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| **Minnesota**                                               | **41-1424202**                      |
|-------------------------------------------------------------|-------------------------------------|
| State or other jurisdiction of incorporationor organization | (I.R.S.Employer Identification No.) |
|                                                        |
| **11409 Valley View Road, Eden Prairie, Minnesota**         | **55344**                           |
| (Address of principal executive offices)                    | (ZipCode)                           |

|                          Titleof each class                                  | Name of each exchange on which registered |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|
| **Common stock, $0.01 par value (“Common Stock”)**                                                                                                                                                                                                                                                                                                                   | **The NASDAQ Stock Market, LLC**          |

|      Large accelerated filer [   ]                                                                                    | Acceleratedfiler [X]                                |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------|
|      Non-accelerated filer [   ] (Donot check if a smaller reporting company)      | Smallerreporting company [   ]  |

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PART I

Item1. Business.

Our StrategyOur Products and Markets

SensorProducts and MarketsCoupler Products and MarketsMRAM Products and Markets

Product ManufacturingSales and Product DistributionNew Product StatusOur CompetitionSources and Availability of Raw MaterialsIntellectual PropertySeasonalityWorking Capital ItemsDependence on Major CustomersFirm BacklogResearch and Development ActivitiesEnvironmental MattersNumberof EmployeesFinancial Information About GeographicAreasAvailable Information

Item 1A. Risk Factors.Item 2. Properties.Item3. Legal Proceedings.

PART II

Item5. Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities.

MarketInformationShareholders, Dividends, and SecuritiesAuthorized for Issuance Under Equity Compensation PlansStockPerformance GraphStock Repurchase Program

Item 6. Selected FinancialData.Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations.

Item7A. Quantitative and Qualitative Disclosures About Market Risk.Item8. Financial Statements and Supplementary Data.Item9A. Controls and Procedures.

PART III

Item 10. Directors, ExecutiveOfficers and Corporate Governance.Item 11. ExecutiveCompensation.Item 12. Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.Item13. Certain Relationships and Related Transactions, and Director Independence.Item 14. Principal Accounting Fees and Services.

PART IV

Item15. Exhibits, Financial Statement Schedules.

SIGNATURES

FINANCIAL STATEMENTS

Reportsof Independent Registered Public Accounting FirmBalanceSheetsStatements of IncomeStatements of Shareholders’ EquityStatements of Cash FlowsNotes to Financial Statements

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**Tableof Contents**

PARTI

ITEM 1. BUSINESS.

