**EXHIBIT 99**

 

**CAUTIONARY STATEMENTS FOR PURPOSES OF THE “SAFEHARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT**

 

NVE Corporation is filing this Exhibit 99to its Annual Report on Form 10-KSB to avail itself of the “safe harbor”provisions of the Private Securities Litigation Reform Act of 1995. When usedin this Annual Report on Form 10-KSB, future filings with the Securitiesand Exchange Commission, press releases and in oral statements made with theapproval of an authorized executive officer, the words may, will, expect,anticipate, intend, believe, estimate, should, or continue or the negatives ofthese terms or other variations on these words or comparable terminology areintended to identify “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. These types of statements andthe facts or events to which they relate express risks and uncertainties thatcould cause actual results to differ materially from historical financialcondition, operating results, business prospects or any other aspect of NVE,and those presently anticipated or projected. We caution readers that thefollowing important factors, among others, could affect our financialcondition, operating results, business prospects or any other aspect of NVE,and could cause our actual results to differ materially from that projected orestimated by us in the forward-looking statements made by us or on our behalf.Although we have attempted to list below the important factors which do or mayaffect our financial condition, operating results, business prospects or anyother aspect of NVE, other factors may in the future prove to be moreimportant. New factors emerge from time to time and it is not possible for usto predict all of such factors. Similarly, we cannot necessarily assess orquantify the impact of each such factor on the business or the extent to whichany factor, or combination of factors, may cause actual results to differmaterially from those contained in forward-looking statements.

 

**RISKS RELATED TO OURBUSINESS**

 

**We rely on governmentcontracts for a large percentage of our revenue and we will lose revenue ifgovernment funding is reduced or eliminated.**

During fiscal 2005 United Statesgovernment contracts accounted for the majority of our revenue. Certain Federalbudget proposals have included less than an inflationary increase for overallresearch and development funding, and a reduction in dollar terms in theNational Nanotechnology Initiative. Furthermore, government research anddevelopment funding may move away from basic research, which is the area wheremost of our contracts are classified, toward near-term development.Disqualification as a vendor to the United States government for any reason ora material decrease in government funding research would cause serious setbacksand would likely hamper both future research and development activity, as wellas related revenue.

 

**Failure to qualify as asmall business under federal regulations could make us ineligible for somegovernment-funded research grants which could have a significant impact on ourrevenue and our ability to make research and development progress.**

Federal regulations place a number ofcriteria for a business to be eligible to compete for Small Business InnovationResearch (SBIR) awards. Those criteria include number of employees andownership structure. While we believe we meet the criteria, changes in ourownership beyond our control could cause us to lose our eligibility to competefor SBIR awards, which in turn could have a material adverse effect on ourrevenue, profits, and research and development efforts.

 

**We may lose revenue ifany of our large customers cancel, postpone, or reduce their purchases.**

We rely on several large customers for alarge percentage of our revenue; these include Agilent Technologies, Inc.,St. Jude Medical, Inc., the United States Government, and certaindistributors. Orders from these customers can be cancelled, postponed, orreduced without cause or notice, and the loss of any of these customers couldhave a significant impact on our revenue and our profitability.

 

**We face an uncertaineconomic environment in our industry that could adversely affect our businessand operations.**

Industry reports indicated a suddendownturn in the semiconductor market in the final months of calendar 2004.Economic conditions appear to have improved in calendar 2005, but conditionscould change suddenly. Any future downturn in the economic environment wouldlikely have a material adverse impact on our business and revenue.

 

**Our reputation could bedamaged and we could lose revenue if we fail to meet technical challengesrequired to produce marketable products.**

Our products use new technology and we arecontinually researching and developing product designs and productionprocesses. Our production processes require control of magnetic and otherparameters that are not required in conventional semiconductor processes. If weare unable to develop stable designs and production processes we may not beable to produce products that meet our customers’ requirements, which couldcause damage to our reputation and loss of revenue.

