724910--5/22/2006--NVE_CORP

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Risks Related to Our Business We may lose revenue if any of our large customers cancel, postpone, or reduce their purchases. We rely on government contracts for a significant percentage of our revenue and we will lose revenue if government funding is reduced or eliminated. Failure to qualify as a small business under federal regulations could make us ineligible for some government-funded research grants which could have a significant impact on our revenue and our ability to make research and development progress. Our backlog may not result in future revenue. We face an uncertain economic environment in our industry that could adversely affect our business and operations. Our reputation could be damaged and we could lose revenue if we fail to meet technical challenges required to produce marketable products. Our failure to meet stringent customer technical requirements could result in the loss of key customers and potentially reduce our sales. Our sensors are incorporated into medical devices, which could expose us to a risk of product liability claims and such claims could seriously harm our business and financial condition. Federal legislation may not protect us against liability for the use of our sensors in medical devices and a successful liability claim could seriously harm our business and financial condition. Changes in the interaction between our sensors and our customers medical devices could cause the medical devices to fail, exposing us to a risk of product liability claims that could seriously harm our business and financial condition. Any malfunction of our sensors in existing medical devices could lead to the need to recall devices incorporating our sensors from the market, which may be harmful to our reputation and cause a significant loss of revenue. We may lose business and revenue if our critical production equipment fails. If we are unable to deliver products we face penalties, including loss of certain exclusive manufacturing rights. The loss of supply from any of our key single-source wafer suppliers could impact our ability to produce and deliver products and cause loss of revenue. The loss of supply of any critical chemicals or supplies could impact our ability to produce and deliver products and cause loss of revenue. The loss of supply from any of our single-source packaging vendors could impact our ability to produce and deliver products and cause loss of revenue. Because we are significantly smaller than the majority of our competitors, we may lack the financial resources needed to increase our market share and future revenue. Our business may suffer because we have limited influence over the rate of adoption of our technology, and MRAM technology may not build into a large or significant market. Our license agreements include revenue minimums and royalty limits, which could limit the total amount of revenue we can derive under these agreements. Our licensees may not be able to make commercially viable MRAMs, which would limit our revenue from MRAM and likely cause our stock price to decline. Our future business may suffer because we may not be able to consummate additional MRAM license agreements. We will not receive royalties if our licensees do not use our intellectual property. We may not be able to enforce our intellectual property rights or our technology may prove to infringe upon patents or rights owned by others, which may prevent the future sale of our products or increase the cost of such sales. Our future business may suffer if we are unable to enforce our intellectual property rights with existing licensees. We may not be able to negotiate a new MRAM licensing agreement with Freescale. Our business success may be adversely affected if we are unable to attract and retain highly qualified management and technical employees. While we believe that we currently have adequate internal control over financial reporting in place, in the future our management will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse affect on our financial results and the market price of our common stock. We are presently involved in class action litigation. Risks Related to Buying Our Stock Our stock has been more volatile than other technology sector stocks. Our stock may be subject to volatility because it is not listed on a national market. The price of our common stock may be adversely affected by significant price fluctuations due to a number of factors, many of which are beyond our control.

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