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**Tableof Contents****ITEM 1A. RISK FACTORS.**     We caution readers that the following importantfactors, among others, could affect our financial condition, operating results,business prospects or any other aspect of NVE, and could cause our actual resultsto differ materially from that projected or estimated by us in the forward-lookingstatements made by us or on our behalf. Although we have attempted to list belowthe important factors that do or may affect our financial condition, operatingresults, business prospects, or any other aspect of NVE, other factors may inthe future prove to be more important. New factors emerge from time to time andit is not possible for us to predict all of such factors. Similarly, we cannotnecessarily assess or quantify the impact of each such factor on the businessor the extent to which any factor, or combination of factors, may cause actualresults to differ materially from those contained in forward-looking statements.**Risks Related to Our Business*We may lose revenue if any of ourlarge customers cancel, postpone, or reduce their purchases.***     We rely on several large customers for a significant percentage of our revenue. Theselarge customers include Avago Technologies; Phonak AG; St. Jude Medical, Inc.;certain other medical device manufacturers; certain distributors; and the U.S.Government. Although we have agreements with certain large customers, these agreementsdo not obligate customers to purchase from us and may not prevent price reductions.Furthermore, orders from our large customers can generally be reduced, postponed,or canceled. Any decreases in purchase quantities or purchase prices, or the lossof any of our large customers, could have a significant impact on our revenueand our profitability.***We risk losing business to our competitors.***     Our known product competitors include Avago Technologies;Analog Devices, Inc.; Fairchild Semiconductor International; Hermetic Switch,Inc.; Linear Technology Inc.; Maxim Integrated Products, Inc.; Meder Electronic AG;Memscap SA; NEC Corporation; Sharp Corporation; Silicon Laboratories, Inc.;Texas Instruments Incorporated; Toshiba Corporation; Vishay Intertechnology; andothers. Many of our competitors and potential competitors have significantly greaterfinancial, technical, and marketing resources than us. We believe that our competitionis increasing as the technology and markets mature. This has meant more competitorsand more severe pricing pressure. In addition, our competitors may be narrowingor eliminating our performance advantages. We expect these trends to continue,and we may lose business to competitors or it may be necessary to significantlyreduce our prices in order to acquire or retain business. These factors couldcause a material adverse impact on our financial condition, revenue, gross profitmargins, or income.***We will lose revenue if government contract funding is reduced, delayed, or eliminated.***     Although our revenue from agencies of the U.S. Government was less than 10% of our totalrevenue in each of the past three fiscal years, a material decrease in U.S. Governmentfunded research or disqualification as a vendor to the U.S. Government for anyreason would likely hamper future research and development activity and decreaserelated revenue. In addition to direct Government funding, certain of our non-Governmentcustomers depend on Government support to fund their contracts with us. Our direct and indirect Governmentfunding depends on adequate continued funding of the agencies and their programs.Such funding is affected by Government spending priorities that can change and over whichwe have no control, and delays in such funding can occur for a number of reasons. Deficit reduction initiatives may impact Department of Defensebudgets. Furthermore, a significant portion of our Government funding has beenthrough Small Business Innovation Research (SBIR) contracts. SBIR budgets maybe changed by legislation or by agencies such as the Department of Defense.***If we were barred for any reason from U.S. government contracts there couldbe a significant adverse impact on our revenue and our ability to make researchand development progress.***     If we were to be charged with violation of certain laws or if the U.S. Governmentwere to determine that we are not a “presently responsible contractor,”we could be temporarily suspended or, in the event of a violation, barred forup to three years from receiving new U.S. Government contracts or government-approvedsubcontracts. In addition, we could expend substantial amounts in defending againstsuch charges and in damages, fines and penalties if such charges are proven orresult in negotiated settlements. Being barred for any reason from U.S. Governmentcontracts could have a material adverse effect on our revenue, profits, and researchand development efforts.***Failure to qualify as a small businessunder federal regulations could make us ineligible for some government-fundedresearch contracts, which could have a significant adverse impact on our revenueand our ability to make research and development progress.***    We received approximately $2.35 million inSmall Business Innovation Research (SBIR) contract awards in fiscal 2011. Federal regulations placea number of criteria for a business to be eligible to compete for SBIR awards.Those criteria currently include number of employees and ownership structure.While we believe we meet the eligibility criteria, changes in our ownership beyondour control could cause us to lose our eligibility to compete for SBIR awards,which in turn could have a material adverse effect on our revenue, profits, andresearch and development efforts. In addition, SBIR eligibility requirements couldbe changed at any time.8**Table of Contents*****Our backlog may not result in future revenue.***     While we evaluate each order to determine qualificationfor inclusion in our firm backlog, there can be no assurance that amounts includedin our firm backlog ultimately will result in future revenue. A reduction in ourfirm backlog during any particular period, or the failure of our firm backlogto result in future revenue, could harm our business and revenue.***We face an uncertain economic environment inthe industries we serve, which could adversely affect our business.***     We sell our products into the semiconductor market, which is highly cyclical.Additionally, elements of U.S. healthcare system reform could have an adverse effect on the economic environment for the medical device industries we serve.We cannot predict the timing, strength, or duration of any economic slowdown or subsequent recovery, worldwide or in the industries we serve.The economic environment could have a material adverse impact on our business and revenue.***Our reputation could be damaged andwe could lose revenue if we fail to meet technical challenges required to producemarketable products.***     Our products usenew technology and we are continually researching and developing product designsand production processes. Our production processes require control of dimensional,magnetic, and other parameters that are not required in conventional semiconductorprocesses. If we are unable to develop stable designs and production processes,we may not be able to produce products that meet our customers’ requirements,which could cause damage to our reputation and loss of revenue.***Our failure to meet stringent customer requirements could result in the loss of keycustomers and potentially reduce our sales.***     Some of our customers, including Avago Technologies and certain medical device manufacturers,have stringent technical and quality requirements that require our products tomeet certain test and qualification criteria. Failure to meet those criteria couldresult in the loss of current sales revenue, customers, and future sales.***Some of our sensors are incorporated into medical devices, which couldexpose us to a risk of product liability claims and such claims could seriouslyharm our business and financial condition.***     Certain of our sensor products are used in medical devices, including devices that helpsustain human life. We are also marketing our sensor technology to other manufacturersof cardiac pacemakers and ICDs. Although we have indemnification agreements withcertain customers including provisions designed to limit our exposure to productliability claims, there can be no assurance that we will not be subject to losses,claims, damages, liabilities, or expenses resulting from bodily injury or propertydamage arising from the incorporation of our products in devices sold by our customers.Existing or future laws or unfavorable judicial decisions could limit or invalidatethe provisions of our indemnification agreements, or the agreements may not beenforceable in all instances. A successful product liability claim could requireus to pay, or contribute to payment of, substantial damage awards, which wouldhave a significant negative effect on our business and financial condition.***Federal legislation may not protect us against liability for the useof our sensors in medical devices and a successful liability claim could seriouslyharm our business and financial condition.***     Althoughthe Biomaterials Access Assurance Act of 1998 may provide us some protection againstpotential liability claims, that Act includes significant exceptions to supplierimmunity provisions, including limitations relating to negligence or willful misconduct.A successful product liability claim could require us to pay, or contribute topayment of, substantial damage awards, which would have a significant negativeeffect on our business and financial condition. Any product liability claim againstus, with or without merit, could result in costly litigation, divert the time,attention, and resources of our management and have a material adverse impacton our business.***Any malfunction of our sensors in existing medicaldevices could lead to the need to recall devices incorporating our sensors fromthe market, which may be harmful to our reputation and cause a significant lossof revenue.***     Any malfunction of our sensorscould lead to the need to recall existing medical devices incorporating our sensorsfrom the market, which may be harmful to our reputation because it is dependenton product safety and efficacy. Even if assertions that our sensors caused orcontributed to device failure do not lead to product liability or contract claims,such assertions could harm our reputation and our customer relationships. Anydamage to our reputation and/or the reputation of our products, or the reputationof our customers or their products could limit the market for our and our customers’products and harm our results of operations.***We may lose businessand revenue if we are unable to increase production capacity to meet market demand.***     Our production process relies on resources such as equipment,facilities, and personnel to meet the market demand for our products and services. If market demand increases, we may not be able to add production capacity fast enough to meet market demand. Furthermore, expansion of our production facilities caries risks of disruption. Failure to meet market demand couldresult in the loss of current sales revenue, customers, and future sales.9**Tableof Contents*****We may lose businessand revenue if our critical production equipment fails.***     Our production process relies on certain critical pieces of equipment for defining,depositing, and modifying the magnetic properties of very thin metal films. Someof this equipment was designed or customized by us, and some may no longer bein production. While we have an in-house maintenance staff, maintenance agreementsfor certain equipment, some critical spare parts, and back-ups for some of theequipment, we cannot be sure we could repair or replace critical manufacturingequipment were it to fail.***The loss of supply from any of our key single-sourcewafer suppliers could impact our ability to produce and deliver products and causeloss of revenue.***     Our critical suppliersinclude suppliers of certain raw silicon and semiconductor foundry wafers thatare incorporated in our products. We maintain inventory of some critical wafers,but we have not identified or qualified alternate suppliers for many of the wafersnow being obtained from single sources. Increased industry demand due to an economicrecovery or other factors beyond our control or ability to predict could causeor exacerbate wafer supply shortages. Any wafer supply interruptions could seriouslyjeopardize our ability to provide products that are critical to our business andoperations and may cause us to lose revenue.***The loss of supply of any critical chemicals or supplies could impact our ability to produce anddeliver products and cause loss of revenue.***     There are a number of critical chemicals and supplies that we require to make products.These include certain gases, photoresists, polymers, metals, and alloys. We maintaininventory of critical chemicals and materials, but in many cases we are dependenton single sources, and some of the materials could be discontinued by their suppliersat any time. Furthermore, current and future climate change regulations couldincrease our costs or cause the loss of supply of critical chemicals. We use chemicalssuch as sulfur hexafluoride in our manufacturing process that have been identifiedas greenhouse gases. If such chemicals were restricted or prohibited we wouldneed to obtain substitutes that might be more expensive or less available. Supplyinterruptions or shortages for any reason could seriously jeopardize our abilityto provide products that are critical to our business and operations and may causeus to lose revenue.