 

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**We may lose business andrevenue if our critical production equipment fails.**

Our production process relies on certaincritical pieces of equipment for defining, depositing, and modifying themagnetic properties of very thin metal films. Some of this equipment wasdesigned or customized by us, and some may no longer be in production. While wehave back-ups for some of the equipment, an in-house maintenance staff, somecritical spare parts, and maintenance agreements for certain pieces ofequipment, we cannot be sure we could repair or replace critical manufacturingequipment were it to fail.

 

**Our failure to meetstringent customer technical requirements could result in the loss of keycustomers and potentially reduce our sales.**

Some of our customers, including Agilentand St. Jude Medical, have stringent technical requirements which require ourproducts to pass certain test and qualification criteria before they areaccepted by such customers. Failure to meet those criteria could result in theloss of current sales revenue, customers and future sales.

 

**If we are unable todeliver products we face penalties, including loss of certain exclusivemanufacturing rights.**

Our Agilent supply agreement allowsAgilent to gain rights to manufacture couplers based on our technology if weare unable to deliver products on time. The imposition of this penalty couldhave a material impact on future sales of our products. Furthermore, onreaching certain sales goals, Agilent could gain exclusive rights to distributecertain couplers based on our technology, which could reduce our product salesand leave us partially or totally dependent on Agilent for future couplersales.

 

**The loss of supply fromany of our key single-source wafer suppliers could impact our ability toproduce and deliver products and cause loss of revenue.**

Critical suppliers include our suppliersof certain semiconductor wafers that are incorporated in our products. Thesecritical suppliers include Advanced Semiconductor Manufacturing Corporation ofShanghai (China), AMI Semiconductor, Inc., Intersil Corporation, TaiwanSemiconductor Manufacturing Corporation, and Texas Instruments Inc. We maintaininventory of some critical wafers, but we have not identified or qualifiedalternate suppliers for many of the wafers now being obtained from singlesources.

 

**The loss of supply fromany of our single-source packaging vendors could impact our ability to produceand deliver products and cause loss of revenue.**

We are dependent on our packaging vendorsincluding NS Electronics Bangkok (Thailand), Ltd., and Circuit ElectronicIndustries Public Co., Ltd. (“CEI,” Ayutthaya, Thailand). Some of our productsuse processes or tooling unique to a particular packaging vendor, and it mightbe expensive, time-consuming, or impractical to convert to another vendor inthe event of a supply interruption. CEI has notified us that it has enteredvoluntary debt rehabilitation under Thailand law, which we understand to beroughly analogous to a reorganization proceeding under Chapter 11 of the U.S.Bankruptcy Code. CEI has told us that the rehabilitation process will notaffect their ability to support their customers in any way. We have identifiedan alternate vendor in case CEI’s ability to serve our needs becomes impaired,however it could prove expensive or time-consuming to convert to an alternatevendor. Any supply interruptions could seriously jeopardize our ability toprovide products that are critical to our business and operations that maycause us to lose revenue.

 

**Because we aresignificantly smaller than the majority of our competitors, we may lack thefinancial resources needed to increase our market share and future revenue.**

Our known competitors and potentialcompetitors include Advanced Micro Devices, Inc., Agilent Technologies, Inc.,Allegro Microsystems, Inc., Analog Devices, Inc., Coatue, CypressSemiconductor Corporation, Elpida Memory, Inc., Fairchild SemiconductorInternational, Fujitsu Limited, Grandis, Inc., IBM Corporation, InfineonTechnologies AG, Intel Corporation, Linear Technology Inc., MacronixInternational Co., Ltd., Maxim Integrated Products, Inc., Nantero, Inc.,NEC Corporation, Ovonyx, Inc., Ramtron International Corporation, RenesasTechnology Corporation, Royal Philips Electronics, Samsung Electronics, Ltd.,Sensitec GmbH, Simtek Corporation, Spintec, Spintron,STMicroelectronics NV, Texas Instruments Inc., Thin Film Electronics ASA,Toshiba Corporation, Vishay Intertechnology, and others. We believe that weface particularly aggressive competition in our coupler business, and webelieve that our competition is increasing as the technology matures. This hasmeant more competitors and more severe pricing pressure. Furthermore, ourcompetitors are narrowing or eliminating performance advantages we may havehad. We expect these trends to continue, and our future competitiveness willdepend on our ability to develop new products and reduce our product costs.Most of our competitors and potential competitors are established companiesthat have significantly greater financial, technical, and marketing resourcesthan us. While we believe that our products have important competitive advantages,our competitors may succeed in developing and marketing products that performbetter or are less expensive than ours, or that would render our products andtechnology obsolete or noncompetitive.

