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OPTI > SEC Filings for OPTI > Form 10-Q on 14-Nov-2012All Recent SEC Filings

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Form 10-Q for OPTI INC


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Information set forth in this report may include forward-looking statements made within the meaning of Section 27A of the Security Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements as a result of a number of factors. Readers are encouraged to review "Risk Factors" set forth below.

On May 31, 2012, the shareholders of OPTi approved a Plan of Liquidation pursuant to which the Company is winding up and dissolving. The Company anticipates that its liquidation will be complete by March 31, 2016. During the winding up period, the Company has ceased to carry on business except to the extent necessary for the beneficial winding up thereof. Please see Part 1, Item 1 of Form 10-K for the fiscal year ended March 31, 2012, for background regarding the Plan of Liquidation.

The Company intends to continue to conduct its ongoing litigation against VIA Technologies, Inc. during the Liquidation Period. A trial date has been set for May 2013. See "Legal Proceedings" below. As noted above in footnote 6 to the Company's Consolidated Financial Statements, the litigation with SIS has been settled.

In addition, the Company may be compelled to defend itself and its directors against litigation initiated by its shareholders or others in connection with the Plan of Liquidation and the winding up of the Company. See below "Risk Factors-Uncertainty Over Winding Up and Dissolution of the Company.

Critical Accounting Policies

General. Our discussions and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that, of the significant accounting policies used in preparation of our consolidated financial statements (see Note 1 of Notes to Condensed Consolidated Financial Statements), the following are critical accounting policies, which may involve a higher degree of judgment and complexity.

Revenue Recognition Revenue from license arrangements is recognized when persuasive evidence of an arrangement exists, delivery has occurred and there are no future performance obligations, fees are fixed or determinable and collectability is reasonably assured.

Litigation and Contingencies From time to time, we receive various inquiries or claims in connection with patent and other intellectual property rights. We estimate the probable outcome of these claims and accrue estimates of the amounts that we expect to pay upon resolution of such matters, if needed. Should we not be able to secure the terms we expect, these estimates may change and may result in increased accruals, resulting in decreased profits.

Accrual for Costs of Liquidation We expect it will take approximately forty-six months to complete the Plan of Liquidation. Accordingly, we had to estimate expenses for the liquidation period based on historical information and known future events. The actual costs associated with carrying out the Plan of Liquidation may depend on factors beyond the control of the Company and may differ materially from the accrued amounts because of the Plan's inherent uncertainty. See "Risk Factors" below.


Table of Contents

Results of Operations for the Two Months Ended May 31, 2012

and the Three and Six Months Ended September 30, 2011

The following comparisons cover periods during which the Company used the going concern basis of accounting. As noted above, the Company adopted the liquidation basis of accounting effective June 1, 2012, so the only comparable period is the two months ended May 31, 2012.

Revenues

The Company had no license revenue for the two-month period ended May 31, 2012 and the three and six -month periods ended September 30, 2011.

General and Administrative

General and administrative expenses for the two months ended May 31, 2012 were $265,000. General and administrative expenses for the three and six-month periods ended September 30, 2011 were $793,000 and $1,667,000, respectively.

Interest and Other Income, Net

Net interest and other income for the two-month period ending May 31, 2012 was $2,000. Net interest and other income for the three and six-month periods ended September 30, 2011 were $2,000 and $7,000, respectively.

Income Taxes

As part of the process of preparing the unaudited condensed consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves estimating the current tax liability under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the unaudited condensed consolidated balance sheet.

Income tax benefit for the two months ended May 31, 2012 was $34,000, or 13% of pre-tax income. Income tax benefit for the three and six-month periods ended September 30, 2011 were $211,000 and $506,000, respectively. The effective tax rate for the two months ended May 31, 2012 differs from the U.S. federal statutory rate of 34% primarily due to the unfavorable impact of current federal and state income taxes.

As of September 30, 2012, the Company's total gross unrecognized tax benefit did not materially change compared with the balance as of March 31, 2012. The Company has provided a liability of approximately $3.5 million representing unrecognized tax benefits relating to federal and state R&D credit. All of this amount would impact the Company's effective rate, if recognized. Penalty and interest of approximately $0.5 million has been accrued in income tax expense.

Liquidity and Capital Resources

Cash and cash equivalents decreased to $7.9 million at September 30, 2012 from $21.9 million at March 31, 2012. The decrease in cash and cash equivalents of approximately $14.0 million from March 31, 2012, to September 30, 2012, primarily relates to the liquidating distribution of approximately $12.8 million paid in July 2012 and the net loss for the period. Working capital as of March 31, 2012 was $23.0 million. The Company had no investing activity for the three and six-month periods ended September 30, 2011. The Company had no financing activities for the three and six-month periods ended September 30, 2012 and 2011.


Table of Contents

As of September 30, 2012, the Company's principal sources of liquidity included cash and cash equivalents of approximately $7.9 million. The Company believes that the existing sources of liquidity will satisfy the Company's projected working capital and other cash requirements during the Plan of Liquidation.

The Company's current building lease agreement is scheduled to end in January 2014. The total remaining commitment under the lease at September 30, 2012 is approximately $65,000.

Contractual Obligations

There was no material change as of September 30, 2012, to our contractual obligations as compared to those at March 31, 2012, as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2012.

Off Balance Sheet Arrangements

None

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