As is the case with many technology companies, female employees are underrepresented in our workforce, particularly in engineer and technician jobs.
Added
We provide opportunities for equipment operators (a job where female employees are well represented) to advance to technician and engineer positions, including internal equipment training, tuition reimbursement, and scheduling flexibility to attend classes.
Added
Employee Racial Diversity Our workforce demographics by race as of March 31, 2024, were as follows: Race NVE Minnesota African American or Black 13% 8% American Indian or Alaska Native 2% 1% Asian 17% 6% White or Caucasian 69% 83% Black or African American and Asian employees are overrepresented in our workforce.
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We believe this is because we are close to immigrant population clusters, have a multilingual workforce, provide equal pay, and equal opportunity for advancement, and have a culture of acceptance. Educational Demographics We have a highly educated workforce. Thirty-nine percent of our employees have bachelor’s or advanced degrees compared to 26% of all Minnesota workers.
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For example, we participate in Dunwoody College of Technology’s Pathways to Careers (P2C) program and the Minnesota Technology Association’s SciTech internship program as a qualified employer. P2C is focused on preparing underserved and underrepresented individuals for college success and immediate jobs.
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The SciTech internship program has an objective of increasing the participation of women and students of color in science, technology, engineering, and mathematics.
Added
Women and Families We have family-friendly policies and fully comply with the Minnesota Women’s Economic Security Act (WESA) by providing reasonable accommodations to employees for health conditions related to pregnancy or childbirth and up to 12 weeks of pregnancy and parental leave.
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Additionally, Minnesota’s paid family and medical leave law, which provides paid time off during or following a pregnancy, goes into effect on January 1, 2026. NVE is committed to the timely implementation of such paid leave. 7 Table of Contents Executive Diversity We have three Named Executive Officers . All are male; one is racially diverse.
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Board of Directors Diversity We meet and are committed to continuing to meet the board diversity goals of NASDAQ Listing Rule 5605(f)(1), including at least two Diverse directors by December 31, 2026. Additionally, we plan to nominate an ethnically diverse director in the Proxy Statement for our 2024 Annual Meeting of Shareholders.
Added
An ethnically diverse director would meet the racial/ethnic diversity recommendations of Institutional Shareholder Services for Russell 3000 companies.
Added
Employee Health and Safety NVE is committed to providing a safe and healthy work environment. We offer employees a variety of health and fitness resources in conjunction with our medical insurance. Employee Development and Training NVE provides paid training including paid on-the-job training, specialized online training, 100% tuition reimbursement, and paid internships.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese patent rights may be challenged, rendered unenforceable, invalidated, or circumvented. Additionally, rights granted under the patents or under licensing agreements may not provide a competitive advantage to us. Efforts to enforce patent rights can involve substantial expense and may not be successful.
Biggest changeThese patent rights may be challenged, rendered unenforceable, invalidated, or circumvented. Efforts to 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.
The market price of our common stock may be significantly affected by many factors, some of which are beyond our control, including: • the announcement of new products or product enhancements by us or our competitors; • delays in our introduction of new products or technologies or market acceptance of these products or technologies; • loss of customers, decreases in customers’ purchases, or decreases in customers’ purchase prices; • changes in demand for our customers’ products; • quarterly variations in our financial results, revenue, or revenue growth rates; • speculation in the press or elsewhere about our business, potential revenue, or potential earnings; • general economic conditions or market conditions specific to industries we or our customers serve or may serve; • legal proceedings involving us, including intellectual property litigation or class action litigation; • changes in Federal or state corporate income tax rates, tax credits, or other changes in tax policies; • changes in tariffs, customs, duties, or other trade barriers in foreign jurisdictions where we purchase raw materials or sell our products; and • our stock repurchase and dividend policies and decisions. 10 Table of Contents
The market price of our common stock may be significantly affected by many factors, some of which are beyond our control, including: · the announcement of new products or product enhancements by us or our competitors; · delays in our introduction of new products or technologies or market acceptance of these products or technologies; · loss of customers, decreases in customers’ purchases, or decreases in customers’ purchase prices; · changes in demand for our customers’ products; · quarterly variations in our financial results, revenue, or revenue growth rates; · speculation in the press or elsewhere about our business, potential revenue, or potential earnings; · general economic conditions or market conditions specific to industries we or our customers serve or may serve; · legal proceedings involving us, including intellectual property litigation or class action litigation; · changes in Federal or state corporate income tax rates, tax credits, or other changes in tax policies; · changes in tariffs, customs, duties, or other trade barriers in foreign jurisdictions where we purchase raw materials or sell our products; and · our stock repurchase and dividend policies and decisions. 12 Table of Contents
Risks relating to operating in foreign markets that could impair our results of operations include economic and political instability; acts of God, including floods, typhoons, cyclones, and earthquakes; public health crises including, but not limited to, difficulties in enforcement of contractual obligations and intellectual property rights; changes in regulatory requirements; changes in import/export regulations and tariffs; transportation delays; and other uncertainties relating to the administration of, or changes in, or new interpretation of, the laws, regulations, and policies of jurisdictions where we do business.