 

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**Our license agreementsinclude revenue minimums and royalty limits, which could limit the total amountof revenue we can derive under these agreements.**

Our existing license agreements do notprovide for us to receive royalties until revenue minimums are met bylicensees. In addition, some of these agreements place limits on future royaltyand license payments. These provisions could substantially delay our potentialrevenue and profits from these licensing arrangements and could limit the totalamount of revenue that we can derive under these license agreements. Suchlimits are common practice in our industry, but they could limit our potentialMRAM revenue and profits even if our intellectual property is widely adopted.

 

**Our business may sufferbecause we have limited influence over the rate of adoption of our technology,and MRAM technology may not build into a large or significant market.**

A significant portion of our futurerevenue and profits is dependent on our current and future licenseesintroducing MRAM products. Production difficulties, technical barriers, highproduction costs, poor market reception or other problems, almost all of whichare outside our control, could prevent the deployment of MRAM or limit itsmarket potential. In addition, our licensees may have other priorities thatdetract attention and resources from introduction of MRAM products using ourtechnology. Furthermore, competing technologies could prevent or supplant MRAMfrom becoming an important memory technology.

 

**Our licensees may not beable to make commercially viable MRAMs, which would limit our revenue from MRAMand likely cause our stock price to decline.**

MRAM is a new technology, and we arealmost completely dependent on licensees to convert our intellectual propertyinto commercially viable MRAM. While our licensees have made samples, there maybe technical and manufacturing issues to be resolved before commercially viabledevices can be produced, and these problems may never successfully be solved.In 2004 Motorola, Inc. separated its semiconductor products sector asFreescale Semiconductor, Inc. Freescale has said it expects to be inproduction with MRAM products in 2005, but any delays could have a materialimpact on our potential MRAM license revenue.

 

**We are highly dependenton Motorola or Freescale to combine our MRAM technology with conventionalsemiconductors and we may lose potential revenue if Motorola or Freescale areunsuccessful.**

Embedded MRAM, that is, MRAM combined withconventional semiconductors, is a major market for MRAM and our primarypotential source of royalties from Motorola. We are highly dependent on thesuccess of Motorola or Freescale embedding MRAM into cellphone and systemintegrated circuits. Technical difficulties with embedding, productiondifficulties, high production costs, or other problems, almost all of which areoutside our control, could limit our potential MRAM royalties under our licenseagreement with Motorola.

 

**Freescale could cancelits MRAM development program at any time, which would reduce our future revenuepotential.**

Freescale could cancel its MRAMdevelopment programs at any time because of financial or other considerations.Such a cancellation would likely eliminate our opportunity to negotiate alicense agreement with Freescale or receive royalties from the sale of devicesunder our agreements with Motorola. Furthermore, we believe RoyalPhilips Electronics and STMicroelectronics NV are dependent on Freescale for their MRAM designs. Therefore a cancellation or lack of success of Freescale’s MRAM programswould likely hamper or eliminate any opportunity to negotiate licenseagreements with Philips or STMicroelectronics.

 

**Our future business maysuffer because we may not be able to consummate additional MRAM licenseagreements**.

Although there are potential licensees forour MRAM intellectual property in addition to our current licensees, we maynever be able to consummate additional license agreements. Potential licenseesfor our MRAM intellectual property might not be interested unless and until thecommercial viability of the technology is demonstrated. Potential licenseescould also use their own or a third party’s MRAM intellectual property ratherthan ours. In addition, our existing agreements place restrictions on futurelicense agreements. Specifically, one of our agreements allows one of ourlicensees to approve licenses with certain other potential licensees. Each ofthese limitations could hinder our ability to consummate additional MRAMlicense agreements.