***The loss of supply from any of our single-sourcepackaging vendors could impact our ability to produce and deliver products andcause loss of revenue.***     We are dependenton our packaging vendors including Circuit Electronic Industries Public Co., Ltd.(“CEI”) of Ayutthaya, Thailand. Some of our products use processes ortooling 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.CEI has been operating under voluntary debt rehabilitation under Thailand lawsince 2005. We have identified potential alternate vendors for our most importantproducts in case CEI’s ability to serve our needs becomes impaired, but itcould prove expensive, time-consuming, or technically challenging to convert toan alternate vendor. If one of our packaging vendors were to become insolventwe might not be able to recover work in process or finished goods in their possession.Furthermore, an alternate vendor may not have sufficient capacity available tomeet our requirements. Any supply interruptions or loss of inventory could seriouslyjeopardize our ability to provide products that are critical to our business andoperations and may cause us to lose revenue.***We are subject torisks inherent in doing business in foreign countries that could impair our resultsof operations.***     Foreign sales were approximately55% of our revenue for fiscal 2011, and weexpect foreign sales to continue to represent a significant portion of our revenuein the future. Furthermore, we rely on suppliers in China, India, Taiwan, Thailand,and other foreign countries. Risks relating to or arising from operating in foreignmarkets that could impair our results of operations include economic and politicalinstability; difficulties in enforcement of contractual obligations and intellectualproperty rights; changes in regulatory requirements, tariffs, customs, duties,and other trade barriers; transportation delays; acts of God, including floods,typhoons, and earthquakes; and other uncertainties relating to the administrationof, or changes in, or new interpretation of, the laws, regulations, and policiesof the jurisdictions where we do business.***Our business may suffer because we have limited influence over the rate of adoption of our MRAM technology,and MRAM technology may not build into a large or significant market.***     A significant portion of our future revenue andprofits may be dependent on our current or future licensees introducing MRAM productsusing our technology. Production difficulties, technical barriers, high productioncosts, poor market reception, or other problems, almost all of which are outsideour control, could prevent the deployment of MRAM or limit its market potential.Furthermore, competing technologies could prevent or supplant MRAM from becomingan important memory technology.***Our future business may sufferbecause we may not be able to consummate additional MRAM license agreements.***     Although there are potential licensees forour MRAM intellectual property in addition to our current licensees, we may neverbe able to consummate additional license agreements. Potential licensees couldalso use their own or a third party’s MRAM intellectual property rather thanours.10**Tableof Contents*****We may not be able to enforce our intellectualproperty rights or our technology may prove to infringe upon patents or rightsowned by others, which may prevent the future sale of our products or increasethe cost of such sales.***     We protect ourproprietary technology and intellectual property by seeking patents, trademarks,and copyrights, and by maintaining trade secrets through entering into confidentialityagreements with employees, suppliers, customers, and prospective customers dependingon the circumstances. We hold patents or are the licensee of others owning patentedtechnology covering certain aspects of our products and technology. These patentrights may be challenged, rendered unenforceable, invalidated, or circumvented.In addition, rights granted under the patents or under licensing agreements maynot provide a competitive advantage to us. At least several potential MRAM competitorshave described designs that we believe would infringe on our patents if such designswere to be commercialized. Efforts to legally enforce patent rights can involvesubstantial expense and may not be successful. Furthermore, others may independentlydevelop similar, superior, or parallel technologies to any technology developedby 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 competitiveadvantage. If technology we use infringes on patents or rights owned by others,we may be prevented from selling products that use such technology, we might berequired to license the patents or rights owned by others, or we may be requiredto indemnify our customers against expenses relating to possible infringement.Also, our confidentiality agreements may not provide meaningful protection ofour proprietary information. Our inability to maintain our proprietary rightscould have a material adverse effect on our business, financial condition, andresults of operations.***We may not be able to negotiate a new MRAMlicensing agreement with Freescale or EverSpin.***     Our Patent License Option Agreement with Motorola provided for termination on December 31,2005 or on the date Motorola ceases manufacturing MRAM Products, whichever islater. We believe such a termination is likely to have occurred as a result ofMotorola apparently having eliminated its ability to manufacture MRAM Productsthrough its spinoff of Freescale. In 2008 Freescale announced that it had transferredits MRAM technology and intellectual property to an independent company, EverSpinTechnologies. We believe we are free to negotiate a new agreement with Freescaleor EverSpin, or an assignment of the Motorola Patent License Option Agreement,but we have said we would do so only with amendments thereto. We have notifiedFreescale that we believe that MRAM products it has sold come within the scopeof claims of a number of our patents. There can be no assurance, however, thatany agreement can be reached with Freescale or EverSpin, or that any such agreementwould be on more favorable terms to NVE than our agreement with Motorola, or thatNVE would receive any value under the existing agreement with Motorola or anyvalue under any such further agreement with Freescale or EverSpin.***Our business success may be adversely affected if we are unable to attract and retainhighly qualified management and technical employees.***     Employmentagreements with our Chief Executive Officer and Chief Financial Officer do notprevent either from leaving the company, and we have no employment agreementswith any other employees. We have no key-person insurance covering employees.Competition for highly qualified management and technical personnel can be intenseand we may not be able to attract and retain the personnel necessary for the developmentand operation of our business. The loss of the services of key personnel couldhave a material adverse effect on our business, financial condition, and resultsof operations.***We could incur losses on our marketable securities.***     At March 31, 2011, we held $61,227,498in short-term and long-term marketable securities, representing approximately85% of our total assets. For the fiscal yearended March 31, 2011 we earned $2,021,426in interest, virtually all of which was from those securities. Duringthe past two fiscal years a number of the securities we hold were downgraded byMoody’s or Standard and Poor’s indicating a possible increase in defaultrisk. A credit crisis may have caused or contributed to many of these downgrades.Conditions and circumstances beyond our control or ability to anticipate can causedowngrades and increases in default risk. For example, in fiscal 2011 guaranteedglobal notes issued by BP Capital Markets plc that we hold were downgraded dueto the impact of BP’s Macondo oil spill on BP’s financial profile. Downgradesof any of our marketable securities are possible at any time for reasons beyondour control. Additionally, the assignment of a high credit rating doesnot preclude the risk of default on any marketable security. We could incur losseson our marketable securities, which could have a material adverse impact on ourfinancial condition, income, or cash flows.11**Tableof Contents****Risks Related to Buying Our Stock*Our stockhas been more volatile than other technology sector stocks.***     The market price of our common stock has experienced significant fluctuations andmay continue to fluctuate in the future. Depending on the metric used, we believethis volatility is more than the overall market or some other technology-sectorstocks.***The price of our common stock may be adversely affectedby significant price fluctuations due to a number of factors, many of which arebeyond our control.***     From time to timeour stock price has decreased sharply, and could decline in the future. The marketprice of our common stock may be significantly affected by many factors, someof which are beyond our control, including:          • technologicalinnovations by us or our competitors;•theannouncement of new products, product enhancements, contracts, or license agreementsby us or our competitors;•delaysin our introduction of new products or technologies or market acceptance of thesenew products or technologies;•changesin demand for our customers’ products;•theannouncement of changes in strategy or discontinuation of products by us or ourpotential licensees;•quarterly variations inour operating results, revenue, or revenue growth rates;•changesin revenue estimates, earnings estimates, or market projections by market analysts;•speculation in the press or analyst communityabout our business, potential revenue, or potential earnings;•shortselling and covering of short positions in our stock; and•generaleconomic conditions or market conditions specific to particular industries servedor potentially served by us or our customers.**ITEM 1B. UNRESOLVED STAFF COMMENTS.**     None.**ITEM 2. PROPERTIES.**      Ourprincipal executive offices and manufacturing facility are located at 11409 ValleyView Road, Eden Prairie, Minnesota, 55344. The space consists of 21,362 squarefeet of offices, laboratories, and production areas. The space is ownedby the Barbara C. Gage Revocable Trust and leased under an agreement expiring December 31,2015, with a right to cancel the lease at our option on December 31, 2012.We believe the facility is adequate to support our needed production capacityand plan to expand our production space within the facility. We hold no investmentsin real estate.**ITEM 3. LEGAL PROCEEDINGS.**     In the ordinary course of business we may becomeinvolved in litigation. At this time, we are not aware of any material pendingor threatened legal proceedings or other proceedings contemplated by governmentalauthorities that we expect would have a material adverse impact on our futureresults of operation and financial condition.**ITEM 4. RESERVED.** **PART II** **ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.****Market Information**     Our Common Stock trades on theCapital Market tier of the NASDAQ Stock Market under the symbol NVEC. The followingtable shows the high and low sales prices of our Common Stock as reported on theNASDAQ for each quarter within our two most recent fiscal years:**Quarter Ended****3/31/11****12/31/10****9/30/10****6/30/10****3/31/10****12/31/09****9/30/09****6/30/09**High  $63.49 $58.65 $48.10$51.59$48.61 $53.49 $63.64 $49.49Low$51.01 $42.17 $38.00 $42.84$39.83$35.51$40.00$28.02**Shareholders,Dividends, and Securities Authorized for Issuance Under Equity Compensation Plans**     We had approximately 111 shareholders of record and 8,347total shareholders as of April 20, 2011. We have never paidor declared any cash dividends on our Common Stock. We do not anticipate payingdividends in the foreseeable future, as we intend to retain any earnings we maygenerate if needed to provide for the expansion of our business, the possibledefense of our intellectual property, or for use in unforeseen circumstances.Information regarding our securities authorized for issuance under equity compensationplans will be included in the section “Equity Compensation Plan Information”of our Proxy Statement for our 2011 Annual Meeting of Shareholders, and is incorporatedby reference into Item 12 of this Report.12**Tableof Contents****Stock Performance Graph**      The graph below compares the performance ofour Common Stock to the cumulative five-year performance of the NASDAQ IndustrialIndex and the Cedrus Nanotechnology Index – Pure. NVE is included inboth indices. The NASDAQ Industrial Index includes NASDAQ domestic and internationalbased common-type stocks. The graph and table assume $100 was invested on March 31,2006 in each of our Common Stock, the NASDAQ Industrial Index, and the Cedrus Nanotechnology Index – Pure, with reinvestment of dividends.  **3/31/2006****3/31/2007****3/31/2008****3/31/2009****3/31/2010****3/31/2011**NVE Corporation$100.00$170.29$154.18$179.84$282.77$351.69Cedrus Nanotechnology Index – Pure$100.00$111.27$121.16$73.82$137.22$158.75NASDAQ Industrial Index$100.00$106.51$95.08$56.35$93.56$117.51 **Stock Repurchase Program**     On January 21, 2009, we announced that our Board of Directors authorized therepurchase of up to $2,500,000 of our Common Stock. The repurchase program maybe modified or discontinued at any time without notice. We didnot repurchase any of our Common Stock during the quarter ended March31, 2011.**ITEM 6. SELECTED FINANCIAL DATA.