Risks relating to operating in foreign markets that could impair our results of operations include economic and political instability; acts of God, including floods, typhoons, cyclones, and earthquakes; public health crises including, but not limited to, difficulties in enforcement of contractual obligations and intellectual property rights; changes in regulatory requirements; changes in import/export regulations and tariffs; transportation delays; and other uncertainties relating to the administration of, or changes in, or new interpretations of, the laws, regulations, and policies of jurisdictions where we do business.
Failure to meet technical or quality requirements or a negative customer audit could result in the loss of current sales revenue, customers, and future sales. We may lose revenue if we are unable to renew customer agreements. We have agreements with certain customers, including a Supplier Partnering Agreement, as amended, with Abbott Laboratories, which expires December 31, 2023.
Failure to meet technical or quality requirements or a negative customer audit could result in the loss of current sales revenue, customers, and future sales. We may lose revenue if we are unable to renew customer agreements. We have agreements with certain customers, including a Supplier Partnering Agreement, as amended, with Abbott Laboratories, which expires December 31, 2024.
We sell our products into the semiconductor market, which has been highly cyclical. We cannot predict the timing, strength, or duration of any economic slowdown, recession, semiconductor-industry slowdown or subsequent recovery. The economic environment could have a material adverse impact on our business and revenue. Our business and our reliance on intellectual property exposes us to litigation risks.
We sell our products in the semiconductor market, which has been highly cyclical. We cannot predict the timing, strength, or duration of any economic slowdown, recession, semiconductor-industry slowdown, or subsequent recovery. The economic environment could have a material adverse impact on our business and revenue. Our business and our reliance on intellectual property exposes us to litigation risks.
Foreign sales are a significant portion of our revenue and we rely on suppliers in China, India, Taiwan, Thailand, and other foreign countries.
Foreign sales are a significant portion of our revenue and we rely on suppliers in China, India, Malaysia, Taiwan, Thailand, and other foreign countries.
Additionally, the assignment of a high credit rating does not preclude the risk of default on any marketable security. Any losses on our marketable securities could impact our financial condition, income, or cash flows, or our ability to pay dividends. We may not be able to enforce our intellectual property rights.
Additionally, the assignment of a high credit rating does not preclude the risk of default on any marketable security. Any impairments of our marketable securities could impact our financial condition, income, or cash flows, or our ability to pay dividends. We may not be able to enforce our intellectual property rights.
Labor shortages could impact our revenue and profitability, and increases in labor cost could adversely affect our profit margins and results of operations. The loss of supply from any of our key single-source wafer suppliers could substantially impact our ability to produce and deliver products and seriously harm our business and financial condition.
Labor shortages could impact our revenue and profitability, and increases in labor costs could adversely affect our profit margins and results of operations. The loss of supply from any of our key single-source wafer suppliers could substantially impact our ability to produce and deliver products and seriously harm our business and financial condition.
Our inability to maintain our proprietary rights could have a material adverse effect on our business, financial condition, and results of operations. 9 Table of Contents Risks Related to Our Industry We face an uncertain economic environment in the industries we serve, which could adversely affect our business.
Our inability to maintain our proprietary rights could have a material adverse effect on our business, financial condition, and results of operations. 11 Table of Contents Risks Related to Our Industry We face an uncertain economic environment in the industries we serve, which could adversely affect our business.
