EDEN PRAIRIE, Minn.--October 19, 2005--NVE Corporation (Nasdaq: NVEC) today announced financial results for the quarter and six months ended September 30, 2005.

Product sales for the quarter increased 39% over the prior year to $2.02 million from $1.45 million. Total revenue, consisting of product sales and contract research and development revenue, declined 1% to $3.05 million for the second quarter of fiscal 2006 compared to $3.10 million in the prior-year quarter. Income before taxes for the quarter was $592,505 or $0.13 per diluted share, compared to $423,298 or $0.09 per diluted share for the prior-year quarter. After the effect of a provision for income taxes of $228,537, net income for the second quarter of fiscal 2006 was $363,968 or $0.08 per diluted share.

Product sales in the first half of fiscal 2006 increased 35% to $3.81 million from $2.81 million for the first half of fiscal 2005. Total revenue was $6.08 million for the first half of fiscal 2006 compared to $5.98 million for the first half of fiscal 2005. Income before taxes for the first half of fiscal 2006 was $1.25 million or $0.27 per diluted share, compared to $906,969 or $0.18 per diluted share for the prior-year period. After the effect of a provision for income taxes of $471,005, net income for the first half of fiscal 2006 was $776,617 or $0.17 per diluted share.

"We are pleased to report another quarter of solid product sales and profits," said NVE President and Chief Executive Officer Daniel A. Baker, Ph.D. "Gross margins increased to 47% from 37% due to a more profitable revenue mix and higher product margins. Pretax margin improved to 19%. Our cash plus investments increased to $9.39 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 products, including 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, uncertainties relating to MRAM production by our licensees, risks in the enforcement of our patents, uncertainties related to the awarding of future government contracts, risks related to our dependence on certain suppliers, 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 SIX MONTHS ENDED SEPTEMBER 30, 2005 AND 2004 (Unaudited) Quarter Ended September 30 2005 2004 ------------ ------------ Revenue Product sales $ 2,021,672 $ 1,450,052 Contract research and development 1,030,250 1,645,662 ------------ ------------ Total revenue 3,051,922 3,095,714 Cost of sales 1,627,673 1,960,797 ------------ ------------ Gross profit 1,424,249 1,134,917 Expenses Research and development 517,939 306,593 Selling, general, and administrative 394,980 481,648 ------------ ------------ Total expenses 912,919 788,241 ------------ ------------ Income from operations 511,330 346,676 Interest income 77,119 58,497 Interest expense (1,695) (3,605) Other income 5,751 21,730 ------------ ------------ Income before taxes 592,505 $ 423,298 Provision for income taxes 228,537 - ------------ ------------ Net income $ 363,968 $ 423,298 ============ ============ Net income per share - basic $ 0.08 $ 0.09 ============ ============ Net income per share - diluted $ 0.08 $ 0.09 ============ ============ Weighted average shares outstanding Basic 4,573,168 4,499,180 Diluted 4,679,335 4,932,500 Six Months Ended Sept. 30 2005 2004 ------------ ------------ Revenue Product sales $ 3,805,922 $ 2,813,192 Contract research and development 2,271,548 3,171,749 ------------ ------------ Total revenue 6,077,470 5,984,941 Cost of sales 3,308,791 3,586,678 ------------ ------------ Gross profit 2,768,679 2,398,263 Expenses Research and development 894,739 667,852 Selling, general, and administrative 804,574 966,244 ------------ ------------ Total expenses 1,699,313 1,634,096 ------------ ------------ Income from operations 1,069,366 764,167 Interest income 145,438 113,366 Interest expense (3,748) (8,062) Other income 36,566 37,498 ------------ ------------ Income before taxes 1,247,622 906,969 Provision for income taxes 471,005 - ------------ ------------ Net income $ 776,617 $ 906,969 ============ ============ Net income per share - basic $ 0.17 $ 0.20 ============ ============ Net income per share - diluted $ 0.17 $ 0.18 ============ ============ Weighted average shares outstanding Basic 4,571,524 4,495,442 Diluted 4,677,691 4,928,762 NVE CORPORATION BALANCE SHEETS SEPTEMBER 30, 2005 AND MARCH 31, 2005 (Unaudited) September 30, March 31, 2005 2005 -------------- --------------- ASSETS Current assets Cash and cash equivalents $ 1,696,519 $ 1,240,205 Short-term investments 1,000,145 252,775 Accounts receivable, net of allowance for uncollectible accounts of $15,000 1,974,299 2,285,472 Inventories 1,681,660 1,572,759 Deferred tax assets 810,038 756,074 Prepaid expenses and other assets 117,791 130,873 -------------- -------------- Total current assets 7,280,452 6,238,158 Fixed assets Machinery and equipment 4,102,089 4,140,307 Leasehold improvements 413,482 413,482 -------------- -------------- 4,515,571 4,553,789 Less accumulated depreciation 3,066,060 2,826,227 -------------- -------------- Net fixed assets 1,449,511 1,727,562 Long-term investments 6,695,794 6,224,284 -------------- -------------- Total assets $ 15,425,757 $ 14,190,004 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 386,481 $ 319,427 Accrued payroll and other 505,063 465,930 Deferred revenue 139,504 267,355 Capital lease obligations 67,719 67,430 -------------- -------------- Total current liabilities 1,098,767 1,120,142 Capital lease obligations, less current portion - 33,281 -------------- -------------- Total liabilities 1,098,767 1,153,423 Shareholders' equity: Common stock 45,765 45,698 Additional paid-in capital 14,550,876 14,064,625 Accumulated other comprehensive loss (104,754) (132,228) Accumulated deficit (164,897) (941,514) -------------- -------------- Total shareholders' equity 14,326,990 13,036,581 -------------- -------------- Total liabilities and shareholders' equity $ 15,425,757 $ 14,190,004 ============== ==============