 

**We will not receiveroyalties if our licensees do not use our intellectual property**.

Our license agreements do not require ourlicensees to use our intellectual property. Although we believe, based on theirpublic disclosures, that devices Freescale and Motorola have described use ourintellectual property at least to some extent, our licensees could circumventor find alternatives to all or some of our technology, and our licenseagreements require royalty payments only if our licensees use our intellectualproperty in their devices. It is possible that our licensees might make MRAMdevices without using our technology or infringing on our patents, and we wouldnot receive royalties on such devices.

 

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**We may not be able toenforce our intellectual property rights or our technology may prove toinfringe upon patents or rights owned by others which may prevent the futuresale of our products or increase the cost of such sales.**

We protect our proprietary technology andintellectual property by seeking patents, trademarks, and copyrights, and bymaintaining trade secrets through entering into confidentiality agreements withemployees, suppliers, customers, and prospective customers depending on thecircumstances. We hold patents or are the licensee of others owning patentedtechnology covering certain aspects of our sensor, coupler, and MRAMtechnology. These patent rights may be challenged, rendered unenforceable,invalidated or circumvented. In addition, rights granted under the patents orunder licensing agreements may not provide a competitive advantage to us. Atleast several potential MRAM competitors have described designs that we believewould infringe on our patents if such designs were to be commercialized.Efforts to legally enforce patent rights can involve substantial expense whichwe may not be able to afford and in any case may not be successful. Further,others may independently develop similar, superior, or parallel technologies toany technology developed by us, or our technology may prove to infringe uponpatents or rights owned by others. Thus the patents held by or licensed to usmay not afford us any meaningful competitive advantage. Also, ourconfidentiality agreements may not provide meaningful protection of ourproprietary information. Our inability to maintain our proprietary rights couldhave a material adverse effect on our business, financial condition and resultsof operations.

 

**Our future business maysuffer if we are unable to enforce our intellectual property rights withexisting licensees.**

Our success in enforcing our intellectualproperty rights may be dependent on our ability to enforce our contract rightsunder existing license agreements. Our existing licensees could claim withoutmerit that they do not use our intellectual property or claim that one or moreof our patents are invalid. In 2000 we were forced to resort to litigation toenforce our intellectual property rights with Motorola, and we plan to continueto vigorously defend our intellectual property rights. Our limited capitalresources could put us at a disadvantage if we take legal action to enforce ourintellectual property rights.

 

**We may not be able tonegotiate a new MRAM licensing agreement with Freescale.**

Our Patent License Option Agreement withMotorola provides for termination December 31, 2005 or on the dateMotorola ceases manufacturing MRAM Products whichever is later. Such atermination appears likely as a result of Motorola apparently having eliminatedits ability to manufacture MRAM Products through its spinoff of Freescale. Weare free to negotiate a new agreement with Freescale or an assignment of theMotorola Patent License Option Agreement to Freescale, but would do so onlywith amendments thereto. There can be no assurance, however, that any suchagreement can be reached with Freescale, or that any such agreement with Freescalewould be on more favorable terms to NVE than the present agreement withMotorola, or that NVE would receive any value under the existing Patent LicenseOption Agreement or any value under any such further agreement with Freescale.

 

**Motorola may attempt tohave MRAM manufactured by Freescale for Motorola under our agreement withMotorola, which could be under less favorable terms for us than an agreementwith Freescale.**

Motorola has indicated to us that it mayattempt to have MRAMs manufactured by Freescale for Motorola under theso-called “have made” rights in our agreement with Motorola. We believeMotorola will likely have terminated this agreement and so relinquish itshave-made rights at the end of 2005, as a result of having transferred its MRAMmanufacturing capability to Freescale. We hope to, before then, negotiate a newagreement with Freescale, or an assignment of the Motorola agreement toFreescale, though only with amendments thereto, but there can be no assurancesthat we will complete such an agreement or assignment.