Wafer supply interruptions 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. The loss of supply of any critical chemicals or supplies could impact our ability to produce and deliver products and cause loss of revenue.
Wafer supply interruptions 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. Shortages of any critical chemicals or supplies could impact our ability to produce and deliver products and cause loss of revenue.
Our quality management system is certified to the ISO 9001 standard, and some of our products are also subject to independent certification and listings including by the VDE Institute and UL LLC. These certifications are subject to a number of rigorous conditions.
Our quality management system is certified to the ISO 9001 standard, and some of our products are also subject to independent certification and listings including by the VDE Institute and UL LLC. These certifications are subject to rigorous conditions.
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. We are subject to risks inherent in doing business in foreign countries that could impair our results of operations.
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. 10 Table of Contents We are subject to risks inherent in doing business in foreign countries that could impair our results of operations.
Furthermore, environmental regulations or the impacts of climate change could curtail the availability of electricity we need for production or increase the number of incidents of power outages. Increased natural resource or energy costs, or decreased availability, could have adverse effects on our results of operations by increasing our costs and expenses or requiring us to change our production processes.
Furthermore, environmental regulations or the impacts of climate change could curtail the availability of electricity we need for production or increase the incidence of power outages. Increased natural resource or energy costs, or decreased availability, could have adverse effects on our results of operations by increasing our costs and expenses or requiring us to change our production processes.
Our production process relies on certain critical pieces of equipment for defining, depositing, and modifying the magnetic properties of thin films. Some of this equipment was designed or customized by us, and some may no longer be in production.
Our production process relies on certain critical pieces of equipment for defining, depositing, and modifying the magnetic properties of thin films. Some of this equipment was designed or customized by us, and some is no longer in production.
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’ products and harm our results of operations. 8 Table of Contents We may lose business and revenue if our critical production equipment fails.
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’ products and harm our results of operations. We may lose business and revenue if our critical production equipment fails.
Future dividends will be subject to Board approval and will take into account factors including our results of operations, cash and marketable security balances, the timing of securities maturations, estimates of future cash requirements, fixed asset requirements, and other factors our Board may deem relevant.
Future dividends will be subject to Board approval and will consider factors including our results of operations, cash and marketable security balances, the timing of securities maturations, estimates of future cash requirements, fixed asset requirements, and other factors our Board may deem relevant.
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. The loss of supply from any of our packaging vendors could impact our ability to produce and deliver products and cause loss of revenue.
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. A loss of supply from any of our packaging vendors could impact our ability to deliver products and cause loss of revenue. We are dependent on our packaging vendors.
We are dependent on our packaging vendors. Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits.
Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits.
We cannot predict if these agreements will be renewed, or if renewed, under what terms. Although it is possible we could continue to sell products to these customers without formal agreements, an inability to agree on mutually acceptable terms could have a significant adverse impact on our revenue or profitability.
We cannot predict if these agreements will be renewed, or if renewed, under what terms. Although in the past we have continued to sell products to these customers without formal agreements, an inability to agree on mutually acceptable terms could have a significant adverse impact on our revenue or profitability.
Although these events did not materially impact our business, future events could disrupt our operations, harm our reputation, expose us to liability, compromise our eligibility for research and development contracts involving sensitive or classified information, or have other effects including unpredictable effects. We could incur losses on our marketable securities.
Although these events did not materially impact our business, future events could disrupt our operations, harm our reputation, expose us to liability, compromise our eligibility for research and development contracts involving sensitive or classified information, or have other effects.
As of March 31, 2023, we held $52,544,283 in short-term and long-term marketable securities, representing approximately 76% of our total assets. Business conditions, bond-market conditions, and interest rates increases beyond our control or ability to anticipate can cause credit-rating downgrades, increased default risk, or unrealized losses.
As of March 31, 2024, we held $52,548,876 in short-term and long-term marketable securities, representing approximately 79% of our total assets. Business conditions, bond-market conditions, and interest rate increases beyond our control or ability to anticipate can cause credit-rating downgrades, increased default risk, or unrealized losses.
We maintain policies and procedures for the mitigation of information technology risks, and we maintain data backups, backup hardware, and some redundant systems. We have experienced cyber security events and disruptions such as viruses, ransomware, hacker attacks, and limited server, Website, and e-mail outages.