**      The following balance sheet and income statementselected financial data should be read in conjunction with our financial statementsand notes included in Item 8 of this Report, and with “Management’sDiscussion and Analysis of Financial Condition and Results of Operation”included in Item 7 of this Report. The data are derived from our financialstatements.**Balance Sheet Data as of March 31****2011****2010****2009****2008****2007**Cash, cash equivalents,and marketable securities$62,179,707$49,543,766$34,321,811$24,736,874$18,289,191Total assets$71,836,225$57,462,914$42,566,440$32,768,128$25,010,494Total shareholders’ equity$69,970,549$55,953,294$41,567,571$31,513,482$23,888,255** Income Statement Data for Years Ended March 31****2011****2010****2009****2008****2007**RevenueProduct sales$26,024,823$22,665,860$19,715,311$18,505,650$ 14,425,632Contract research and development5,172,2405,481,3253,656,9582,023,1622,035,198Total revenue$31,197,063$28,147,185$23,372,269$20,528,812$16,460,830 Gross profit$21,413,365$19,834,170$16,648,027$13,695,504$10,673,172Income from operations$17,669,770$16,298,536$13,251,590$10,048,779$6,545,569Net income$13,360,945$11,999,344$9,782,895$7,187,384$4,780,783Net income per share – diluted$2.76$2.47$2.04$1.51$1.0013**Tableof Contents****ITEM 7. MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**     You should read this discussion together with ourfinancial statements and notes included elsewhere in this Report. In additionto historical information, the following discussion contains forward-looking informationthat involves risks and uncertainties. Our actual future results could differmaterially from those presently anticipated due to a variety of factors, includingthose discussed in Item 1A of this Report.**General**     We develop and sell devices that use “spintronics,” a nanotechnology thatrelies on electron spin rather than electron charge to acquire, store, and transmitinformation. We manufacture high-performance spintronic products including sensorsand couplers to revolutionize data sensing and transmission. We also receive contractsfor research and development and are a licensor of spintronic magnetoresistiverandom access memory technology, commonly known as MRAM.**Application of Critical Accounting Policies and Estimates**     Inaccordance with SEC guidance, those material accounting policies that we believeare the most critical to an investor’s understanding of our financial resultsand condition and require complex management judgment are discussed below.***Research and Development Contract Percentage of Completion Estimation***     We recognize research and development contract revenuesand costs pro-rata as work progresses, which requires us to make estimates ofthe percentage of completion. If increases in projected costs-to-complete aresufficient to create a loss contract, the entire estimated loss is charged tooperations in the period the loss first becomes known. This estimate has not affectedour financial statements in the past three fiscal years. Increases in projectedcosts to complete contracts could materially impact our future results, however.***Inventory Valuation***     Inventoriesare stated at the lower of cost or net realizable value. Cost is determined bythe first in, first out method. Where there is evidence that inventory could bedisposed of at less than carrying value, the inventory is written down to thenet realizable value in the current period. Additionally, we periodically examineour inventory in the context of inventory turnover, sales trends, competitionand other market factors, and we record provisions to inventory reserve when wedetermine certain inventory is unlikely to be sold. If reserved inventory is subsequentlysold, corresponding reductions in inventory and inventory reserves are made. Ourinventory reserve was $300,000 at March 31,2011 and 2010.***Allowance for Doubtful Accounts Estimation***     We must make estimatesof the uncollectibility of our accounts receivable. The most significant riskis the risk of sudden unexpected deterioration in financial condition of a significantcustomer that is not considered in the allowance. We specifically analyze accountsreceivable, historical bad debts, and customer credit-worthiness when evaluatingthe adequacy of the allowance for doubtful accounts. Our results could be materiallyimpacted if the financial condition of a significant customer deteriorated andrelated accounts receivable are deemed uncollectible. Our allowance for doubtfulaccounts was $15,000 at March 31, 2011and 2010. Our allowance for doubtful accounts is a relatively small percentageof our accounts receivable because our revenues are primarily from large customers,distributors, and U.S. Government agencies, all of which we consider generallycredit-worthy. Our allowance for doubtful accounts could increase in the futureif larger portions of our sales come from small end-user customers.***Deferred Tax Assets Estimation***     In determiningthe carrying value of our net deferred tax assets, we must assess the likelihoodof sufficient future taxable income in certain tax jurisdictions, based on estimatesand assumptions to realize the benefit of these assets. We evaluate the realizabilityof the deferred assets quarterly and assess the need for valuation allowancesor reduction of existing allowances quarterly.     Asof March 31, 2011 our net deferred tax liabilities were $146,693compared to $102,138 as of March 31, 2010. Deferred taxes included $117,800in stock-based compensation deductions as of March 31, 2011 and $162,869as of March 31, 2010. Utilization of certain of our deferred tax assets issubject to limitations based on Internal Revenue Code Section 382.14**Tableof Contents****Results of Operations**      The following table summarizes the percentage ofrevenue and year-to-year changes for various items for the last three fiscal years: **Percentageof RevenueYear Ended March 31** **Year-to-Year ChangeYears Ended March 31****2011****2010****2009****2010to2011****2009to2010**RevenueProduct sales83.4%80.5%84.4%14.8%15.0%Contract research and development      16.6%19.5%15.6%(5.6)%49.9%Total revenue100.0%100.0%100.0%10.8%20.4%Cost of sales31.4%29.5%28.8%17.7%23.6% Gross profit68.6%70.5%71.2%8.0 %19.1 % ExpensesSelling,general, and administrative7.9%8.6%9.3% 2.5%10.9%Research and development4.1%4.0%5.2%13.2%(8.0)%Total expenses12.0%12.6%14.5%5.9%4.1%Income from operations56.6%57.9%56.7%8.4%23.0%Interest and other income6.5%5.7%5.0%24.9%37.6%Income before taxes63.1%63.6%61.7%9.9%24.2%Income tax provision20.3%21.0%19.9%7.0%27.4%Net income42.8%42.6%41.8%11.3%22.7%      Total revenue for fiscal 2011 increased 11%to $31,197,063 compared to $28,147,185 for fiscal 2010, and increased 20% infiscal 2010 compared to $23,372,269 for fiscal 2009. The increase in total revenuein fiscal 2011 was due to a 15% increase inproduct sales, partially offset by a 6% decreasein research and development revenue. The increase in fiscal 2010 was due to a15% increase in product sales and a 50% increase in research and development revenue.In fiscal 2011, total revenue increased 29% in Europe, 11%in Asia, and 12% in other areas, partially offset by a 1% decreasein the U.S.     Product sales increased15% for fiscal 2011 to $26,024,823 compared to $22,665,860 in fiscal 2010. Fiscal 2010 product sales also increased 15%,from $19,715,311 in fiscal 2009. The increases in bothyears were due to both the addition of new customers and increased purchases byexisting customers. Increased product sales in fiscal 2011 were driven by strong sales intoindustrial control and factory automation markets.In fiscal 2010, strong sales of components for medical devicesmore than offset weak sales into other markets such as industrial control andfactory automation. We believe the weakness in the industrial control and factoryautomation markets in fiscal 2010 was due to a worldwide manufacturing slowdown.     Contract research and development revenuedecreased 6% for fiscal 2011 compared tofiscal 2010 due to completion of certaincontracts and contract activities. Contract research and development revenue increased50% for fiscal 2010 compared to fiscal 2009 due to new contracts and increasedactivity on certain contracts. Contract research and development activities can fluctuatefor a number of reasons, some of which are beyond our control, and there can beno assurance of additional or follow-on contracts for expired or completed contracts.     Gross profit margin decreasedto 69% of revenue for fiscal 2011 from 70%for fiscal 2010 due to a less favorable product sales mix. Gross profit margin decreased to 70% for fiscal 2010from 71% for fiscal 2009 due to a higher percentage of total revenue from contractresearch and development, which generally is less profitable than product sales.     Selling, general, and administrative expense increased 2% for fiscal 2011 comparedto fiscal 2010 and 11% for fiscal 2010 compared to fiscal 2009. The increase for fiscal 2010 was primarily due to increasedsalaries and commissions.     Research anddevelopment expense increased 13%for fiscal 2011 compared to fiscal 2010 due to increased product development activities, and a decrease in contract research and development activities, which causedresources to be reallocated to expensed research and development activities. Researchand development expense decreased 8% for fiscal 2010 compared to fiscal 2009 dueto an increase in contract research and development activities, which caused resourcesto be reallocated from expensed research and development activities. Research and development expense canfluctuate significantly depending on staffing, project requirements, and contractresearch and development activities.15**Tableof Contents**     Interest and otherincome increased 25% to $2,021,426 for fiscal 2011 compared to $1,617,880 for fiscal 2010, and increased 38% forfiscal 2010 compared to $1,176,010 for fiscal 2009. The increases for both fiscalyears were due to increases in interest-bearing marketable securities.     The effective income tax rate in fiscal 2011 was32% of income before taxes compared to 33%in fiscal 2010 and 32% in fiscal 2009. The decreased tax rate for fiscal 2011compared to fiscal 2010 was primarily due to a lower state effective tax rate. The increased tax rate for fiscal 2010compared to fiscal 2009 was primarily due to higher Federal and state effectivetax rates. Our tax rate can fluctuate from year to year due to a number of factors,including Federal and state tax rates and regulations, the mix between taxableand tax-exempt securities in our marketable securities, and other factors, some of whichare outside our control.     Net income increased11% in fiscal 2011 compared to fiscal 2010due to increases in product sales and interest income. Net income increased23% in fiscal 2010 compared to fiscal 2009 due to increases in product sales,contract research and development revenue, and interest income.**Liquidityand Capital Resources**     Our primary sourceof working capital for fiscal years 2009 through 2011 was cash provided by operatingactivities related to product sales and research and development contract revenue.At March 31, 2011 we had $62,179,707in cash plus short-term and long-term marketable securities compared to $49,543,766at March 31, 2010. All of our marketable securities were classified as availablefor sale. The $12,635,941 increase in cash plus marketable securities was primarily due to $12,808,807in net cash provided by operating activities.     The $6,403,692 increase in short-term marketable securities in fiscal 2011 was primarily due to marketable securities previously classified as long-term approaching maturity.     Accounts Receivable decreased by $625,325 due to the timing of payments by our customers.     Inventories increased by $1,637,430due to raw material purchase timing and to support an increased rate of productsales.     Purchases of fixed assets were $732,800 in fiscal 2011compared to $305,862 in fiscal 2010 and $401,612 in fiscal 2009. Purchases inall three fiscal years were primarily for capital equipment to increase our productioncapacity and were financed with cash provided by operating activities. Our capitalexpenditures can vary significantly from year to year depending on our needs, equipment purchasing opportunities, andproduction expansion plans.     For the past three fiscal years, after purchasing fixed assets we invested excesscash provided by operating activities in long-term marketable securities. As ofMarch 31, 2011 our marketable securities had remaining maturities between two and 59 months (see “Note 4 – Marketable Securities”for additional information). As our marketable securities mature, we currentlyplan to either use the proceeds to meet future capital needs or reinvest the proceedsin other marketable securities.     The followingtable provides aggregate information about our contractual payment obligationsand the periods in which payments are due: **Payments Due by Period****Contractual obligations****Total****<1 Year****1–3 Years****3–5 Years****>5 Years**Operating lease obligations$1,237,359$254,053$519,055$464,251$- Purchase obligations454,972454,972---Total$1,692,331$709,025$519,055$464,251$-     Operating lease obligations are primarily for our facility lease. “Note 9 –Commitments and Contingencies” to the Financial Statements, included elsewhere in this report, provides additional information about ourlease obligations. Purchase obligations as of March 31, 2011 consisted of raw materials purchase commitments and fixed assetpurchase obligations. We expect to meet these contractualpayment obligations from cash provided by operating activities or proceeds from maturities of marketable securities. We plan to evaluateraw materials purchases based on a variety of factors including forecasted requirementsand anticipated supply leadtimes, and our obligations could vary significantlyin the future. We had approximately $156,154 of fixed assetpurchase obligations as of March 31, 2011, for production equipment. We plan to evaluatecapital expenditures as needs and opportunities arise, and our future capitalexpenditures and purchase obligations could vary significantly from expendituresin the past.     