Good day, Ladies and gentlemen, and welcome to the NVE Conference Call on Second Quarter Results. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder this conference call may be recorded. I would now like to introduce your host for today’s conference Dan Baker, President and CEO.

Good afternoon. And welcome to our conference call for the quarter ended September 30, 2014, the second quarter of fiscal 2015. As always, I’m joined by Curt Reynders, our Chief Financial Officer. This call is being webcast live and being recorded. A replay will be available through our website NVE.com. After my opening comments, Curt will present a financial review of the quarter, I’ll cover business and governance items, and we’ll open the call to questions. In the past hour following the close of market, we filed our press release with quarterly results and our quarterly report on Form 10-Q with the SEC. The filings are available through our website or the SEC’s website. 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 uncertainties related to the economic environments in the industries we serve, uncertainties relating to future revenue, uncertainties related to future R&D contracts, risks related to developing marketable products, uncertainties relating to the revenue potential of new products, risks related to the material weaknesses and our internal controls, as well as the risk factors listed from time-to-time in our filings with the SEC including our annual report on Form 10-K for the year-ended March 31, 2014. The Company undertakes no obligation to update forward-looking statements we may make. We’re pleased to report a 20% increase in net income to $0.80 per diluted share driven by a 13% increase in total revenue; an increased gross, operating and net margins. I’ll let Curt cover the details of our financial results.

Thanks, Dan. As Dan said, for the second quarter of fiscal 2015, total revenue increased to 13%, the increase was due to a 12% increase in product sales and 119% increase in contract R&D revenue. The increase in product sales was from then record product sales of the prior year and it was due to increased purchase volume by existing customers, favorable order timing and new customers. The increase in contract R&D revenue was due to a new contract. Despite a challenging environment for government funding, we have some promising contract opportunities and we hope to gradually increase contract R&D revenue in coming quarters. We have some visibility of inventory adjustments by medical device customers in the current quarter, which will negatively impact revenue in the December quarter. This is not unusual as our customers often adjust inventories late in the calendar year. The semiconductor industry correction may also be contributing to inventory adjustments this year. Last year, revenue decreased 11% sequentially from the September quarter to the December quarter and we could see a roughly similar percentage impact this year. Gross profit margin increased to 81% of revenue for the second quarter of fiscal 2015, compared to 79% for the second quarter of fiscal 2014, due to a more favorable product sales mix. Total expenses decreased 8% for the second quarter of fiscal 2015, compared to the second quarter of fiscal 2014, due to a 5% decrease in SG&A expense and a 10% decrease in R&D expense. The decrease in SG&A expense was due to decreased legal expenses. The decrease in R&D expense was due to the completion of certain product development activities. Income from operations increased to 23% and our operating margin was 63% compared to 58% in the prior year quarter. Our non-operating income consisted of interest…

Thanks, Curt. I will cover R&D contracts, patents, product development, and governance. As we’ve discussed before, our growth strategy is new and improved products in the near-term and game changing extensions for the long-term. Contract R&D supports long-term growth with new ideas for spintronics. In the past quarter, we completed the Missile Defense Agency small business innovation research Phase I contract titled Spintronics-based Physical Unclonable Functions. Our Physical Unclonable Functions, PUF or PUF is a function that’s embodied in a physical structure and is easy to evaluate, but hard to predict and replicate. Possible commercial applications include high-speed encryption and security for consumer electronics. There is a link to an abstract approved by the MDA for public release from the, In The News page of our Web site. Also in the past quarter, we continued work under a National Science Foundation grant with a goal of developing sensors for faster detection of food-borne pathogens. We hope to complete the project in the current quarter and to demonstrate detection of Salmonella. We’re in discussions about commercial deployment with leading companies in the food industry. Summarizing patents as we previously reported, in the past quarter, we were granted a new patent titled Magneto-resistive based mixed anisotropy high field sensor. This could have applications in power control, navigation, and other areas. Also, in the past quarter, we received a notice of allowance of patent titled inverted magnetic isolator and notice of allowance is a written notification that a patented application has been examined by the patented office and is nearing issuance. The patent relates to couplers, which are also known as isolators, because they electrically isolate coupled systems. Couplers an important product line for NVE, and we continue to invest and developing new versions and models. Specifically in product development, in the past…

Certainly. (Operator Instructions) Our first question comes from the line of Charles Haff from Craig-Hallum. Your line is open. Charles Haff – Craig-Hallum Capital Group: Hi, guys. Thanks for taking my questions, and congratulations on a nice quarter.

Thanks, Charles. Thank you. Charles Haff – Craig-Hallum Capital Group: I had a question regarding the QSOP chip sales in the quarter. I understand, it’s a relatively new product, but was wondering if you could give us any color on how the launch in going?

Yes, this is Dan. It’s hard to give specific numbers as you said it is early. But we've had an excellent reception to the parts, where we – I personally went to visit some of our distributors just after we announced the QSOP isolated transceivers. And there was a great reaction from our distributors and from prospects who like the idea of having a part that’s one-fourth the size. We brought with us some demonstration boards that show the part. And for engineers who were used to looking at these it really is very impressive. It’s a tiny little chip, 4 millimeters by 5 millimeters, and as we said, one-fourth the size. So we had some interests from customers. We have some sample requests. We have a number of customers who are looking at data sheets and we’re very optimistic about the prospects. Charles Haff – Craig-Hallum Capital Group: And do you expect the QSOP chips sales to be material, say two years from now relative to your business or how should I kind of think about the materiality of where the QSOP could be?

