Good day, ladies and gentlemen, and welcome to the NVE Conference Call on First Quarter 2016 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 is being recorded. I would now like to introduce your host for today’s conference, Mr. Daniel Baker, President and CEO. Sir, please begin.

Thank you and good afternoon. Welcome to our conference call for the quarter ended June 30, 2015, which was the first quarter of fiscal 2016. 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 governance items and we’ll open the call to questions. We issued our press release and filed our Quarterly Report on Form 10-K in the past hour following the close of market. Links to documents are available through the SEC’s website, our website and on Twitter at NVE Corporation. 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 future revenue and earnings, risks related to our reliance on several large customers for a significant percentage of revenue, uncertainties related to future dividends and stock repurchases, 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, 2015. The company undertakes no obligation to update forward-looking statements we may make. We’re pleased to report solid revenues and earnings, a large increase in contract R&D revenue and dollar a share dividend. Now I’ll let Curt cover the details of our financial results.

Thanks, Dan. For the first quarter of fiscal 2016 total revenue decreased 2% to $8.32 million due to a 7% decrease in product sales partially offset by a 457% increase in contract research and development revenue. The year-over-year comparisons are to record total revenue product sales and earnings for the year ago quarter. Total revenue increased 10% compared to the immediately prior quarter. The decrease in product sales from the prior year quarter was due to decreased purchase volume by existing customers. In our 10-Q, we cautioned that based on customer forecast in a more aggressive pricing strategy in certain markets, we currently expect product sales for future quarters including the remaining quarters in fiscal 2016 to be significantly less than product sales for the first quarter of fiscal 2016. We are currently forecasting an impact of $1 million to $2 million per quarter starting this quarter. The large increase in R&D revenue was due to new contracts and contract activities. Gross margin was 76% of revenue compared to 82% last year due to a higher percentage of revenue from contract R&D. Margins tend to be significantly higher on product sales then on contract R&D. Total expenses decreased to 19% for the first quarter of fiscal 2016 compared to the prior year quarter due to a 23% decrease in selling, general and administrative expense and a 15% decrease in R&D expense. The decrease in SG&A was primarily due to decreased performance-based compensation. The decrease in R&D expense was due to an increase in contract R&D, which caused us to reallocate resources away from expensed research and development. Interest income decreased to 11% for the first quarter due to a decrease in interest-bearing marketable securities. The decrease in marketable securities was because we've been using proceeds from maturating securities to help…

Thanks, Curt. I will cover our growth strategy, product development, R&D contracts, patents and governance. Curt covered the near-term product revenue forecast, our long-term goal is to replace the revenue shortfall and then some with unique cutting-edge high value-added products. Our growth strategy is new products and lower pricing to increase market penetration in certain markets. Lower prices will reduce revenue in the near-term, but help fuel a long-term growth and some of our newer products are already starting to generate revenue. And example of our continuing innovation in the past quarter, we made a significant upgrade to our coupler line increasing the key isolation rating by 20% to 6000 volts, which we are able to build as best-in-class. We introduced our V-series couplers last year and this upgrade keeps us on the cutting edge of coupler technology. The 100% test V-series couplers at more than 10,000 peak volts which is remarkable for device that’s small enough for four of them to fit on a postage stamp. It's the equivalent of about 6800 flashlight batteries or a D-cell flashlight more than a quarter-mile long. We introduced several of the new grade couplers last month and plan to add other part types this quarter. Applications of the high-voltage couplers include medical instruments and Internet of Things power management. One high-voltage coupler target market is what's called switch-mode power supplies. These supplies efficiently convert the AC voltage that’s transmitted over power lines to the DC voltage we need for computers, phones and computer infrastructure. These power supplies are ubiquitous in consumer power adapters to facilitate design wins. In the past quarter we began selling switch-mode power supply demonstration boards. We aren’t doing it to make money on the boards, but to show how our technology allows smaller more efficient power conversion. On…

Certainly. [Operator Instructions] Our first question comes from the line of Charles Haff with Craig-Hallum Capital. Your line is now open. Please go ahead.

Hi, guys, thanks for taking my questions. Question for you on the guidance Curt, are the goals that you're kind of setting out for us for the remainder of this fiscal year. I was a little bit confused when you're mentioning that. I just wanted to get some clarification. So on product sales you did $7.7 million roughly this quarter and you said there was a quarterly impact of $1 million to $2 million? Was that for the full-year or is that in subsequent quarter second, third and fourth quarter you expect to have each of those quarters $1 million to $2 million lower than what you did the first quarter. If you could clarify that that would be helpful?

Sure. That would be subsequent quarters the second, third and fourth quarter of this fiscal year.

For each of those quarters you're saying it’s going to be $1 million to $2 million lower than this level?

Yes, that’s correct, Charles.

Okay and why is there such a divergence from the previous couple of fiscal or I guess last year fiscal year why that that lower level is it some lower ASP products that are higher volume or help me understand a little bit?