We believe our working capitaland cash generated from operations will be adequate for our needs at least throughfiscal 2012. 16**Table of Contents****Inflation**     Inflation has not had a significant impact on our operations in any of our three most recentfiscal years. Prices for our products and for the materials and labor costs forthose products are governed by market conditions. It is possible that inflationin future years could impact both materials and labor used for the productionof our products.**Off-Balance-Sheet Arrangements**     Our off-balance sheet arrangements consist of purchase commitments and operating leasesfor our facility. We believe that our off-balance sheet arrangements do not havea material current or anticipated future effect on our profitability, cash flows,or financial position.**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**     We are exposed to financial market risks, primarily marketable securities and, toa lesser extent, changes in currency exchange rates.**Marketable Securities**     The primary objective of our investment activitiesis to preserve principal while at the same time maximizing after-tax yields withoutsignificantly increasing risk. To achieve this objective, we maintain our portfolioof cash equivalents and marketable securities in a variety of securities includinggovernment agency obligations, municipal obligations, corporate obligations, andmoney market funds. Short-term and long-term marketable securities are generallyclassified as available-for-sale and consequently are recorded on the balancesheet at fair value with unrealized gains or losses reported as a separate componentof accumulated other comprehensive income or loss, net of estimated tax. Our marketablesecurities as of March 31, 2011 had remaining maturities between two and 59 months.Marketable securities had a market value of $61,227,498at March 31, 2011, representing approximately 85%of our total assets. We have not used derivative financial instruments in ourinvestment portfolio.**Foreign Currency Transactions**     We have some limited revenue risks from fluctuations in values of foreign currencydue to product sales abroad. Foreign sales are generally made in U.S. currency,and currency transaction gains or losses in the past three fiscal years were notsignificant. **ITEM 8. FINANCIAL STATEMENTSAND SUPPLEMENTARY DATA.**     Financial statementsand accompanying notes are included in this Report beginning on page F-1.17**Tableof Contents****Quarterly Summary Information**      Selectedunaudited quarterly financial data for fiscal 2011 and 2010, presented as supplementaryfinancial information, are as follows:  **Unaudited;Quarter Ended****March31, 2011****Dec. 31, 2010****Sept. 30,2010****June 30,2010**RevenueProduct sales$6,733,984$6,686,451$6,410,512$6,193,876Contract research and development1,449,1171,277,0571,398,6481,047,418Total revenue 8,183,1017,963,5087,809,1607,241,294Cost of sales2,641,1702,461,7982,604,9262,075,804Gross profit5,541,9315,501,7105,204,2345,165,490ExpensesSelling, general, and administrative573,312638,223634,547628,386Research and development286,910330,681309,873341,663 Total expenses860,222968,904944,420970,049Income from operations4,681,7094,532,8064,259,8144,195,441Income before taxes5,217,4715,045,0094,757,5454,671,171Net income$3,669,919$3,383,919$3,206,010$3,101,097Net income per share – diluted$0.75$0.70$0.66$0.64**Unaudited;Quarter Ended****March31, 2010****Dec. 31, 2009****Sept. 30,2009****June 30,2009**RevenueProduct sales$6,662,150$5,292,228$5,177,445$5,534,037Contract research and development1,517,1451,332,6291,331,0561,300,495Total revenue 8,179,295 6,624,857 6,508,501 6,834,532Cost of sales2,333,6372,102,8551,985,1001,891,423Gross profit 5,845,658 4,522,002 4,523,401 4,943,109ExpensesSelling, general, and administrative 607,534 548,973 622,354 635,723Research and development310,564251,625291,540267,321 Total expenses 918,098 800,598 913,894 903,044Income from operations 4,927,560 3,721,404 3,609,507 4,040,065Income before taxes5,367,5484,136,0734,002,7054,410,090Net income$3,598,746$2,767,483$2,694,183$2,938,932Net income per share – diluted$0.74$0.57$0.55$0.61 **ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE.**      None.**ITEM 9A. CONTROLS AND PROCEDURES.Disclosure Controls and Procedures**     Management, withthe participation of the Chief Executive Officer and Chief Financial Officer,has performed an evaluation of our disclosure controls and procedures (as definedin Rules 13a-15(e) and 15d-15(e)of the Securities Exchange Act) as of the end of the period covered by this Report.This evaluation included consideration of the controls, processes, and proceduresthat are designed to ensure that information required to be disclosed by us inthe reports we file under the Exchange Act is recorded, processed, summarized,and reported within the time periods specified in the SEC’s rules and formsand that such information is accumulated and communicated to our management, includingour Chief Executive Officer and Chief Financial Officer, as appropriate to allowtimely decisions regarding required disclosure. Based on such evaluation, ourChief Executive Officer and Chief Financial Officer concluded that, as of March 31,2011, our disclosure controls and procedures were effective.**Management’s Report on Internal Control Over Financial Reporting**     Ourmanagement is responsible for establishing and maintaining adequate internal controlover financial reporting, as such term is defined in Rule13a-15(f) under the Exchange Act. Our management, including our Chief ExecutiveOfficer and Chief Financial Officer, assessed the effectiveness of our internalcontrol over financial reporting as of March 31, 2011. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizationsof the Treadway Commission (COSO) in *Internal Control – IntegratedFramework*.18**Tableof Contents**     Based on our assessment using the criteria set forth by COSO in *Internal Control –Integrated Framework*, management concluded that our internal control overfinancial reporting was effective as of March 31, 2011. Our internal controlover financial reporting as of March 31, 2011 has been audited by Ernst &Young LLP, an independent registered public accounting firm, as stated intheir report.     Our management, includingour Chief Executive Officer and Chief Financial Officer, does not expect thatour internal control over financial reporting will prevent all errors and allfraud. A control system, no matter how well conceived and operated, can provideonly reasonable, not absolute, assurance that the objectives of the control systemare met. Further, the design of a control system must reflect the fact that thereare resource constraints, and the benefits of controls must be considered relativeto their costs. Because of the inherent limitations in all control systems, noevaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within NVE have been detected. Our internal controlsover financial reporting, however, are designed to provide reasonable assurancethat the objectives of internal control over financial reporting are met.**Changes in Internal Controls**     Duringthe quarter ended March 31, 2011, there was no change in our internal controlover financial reporting that materially affected, or is reasonably likely tomaterially affect, our internal control over financial reporting.**PART III** **ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.**     The sections titled “Proposal 1. Electionof Board of Directors” and “Certain Relationships and Related PersonTransactions – Section 16(a) Beneficial Ownership Reporting Compliance”to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholdersset forth certain information regarding our directors and executive officers requiredby Item 10, the section titled “Executive Officers of the Company”sets forth information regarding our executive officers required by Item 10,and the section titled “Corporate Governance” sets forth informationregarding our corporate governance and code of ethics required by Item 10.The information in these sections to be included in our Proxy Statement for our2011 Annual Meeting of Shareholders are incorporated by reference into this section.**ITEM 11. EXECUTIVE COMPENSATION.**     Theinformation in the sections “Executive Compensation,” “CompensationDiscussion and Analysis,” “Corporate Governance – Board Committees –Compensation Committee Interlocks and Insider Participation,” “CompensationCommittee Report,” and “Director Compensation” to be included inour Proxy Statement for our 2011 Annual Meeting of Shareholders is incorporatedby reference into this section.**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**     The information in the sections“Equity Compensation Plan Information” and “Security Ownership”to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholdersis incorporated by reference into this section. Information regarding the materialfeatures of our 2000 Stock Option Plan, as amended, is contained in Note 6to the Financial Statements included elsewhere in this Report.**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.**     The information in the sections “Security Ownership –Transactions With Related Persons, Promoters, and Certain Control Persons”and “Corporate Governance – Board Composition and Independence”to be included in our Proxy Statement for our 2011 Annual Meeting of Shareholdersis incorporated by reference into this section.**ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.**      Theinformation in the sections “Audit Committee Disclosure – FeesBilled to Us by Ernst & Young During Fiscal 2011 and 2010” and “AuditCommittee Disclosure – Audit Committee Pre-Approval Policy” tobe included in our Proxy Statement for our 2011 Annual Meeting of Shareholdersis incorporated by reference into this section.**PART IV** **ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.(a) Financial Statements and Schedules**     Financial statements are providedpursuant to Item 8 of this Report. Certain financial statement scheduleshave been omitted because they are not required, not applicable, or the requiredinformation is provided in other financial statements or the notes to the financialstatements.**(b) Exhibits**     A list of exhibits is on the following page.19**Tableof Contents****Exhibit #****Description**  3.1Amended and Restated Articles of Incorporation of the company as amended by the Boardof Directors effective November 21, 2002 (incorporated by reference to the Form 10-QSB for the period ended December 31, 2002).  3.2Bylaws of the company as amendedby the Board of Directors effective December 18, 2007 (incorporated by referenceto the Form 8-K filed December 19, 2007).  10.1 Lease dated October 1, 1998 between the company andGlenborough Properties, LP (incorporated by reference to the Form 10-QSB for the period ended September 30, 2002).   10.2First amendment to lease between thecompany and Glenborough Properties, LP dated September 18, 2002 (incorporatedby reference to the Form 10-QSB for the period ended September 30,2002).   10.3Second amendment to lease between the company and Glenborough Properties, LP dated December 1,2003 (incorporated by reference to the Form 10-QSB for theperiod ended December 31, 2003).  10.4 Notification from Glenborough Properties, LP relatingto change in building ownership (incorporated by reference to the Form 8-K filed October 11, 2005).   10.5Notification from Carlson Real Estate Company, Inc. relating to change in buildingownership (incorporated by reference to the Form 8-K filed October 11,2005).  10.6Third amendment to lease between the company and Carlson Real Estate Company,Inc. (incorporated by reference to the Form 8-K/A filed December20, 2007).   10.7Letter from Carlson Real Estate Services, LLC relating to transfer of buildingtitle (incorporated by reference to the Form 8-K/A filed April 15, 2011).  10.8*Employment Agreement between the company and Daniel A. Baker dated January 29, 2001(incorporated by reference to the Form 10-KSB for the year endedMarch 31, 2001).   10.9*NVECorporation 2000 Stock Option Plan as Amended July 19, 2001 by the shareholders(incorporated by reference to our Registration Statement on Form S-8 filed July 20,2001).   10.10+Agreement betweenthe company and Agilent Technologies, Inc. dated September 27, 2001(incorporated by reference to the Form 10-QSB for the periodended September 30, 2001).  10.11Amendmentdated October 18, 2002 to Agreement between the company and Agilent Technologies,Inc. (incorporated by reference to the Form 10-QSB for theperiod ended December 31, 2002).  10.12Notification from Agilent Technologies of planned sale of Agilent’s Semiconductor ProductGroup (incorporated by reference to the Form 8-K filed October 19,2005).  10.13Report of completion of the divestiture of Agilent’s Semiconductor Products business(incorporated by reference to the Form 8-K/A filed December 6,2005).  10.14Amendment No. 2 to OEM Purchase Agreement between Agilent Technologies, Inc. and the company (incorporated by referenceto the Form 8-K/A filed September 11, 2007).  10.15Amendment No. 3 to Agreement betweenthe company and Agilent Technologies, Inc. (incorporated by reference to the Form 8-K/A filed June 28, 2010.  