We maintain policies and procedures for the mitigation of information technology risks, and we maintain data backups, backup hardware, and some redundant systems. Our risk mitigation measures may not be effective in all scenarios, however. We have experienced cyber security events and disruptions such as viruses, ransomware, hacker attacks, and limited server, Website, and e-mail outages.
Failure to meet stringent customer requirements could result in the loss of key customers and reduce our sales. Some of our customers, including certain medical device manufacturers, have stringent technical and quality requirements that require our products to meet certain test and qualification criteria or to adopt and comply with specific quality standards. Certain customers also periodically audit our performance.
Some of our customers, including certain medical device manufacturers, have stringent technical and quality requirements that require our products to meet certain test and qualification criteria or to adopt and comply with specific quality standards. Certain customers also periodically audit our performance.
We are subject to risks associated with the availability of natural resources and energy. We use significant resources such as electricity, natural gas, and water in our production processes. New or increased climate change regulation could increase our energy costs, for example as a result of carbon pricing impacts on natural gas or electrical utilities.
We use significant resources such as electricity, natural gas, and water in our operations. New or increased climate change regulation could increase our energy costs, for example, due to carbon pricing impacts on natural gas or electrical utilities.
Public health crises could have an adverse effect on our operations and financial results. The COVID-19 pandemic disrupted our supply chains and caused employee absences. Impacts of the COVID-19 pandemic or other public health crises could have a material adverse effect on our results of operations or our financial condition.
Public health crises could have an adverse effect on our operations and financial results. The COVID-19 pandemic disrupted our supply chains and caused employee absences. Future public health crises could have a material adverse effect on our results of operations or our financial condition. We are subject to risks associated with the availability of natural resources and energy.
Additionally, certain of our packaging vendors are in flood-susceptible areas. Flooding risks to such vendors may increase in the future due to possible higher ocean levels, extreme weather, and other potential effects of climate change.
Furthermore, we may not be able to recover work in process or finished goods at a packaging vendor in the event of a disruption. Additionally, certain of our packaging vendors are in flood-susceptible areas. Flooding risks to such vendors may increase in the future due to possible higher ocean levels, extreme weather, and other potential effects of climate change.
We have a number of competitors and potential competitors, many of whom have significantly greater financial, technical, and marketing resources than us. We believe that our competition is increasing as 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 believe that our competition is increasing as 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.
Supply delays, 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. 7 Table of Contents We risk losing business to our competitors.
Supply delays, 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. We risk losing business to our competitors. We have a number of competitors and potential competitors, many of whom have significantly greater financial, technical, and marketing resources than us.
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. Also, our confidentiality agreements may not provide meaningful protection of our proprietary information.
Thus the patents held by or licensed to us may not afford us any meaningful competitive advantage. Also, our confidentiality agreements may not provide meaningful protection of our proprietary information.
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 due to vendors’ business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics.
We have alternate vendors or potential alternate vendors for the majority of our products, but it could be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors’ business decisions, business conditions, or acts of God, including floods, typhoons, earthquakes, or pandemics.
We expect these trends to continue, and we may lose business to competitors or it may be necessary to significantly reduce our prices to acquire or retain business. These factors could cause a material adverse impact on our financial condition, revenue, gross profit margins, or income.
We expect these trends to continue, and we may lose business to competitors or it may be necessary to significantly reduce our prices to acquire or retain business.
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Lead times for packaging services increased during the COVID-19 pandemic and there have been shortages of raw materials our packaging vendors need for their processes. Government lockdown restrictions, labor shortages, raw-material shortages, and supply-chain disruptions have reduced our vendors’ capacity and increased their lead times. These conditions could continue, worsen, or recur.
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These factors could have a material adverse impact on our financial condition, revenue, gross profit margins, or income. 9 Table of Contents Failure to meet stringent customer requirements could result in the loss of key customers and reduce our sales.
Removed
We have alternate vendors or potential alternate vendors for the majority of our products, but it can be expensive, time-consuming, and technically challenging to convert to alternate vendors. Furthermore, we may not be able to recover work in process or finished goods at a packaging vendor in the event of a disruption.