This is Dan. There are two causes for the revenue headwind. So the first is lower customer forecast and that's a variety of factors we don't always know why the second which we do control is more aggressive pricing and we believe that will maintain and build market share in the long run, but the pricing strategy does sacrifice short-term revenue for long-term share we think it's the right thing to do and but there is going to be the short-term effect for long-term game.

Okay, well then since there is some changing pricing strategy here, maybe we should be talking about gross margins than a little bit, last year you did 80% gross margins, this quarter you did 76%. So would it be fair to assume that we should assume similar gross margins to what you did in the first quarter here for the remainder of the fiscal year?

I would assume that the gross margins would probably decrease for the remaining quarters of the fiscal year as we expect our contract R&D revenue to be roughly in the same range as the first quarter, but product sales which tend to be higher margin, as we mentioned we expect those to be down by $1 million to $2 million each quarter.

Okay, so lower than the 76% that you did this quarter. Do you have a rough idea for what the – where you think you may end up for fiscal 2016 I know we’re a little bit early in the year, but any best guess that a range that you could provide there for gross margin?

I mean that would be pretty speculative at this point.

Okay. And then question for you on the biosensor business. It sounds like you have some interest Dan in the biosensor platform wondering how the discussions are going with commercial partners. I know you can't give us names or anything, but maybe if you could just talk about the dialogue that you’ve been having on the biosensor. And then in terms of the sensitivity of your biosensor relative to the standard of care, could you just remind me how much more sensitive that your product is versus kind of the standard of care for pathogen detection? Thank you.

Right. So our goal is to deploy that the market that we’re targeting for a biosensors is food production and particularly wholesale food production. So the areas that have the most [promise], our areas that are susceptible to Salmonella. We are working on other pathogens that Salmonella has been a focus of ours and it’s the focus of the USDA grant. So Salmonella shows up a lot in poultry, Turkey in particular, which is very large, very large business in a large industry here in Minnesota. And so what we believe we have is better technology that can be used to increase speed or accuracy or a combination. The USDA contract that we have is to have – the goal is to have comparable accuracy. So comparable sensitivity to the existing methods, but faster and so we can trade those off. But the goal here is to have something that's more what the industry needs for these types of industries that we’re targeting which is larger sample volumes, lower costs and higher speed. And the reason for the higher speed is because the faster that they can detect Salmonella the less it goes downstream into the production process and the less risk of it getting into consumers hands and making somebody sick. So what we've been focusing on is comparable accuracy, but higher speed and larger sample volumes.

Okay. And how would you kind of characterize the level of interest from potential commercial customers for your buyers biosensor product at this juncture?

The interest has been very strong and the USDA and NIFA are charged with protecting our food safety and so the regulatory pressure actually helps us as opposed to say the medical business were often that can slow you down. So there are more and more requirements that have come online and will come online for detecting pathogens and having a sensor system that can work in the harsh industrial environment is we think pretty valuable and we were very pleased to win the support of NIFA. As I mentioned in the prepared remarks their mission is solving societal challenges. It's a really big goal, bold mission, but we feel that our technology has that kind of potential to solve the societal problem of food safety.

Yes, it seems to make a lot of sense and apologize for trying to push this little bit more, but I think it's a pretty exciting part of your business. When do you think you may have maybe a commercial customer there, would it be a year or do you think more or like two years any kind of best estimate that you could give us on that?

We’re trying to do it as quickly as humanly possible and we do have as I mentioned we have a six-month contract, the goal of that is to demonstrate feasibility within the goals that we’ve set, which is comparable accuracy to existing methods large sample volumes, commercial type sample volumes and higher speed. And so within six months and we started in June, we started last month, six months from then our goal is to be able to demonstrate feasibility and then we are in a much better position to go to our potential commercial partners and say here's what we have, now let’s work on the deployment. Now that'll take some time to, but the goal of this program will be to have something that meets these key goals supported by the regulatory agency that’s charged USDA and therefore that’s charged with food safety and have the feasibility of that type of system demonstrated within less than six months. So our goal is to move very quickly.

Okay. And my last question is regarding complementary acquisitions, you obviously have quite a bit of cash and you started a dividend program to use some of that, but there's still quite a bit left over and I'm wondering if you spent much time considering complementary tuck-in type of acquisitions maybe with the some distribution partners or technology partners and if you could kind of just maybe frame any thoughts that you have on that it really as you can't get into specifics, but in terms of how we should think about NVE possibly doing some acquisitions with that extra cash?

Right, well that’s a key part of our capital allocation strategies to look for very good investments. We do hold those to high standards, we pride ourselves on having best-in-class financial metrics, best-in-class technology and we don't want to do an acquisition that's going to dilute that and that’s going to make us less than excellent, but we do look at potential opportunities we hold it to a high standard. Our goal isn’t to become a conglomerate or mini conglomerate. Our goal is to find acquisitions that would really advance our mission that could dramatically help us in either distribution as we mentioned technology or product development and that's continuous and opportunistic activity, but we don't have specific goals, we don't want to be bound by saying okay we are going to do X number of acquisitions in a certain time period, because if the acquisitions aren’t right we are not going to do them. If they are we’re prepared to look at them seriously and move quickly.

Okay. Thanks for taking my questions.