10.16*Amendment No. 1to Stock Option Agreement dated May 7, 2004 between the Company and Daniel A.Baker (incorporated by reference to the Form 8-K filed March 30,2005).  10.17Amendment No. 1to Stock Option Agreement dated August 17, 2004 between the Company and Patricia M.Hollister (incorporated by reference to the Form 8-K filed March 30,2005).  10.18Indemnification Agreement by and between Pacesetter, Inc., a St. Jude Medical Company, d.b.a.St. Jude Medical Cardiac Rhythm Management Division (“St. Jude”), andthe company (incorporated by reference to the Form 8-K filedSeptember 27, 2005).  10.19+SupplierPartnering Agreement by and between St. Jude and the company (incorporatedby reference to the Form 8-K filed January 4, 2006).  10.20+Amendment No. 1 to Supplier Partnering Agreement between St. Jude and the company (incorporatedby reference to the Form 8-K/A filed September 10, 2007).  10.21+Amendment No. 2 to Supplier PartneringAgreement between St. Jude and the company (incorporated by reference tothe Form 8-K/A filed December 18, 2009).  10.22+Amendment Number 3 to Supplier Partnering Agreement between St. Jude and the company (incorporatedby reference to the Form 8-K/A filed September 16, 2010).  10.23Amendment No. 4 to Supplier PartneringAgreement between St. Jude and the company (incorporated by reference tothe Form 8-K/A filed February 7, 2011).   10.24Supply Agreement by and between thecompany and Phonak AG (incorporated by reference to the Form8-K filed May 6, 2009).  10.25+Amendment to Supply Agreement by and between the company and Phonak AG (incorporated byreference to the Form 8-K/A filed January 12, 2011).  23Consent of Ernst & Young LLP.  31.1Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).  31.2Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a).  32Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section 1350.  *Indicates a management contract or compensatory plan or arrangement.+Confidential portions deleted and filed separately with the SEC.  20**Tableof Contents****SIGNATURES**      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.**NVE CORPORATION**          (Registrant)/s/Daniel A. Baker by Daniel A. BakerPresident and Chief Executive OfficerDate    May 4, 2011     Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the following personson behalf of the registrant and in the capacities and on the dates indicated.**Name** **Title****Date** /s/Terrence W. Glarner TerrenceW. Glarner Director and Chairman of theBoard      May 4, 2011/s/Daniel A. Baker Daniel A.Baker Director, President & ChiefExecutive Officer (Principal Executive Officer)   May 4, 2011/s/CurtA. Reynders Curt A. Reynders Treasurerand Chief Financial Officer (Principal Financial and Accounting Officer)May 4, 2011/s/James D. HartmanJames D. Hartman      DirectorMay 4, 2011/s/Patricia M. HollisterPatricia M. Hollister   DirectorMay 4, 2011/s/RobertH. Irish Robert H. Irish DirectorMay 4, 2011 21**Tableof Contents****REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** The Board of Directors and ShareholdersNVE CorporationWe have audited NVE Corporation’s internal control over financial reportingas of March 31, 2011, based on criteria established in *Internal Control –Integrated Framework* issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (the COSO criteria). NVE Corporation’s managementis responsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting included in the accompanying report of management titled “Management’sReport on Internal Control Over Financial Reporting.” Our responsibilityis to express an opinion on NVE Corporation’s internal control over financialreporting based on our audit.We conducted our audit in accordance withthe standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understandingof internal control over financial reporting, assessing the risk that a materialweakness exists, testing and evaluating the design and operating effectivenessof internal control based on the assessed risk, and performing such other proceduresas we considered necessary in the circumstances. We believe that our audit providesa reasonable basis for our opinion.A company’s internal controlover financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includesthose policies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurancethat transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could havea material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because ofchanges in conditions or that the degree of compliance with the policies or proceduresmay deteriorate.In our opinion, NVE Corporation maintained, in all materialrespects, effective internal control over financial reporting as of March 31,2011, based on the COSO criteria.We also have audited, in accordancewith the standards of the Public Company Accounting Oversight Board (United States),the balance sheets of NVE Corporation as of March 31, 2011 and 2010, andthe related statements of income, shareholders’ equity, and cash flows foreach of the three years in the period ended March 31, 2011, and our reportdated May 4, 2011 expressed an unqualified opinion thereon.  /s/ Ernst & Young LLP  Minneapolis,MinnesotaMay 4, 2011F-1**Table of Contents** **REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** The Board of Directors and ShareholdersNVE CorporationWe have audited the accompanying balance sheets of NVE Corporation (the Company) as of March 31,2011 and 2010, and the related statements of income, shareholders’ equity,and cash flows for each of the three years in the period ended March 31,2011. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statementsbased on our audits.We conducted our audits in accordance with the standardsof the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.In our opinion, the financial statements referredto above present fairly, in all material respects, the financial position of NVECorporation at March 31, 2011 and 2010, and the results of its operationsand its cash flows for each of the three years in the period ended March 31,2011, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company AccountingOversight Board (United States), NVE Corporation’s internal control overfinancial reporting as of March 31, 2011, based on criteria established in*Internal Control – Integrated Framework* issued by the Committeeof Sponsoring Organizations of the Treadway Commission, and our report dated May4, 2011, expressed an unqualified opinion thereon.  /s/Ernst & Young LLP  Minneapolis, MinnesotaMay 4, 2011F-2**Tableof Contents****NVECORPORATION BALANCE SHEETS**  **March 31****2011****2010**ASSETSCurrent assetsCash and cash equivalents$952,209$1,389,288Marketable securities, short term7,970,3581,566,666Accounts receivable, net of allowance for uncollectible accounts of $15,0003,596,2394,221,564Inventories3,343,8571,706,427Prepaid expenses and other assets1,185,306 781,294 Total current assets17,047,9699,665,239Fixed assetsMachineryand equipment 6,178,2075,617,136Leasehold improvements612,682 450,546  6,790,8896,067,682Less accumulated depreciation 5,259,773 4,857,819 Net fixed assets1,531,1161,209,863Marketable securities, long term53,257,140 46,587,812 Total assets$71,836,225 $57,462,914  LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent liabilitiesAccounts payable$731,580$665,782Accrued payroll and other 987,403720,867Deferred taxes146,693102,138Deferred revenue- 20,833 Total current liabilities1,865,6761,509,620 Shareholders’ equityCommon stock, $0.01 par value, 6,000,000 shares authorized; 4,776,198 issued andoutstanding (4,700,583 issued and outstanding in 2010)47,76247,006Additional paid-incapital20,894,76620,169,924Accumulated other comprehensive income1,060,4381,129,726Retained earnings47,967,583 34,606,638 Total shareholders’ equity69,970,549 55,953,294 Total liabilities and shareholders’ equity$71,836,225 $57,462,914   See accompanying notes.F-3**Tableof Contents****NVECORPORATION STATEMENTS OF INCOME**  **YearEnded March 31****2011****2010****2009**RevenueProductsales$26,024,823$22,665,860$19,715,311Contract research anddevelopment5,172,240 5,481,325 3,656,958 Total revenue 31,197,06328,147,18523,372,269Cost of sales9,783,698 8,313,015 6,724,242 Gross profit21,413,36519,834,17016,648,027ExpensesSelling,general, and administrative 2,474,4682,414,5842,177,865Research and development1,269,127 1,121,050 1,218,572 Totalexpenses3,743,595 3,535,634 3,396,437 Income from operations  17,669,77016,298,53613,251,590Interest income 2,021,4261,617,8801,171,810Other income- - 4,200 Income before taxes 19,691,19617,916,41614,427,600Provision for income taxes6,330,251 5,917,072 4,644,705 Net income$13,360,945 $11,999,344 $9,782,895 Net income per share – basic$2.83 $2.56 $2.10 Net income per share – diluted$2.76 $2.47 $2.04 Weighted average shares outstandingBasic4,729,0354,692,4964,659,486Diluted4,844,2664,857,0444,785,565 See accompanying notes.F-4**Tableof Contents****NVECORPORATIONSTATEMENTS OF SHAREHOLDERS’ EQUITY**     **AdditionalPaid-InCapital** **AccumulatedOtherComprehen-sive Income(Loss)** **RetainedEarnings** **Common Stock****Shares** **Amount****Total**Balance at March 31, 20084,638,683 $46,387 $18,539,538 $103,158$12,824,399  $31,513,482Exercise of stockoptions and warrants30,650  306  269,901  -  -   270,207Comprehensive income:Unrealized (loss) onmarketablesecurities, net of tax  -  -   -  (356,098)(356,098)Net income -  -   -  -  9,782,895   9,782,895Total comprehensive income 9,426,797Stock-based compensation86,67286,672Tax benefit of stock-based compensation270,413270,413 Balance at March 31, 20094,669,333  46,693   19,166,524  (252,940)   22,607,294   41,567,571 Exercise of stockoptions and warrants31,250313622,110--622,423Comprehensive income:Unrealized gain onmarketable securities,net of tax-  -   -1,382,6661,382,666Net income-  -  --11,999,34411,999,344Total comprehensive income13,382,010Stock-based compensation100,842100,842Tax benefit of stock-based compensation280,448280,448 Balance at March 31, 20104,700,58347,00620,169,9241,129,72634,606,63855,953,294Exercise of stockoptions and warrants75,615756417,949--418,705Comprehensive income:Unrealized(loss) onmarketable securities,net of tax-  -  -  (69,288)(69,288)Net income-  -  -  -   13,360,945   13,360,945Total comprehensive income13,291,657Stock-based compensation76,720 76,720Tax benefit of stock-based compensation230,173230,173 Balance at March 31, 20114,776,198 $47,762 $20,894,766 $1,060,438  $47,967,583  $69,970,549  See accompanying notes.F-5**Table of Contents****NVE CORPORATIONSTATEMENTS OF CASH FLOWS**  **Year Ended March 31****2011****2010****2009**OPERATING ACTIVITIESNet income$13,360,945$11,999,344$9,782,895Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation411,547389,273473,740Stock-based compensation76,720100,84286,672Excess tax benefits(230,173)(280,448)(270,413)Gain on sale of fixed assets--(4,200)Deferred income taxes294,384271,651256,376Changes in operating assets and liabilitiesAccountsreceivable625,325 (854,866 )(140,671)Inventories(1,637,430)541,194209,183 Prepaid expenses and other assets(404,012)(111,987 )(139,691)Accounts payable and accrued expenses332,334491,947(172,444)Deferred revenue(20,833)(83,334)(83,333)Net cash provided by operating activities12,808,80712,463,6169,998,114 INVESTING ACTIVITIESPurchases of fixed assets(732,800)(305,862)(401,612)Proceeds from sale of fixed assets--4,200Purchases of marketable securities(14,742,032)(13,804,629)(12,137,160)Proceeds from maturities and sales of marketable securities1,580,068 258,229 1,985,034 Net cash used in investing activities(13,894,764)(13,852,262)(10,549,538) FINANCING ACTIVITIESNet proceeds from sale of common stock418,705622,423270,207Excess tax benefits230,173 280,448 270,413 Net cash provided by financing activities648,878 902,871 540,620  Decrease in cash and cash equivalents(437,079)(485,775)(10,804)Cash and cash equivalents at beginning of year1,389,288 1,875,063 1,885,867  Cash and cash equivalents at end of year$952,209 $1,389,288 $1,875,063  Supplemental disclosures of cash flow information:Cashpaid during the year for income taxes$6,303,598$5,587,438$4,356,000 See accompanying notes.F-6**Table of ContentsNVE CORPORATIONNOTES TO FINANCIAL STATEMENTS** **NOTE 1. DESCRIPTION OF BUSINESS**     We develop and sell devices that use spintronics,a nanotechnology that relies on electron spin rather than electron charge to acquire,store, and transmit information.**NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCash and Cash Equivalents**     Weconsider all highly-liquid investments with maturities of three months or lesswhen purchased to be cash equivalents.**Fair Value of Financial Instruments**     The carrying amount of cash and cash equivalents,accounts receivable, and accounts payable approximates fair value because of theshort maturity of these instruments. Fair values of marketable securities arebased on quoted market prices.**Marketable Securities**     We classify securities with original maturities greater than three months and remainingmaturities less than one year as short-term marketable securities, and securitieswith remaining maturities greater than one year as long-term marketable securities.Securities not due at a single maturity date are classified by their average life. We classify all of ourmarketable securities as available-for-sale, thus securities are recorded at fairmarket value and any associated unrealized gain or loss, net of tax, is includedas a separate component of shareholders’ equity, “Accumulated othercomprehensive income (loss).” We use a specific-identification cost basisto determine gains and losses. The amortized cost of marketablesecurities is adjusted for amortization of premiums and accretion of discounts to maturity,both of which are included in interest income.     