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OPTI > SEC Filings for OPTI > Form 10-K on 28-Jun-2013All Recent SEC Filings

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Form 10-K for OPTI INC


Annual Report

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations

Information set forth in this report constitutes includes 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 that 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, including the Company's ongoing efforts to enforce its intellectual property rights, its current litigation efforts and the uncertainty inherent in such litigation, and the effects of the implementation of its Plan of Liquidation.
Readers are encouraged to refer to "Risk Factors."

On May 31, 2012, the Company's shareholders approved a Plan of Liquidation pursuant to which the Company will wind up and dissolve. The Company anticipates that its liquidation will be complete by March 31, 2016. During the winding up period, the Company will cease to carry on business except to the extent necessary for the beneficial winding up thereof and except as to preserve the Company's goodwill or going-concern value.

On June 4, 2012, the Company announced a cash distribution of $1.10 per share of the Company's stock pursuant to the Plan of Liquidation. The distribution was paid on July 3, 2012 to shareholders of record as of the close of business on June 26, 2012.

See Item 3. "Legal Proceedings" above.

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 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. Royalties are recorded as revenue when earned 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 may take until March 31, 2016 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" above.

Results of Operation for the Two Months ended May 31, 2012 ("2013") And the Twelve Months ended March 31, 2012 ("2012")

2013 Compared to 2012 - The Company recorded no revenue for the two-month period ended May 31, 2012 as compared to $240,000 of net sales during the fiscal year ended March 31, 2012 ("fiscal year 2012"). This decrease in net sales was attributable to the Company not entering into licensing any licensing agreements during 2013 as compared with the licensing agreement with Allied Security Trust in fiscal year 2012. The Company's future revenues depend on the final resolution of our current litigation with VIA.

There was no gross margin for fiscal year 2013 and the gross margin for fiscal year 2012 was 100%. This gross margin is attributable to the Company's revenue in fiscal year 2012 relating entirely to license and settlement revenue, which had no associated costs.

Selling, general and administrative ("SG&A") expenses for the two months ended May 31, 2012 were $0.3 million as compared to $2.9 million for fiscal year 2012.

Net interest and other income for two month ended May 31, 2012 was $2,000 as compared to $13,000 in fiscal year 2012.

The Company recognizes income taxes under the liability method. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

Liquidity and Capital Resources

In the two month period ended May 31, 2012, the Company allocated approximately $0.3 million towards operating activities primarily related to the operating loss of the Company, an increase in income tax receivable and a reduction in accrued employee expenses. In fiscal year 2012, the Company allocated approximately $3.8 million towards operating activities primarily related to the operating loss of the Company, an increase in income tax receivable and a reduction in accrued employee expenses, offset in part, by a decrease in tax valuation allowance.

The Company had insignificant investment activities in the two months ended May 31, 2012 and fiscal year 2012, making only $8,000 in purchases of property and equipment in fiscal year 2012.

The Company had no financing activity during the two month period ended May 31, 2012 and fiscal year ended March 31, 2012.

As of March 31, 2013, the Company's had approximately $7.9 million of cash and cash equivalents. The Company believes that the existing sources of liquidity will satisfy the Company's projected working capital and other cash requirements through at least the next twelve months.

Off Balance Sheet Arrangements


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