UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
¾¾¾¾¾¾¾¾¾¾¾¾¾¾¾
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
Quarterly Period Ended December 31, 2009
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
Transition Period from ____________ to
___________
________________________
Commission
File Number 0-21422
OPTi
Inc.
(Exact
name of registrant as specified in its charter)
________________________
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CALIFORNIA
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77-0220697
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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3430
W. Bayshore Road, Suite 103 Palo Alto, California
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94303
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(Address
of principal executive office)
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(Zip
Code)
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Registrant's
telephone number, including area code (650) 213-8550
________________________
Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days: Yes x No o
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files).
Yes o No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See definitions of "large
accelerated filer", "accelerated filer", "non-accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
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o |
Accelerated
filer
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o |
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Non-accelerated
filer
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o(Do not check if
smaller reporting company)
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Smaller
reporting company
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x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12(b)-2 of the Exchange Act).Yes oNo x
The
number of shares outstanding of the registrant's common stock as of January 31,
2010 was 11,641,903.
OPTi Inc.
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3
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3
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4
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5
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6
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8
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8
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10
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10
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11
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11
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12
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12
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13
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ITEM
6:
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14 |
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15
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PART
I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
OPTi
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share amounts)
(unaudited)
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December
31, |
March 31,
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2009 |
2009 |
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$ |
5,314 |
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$ |
7,032 |
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Accounts
receivable
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— |
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750
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Prepaid
expenses and other current assets
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26 |
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46 |
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Total
current assets
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5,340 |
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7,828 |
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Property
and equipment, at cost
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Machinery
and equipment
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57 |
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48 |
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Furniture
and fixtures
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17 |
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17 |
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74 |
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65 |
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Accumulated
depreciation
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(65 |
) |
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(60 |
) |
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9 |
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5 |
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| |
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Long
term accounts receivable
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450 |
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— |
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Other
assets
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18 |
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— |
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Total
assets
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$ |
5,817 |
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$ |
7.833 |
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
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Accounts
payable
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$ |
734 |
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$ |
1,107 |
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Accrued
expenses
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944 |
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569 |
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Accrued
employee compensation
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144 |
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238 |
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Total
current liabilities
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1,822 |
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1,914 |
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Stockholders’
equity:
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Preferred
stock, no par value
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Authorized
shares – 5,000,000
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No
shares issued or outstanding
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— |
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— |
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Common
stock
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Authorized
shares – 50,000,000
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Issued
and outstanding – 11,641,903 at December 31, and March 31,
2009
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13,539 |
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13,539 |
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Accumulated
deficit
|
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|
(9,544 |
) |
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(7,620 |
) |
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Total
stockholders’ equity
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|
3,995 |
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5,919 |
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Total
liabilities and stockholders’ equity
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$ |
5,817 |
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$ |
7,833 |
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*The
balance sheet as of March 31, 2009 has been derived from the audited financial
statements.
The
accompanying notes are an integral part of the condensed consolidated financial
statements.
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(in
thousands, except per share data)
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Three Months Ended
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Nine
Months Ended
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December 31,
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December
31,
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2009
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2008
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2009
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2008
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Sales
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License
and royalties
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$
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650
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$
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—
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$
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650
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$
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3,750 |
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Net
sales
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650
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—
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650
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3,750 |
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Costs
and expenses
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Selling,
general and administrative
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1,452
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3,159
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4,891
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7,648
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Total
costs and expenses
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1,452
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3,159
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4,891
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7,648
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Operating
loss
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(802
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) |
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(3,159
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) |
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(4,241
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)
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(3,898
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)
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Interest
income and other income, net
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283
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1,049
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2,317
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1,393
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Loss
before provision for income taxes
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(519
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(2,110
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( 1,924
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) |
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(2,505
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Income
tax provision
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—
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—
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—
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—
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Net
loss
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$
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(519
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$
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(2,110
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) |
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$
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(1,924
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) |
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$
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(2,505
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) |
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Basic
and diluted net loss per share
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$
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(0.04
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) |
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$
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(0.18
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)
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$
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(0.17
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$
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(0.22
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Shares
used in computing basic and
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diluted
net loss per share amounts
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11,642
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11,642
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11,642
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11,642
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OPTi INC.
