Good day everyone and welcome to the NVE Corporation fourth quarter and fiscal 2009 earnings call. This call is being recorded. With us today from the Company is the President and Chief Executive Officer, Dr. Daniel Baker; and the Chief Financial Officer, Mr. Curt Reynders. At this time, I would like to turn the call over to the Dr. Daniel Baker. Please go ahead, doctor.

Thank you. Good afternoon and welcome to our conference call for the fourth quarter of fiscal 2009. With me on the call is Curt Reynders, our CFO. This call is being webcast live and being recorded. A replay will be available through nve.com. After my opening comments, Curt will present a financial review of the quarter and fiscal year. I will highlight the business items and then we will open the call to questions. We made three filings with the SEC in the past hour following the close of the market which available for our website. As usual, we filed our press release with quarterly and fiscal results. We also filed our annual report on Form 10-K in the past hour. This is much sooner as of the end of the fiscal year than in past years and well ahead of the deadline. Lastly, within the past hour, we filed a current report on Form 8-K relating to a supplier agreement by and between us and Phonak. I will talk about that new agreement in a few minutes. Comments we may make that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties, including among others, such factors as risks in continued revenue growth and continued profitability; uncertainties related to the awarding of future research and development contracts; risks related to the liquidity or value of our marketable securities; and uncertainties related to the economic environment in the industries we serve; as well as the risk factors listed from time-to-time in our filings with the SEC, including our just filed annual report on Form 10-K. The Company undertakes no obligation to update forward-looking statements we may make. We are pleased to report record revenue and earnings for the quarter and fiscal year to the quarter net income increased 38%, $0.65 per diluted share. Annual revenue increased to 14% to $6.90 million. For the full fiscal year net income increased 36% to $1.04 per diluted share. Annual revenue increased to 14% to $23.4 million. Now, I will turn the call over to Curt to discuss details of our financial results.

Thanks Dan and good afternoon. Revenue for the quarter ended March 31, the fourth quarter of fiscal 2009, increased 14% to $6.9 million, our fourteenth consecutive quarterly year-over-year increase in total revenue. Product sales increased $25,000 to $5.7 million in contract R&D increased $822,000 or 220% to $1.2 million. Our seasonal pattern of strong product sales in the fourth fiscal quarter compared to the rest of the year continued with the 24% sequential increase in product sales from the third quarter. We were also pleased to show an increase albeit a small percentage in year-over-year product sales despite the challenging economy and comparisons to an extraordinary quarter last year. This is our best quarter for product sales in our history and our 17th consecutive year-over-year increase. We had a strong quarter for contract R&D with revenue up 220%. As we said in our January call, much of our contract revenue is dependent on meeting certain technical milestones and our research staff has done a great job meeting those milestones. Our fourth quarter contract R&D revenue reflects that success. Gross margin in the quarter increased to an extraordinary 74% of revenue compared to 69% in the prior year quarter. This was due to higher margins on both product sales and contract R&D revenue. Research and development expense decreased 8% compared to the fourth quarter of fiscal 2008. The decrease was due to the completion of certain R&D projects in the past year and the increase in funded R&D which tends to pull resources from company-funded R&D to customer funded R&D. Because we received revenue for these activities, customer funded R&D is included in cost of sales. We have said that R&D expense both in dollar terms and as a percentage of revenue could increase as we identify additional company-funded product development…

Thanks Curt. As we have said before, we summarize our product advantages with four B's, boxes, or a small footprint; bps, more precise; bulletproof inherent reliability; and batteries, meaning low power and long battery life. Highlighting the second B, this is our position. In the past quarter we announced a new angle sensor based on tunneling magnetoresistance or TMR. This is our first commercial product using TMR. Most of our products used giant magnetoresistive or GMR. TMR produces an even larger signal than GMR. Tunneling magnetoresistors are synchronic structures based on insulating layers, a few atomic layers thick. The layers are so thin that electrons can tunnel through and the resistance changes with the external magnetic field. NVE pioneered the new technology and the new part is the culmination of years of research and development. We have sensors to detect magnetic field, to detect fields’ radiance, to detect proximity, to measure rotational speed and to measure electrical current. New tunneling part opens a new application market, measuring angular position. We are targeting motor control, automotive, and non-position centers with the new part. Another new product introduced in the past quarter was the giant magnetoresistive current sensor, 2.5 millimeter square less than 1/10 of an inch with excellent accuracy. We talked about that product on our last call but since then we have improved the specification and the device is even more sensitive. Electrical current sensors are used in a wide range of industrial control and instrumentation application such as motor control. The new sensors along with our entire sensor product line will be shown at the 2009 Sensor +Test Exhibition in Nuremberg, Germany later this month. The annual exhibition is billed as the leading forum for sensors, measuring and testing technologies worldwide and this is an important show for us.…