We consider an other-than-temporary impairment of our marketable securities to exist if wedetermine it is probable that we will be unable to collect all amounts due accordingto the contractual terms of a debt security. If we judged a decline in fair valuefor any security to be other than temporary, the cost basis of the individualsecurity would be written down and a charge recognized in net income. We considera number of factors in determining whether other-than-temporary impairment exists,including: credit market conditions; the credit ratings of the securities; historicaldefault rates for securities of comparable credit rating; the presence of insuranceof the securities and, if insured, the credit rating and financial condition ofthe insurer; the effect of market interest rates on the value of the securities;and the duration and extent of any unrealized losses. We also consider the likelihoodthat we will be required to sell the securities prior to maturity based on ourfinancial condition and anticipated cash flows. We determined that no write-downswere required on available-for-sale securities during fiscal 2011, 2010, or 2009.**Concentration of Risk and Financial Instruments**     Financial instruments potentiallysubject to significant concentrations of credit risk consist principally of cashequivalents, marketable securities, and accounts receivable.     We invest our excess cash in U.S. Government agency securities, corporate-backedand municipal-backed bonds, and other money market instruments. Our investmentpolicy prescribes investment only in high-grade securities, and limits the amountof credit exposure to any one issuer.     Our customers include agencies of the U.S. Government and other customers throughoutthe world. We generally do not require collateral from our customers, but we performongoing credit evaluations of their financial condition. More information on accountsreceivable is contained in the paragraph titled “Accounts Receivable andAllowance for Doubtful Accounts” of this note.     Additionally,we are dependent on critical suppliers including our packaging vendors and suppliersof certain raw silicon and semiconductor wafers that are incorporated in our products.**Accounts Receivable and Allowance for Doubtful Accounts**     Accounts receivableare recorded net of an allowance for doubtful accounts. We make estimates of theuncollectibility of accounts receivable. We specifically analyze accounts receivable,historical bad debts, and customer creditworthiness when evaluating the adequacyof the allowance. We had no charges or provisionsto our allowance for doubtful accounts in fiscal 2011or 2010, and $175 in charges and provisions in fiscal 2009.**Inventories**     Inventories are stated at the lower of cost or netrealizable value. Cost is determined by the first in, first out method. We recordinventory reserves when we determine certain inventory is unlikely to be soldbased on sales trends, turnover, competition, and other market factors.F-7**Table of Contents****Product Warranty**     In general we warrant our products to be free from defects in material and workmanshipfor one year. We maintain a reserve for the estimated cost of maintaining productwarranties.**Fixed Assets**     Fixed assets are stated at cost. Depreciation of machinery and equipment, and furnitureand fixtures is recorded over the estimated useful lives of the assets, generallyfive years, using the straight-line method. Amortization of leasehold improvementsis recorded using the straight-line method over the lesser of the lease term orfive-year useful life. We record losses on long-lived assets used in operationswhen indicators of impairment are present and the undiscounted cash flows estimatedto be generated by those assets are less than the assets’ carrying amount.**Revenue Recognition*****Product Revenue Recognition***     We recognize product revenue on shipment becausethe terms of our sales are FOB shipping point, meaning that our customers (endusers and distributors) take title and assume the risks and rewards of ownershipupon shipment. Our customers may return defective products for refund or replacementunder warranty, and have other very limited rights of return. We maintain reservesbased on historical returns.     Shipping chargesbilled to customers are included in product sales and the related shipping costsare included in selling, general, and administrative expense. Such shipping costswere $39,427 for fiscal 2011, $34,694 forfiscal 2010, and $33,483 for fiscal 2009.     Paymentsfrom our distributors are not contingent on resale or any other matter other thanthe passage of time, and delivery of products is not dependent on the number ofunits resold to the ultimate customer. There are no other significant acceptancecriteria, pricing or payment terms that would affect revenue recognition.***Accounting for Commissions and Discounts***     We sometimes utilize independent sales representatives that provide services relatingto promoting our products and facilitating product sales but do not purchase ourproducts. We pay commissions to sales representatives based on the amount of revenuefacilitated, and such commissions are recorded as selling, general, and administrativeexpenses.     Our stocking distributors taketitle and assume the risks and rewards of product ownership. We presume considerationgiven to a customer is a reduction in revenue unless both of the following conditionsare met: (i) we receive an identifiable benefit in exchange for the considerationand the identifiable benefit is sufficiently separable from the customer’spurchase of our products such that we could have purchased the products or servicesfrom a third party; and (ii) we can reasonably estimate the fair value ofthe benefit received. We recognize discounts provided to our distributors as reductionsin revenue. Under certain limited circumstances, our distributors may earn commissionsfor activities unrelated to their purchases of our products, such as for facilitatingthe sale of custom products or research and development contracts with third parties.We recognize any such commissions as selling, general, and administrative expenses.***Research and Development Contract Revenue Recognition***     We recognize contract revenues and costs pro-rata as work progresses. Our researchand development contracts do not contain post-shipment obligations. Contractsmay be either firm-fixed-price or cost-plus-fixed-fee. Firm-fixed-price contractsprovide for a price that is not subject to any adjustment based on our cost inperforming the contract.     Cost-plus-fixed-feecontracts are cost-reimbursement contracts that also provide for payment to usof a negotiated fee that is fixed at the inception of the contract. The costsfor which we earn reimbursement are the actual costs incurred and are recordedin the period in which they are incurred. We recognize the contract fees pro-rataas work progresses.***Revenue Recognition of Upfront Fees***     Revenue from nonrefundable upfront fees from developmentprograms is deferred and recognized over the periods that the fees are earned.We recognize revenue from development programs which is refundable, recoupableagainst future royalties, or for which future obligations exist, over the termof the agreement. **Income Taxes**     We account for income taxes using the liability method. Deferred income taxes areprovided for temporary differences between the financial reporting and tax basesof assets and liabilities. We provide valuation allowances against deferred taxassets if we determine that it is less likely than not that we will be able toutilize the deferred tax assets.F-8**Tableof Contents****Research and Development Expense Recognition**     Research and development costs are expensed as theyare incurred.**Stock-Based Compensation**     We measure stock-based compensation cost at the grant date based on the fair valueof the award and recognize the compensation expense over the requisite serviceperiod, which is generally the vesting period. We estimate pre-vesting optionforfeitures at the time of grant by analyzing historical data and revise thoseestimates in subsequent periods if actual forfeitures differ from those estimates.Ultimately, the total expense recognized over the vesting period will only befor those awards that vest.**Net Income Per Share**     Net income per basic share is computed based on the weighted-average number of commonshares issued and outstanding during each year. Net income per diluted share amountsassume conversion, exercise or issuance of all potential common stock instruments(stock options and warrants). Stock options and warrants totaling 1,000for fiscal 2011; 5,000 for fiscal 2010; and 60,000 for fiscal 2009 were not includedin the computation of diluted earnings per share because the exercise prices weregreater than the market price of the common stock. The following table reflectsthe components of common shares outstanding:**YearEnded March 31****2011****2010****2009** Weighted average common shares outstanding – basic4,729,0354,692,4964,659,486Effect of dilutive securities:Stock options108,121158,142121,135Warrants7,1106,4064,944Shares used in computing net income per share – diluted4,844,2664,857,0444,785,565 **Use of Estimates**     The preparation of financialstatements in conformity with U.S. generally accepted accounting principles requiresus to make estimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. Actual results could differ from those estimates.**Recent Accounting Pronouncements**     We have adopted all recently issued accounting pronouncements. The adoption of theaccounting pronouncements, including those not yet effective, is not anticipatedto have a material effect on our financial position or results of operations.**NOTE 3. FAIR VALUE MEASUREMENTS**     Generally accepted accounting principles establish a framework for measuring fair value,provide a definition of fair value and prescribe required disclosures about fair-valuemeasurements. Generally accepted accounting principles define fair value as theprice that would be received to sell an asset or paid to transfer a liability.Fair value is a market-based measurement that should be determined using assumptionsthat market participants would use in pricing an asset or liability. Generallyaccepted accounting principles utilize a valuation hierarchy for disclosure offair value measurements. The categorization within the valuation hierarchy isbased on the lowest level of input that is significant to the fair value measurement.The categories within the valuation hierarchy are described as follows:     Level 1 – Financial instruments with quotedprices in active markets for identical assets or liabilities. Our Level 1financial instruments consist of publicly-traded marketable debt securities thatare classified as available-for-sale. On the balance sheets, available-for-salesecurities are classified as “Marketable securities, short term” and“Marketable securities, long term.” The fair value of our available-for-salesecurities was $61,227,498 at March 31, 2011 and $48,154,478 at March 31, 2010.     Level 2 – Financial instruments with quoted prices in active markets for similarassets or liabilities. Level 2 fair value measurements are determined usingeither prices for similar instruments or inputs that are either directly or indirectlyobservable, such as interest rates. We do not have any financial assets or liabilitiesbeing measured at fair value that are classified as Level 2 financial instruments.     Level 3 – Inputs to the fair value measurementare unobservable inputs or valuation techniques. We do not have any financialassets or liabilities being measured at fair value that are classified as Level 3financial instruments.F-9**Tableof Contents****NOTE 4. MARKETABLE SECURITIES**      Marketablesecurities with remaining maturities less than one year are classified as short-term,and those with remaining maturities greater than one year are classified as long-term.The fair value of our marketable securities as of March 31, 2011, by maturity,were as follows:**Total****<1 Year****1–3 Years****3–5 Years**$61,227,498$7,970,358$28,391,106$24,866,034      As of March 31, 2011 and 2010 our marketable securities were as follows:**As of March 31, 2011****As of March 31, 2010****AdjustedCost****GrossUnrealizedGains****GrossUnrealizedLosses****FairMarketValue****AdjustedCost****GrossUnrealizedGains****GrossUnrealizedLosses****FairMarketValue**U.S. agencysecurities$83,358  $1,200  $-   $84,558  $702,992  $19,240  $-   $722,232Corporate bonds37,884,1461,231,743(147,443)38,968,44623,807,375  1,029,273  (23,601)  24,813,047Municipal bonds  21,582,084602,457(10,047) 22,174,49421,877,258 747,483 (5,542)22,619,199Total$59,549,588 $1,835,400$(157,490) $61,227,498$46,387,625 $1,795,996 $(29,143) $48,154,478     Thefollowing table shows the gross unrealized losses and fair value of our investmentswith unrealized losses, aggregated by investment category and length of time thatindividual securities had been in a continuous unrealized loss position as ofMarch 31, 2011 and 2010:**Less Than 12 Months****12 Months or Greater****Total****FairMarketValue****GrossUnrealizedLosses****FairMarketValue****GrossUnrealizedLosses****FairMarketValue****GrossUnrealizedLosses**As of March 31, 2011U.S. agency securities $- $-  $- $-  $- $- Corporate bonds9,146,952(147,443)-- 9,146,952(147,443)Municipal bonds2,178,225 (10,047) - -  2,178,225 (10,047)Total$11,325,177 $(157,490) $- $-  $11,325,177 $(157,490)As of March 31, 2010U.S. agency securities $- $- $- $- $- $- Corporate bonds2,032,306(23,601)-- 2,032,306(23,601)Municipal bonds1,564,416 (5,542) --  1,564,416 (5,542)Total$3,596,722 $(29,143) $- $-  $3,596,722 $(29,143)     Gross unrealized losses totaled $157,490 as of March 31,2011, and were attributable to six corporate and two municipal bonds out of a portfolio of 57 bonds.Corporate bonds accounted for $147,443 of the total gross unrealized losses. The gross unrealized losses were due to market-pricedecreases after the bonds were purchased. All of the bonds with an unrealized loss were rated investment grade by Moody’sor Standard and Poor’s, and none had been in a continuous unrealized loss position for 12 months or more. Foreach bond with an unrealized loss, we expect to recover the entire cost basisof each security based on our consideration of factors including their creditratings, the underlying ratings of insured bonds, and historical default ratesfor securities of comparable credit rating. Because we expect to recover the entirecost basis of the securities, and because we do not intend to sell the securitiesand it is not more likely than not that we will be required to sell the securitiesbefore recovery of the cost basis, which may be maturity, we did not considerany of our marketable securities to be other-than-temporarily impaired at March 31,2011.