EDEN PRAIRIE, Minn.--January 18, 2006--NVE Corporation (Nasdaq: NVEC) today announced financial results for the quarter and nine months ended December 31, 2005.

Product sales for the quarter increased 56% over the prior year to $1.74 million from $1.12 million. Total revenue, consisting of product sales and contract research and development revenue, increased 2% to $2.61 million for the third quarter of fiscal 2006 compared to $2.56 million in the prior-year quarter. Income before taxes for the quarter was $614,664 or $0.13 per diluted share, compared to $375,172 or $0.08 per diluted share for the prior-year quarter. After the effect of a provision for income taxes of $213,279, net income for the third quarter of fiscal 2006 was $401,385 or $0.09 per diluted share, compared to $375,172 or $0.08 per diluted share in the third quarter of fiscal 2005.

Product sales in the first nine months of fiscal 2006 increased 41% to $5.55 million from $3.93 million for the first nine months of fiscal 2005. Total revenue was $8.69 million for the first nine months of fiscal 2006 compared to $8.54 million for the first nine months of fiscal 2005. Income before taxes for the first nine months of fiscal 2006 was $1.86 million or $0.40 per diluted share, compared to $1.28 million or $0.26 per diluted share for the prior-year period. After the effect of a provision for income taxes of $684,284, net income for the first nine months of fiscal 2006 was $1.18 million or $0.25 per diluted share, compared to $1.28 million or $0.26 per diluted share in the prior nine-month period.

"We are pleased with the increase in product sales and our solid profitability in the quarter," said NVE President and Chief Executive Officer Daniel A. Baker, Ph.D. "Pretax income improved to 24% of revenue for the quarter, driven by an increase in gross profit margin to 50% from 39% compared to the prior-year quarter. Our cash plus investments is approaching $10 million as we continue to build liquidity."

NVE is a leader in the practical commercialization of spintronics, a nanotechnology that many experts believe represents the next generation of microelectronics. NVE licenses its MRAM intellectual property and sells spintronic sensors and couplers to revolutionize data sensing and transmission.

Statements used in this press release that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties including, among others, such factors as risks in continued profitability, risks associated with our reliance on several large customers, as well as the risk factors listed from time to time in our filings with the SEC, including our Annual Report on Form 10-KSB and other reports filed with the SEC.

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NVE CORPORATION STATEMENTS OF INCOME QUARTERS AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004 (Unaudited) Quarter Ended December 31 2005 2004 ------------ ------------ Revenue Product sales $ 1,742,163 $ 1,118,210 Contract research and development 868,119 1,440,262 ------------ ------------ Total revenue 2,610,282 2,558,472 Cost of sales 1,308,752 1,570,826 ------------ ------------ Gross profit 1,301,530 987,646 Expenses Research and development 342,616 257,284 Selling, general, and administrative 434,183 437,839 ------------ ------------ Total expenses 776,799 695,123 ------------ ------------ Income from operations 524,731 292,523 Interest income 88,168 60,177 Interest expense (1,336) (2,796) Other income 3,101 25,268 ------------ ------------ Income before taxes 614,664 $ 375,172 Provision for income taxes 213,279 - ------------ ------------ Net income $ 401,385 $ 375,172 ============ ============ Net income per share - basic $ 0.09 $ 0.08 ============ ============ Net income per share - diluted $ 0.09 $ 0.08 ============ ============ Weighted average shares outstanding Basic 4,576,454 4,501,345 Diluted 4,677,712 4,883,402 Nine Months Ended December 31 2005 2004 ------------ ------------ Revenue Product sales $ 5,548,085 $ 3,931,402 Contract research and development 3,139,667 4,612,011 ------------ ------------ Total revenue 8,687,752 8,543,413 Cost of sales 4,617,543 5,157,504 ------------ ------------ Gross profit 4,070,209 3,385,909 Expenses Research and development 1,237,355 925,136 Selling, general, and administrative 1,238,757 1,404,083 ------------ ------------ Total expenses 2,476,112 2,329,219 ------------ ------------ Income from operations 1,594,097 1,056,690 Interest income 233,606 173,543 Interest expense (5,084) (10,858) Other income 39,667 62,766 ------------ ------------ Income before taxes 1,862,286 1,282,141 Provision for income taxes 684,284 - ------------ ------------ Net income $ 1,178,002 $ 1,282,141 ============ ============ Net income per share - basic $ 0.26 $ 0.29 ============ ============ Net income per share - diluted $ 0.25 $ 0.26 ============ ============ Weighted average shares outstanding Basic 4,573,173 4,497,919 Diluted 4,674,431 4,879,976 NVE CORPORATION BALANCE SHEETS DECEMBER 31, 2005 AND MARCH 31, 2005 (Unaudited) December 31 March 31 2005 2005 ------------- -------------- ASSETS Current assets Cash and cash equivalents $ 1,111,009 $ 1,240,205 Short-term investments 998,205 252,775 Accounts receivable, net of allowance for uncollectible accounts of $15,000 1,741,367 2,285,472 Inventories 2,033,941 1,572,759 Deferred tax assets 1,042,877 756,074 Prepaid expenses and other assets 138,311 130,873 -------------- -------------- Total current assets 7,065,710 6,238,158 Fixed assets Machinery and equipment 4,122,662 4,140,307 Leasehold improvements 413,482 413,482 -------------- -------------- 4,536,144 4,553,789 Less accumulated depreciation 3,205,085 2,826,227 -------------- -------------- Net fixed assets 1,331,059 1,727,562 Long-term investments 7,669,263 6,224,284 -------------- -------------- Total assets $ 16,066,032 $ 14,190,004 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 270,447 $ 319,427 Accrued payroll and other 503,991 465,930 Deferred revenue 99,015 267,355 Capital lease obligations 50,685 67,430 -------------- -------------- Total current liabilities 924,138 1,120,142 Capital lease obligations, less current portion - 33,281 -------------- -------------- Total liabilities 924,138 1,153,423 Shareholders' equity: Common stock 45,765 45,698 Additional paid-in capital 14,983,963 14,064,625 Accumulated other comprehensive loss (124,322) (132,228) Retained earnings (deficit) 236,488 (941,514) -------------- -------------- Total shareholders' equity 15,141,894 13,036,581 -------------- -------------- Total liabilities and shareholders' equity $ 16,066,032 $ 14,190,004 ============== ==============