We would certainly hope so and particularly if we – as I mentioned we targeted automotive applications and particularly hybrid electric vehicles. And those types of vehicles are surprisingly space sensitive, where there’s going to be a lot of electronics, very high network content in those vehicles, in the next generation of hybrid electric vehicles. So we feel we have a convincing benefit proposition. And we have markets in industrial control and other applications that are space sensitive, but we have some excellent potential in automotive. And we talked about this before, but we have a partner that’s looking at private labeling, controller area, network transceivers, including the QSOPs for automotive. And the QSOP format gives us a significant advantage and gives our customers a significant benefit in the automotive market. Charles Haff – Craig-Hallum Capital Group: Okay. Thank you for that response. And in terms of your inventory reserve, I noticed from the 10-Q that the inventory reserve decreased by about $40,000 relative to the last quarter. Was there any reason why you’re bringing down your inventory reserve? Was that the medical device change that you mentioned in the prepared remarked remarks or was there something else going on there?

No, Charles. This is Curt. We basically just wrote down some parts that had been showing up in inventory, wrote them off into the reserve. Charles Haff – Craig-Hallum Capital Group: Okay. Will that be a recurring situation, Curt, or is that – I don’t know how to think about this going forward. Is this kind of a normalized level now or is it something that should be recurring?

Yes. It’s probably something that’s not – wouldn’t be recurring. It really didn’t have an impact on our income statement. It was basically a balance sheet type of accounting where we moved out of the asset into the reserve. So – I mean that happens from time to time, but most quarters it’s not a significant amount. Charles Haff – Craig-Hallum Capital Group: Okay. Great. And then, gross margin increased you mentioned due to favorable product mix. I’m wondering if you could give some details around the mix there or was some of that from the contract R&D or is that separate when you talk about product mix.

When we’re talking about product mix, that is a mix between our various products. It doesn’t impact contract R&D at all. Charles Haff – Craig-Hallum Capital Group: And what would be some of those products that would be – have a higher gross margin mix?

Generally, our sensor products would have a little bit higher margin than the coupler product line. Charles Haff – Craig-Hallum Capital Group: And is that something that you would expect to recur in the next few quarters this fiscal year, the mix?

Yeah, I think the mix will be similar to what we’ve had the first two quarters of this fiscal year. Charles Haff – Craig-Hallum Capital Group: Okay. Great. Thanks for your time.

Thanks, Charles.

Thank you. (Operator Instructions) Our next question is coming from the line of Jung Hoge [ph] from – with a private investor. Please go ahead.

Hi, guys. Congratulations on your quarter. It looks great.

Thank you.

I’m really happy to hear that you’re considering distributing some money back to shareholders. I know you said in the next quarter you’re going to talk about it a little bit more, but I’m going to ask you some questions anyway. Are you going to be dipping into your cash hoard to issue a special dividend or are you considering a regular dividend used from your free cash flow?

This is Dan. The board hasn’t made a final decision, but we have – well let me put it in terms of three main goals. One goal is to return a significant amount of cash to shareholders in the relative near term. We do want to maintain a strong enough balance sheet for strategic investments, contingencies. And we also want to minimize the transaction expenses of returning cash, so that our capital allocation plan will increase shareholder value. So we’ll have more to say on the next call and I think it’d be a little bit presumptuous of us to talk about the specifics at this point. But we do appreciate your input and we’ve gotten some feedback from other shareholders as well. So we feel that that this will help improve our shareholder value and meet the needs of a broad range of shareholders.

Have you given any thought to – I’ve seen in your older transcripts that you hold cash as a deterrent against potential threats. Have you thought of getting a line of credit against your working capital or something like that, and then being able to distribute even more cash than you may have already thought?

We have and that’s part of the mix. So we’re looking at a number of options for what we would do if we needed to raise cash. The difficulty with that, of course, is there’s an expense involved even if one doesn’t use the line of credit, there’s a commitment fee generally. So we’re trying to balance that. We’re trying to balance expenses that would hit our bottom line and reduce our shareholder value versus returning a significant amount of cash to our shareholders. So the exact amounts are things that we’re still working through and looking at some of these contingency plans of what would happen if we had opportunities for large strategic investment or contingency. But we’re sensitive to returning as much as is reasonable to our shareholders.

Okay. Great. One last question, do you think that – have you considered the opportunity of distributing a regular dividend and then increasing – getting a higher value in the marketplace like trading at a higher multiple of EBITDA or more in line with some of the comps that are out there?

Well, that’s certainly one of the considerations is what – how our shareholders would react. We recognize that when our shareholders investing in NVE, they’re not investing probably for our bond portfolio and they might have other investments for that money. And that’s one of the reasons why we’re looking at returning that capital to shareholders. What the reaction will be, that’s difficult for us to predict, but we do feel that if we do things as a company and as a board that increase shareholder value in the long term, that the stock price will reflect that.

That’s great. I look forward to the dividend announcement or whatever you guys decide is best. Good luck.

Thank you.

Thank you. And at this time, I’m not showing any further questions on the phone lines.

Well, thank you. If there are no other questions, I’ll summarize. We were pleased to report 20% increase in net income for the second quarter and we look forward to speaking with you again in January to report third quarter results. Thank you for participating in the call.