Added
We face the risk of credit losses Financial Accounting Standards Board Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements requires us to measure our allowance for credit losses based on the expected credit losses over the life of our receivables.
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In the past fiscal year, we recorded significant expenses under this standard, although most of these expenses were later reversed. Any future increases in our allowance for credit losses would have a negative impact on our financial results, including reducing our net income and net income per share. We could incur losses on our marketable securities.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have expanded the facility’s production space in recent years are have limited options to further expand production in the current facility. We are exploring options for future expansion if necessary. We hold no investments in real estate.
Biggest changeWe have expanded the facility’s production space in recent years and have limited options to further expand production in the current facility. We are exploring options for future expansion if necessary. We hold no investments in real estate.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur dividend policy is subject to change at any time, and future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, our forecasts of future cash requirements, and other factors our Board may deem relevant. Shareholders We had approximately 54 shareholders of record as of April 12, 2023.
Biggest changeOur dividend policy is subject to change at any time, and future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, our forecasts of future cash requirements, and other factors our Board may deem relevant. Shareholders We had 52 shareholders of record as of March 31, 2024.
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our securities authorized for issuance under equity compensation plans will be included in the section “Equity Compensation Plan Information” of our Proxy Statement for our 2023 Annual Meeting of Shareholders and is incorporated by reference into Item 12 of this Report.
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our securities authorized for issuance under equity compensation plans will be included in the section “Equity Compensation Plan Information” of our Proxy Statement for our 2024 Annual Meeting of Shareholders and is incorporated by reference into Item 12 of this Report.
Removed
Stock Repurchase Program We repurchased 1,000 shares in fiscal 2023 and 2,888 shares in fiscal 2022.
Added
Stock Repurchase Program We did not repurchase any shares in fiscal 2024. We repurchased 264 shares in fiscal 2023. The Stock Repurchase Program may be modified or discontinued at any time without notice. 14 Table of Contents
Removed
The Stock Repurchase Program may be modified or discontinued at any time without notice, and our Board of Directors has resolved to forgo stock buybacks for five years if, under Government policies, such a voluntary agreement would result in preferential treatment for grants under the CHIPS and Science Act of 2022. 11 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet deferred tax assets included $71,734 in deferred tax assets for stock-based compensation deductions as of March 31, 2023 and $88,710 as of March 31, 2022. 12 Table of Contents Results of Operations The following table summarizes the percentage of revenue and year-to-year changes for various items for the last two fiscal years: Percentage of Revenue Year- Year Ended March 31, to-Year 2023 2022 Change Revenue Product sales 97.2 % 95.9 % 43.8 % Contract research and development 2.8 % 4.1 % (5.6 ) % Total revenue 100.0 % 100.0 % 41.7 % Cost of sales 21.1 % 23.2 % 28.7 % Gross profit 78.9 % 76.8 % 45.7 % Expenses Research and development 6.8 % 10.8 % (11.7 ) % Selling, general, and administrative 5.1 % 5.5 % 33.6 % Total expenses 11.9 % 16.3 % 3.5 % Income from operations 67.0 % 60.5 % 57.0 % Interest income 3.8 % 4.3 % 23.7 % Income before taxes 70.8 % 64.8 % 54.8 % Provision for income taxes 11.5 % 11.0 % 47.0 % Net income 59.3 % 53.8 % 56.4 % Total revenue for fiscal 2023 increased 42% compared to fiscal 2022 due to a 44% increase in product sales, partially offset by a 6% decrease in contract research and development revenue.
Biggest changeNet deferred tax assets included $101,668 in deferred tax assets for stock-based compensation deductions as of March 31, 2024, and $71,734 as of March 31, 2023. 15 Table of Contents Results of Operations The following table summarizes the percentage of revenue and year-to-year changes for various items for the last two fiscal years: Percentage of Revenue Year Ended March 31, Year- to-Year 2024 2023 Change Revenue Product sales 98.0 % 97.2 % (21.4 )% Contract research and development 2.0 % 2.8 % (44.5 )% Total revenue 100.0 % 100.0 % (22.1 )% Cost of sales 22.7 % 21.1 % (16.0 )% Gross profit 77.3 % 78.9 % (23.7 )% Expenses Research and development 9.2 % 6.8 % 5.7 % Selling, general, and administrative 5.9 % 5.1 % (9.7 )% Credit loss expense 0.0 % - - Total expenses 15.1 % 11.9 % (0.8 )% Income from operations 62.2 % 67.0 % (27.8 )% Interest income 6.5 % 3.8 % 34.5 % Income before taxes 68.7 % 70.8 % (24.5 )% Provision for income taxes 11.2 % 11.5 % (24.0 )% Net income 57.5 % 59.3 % (24.5 )% Total revenue for fiscal 2024 decreased 22% compared to fiscal 2023 due to a 21% decrease in product sales and a 45% decrease in contract research and development revenue.