**NOTE 5. INVENTORIES**     Inventories consisted of the following: **March 31****2011****2010**Raw materials$2,083,730$595,032Work in process1,109,270794,091Finished goods450,857 617,304 3,643,8572,006,427Less inventory reserve(300,000)(300,000) Total inventories$3,343,857 $1,706,427  F-10**Tableof Contents****NOTE6. STOCK-BASED COMPENSATIONStock Option Plan**     Our 2000 Stock Option Plan, as amended, provides for issuance to employees, directors,and certain service providers of incentive stock options and nonstatutory stockoptions. Generally, the options may be exercised at any time prior to expiration,subject to vesting based on terms of employment. The period ranges from immediatevesting to vesting over a five-year period. The options have exercisable livesranging from one year to ten years from the date of grant, and are generally noteligible to vest early in the event of retirement, death, disability, or changein control. Exercise prices are not less than fair market value of the underlyingCommon Stock at the date the options are granted.**Valuation assumptions**     We use the Black-Scholes standard option-pricingmodel to determine the fair value of stock options. The following assumptionswere used to estimate the fair value of options granted:**Year Ended March 31****2011****2010****2009** Risk-free interest rate1.6%2.7%3.2% Expected volatility56%55%68% Expected life (years)4.2 4.1 3.7 Dividend yield0%0%0%      The determination of the fair value of the awardson the date of grant using the Black-Scholes model is affected by our stock priceas well as assumptions of other variables, including projected employee stockoption exercise behaviors, risk-free interest rate, and expected volatility ofour stock price in future periods. Our estimates and assumptions affect the amountsreported in the financial statements and accompanying notes.***Expectedlife***     We analyze historical employeeexercise and termination data to estimate the expected life assumption. We believehistorical data currently represents the best estimate of the expected life ofa new employee option. We examined the historical pattern of option exercisesto determine if there was a discernible pattern as to how different classes ofemployees exercised their options. Our analysis showed that officers and directorsheld their stock options for a longer period of time before exercising comparedto the rest of our employee population. Therefore we use different expected livesfor officers and directors than we use for our general employee population fordetermining the fair value of options.***Risk-free interest rate***     The risk-free rate is based on the yield of U.S.Treasury securities on the grant date for maturities similar to the expected livesof the options.***Volatility***     Weuse historical volatility to estimate the expected volatility of our common stock.***Dividend yield***      We assume a dividendyield of zero because we do not anticipate paying dividends in the foreseeable future.**Expenses related to stock-based compensation**     The following table shows the effect of stock-based compensation on our net incomeand earning per share for fiscal 2009 through 2011. Stock-based compensation expensesand costs are included in the same line or lines as cash compensation paid tothe same employees. Therefore the effect of stock-based compensation is includedin “Selling, general, and administrative expenses” and presented inthe line titled “Stock-based compensation” on our Statements of CashFlows:**Year Ended March 31****2011****2010****2009**Effect of stock-based compensation on net income$(76,720)$(100,842)$(86,672)Effect of stock-based compensation on net income per share:Basic$(0.02)$(0.02)$(0.02)Diluted$(0.02)$(0.02)$(0.02)**Tax effects of stock-based compensation**     Stock-based compensation increased deferred taxes by $28,233for fiscal 2011 and $36,364 for fiscal 2010.F-11**Tableof Contents** **General stock option information**     We had no nonvested shares as of March 31, 2011 or 2010.      The following table summarizes information aboutoptions outstanding at March 31, 2011, all of which were exercisable:**Ranges ofExercise Prices**    **Number Outstanding**    **Weighted Average Exercise Price**    **Weighted Remaining Contractual Life (years)**$  15.08 - 16.93122,000$16.334.3 29.65 - 31.2738,00029.783.4 34.71 - 58.2715,00043.067.1175,000$21.544.3      Our 2000 Stock Option Plan, as amended, providesfor issuance to employees, directors, and certain service providers of incentivestock options and nonstatutory stock options. Generally, the options may be exercisedat any time prior to expiration, subject to vesting based on terms of employment.The period ranges from immediate vesting to vesting over a five-year period. Theoptions have exercisable lives ranging from one year to ten years from the dateof grant. Exercise prices are not less than fair market value as determined byour Board at the date the options are granted.     A summary of our stock options and warrants are shown in the following table: **Option SharesReserved**     **Options Outstanding**     **WeightedAverage Option Exercise Price**     **WarrantsOutstanding**     **Weighted Average Warrant Exercise Price**At March 31, 2008178,230308,400$16.0910,000$16.28Granted(4,000) 4,000  $31.27 -  -Exercised-  (30,650) $8.82 --At March 31, 2009174,230  281,750  $17.10 10,000 $16.28Granted(4,000)4,000 $51.04 -  -Exercised-  (31,250) $19.92 --At March 31, 2010    170,230  254,500  $17.28 10,000 $16.28Granted(4,000)4,000$42.45--Exercised- (83,500)$9.56--At March 31, 2011    166,230 175,000 $21.5410,000$16.28      The remaining weighted-average exercisable lifewas 4.3 years at March 31, 2011; 4.0 years at March 31, 2010; and 4.9 years at March 31, 2009.All outstanding options were exercisable as of March 31, 2011and 2010. Exercisable options were outstanding covering 280,250 shares at March 31,2009 at a weighted-average exercise price of $17.08. The total intrinsic valueof options exercised during fiscal 2011 was $3,337,511based on the difference between the exercise price and stock price at the timeof exercise for in-the-money options. The total intrinsic value of options outstandingMarch 31, 2011, based on our closing stock price for that day, was $6,091,740,all of which were exercisable. The total fairvalue of option grants was $76,720 in fiscal2011. There was no unrecognized stock-basedcompensation at March 31, 2011.     No warrants were issued in the past three fiscal years. Remaining weighted-averageexercisable warrant life was 1.9 years atMarch 31, 2011; 2.9 years at March 31, 2010; and 3.9 years at March 31,2009.**NOTE 7. INCOME TAXES**     Incometax provisions for fiscal 2009 through 2011 consisted of the following:**Year Ended March 31****2011****2010****2009**Current taxesFederal$5,761,632$5,375,724$4,304,330State504,408550,146351,625Deferred taxesFederal56,996 (6,109)(17,880)State7,215 (2,689)6,630 Income tax provision$6,330,251 $5,917,072 $4,644,705  F-12**Table of Contents**     A reconciliation of income tax provisions at the U.S. statutory rate for fiscal2009 through 2011 is as follows: **Year Ended March 31****2011****2010****2009**Tax expense at U.S. statutory rate$6,809,003 $6,091,581 $4,905,384 State income taxes, net of Federal benefit345,213 369,754 271,307 Domestic manufacturing deduction(549,123)(309,222)(238,679)Municipal interest(239,636)(225,695)(197,065)Other (35,206) (9,346) (96,242)Income tax provision$6,330,251 $5,917,072 $4,644,705      Deferred income taxes reflect the net tax effects of temporary differences between thecarrying amount of assets and liabilities for financial reporting purposes andthe amounts used for income tax purposes. Significant components of our deferredtax liabilities as of March 31, 2011 and 2010 were as follows: **March31****2011****2010**Deferred revenue$-$7,513 Vacation accrual135,724   121,788 Inventory reserve110,400   108,180 Depreciation36,053   65,443 Stock-based compensation deductions117,800   162,869 Unrealized gain on marketable securities(617,471)(637,127)Other70,801 69,196 Net deferred tax liabilities$(146,693)$(102,138)     Realizations of stock-based compensation deductions are credited to “Additional paid-incapital” and included in “Tax benefit of stock-based compensation”on our statements of shareholders’ equity. Credits of $230,173in fiscal 2011, $280,448 in fiscal 2010, and $270,413 in fiscal 2009 were attributedto stock-based compensation deductions. The “Additional paid-in capital”credits also included the tax benefit of stock-based compensation deductions inthose years.     The amounts credited to “Additionalpaid-in capital” were the tax benefits of the deductions to the extent theyexceeded the corresponding compensation expense recognized for financial reportingpurposes. “Tax benefit of stock-based compensation” represented (i) thetax benefits of deductions for stock-based compensation to the extent they exceededthe corresponding compensation expense recognized for financial reporting purposes,and (ii) reversals of valuation allowances against deferred tax assets fornet operating loss carryforwards attributable to stock-based compensation deductions.Cash we received from the exercise of stock options related to excess tax benefitsis included in “Net proceeds from sale of common stock” in the statementof cash flows for the year in which the option was exercised and cash received.     We had $203,384 of Federal net operating losses and $166,729of state net operating losses at March 31, 2011. These net operating lossesexpire in fiscal 2020 and are subject to limitationincluding limitation under the Internal Revenue Code.     We had no unrecognized tax benefits as of March 31, 2011, and we do not expect anysignificant unrecognized tax benefits within 12 months of the reporting date.We recognize interest and penalties related to income tax matters in income taxexpense. As of March 31, 2011 we had noaccrued interest related to uncertain tax positions. The tax years 1999 through 2010 remain open to examinationby the major taxing jurisdictions to which we are subject.**NOTE 8. SEGMENT INFORMATION**     We operate in one reportablesegment. We manufacture and sell spintronic products, and receive research anddevelopment contracts.     The following tablesummarizes customers comprising 10% or more of revenue for fiscal 2011, 2010,and 2009: **% of Revenue for Year Ended March 31****2011****2010****2009**Customer A14%15%10%Customer B11%16%19%Customer C11%11%11%  F-13**Tableof Contents**      Revenue by geographic region was as follows: **YearEnded March 31****2011****2010****2009**United States$14,169,952$14,283,819$12,445,164Europe12,009,2949,334,7428,154,261Asia4,576,2704,133,2512,314,626Other441,547395,373458,218Total Revenue$31,197,063$28,147,185$23,372,269**NOTE 9. COMMITMENTS AND CONTINGENCIES**     Lease paymentswere $245,220 for fiscal 2011, $237,317 forfiscal 2010, and $234,368 for fiscal 2009. The operating lease for our facilityexpires December 31, 2015. We pay operating expenses including maintenance,utilities, real estate taxes, and insurance in addition to rental payments. Wealso lease a piece of office equipment under an operating lease expiring July 2014with payments due quarterly. Our future minimum lease payments are shown in thefollowing table: **Year Ending March 31****2012****2013****2014****2015****2016****Total**$254,053$257,685$261,370$264,142$200,109$1,237,359 **NOTE 10. COMMON STOCK**     Our authorized stock is stated as six million shares of common stock, $0.01 par value, and tenmillion shares of all types. Our Board may designate any series and fix any relativerights and preferences to authorized but undesignated stock. We have an outstandingauthorization from our Board to purchase up to $2,500,000 of our common stock,all of which remained available as of March 31, 2011.**NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS**     All of our employees areeligible to participate in our 401(k) savings plan the first quarter after reachingage 21. Employees may contribute up to the Internal Revenue Code maximum.We make matching contributions of 100% of the first 3% of participants’ salarydeferral contributions. Our matching contributions were $110,268for fiscal 2011, $103,038 for fiscal 2010, and $95,289 for fiscal 2009.F-14**Table of Contents****EXHIBIT INDEX****Exhibit #****Description**   23Consentof Ernst & Young LLP.   31.1Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a).   31.2Certification by Curt A. Reynders pursuant to Rule 13a-14(a)/15d-14(a).   32Certification by Daniel A. Baker and Curt A. Reynders pursuant to 18 U.S.C. Section 1350.