Thank you, Charles.

Our next question comes from the line of Tom Cochran with Lake Road Partners. Your line is now open.

Hello Dan.

Hi, Tom.

I think [audio dip] a bit from what Charles asked was just asking. As I recall it was about six months to go that you had mentioned on a quarterly call that you were in active talks with a couple of big food processing companies and I thought by now we might have heard something instead you’ve mentioned it might be another six months to demonstrate feasibility of your system. So first question is has there been some problem in developing this? The second question although unrelated has same time factor in it. About a year ago you mentioned that spintronics looked as though they would have a big place in the automotive field, but since then we've heard nothing. Can you explain the delays on these two aspects of the company?

Well, thanks for your question Tom. So as to the first part of your question is there a problem with the biosensor technology? There isn’t. We had a successful Phase I contract – grant contract as you know with the National Science Foundation where we demonstrated feasibility of the basic technology. Now we have a contract with the USDA with NIFA which is charged with food safety as opposed to advancing basic science. And so we feel this is part of a natural progression. We are working on systems that have specific that is meeting specific industry goals, the larger volume and the higher speed. And so our goal is to make this basically real-time detection, which would be a major leap forward and that’s we’re advancing towards that mission. So we have discussions and then when we have feasibility units and prototypes, we’re in a much better position to be specific about commercialization plans. The second part of your question was about automotive and automotive is an excellent growth market for us as we’ve said before and the number of sensors and cars just projected the increase rapidly. Our parts are smaller, more precise, more rugged and lower power than the conventional sensors, semiconductor sensors that are mostly in cars now. And we have several initiatives including current sensors in today's cars and controller area network transceivers for the networks of tomorrow's hybrid electric vehicles. So we hope to be able to say more specifically about that. And in the meantime some of those products have already been introduced in industrial markets, current sensors have been introduced, controller area network transceivers, we have the world's smallest controller area network transceivers and those have been introduced, they’re primarily and not automotive markets now. But they’ve been very well received and we hope to make the same impact on the networks that are going into the next generation of cars particularly hybrid electric vehicles.

All right. Thank you, Dan.

Thank you, Tom.

[Operator Instructions] Our next question comes from the line of Jeff Bernstein with Concept Capital. Your line is now open.

Hi, Dan, thanks for taking my question. I wanted to see if we could get a little bit of an update on the Unclonable Functions market. We’re hearing a lot about cyber security these days as well as sales of very sophisticated weapon systems to other countries. So what’s the update there?

Right, well that's a great question, sometimes we’re not in a position to be terribly specific on that because of the nature of anti-tamper is you don't want to say too much or defeats the purpose, but I did mention in the prepared remarks that we have received additional contracts and some of them are related to anti-tamper. I also mentioned one of the patents that we just received was related to the magnetization states based stress conditions or spin-dependent tunneling devices and those have application to anti-tamper as well. The specific that you mentioned for our folks who aren’t up on the jargon as much is we also developed what are called posture, physical and quotable functions, which are devices that can be used as keys to cryptokeys to prevent hacking or prevent reverse engineering of devices and those types of devices we continue to develop. And as you point out there's more and more interest in this from the U.S. Military where the concern is that if U.S. Military systems fall into the wrong hands or even to when they're sold to allies, we still will have to test those electronic. So we view this as an important area for us not just because it helped us, it gets us some business and helps us develop these next generation of devices, but also there are commercial application and while probably not quite as valuable things like phones and gaming systems, and our communications and our credit card information also need to be secure and as you of course point out there's been lots of examples of what happens when those – that information isn’t secure. So that's an area that we continue to work on and develop. It’s a relatively small part of our revenue mix now, but we see great potential.

Dan, is there a route to market that includes more partnership with other folks and/or licensing of some of this technology in order to get I mean these - some of these are just you know huge, huge markets you know is there another way to kind of go about this as opposed to developing the products individually on your own.

Yes, absolutely and we look at particular for commercialization plan. For example many of these anti-tamper programs some of them are public and what many of the agencies judge these programs on these contracts before they award them is commercialization plans. And so we’ve developed partnerships with potential commercialization companies also potential users of the technology credit cards comes up, smartcards as you know most credit cards and ID cards in United States use magnetic stripes or have no security and that's not very secure. So we’re probably looking at a new generation of cards that will have chips in them or other area of security that's an area of course that we don't make credit cards and we don't sell those. But we’re looking at partnerships with companies that do and can use our technology so that we can focus on what were good at which is the spintronics and partner with somebody who is good at the other areas that are necessary particularly for high-volume consumer electronics and help get this to a broader market.

Great thanks very much.

Thank you, Jeff. End of Q&A

And I am showing no further questions on the phone lines at this time. I'd like to turn the call back to Mr. Daniel Baker for closing remarks.

Well thank you and we were pleased to report solid revenue and earnings a large increase in contract R&D and a dollar per share dividend. We look forward to seeing some of you at our annual meeting in a couple of weeks and we plan to speak with you again in October to report second quarter results. Thanks again for participating in the call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. And you may now disconnect. Everyone have a great day.