If any of these conditions and estimates change in the future, or, if different estimates are used, the fair value of the investments may change significantly and could result in other-than-temporary decline in value, which could have an adverse impact on our results of operations. Inventory Valuation Inventories are stated at the lower of cost or net realizable value.
If any of these conditions and estimates change in the future, or, if different estimates are used, the fair value of the investments may change significantly and could result in an other-than-temporary decline in value, which could have an adverse impact on our results of operations. Inventory Valuation Inventories are stated at the lower of cost or net realizable value.
Our inventory reserve was $215,000 as of March 31, 2023 and March 31, 2022. Deferred Tax Assets Estimation In determining the carrying value of our net deferred tax assets, we must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions to realize the benefit of these assets.
Our inventory reserve was $215,000 as of March 31, 2024 and March 31, 2023. Deferred Tax Assets Estimation 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.
In addition to cash dividends to shareholders paid in fiscal 2023, on May 3, 2023, we announced that our Board had declared a cash dividend of $1.00 per share of Common Stock, or $4,830,826 based on shares outstanding as of April 28, 2023, to be paid May 31, 2023.
In addition to cash dividends to shareholders paid in fiscal 2024, on May 1, 2024, we announced that our Board had declared a cash dividend of $1.00 per share of Common Stock, or $4,833,676 based on shares outstanding as of April 26, 2024, to be paid May 31, 2024.
Cash and cash equivalents were $1,669,896 as of March 31, 2023, compared to $10,449,510 as of March 31, 2022.
Cash and cash equivalents were $10,283,550 as of March 31, 2024, compared to $1,669,896 as of March 31, 2023.
We had $572,038 of net deferred tax assets as of March 31, 2023, and $483,469 as of March 31, 2022.
We had $1,453,704 of net deferred tax assets as of March 31, 2024, and $572,038 as of March 31, 2023.
The $8,779,614 decrease in cash and cash equivalents was due to $19,344,004 net cash used in financing activities and $8,527,108 net cash used by investing activities, partially offset by $19,091,498 in net cash provided by operating activities. 13 Table of Contents Operating Activities Net cash provided by operating activities related to product sales and research and development contract revenue as our primary source of working capital for fiscal 2023 and 2022.
The $8,613,654 increase in cash and cash equivalents was due to $18,247,411 of net cash provided by operating activities and $9,580,084 of net cash provided by investing activities, partially offset by $19,213,841 of net cash used in financing activities. 16 Table of Contents Operating Activities Net cash provided by operating activities related to product sales and research and development contract revenue was our primary source of working capital for fiscal 2024 and 2023.
The increase was primarily due to economies of scale from increased production and increased prices, partially offset by increased material and labor costs. Total expenses increased 4% for fiscal 2023 compared to fiscal 2022 due primarily to a 34% increase in selling, general, and administrative expense, partially offset by a 12% decrease in research and development expense.
Total expenses decreased 1% for fiscal 2024 compared to fiscal 2023 due to a 10% decrease in selling, general, and administrative expense, partially offset by a 6% increase in research and development expense. The increase in research and development expense was due to increased new product development activities.
The increase in product sales was primarily due to increased purchases by existing customers, and sales increased in most of our markets and product lines. The decrease in contract research and development revenue was due to the completion of certain contracts. Gross profit as a percentage of revenue increased to 79% for fiscal 2023 from 77% for fiscal 2022.
Gross profit as a percentage of revenue decreased to 77% for fiscal 2024 from 79% for fiscal 2023. The decrease was due to increases in material, labor, and production overhead costs.