(in
thousands)
(unaudited)
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Nine
Months Ended
December
31,
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2009
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2008
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Cash
flows from operating activities:
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Net
loss
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$ |
(1,924 |
) |
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$ |
(2,505 |
) |
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Depreciation
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6 |
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6 |
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Changes
in operating assets and liabilities:
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Accounts
receivable
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300 |
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(1,000 |
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Prepaid
expenses and other assets
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2 |
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(18 |
) |
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Accounts
payable
|
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(374 |
) |
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1,030 |
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Accrued
expenses
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375 |
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228 |
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Accrued
employee compensation
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(94 |
) |
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— |
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Net
cash used in operating activities
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(1,709 |
) |
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(2,259 |
) |
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Cash
flows from investing activities:
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Purchase
of equipment
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(9 |
) |
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— |
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Sale
of auction rate securities
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— |
|
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|
800 |
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Net
cash used in investing activities
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|
(9 |
) |
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|
800 |
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Cash
flows from financing activities:
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— |
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— |
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Net
decrease in cash and cash equivalents
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(1,718 |
) |
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(1,459 |
) |
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Cash
and cash equivalents, beginning of period
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|
7,032 |
|
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|
6,843 |
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Cash
and cash equivalents, end of period
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|
$ |
5,314 |
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$ |
5,384 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
OPTi
Inc.
December
31, 2009
(unaudited)
The information at December 31, 2009
and for the three and nine-month periods ended December 31, 2009 and 2008, is
unaudited, but include all adjustments (consisting of normal recurring
adjustments) which the Company’s management believes to be necessary for the
fair presentation of the financial position, results of operations and cash
flows for the periods presented. Interim results are not necessarily
indicative of results for a full year.
The accompanying financial statements
should be read in conjunction with the Company’s audited financial statements
for the year ended March 31, 2009, which are included in the annual report on
Form 10-K filed by the Company with the Securities and Exchange
Commission.
Use
of Estimates
The preparation of financial statements
in accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates under different assumptions or
conditions.
2. Net
Loss Per Share
Basic and diluted net loss per share is
computed by dividing net loss by the weighted average number of common shares
outstanding during the period.
The Company has excluded options for
the purchase of 8,000 and 108,000 shares of common stock from the calculation of
diluted net loss per share in the three and nine-month periods ended December
31, 2009 and 2008, because all such securities are anti-dilutive for the
respective periods.
3. Taxes
The Company recorded no tax provision
for the three and nine-months ended December 31, 2009 and 2008. The
Company’s effective tax rate differed from the federal and state statutory rates
during all periods presented due to the uncertainty of the Company returning to
profitability.
Due to uncertainty associated with the
Company’s prospective ability to realize the benefits of its tax assets, the
Company has fully reserved the value of its deferred tax assets. In
addition, utilization of the net operating loss and credit carry forwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended and
similar state provisions. The annual limitations may result in the
expiration of net operating loss carry forwards before utilization.
4. Comprehensive
loss
Total comprehensive loss includes net
loss and other comprehensive income or loss. During the three and
nine-month periods ended December 31, 2008, the Company recorded a temporary
investment gain of $280,000 and $250,000 relating to its investments in auction
rate securities. Total comprehensive loss for the three and
nine-month periods ended December 31, 2008 were $(1.8) million and $(0.8)
million, respectively. There was no difference between net loss and
comprehensive loss for the three and nine-month periods ended December 31,
2009.
5. Cash
and Cash Equivalents
The
following is a summary as of December 31 and March 31, 2009 (in
thousands):
|
|
December
31,
|
|
March
31,
|
|
|
|
2009
|
|
2009
|
|
|
Cash
|
|
$ |
100 |
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$ |
100 |
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|
Money
market funds
|
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|
5,214 |
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|
6,932 |
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$ |
5,314 |
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$ |
7,032 |
|
The accounting standard for fair value
establishes a framework for measuring fair value and requires disclosures about
fair value measurements by establishing a hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level I measurements) and lowest priority to
unobservable inputs (Level III measurements). The three levels of the
fair value hierarchy are described below:
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Level
I -
|
observable
inputs such as quoted prices in active
markets;
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Level
II -
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inputs
other than the quoted prices in active markets that are observable either
directly or indirectly; and
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Level
III -
|
unobservable
inputs in which there is little or no market data, which requires the
Company to develop its own assumptions. This hierarchy requires the
Company to use observable market data, when available, and to minimize the
use of unobservable inputs when determining fair value. On a recurring
basis, the Company measures its investments and marketable securities at
fair value.
|
As of December 31, 2009 and March 31,
2009, the Company had cash and investments in money market funds of $5.3 million
and $7.0 million, respectively, in cash equivalents classified as Level I in the
fair value hierarchy and no Level II or Level III investments.
6. Subsequent
Events
The Company has evaluated all events or
transactions that occurred after December 31, 2009 through February 12, 2011,
the date we issued these financial statements. During this period,
the company did not have any material recognizable or unrecognizable subsequent
events.