(Operator's instruction) Your first question comes from the line of Steven Crowley - Craig-Hallum Capital.

First of all, congratulations on just a sparkling performance, I know a lot of people throw it out around lightly but this was truly an exceptional quarter. Congrats. You have given us a lot to work with between the numbers in you 10-K, that is a good thing and your discussions. In terms of picking a place to start: Phonak, congrats on the newly disclosed relationship. It sounds like they have been a customer for a while here and this is a furthering of the relationship, is that the correct inference?

Yes, that is right, Steve. The agreement notes that Phonak has and continue to develop manufacturing cell hearing system using NVE's medical sensors.

In terms of what the relationship provides you with relative to the previously established business relationship, is it just more visibility? Is it a more formal relationship, well certainly a more formal relationship but in terms of… does it open the door to significant additional business potentially?

Well, it is hard to say whether it leads to additional business. It does formalize a number of areas that are listed in the 8-K and in our files with the contract itself but there are a lot of provisions that are now formalized relating to intellectual property, relating to confidentiality and things like that. I presume that they wanted the contract because we are an important supplier and so we are proud of that. We are proud we accounted our customers a number of leading companies and Phonak is one of the world's leading suppliers with hearing aids.

Now, are they part of [Tunova_28.25] or is it not a completely different because they have got a Phonak entity and I apologize for my [naiveness] about the hearing aid market especially the European players but…

I do not think so, Steve. I think they are an independent corporation or privately held so they are probably is not a lot of MPEG model.

Alright because it seems like Tunova has a Phonak along with another named operation and it was not clear to me how it all falls in together but in terms of the profile with Phonak, they are one of the top five, if not the top three hearing aid companies in the world, is that correct?

I do not have specific numbers but certainly they are one of the leading suppliers of hearing aids but I do not know where they rank offhand.

Okay, well I can backfill on that. Now, switching gears, you obviously had a significant surge in your contract R&D business. It sounds like that is being driven both by traditional government entities but also commercial entities. Did you say that 47% of your backlog in contract R&D was related to non-government sources?

That is correct, Steve, 47% is from non-government sources and we are working with specific customers in three main areas; biosensors, magnetic sensors and anti-tamper MRAM and a compassing magnetic sensor.

And can you give out your sense for whether or not the contract R&D revenue line in the 2009 fiscal year had a similar amount 47% or some number from non-government entities or at similar type flavor?

I think we could characterize it at that way. Generally, our backlog will follow what our revenue has been.

Okay that is helpful. One more question and then I will hop in the queue, it look and reads like 2009 was characterized by modest but impressive growth on the product side of your business but really underneath the hood, a significant change in mix where your success with numerous medical device companies made a significant growth story in the industrial side of that business. Given the economic conditions made that side of the business down meaningfully, is that the right way for us to think about?

Yes, I think so. Over the last year, our medical sensors were strong and the economy did affect our industrial sensors.

And in terms of new customers on the medical side, can you give us some sense as to whether you were successful adding a handful or two hands and two feet worth of new customers in medical? What kind of color can you give us on what looks have been a very successful year in medical? Thanks for taking my questions and I will hop back in the queue.

This is Dan. In terms of new customers, we have added a number of new customers, some of them in the medical front. Of course, they vary over wide range in terms of their size but we hope that some of the new customers which tend to be smaller customers will grow and become large customers. In terms of color on new customers, we have had new customers in industrial control, energy conversion. I talked to an engineer who was amazed that our parts offer five channels and 2500 volts isolation. That was quite impressive to him and he only needed to isolate several hundred volts and he wanted to make sure he is reading the data received right. So, we are reminded constantly that these are just extraordinary products that allow things to be done that could not be done otherwise and we are proud of that and we are proud of the rest of the customers and we look forward to some of these new customers growing and as their products and their offerings to see.