 

**Our business success maybe adversely affected if we are unable to attract and retain highly-qualifiedmanagement and technical employees.**

We have no employment agreements with anyof our management other than our Chief Executive Officer, Dr. Baker, andhave no key-person insurance covering employees. Competition forhighly-qualified management and technical personnel is generally intense and wemay not be able to attract and retain the personnel necessary for thedevelopment and operation of our business. The loss of the services of keypersonnel could have a material adverse effect on our business, financialcondition and results of operations. Our Chief Technology Officer, Dr. Daughton,could decide to retire in Fiscal 2006 and we may not be able to replace histechnical or contract development expertise.

 

**While we believe that wecurrently have adequate internal control over financial reporting in place, inthe future our management may be required to evaluate our internal control overfinancial reporting under Section 404 of the Sarbanes-Oxley act of 2002and any adverse results from such evaluation could result in a loss of investorconfidence in our financial reports and have an adverse affect on our financialresults and the market price of our common stock.**

As required by Section 404 of theSarbanes-Oxley Act of 2002 (“Section 404”), the SEC adopted rules requiringeach public company to include a management report assessing the effectivenessof its internal control over financial reporting in Annual Reports on Form 10-KSBor 10-K, and the independent registered public accounting firm auditing suchcompany’s financial statements must attest to and report on management’sassessment of the effectiveness of the internal control over financialreporting. This requirement could apply to our Annual Report for the fiscalyear ending March 31, 2007. While we currently

 

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anticipate being able to fully implementthe requirements relating to compliance with Section 404 in a timelyfashion, we cannot be certain as to the timing of completion of our evaluation,testing and remediation actions or the impact of such activities on ouroperations due in large part to the lack of precedent available by which tomeasure compliance with such requirements. If we are not able to implement therequirements of Section 404 in a timely manner or with adequatecompliance, investors could lose confidence in the reliability of our financialstatements, which could result in a decrease in the market price of our commonstock. In addition, to the extent we or our independent registered publicaccounting firm identify a significant deficiency in our internal control overfinancial reporting, the resources and costs required to remediate suchdeficiency could have a material adverse impact on our future results ofoperations.

 

**RISKS RELATED TO BUYINGOUR STOCK**

 

**Our stock has been morevolatile than other technology sector stocks.**

The market price of our common stock hasexperienced significant fluctuations and may continue to fluctuate in thefuture. We believe these fluctuations have been greater on a percentage basisthan other technology sector stocks.

 

**Our stock may be subjectto volatility because it is not listed on a national market.**

Our common stock is traded on the NASDAQSmallCap Market, which has less daily trading volume on average than theaverage trading market for companies quoted on the NASDAQ National Market orthe New York Stock Exchange. A public trading market having the desired characteristicsof depth, liquidity and orderliness depends on the presence in the marketplaceof willing buyers and sellers of our common stock at any given time. Thispresence depends on the individual decisions of investors and general economicand market conditions over which we have no control.

 

**The price of our commonstock may be adversely affected by significant price fluctuations due to anumber of factors, many of which are beyond our control.**

Our stock price declined significantly inthe past fiscal year, and could continue to decline. In the past,securities class-action litigation has often been brought against a companyfollowing periods of decline in the market price of its securities. In thefuture we could be the target of this type of litigation. Securities litigationmay result in substantial costs and divert management’s attention andresources, which can seriously harm our business.

 

The market price of our common stock maybe significantly affected by many factors, some of which are beyond our control,including:

•                  technological innovations by us, our licensees, or ourcompetitors;

 

•                  the announcement of new products, product enhancements, contracts,or license agreements by us, our licensees, or our competitors;

 

•                  changes in requirements or demands for our products;

 

•                  changes in prices of our or our competitors’ products andservices;

 

•                  quarterly variations in our operating results;

 

•                  changes in our revenue and revenue growth rates;

 

•                  changes in revenue estimates, earnings estimates, or marketprojections by market analysts, speculation in the press or analyst community;

 

•                  short selling and covering of short positions in our stock; and

 

•                  general market conditions or market conditions specific toparticular industries.

 

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