Purchases in fiscal 2023 and 2022 were primarily for capital equipment to increase our production throughput and capacity and were financed with cash provided by operating activities. Our capital expenditures can vary significantly from year to year depending on our needs and equipment purchasing opportunities.
Investing Activities Net cash provided by investing activities in fiscal 2024 consisted of $15,700,000 in proceeds from maturities of marketable securities, partially offset by $16,731 of fixed asset purchases and $6,103,185 of marketable securities purchases. Our capital expenditures can vary significantly from year to year depending on our needs, strategic goals, and equipment purchasing opportunities.
Interest income for fiscal 2023 increased 24% due to an increase in our available-for-sale securities and an increase in the average interest rates on those securities. Our effective tax rate for fiscal 2023 decreased to 16% of income before taxes from 17% for fiscal 2022.
The decrease in selling, general, and administrative expense was primarily due to decreased performance-based accruals. Interest income for fiscal 2024 increased 35% due to increased yields on marketable securities purchased in fiscal 2024. Our effective tax rate was 16% for fiscal 2024 and fiscal 2023 compared to the statutory tax rate of 21%.
Net cash provided by operating activities was $19,091,498 for fiscal 2023 and $12,503,679 for fiscal 2022. Accounts receivable increased $1,818,515 primarily due to increased product sales and the timing of sales to customers. Inventory increased $1,328,375 primarily due to our decisions to increase inventories to support increased product sales and to mitigate supply-chain risks.
Net cash provided by operating activities was $18,247,411 for fiscal 2024 compared to $19,091,498 for fiscal 2023. Accounts receivable decreased $3,368,997 during fiscal 2024 due to decreased revenue and the timing of customer payments. Inventory increased $741,575 during fiscal 2024 primarily due to our decision to increase raw material and finished goods inventories in anticipation of a semiconductor industry recovery.
Financing Activities Net cash used in financing activities in fiscal 2023 was due to $19,323,304 in cash dividends to shareholders and $20,700 of common stock repurchases.
Financing Activities Net cash used in financing activities in fiscal 2024 consisted of $19,331,304 of cash dividends paid to shareholders, partially offset by $117,463 in proceeds from the exercise of stock options.
The 56% increase in net income in fiscal 2023 compared to the prior year was primarily due to increased product sales, increased gross profit margin, and increased interest income.
Our lower effective tax rate was primarily due to Federal tax credits and deductions. The 25% decrease in net income for fiscal 2024 compared to the prior year was primarily due to decreased revenue, partially offset by decreased expenses and increased interest income.
Removed
The decrease in research and development expense was primarily due to the reallocation of resources to revenue-generating activities. The increase in selling, general, and administrative expense was primarily due to staffing changes and increased employee compensation.
Added
The decrease in product sales was primarily due to decreased purchases by existing customers due to the downturn in the semiconductor industry. The decrease in contract research and development revenue was due to fewer research and development contracts in fiscal 2024 compared to the prior year.
Removed
The decrease was due to $197,008 in investment tax credits under the CHIPS and Science Act of 2022. Such credits require qualifying investments, and eligibility criteria are subject to changes in Federal tax policies. Therefore, our effective tax rate in fiscal 2023 may not be indicative of the rate for future periods.
Added
This will enable us to quickly respond to sales opportunities and to mitigate supply-chain risks. Accounts payables and accrued expenses decreased $964,152 during fiscal 2024 due to decreased performance-based accrual and the timing of purchases and vendor payments.
Removed
Investing Activities Net cash used in investing activities in fiscal 2023 was due to marketable securities purchases of $28,441,317 and fixed assets purchases of $935,791, partially offset by marketable securities maturations of $20,750,000 and the receipt of a $100,000 tenant-improvement allowance. The $935,791 of fixed asset purchases in fiscal 2023 was a significant increase from $484,579 in fiscal 2022.
Added
We are currently planning $4,000,000 to $5,000,000 of investments during fiscal years 2025 and 2026 to increase our production capacity and capabilities. These plans are subject to change. We expect to finance future capital equipment purchases with a combination of cash provided by operating activities and marketable security maturities.
Added
Labor Practices In the past fiscal year, we significantly increased average pay to attract, retain, and motivate top-performing employees despite a tight labor market. These increased compensation costs are allocated to cost of sales and expenses in our income statements.

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