(Operator's instruction) Your next question comes from the line of Clinton Morrison - Feltl & Company. Clinton Morrison - Feltl & Company: In terms of the contract R&D, I just wanted to, it sounds like it kind of matches up obviously with sort of the major products that you have kind of suggest that you are working on with the compassing and the tampered installed forth. Should we assume that when you make the move and actually kind of announce one of those products that we will at that point sort of see a drop off in the contract R&D revenue?

Well, that could happen. We try to be successful in these developments and end up with commercial products but that means that the research end. But our hope would be that there are additional R&D contracts that we can gain. It is hard to predict those and they are situational. We take on these contracts because when there is a good overlap between our capabilities and the technology that is needed and it is technology that we want to develop. Generally, we do not take on contract R&D as a revenue source. We are taking it on because we believe that it is R&D that could be strategic to us. So, it is hard for us to predict contracts. However, it is very hard and it can be lumpy. But we hope that some of these contracts will be finished and hopefully finished successfully. The whole visibility of replacement contract sounds a little bit slow. Clinton Morrison - Feltl & Company: Okay and the $2.2 million contract backlog that is a 12 month number you are providing?

That is actually what our backlog was at the end of March.

Excuse me; I was just going to say that we anticipate that it is going to be fulfilled within the next 12 months.

Right, yes. Clinton Morrison - Feltl & Company: And then just your price decrease, is this sort of the first time you really has sort of price line, a significant product line type price decrease?

I would not say it is the first time. We were reluctant to do that because we believe that our products are premium products that I think meant premium pricing. But we see a number of price sensitive market particularly Curt mentioned the Asian market which there is a lot of activity and industrial control and factory automation in Asia, China and Japan in particular and they tend to be price sensitive market. So, we took this step very deliberately because we felt that it could increase our potential served market and ultimately end up getting us more business than it would cost us in terms of gross margin and it also gave us more separation between the ranges of our product line. We have the IL400 Series Transceivers which are higher priced products and the products that I mentioned, the IL3000 Series, they are lower priced products and we provided more separation, more differentiation between those products. Clinton Morrison - Feltl & Company: Okay and when did that price impact take effect?

It was early in the quarter. I do not remember exactly. Clinton Morrison - Feltl & Company: So, it impacted most of the quarter you just reported.

It would have, yes. Clinton Morrison - Feltl & Company: Okay, so any gross margin impact has already been absorbed. That is what I am trying to get to.

Yes, I mean there is a little bit of the tail because orders that are in place, we would typically honor those at the old, well with the price decrease, it depends on what has been the pipeline but yes, I would say it is largely been incorporated.

(Operator's instruction) You have a follow up question from the line of Steven Crowley - Craig-Hallum Capital.

In terms of the key areas that you have polled out, magnetic and compassing sensors in particular then I would like to ask you about that once a quarter, what can you tell us about the progress that you are making on that front? Is it meaningful? Are you pleased with that? How tangible is it? Any kind of color on that program would be much appreciated.

This is Dan. I think our research guys are doing some remarkable work there and we are working on it on two fronts. One is to reduce the size of the potential devices and the other is to increase the accuracy and optimize the device for extremely for size compassing and I suppose one measure of that is hard to quantify as to one measure of that is that a lot of our contract revenue is dependant on meeting certain technical milestone. So, we have met some important milestones in that development. There are more that we would like to be. We want to have a product out there that is not just a good product but is absolutely the best in class and can dominate the segment. So, we set high goals for ourselves but so far our folks have been up to the challenge. We are pleased with the results.

Great and switching gears, we focused most of the discussion on the successes you had last year that were largely driven by some of those programs in the R&D arena and the medical products. Can you give us a little feel for the state of the industrial business right now? Was Q4, the March quarter, a much more difficult environment to operate in than the December quarter and do you feel like distributors are more constructive that the business is looking up at all industrial? In the industrial side, what can you tell us about what you are taking out?

