EDEN PRAIRIE, Minn.--October 18, 2006--NVE Corporation (Nasdaq: NVEC) today announced financial results for the quarter and six months ended September 30, 2006.

Product sales for the quarter increased 87% over the prior-year quarter to $3.78 million from $2.02 million. Total revenue, consisting of product sales and contract research and development revenue, increased 44% to $4.40 million for the second quarter of fiscal 2007 from $3.05 million in the prior-year quarter. Net income for second quarter fiscal 2007 was $1.28 million, or $0.27 per diluted share compared to $363,968, or $0.08 per diluted share, for the prior-year quarter.

For the first six months of fiscal 2007, product sales increased 79% to $6.83 million from $3.81 million for the first six months of fiscal 2006. Total revenue increased 32% to $8.03 million for the first half of fiscal 2007 from $6.08 million for the prior-year period. Net income for the first half of fiscal 2007 was $2.18 million, or $0.45 per diluted share compared to $776,617, or $0.17 per diluted share, for the first half of fiscal 2006.

Net income for the quarter and six months ended September 30, 2006 included the effects of non-cash stock-based compensation due to the implementation of SFAS 123(R). This expense, net of tax, amounted to $78,402, or $0.02 per diluted share, in the second quarter of fiscal 2007 and $80,971, or $0.02 per share, in the first six months of fiscal 2007. Net income for fiscal 2007 and 2006 also includes primarily non-cash provisions for income taxes recognized in accordance with SFAS 109.

"We are pleased with our financial results in the second quarter," said NVE President and Chief Executive Officer Daniel A. Baker, Ph.D. "Strong product sales drove record revenues and profits. NVE's gross profit margin increased to 67%, our eighth consecutive quarter of sequential increase, and our operating margin increased to 42%."

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-K and other reports filed with the SEC.

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NVE CORPORATION STATEMENTS OF INCOME QUARTERS AND SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (Unaudited) Quarter Ended September 30 2006 2005 ------------ ------------ Revenue Product sales $ 3,777,060 $ 2,021,672 Contract research and development 621,308 1,030,250 ------------ ------------ Total revenue 4,398,368 3,051,922 Cost of sales 1,439,181 1,627,673 ------------ ------------ Gross profit 2,959,187 1,424,249 Expenses Research and development 566,246 517,939 Selling, general, and administrative 535,213 394,980 ------------ ------------ Total expenses 1,101,459 912,919 ------------ ------------ Income from operations 1,857,728 511,330 Interest income 149,440 77,119 Interest expense - (1,695) Other income 25,246 5,751 ------------ ------------ Income before taxes 2,032,414 592,505 Provision for income taxes 748,943 228,537 ------------ ------------ Net income $ 1,283,471 $ 363,968 ============ ============ Net income per share - basic $ 0.28 $ 0.08 ============ ============ Net income per share - diluted $ 0.27 $ 0.08 ============ ============ Weighted average shares outstanding Basic 4,616,819 4,573,168 Diluted 4,791,160 4,679,335 Supplemental financial data Non-cash stock-based compensation $ 117,467 $ - Non-cash income tax expense $ 748,943 $ 217,537 Six Months Ended Sept. 30 2006 2005 ------------ ------------ Revenue Product sales $ 6,830,388 $ 3,805,922 Contract research and development 1,203,175 2,271,548 ------------ ------------ Total revenue 8,033,563 6,077,470 Cost of sales 2,839,002 3,308,791 ------------ ------------ Gross profit 5,194,561 2,768,679 Expenses Research and development 1,096,858 894,739 Selling, general, and administrative 941,945 804,574 ------------ ------------ Total expenses 2,038,803 1,699,313 ------------ ------------ Income from operations 3,155,758 1,069,366 Interest income 261,346 145,438 Interest expense (589) (3,748) Other income 25,246 36,566 ------------ ------------ Income before taxes 3,441,761 1,247,622 Provision for income taxes 1,266,484 471,005 ------------ ------------ Net income $ 2,175,277 $ 776,617 ============ ============ Net income per share - basic $ 0.47 $ 0.17 ============ ============ Net income per share - diluted $ 0.45 $ 0.17 ============ ============ Weighted average shares outstanding Basic 4,616,704 4,571,524 Diluted 4,791,046 4,677,691 Supplemental financial data Non-cash stock-based compensation $ 120,036 $ - Non-cash income tax expense $ 1,222,184 $ 458,005 NVE CORPORATION BALANCE SHEETS SEPTEMBER 30, 2006 AND MARCH 31, 2006 (Unaudited) Sept. 30, 2006 March 31, 2006 -------------- -------------- ASSETS Current assets Cash and cash equivalents $ 363,268 $ 1,288,362 Short-term investments 250,100 1,248,103 Accounts receivable, net of allowance for uncollectible accounts of $15,000 2,141,414 1,667,029 Inventories 2,248,131 2,149,769 Deferred tax assets 1,589,584 1,576,472 Prepaid expenses and other assets 238,343 231,412 -------------- -------------- Total current assets 6,830,840 8,161,147 Fixed assets Machinery and equipment 4,372,765 4,149,080 Leasehold improvements 413,482 413,482 -------------- -------------- 4,786,247 4,562,562 Less accumulated depreciation 3,575,625 3,319,651 -------------- -------------- Net fixed assets 1,210,622 1,242,911 Long-term investments 13,075,943 8,354,861 -------------- -------------- Total assets $ 21,117,405 $ 17,758,919 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 272,300 $ 399,762 Accrued payroll and other 419,206 470,392 Deferred revenue 39,107 77,373 Capital lease obligations - 33,281 -------------- -------------- Total current liabilities 730,613 980,808 Shareholders' equity Common stock 46,170 46,150 Additional paid-in capital 17,425,642 16,042,637 Accumulated other comprehensive loss (116,529) (166,908) Retained earnings 3,031,509 856,232 -------------- -------------- Total shareholders' equity 20,386,792 16,778,111 -------------- -------------- Total liabilities and shareholders' equity $ 21,117,405 $ 17,758,919 ============== ==============