Steve, information that we are getting from customers is mix. We have been concerned about the macroeconomic environment and inventories in the channel that maybe having an impact near term for us. As far as the last two quarters, we did see a weakness as we mentioned in the industrial market, Steve. They were down but we continue to see a bright long term prospects for those markets and we are well positioned to write out a recession. We have got high margin products and relatively low fixed cost.

It sounds like you have added meaningfully the customer base there but over the near term, those the inventory situation or the demand environment will get in more challenging than what we have just gone through for the past quarter or two or does it start to look up but it is difficult to determine the pace of improvement from here? What is the right way to characterize it?

I think it is kind of difficult to look out but I think our best information right now is probably late in the calendar year before we start seeing improvements in those markets.

Do you think, again, not to keep asking the same question but it is an important question about whether or not the degree of difficulty for you guys in industrial for some anomalous reason is much higher as you look forward versus just having to look back. I mean, to us folks on the outside, it looks like we have gone through a really challenging period and things could not get much worse. Does that characterization fit your business profile and maybe we will get Dan to crack it.

Well, thanks for the crack at that, Steve. It is just hard for us to predict what is going to happen in the macroeconomic environment. What we tried to do is focused on running our business efficiently, responding to the market, and things like the price reduction that I talked about a few minutes ago to make our products more affordable in price sensitive industrial market to keep our fixed cost as low as we reasonably can and to run lean. Our hope is that the economy will start to turn around sooner rather than later but it is hard for us to predict that and we try to leave that to expert. Looking at the semiconductor market, some of the analysts, Gartner for example which you are probably familiar with is predicting a pretty tough year in calendar 2009 but we are hoping and I think they are forecasting a turn around towards the second half of the calendar year. So, we certainly hope that that is true but we tried to plan conservatively so that we can write out difficult economic conditions and we are also fortunate to be diversified not just in industrial factory automation but we have the significant medical business which tends to be less susceptible to economic cycles because as you know, people are unlikely to forego medical procedures because of a weak economy. So, that business is held up very well and our hope is that the factory automation business will recover later this year.

One more question for me, in terms of the seasonality of your business, there is typically been a little bit of seasonality in the third quarter of your fiscal year, not typically from Q4 to Q1 although last year, there were some things that came into play that made Q1 down rather significantly sequentially. Those could either be some things like some extra business that happened that fall into Q4 on a timing basis. I think last year, there were some inventory correction that needed to be done out in industrial in Q1. Are there any factors like those factors or some seasonality to the business as you now see it that should cause a significant difference in your product sale let us say from Q4 to Q? Can you help us out understanding the trajectory of your business a little bit?

Well, we were hesitating because as you probably know, we generally do not give quarterly guidance and try not to predict how forward they are looking compared to prior quarters. As you point out, there is the seasonal pattern where the third fiscal quarter or for a calendar quarter tends to be weaker. We believe that that is because of holidays and shop downs late in the calendar year but it is hard for us to predict how quarters will go. On product sales in particular, we do not work off the backlog in general. We are working off orders that are current orders and they can fluctuate. So, sometimes it is hard to know and so we try not to predict quarter-to-quarter how things are going to look or how things are going.

Maybe I asked the question poorly, Dan, was there anything anomalous in Q4 timing, initial stocking of the customer, anything like that on the product side of your business in Q4 that distorted the natural run rate a bit higher in that period?

Well, there was nothing that we reported and we try to call attention to special factors when there are some but sometimes we do not know. Sometimes there can be inventory bubbles or inventory corrections and we do not always have the information on what is going on there. In many cases, our industrial controlled products fall through distribution that was level removed from the customers. It is very good business model but it means that we do not always know what is going on in our customers and then our customers are selling products and they do not always know. So, what I am saying is we did not report anything but on the other hand, sometimes our business can be lumpy and cyclical and we do not always know.

Well, probably you are through a little bit of conservatism about Q1 which is typically what has made sense in the past anyway.

And there appear to be no further questions at this time. I would turn the conference back over to our speakers for any additional or closing comments.

Well, thank you Semica. We were pleased to report record revenues and earnings for both the quarter and the fiscal year. We look forward to speaking with you again in July when we plan to report first quarter results. Thank you for participating in the call.

And that does conclude today's conference call. We thank you for your participation.