Information set forth in this report
constitutes and includes forward looking information made within the meaning of
Section 27A of the Security Act of 1933, as amended and Section 21E of the
Securities and 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 including its current litigation efforts, the willingness of the
parties it believes are infringing its patents to settle its claims against
them, the amount of litigation costs the Company must incur in pursuing its
patent infringement claims, the degree to which technology subject to the
Company’s intellectual property rights is used by other companies in the
personal computer and semiconductor industries and our ability to obtain license
revenues from them, changes in intellectual property law in such industries and
in general and other matters.
OPTi Inc. a California corporation
(“OPTi” or the “Company”), was founded in 1989, as an independent supplier of
semiconductor products to the personal computer (“PC”) and embedded
marketplaces.
From inception through 1995, OPTi’s
principal business was its core logic products for desktop personal computers
and the Company has employed as many as 235 employees over the
years. However, over time, OPTi faced increasingly tight competition
from companies with substantially greater financial, technical, distribution and
marketing resources. In February 1999, the Company completely ceased
further development of core logic products, although OPTi continued to ship such
products to customers until September 2002. The Company’s annual net
sales declined from $163.7 million in 1995 to no revenue in fiscal year
2006. During the years ended March 31, 2009 and March 31, 2007, the
Company recorded net revenue of approximately $3.8 million and $11 million
relating to a license granted to NVIDIA Corporation (“NVIDIA”).
In September 2002, the Company sold its
product fabrication, distribution and sales operations to Opti Technologies,
Inc., an unrelated third party, and the Company ceased manufacturing, marketing
and sales operations. However, the Company believes that certain of
its patented technology is in widespread unlicensed use and the Company has been
engaged in perfecting its intellectual property rights, investigating unlicensed
use of its technology and developing and validating a strategy to pursue product
licenses from unlicensed users.
OPTi holds a majority of its liquid
assets in cash and cash equivalents for the purpose of financing its efforts to
pursue licenses and claims relating to its intellectual property.
The Company’s current strategy is to
pursue licensing opportunities to resolve potential infringement of its
proprietary intellectual property in the core logic area. During the
first quarter of fiscal year 2000, the Company entered into a one-time licensing
arrangement for $13,311,000 on the core logic technology that the Company had
developed during its existence. During the first quarter of fiscal
year 2004, the Company also entered into a one-time license arrangement for
$425,000 on its patented technology. The Company believes that there
may be additional companies that may be infringing its patents. The
Company is actively working to explore all possible arrangements to settle such
infringements.
On October 19, 2004, the Company
announced that it filed a complaint against NVIDIA, in the Eastern District of
Texas, for infringement of five U.S. patents relating to its “Predictive
Snooping” chipset technology. See “Part II, Item 1 – Legal
Proceedings” below.
On April 24, 2006, the United States
District Court for the Eastern District of Texas issued a ruling in the ongoing
patent infringement action between OPTi and NVIDIA, which arose from a special
proceeding required under U.S. patent law called a “Markman hearing,” where both
sides present their arguments to the court as to how they believe certain claims
at issue in the lawsuit should be interpreted.
On August 3, 2006, the Company entered
into a license and settlement agreement with NVIDIA (the “License
Agreement”). Under the License Agreement the Company agreed to
dismiss its patent infringement lawsuit against NVIDIA and licensed certain
patents to NVIDIA. NVIDIA made a non-refundable, non-creditable fully
earned payment of $11 million to the Company. There is no future
performance obligation. In accordance with the Company’s revenue
recognition policy $11 million was
recorded
as revenue during the quarter ended September 30, 2006 as persuasive evidence
that an agreement existed, delivery of payment had occurred and there were no
future performance obligations.
The License Agreement also requires
that NVIDIA make quarterly royalty payments to the Company of $750,000, so long
as NVIDIA continues to use the Company’s Predictive Snoop technology, commencing
in February 2007 up to a maximum of 12 such payments in exchange for a license
for future use of the Pre-Snoop patents. Royalties will be recorded
as revenue when earned and received, when fees are fixed or determinable, or
when collectability is reasonably assured.
On February 5, 2007 the Company
announced that it received a letter from NVIDIA stating that NVIDIA had
discontinued the use of the Predictive Snooping technology that it had licensed
from the Company pursuant to the terms of the License Agreement. The letter from
NVIDIA also stated that NVIDIA would not be remitting to the Company the
quarterly royalty payment originally scheduled for February 2007.
On October 17, 2007
the Company initiated an arbitration against NVIDIA because the Company believed
that NVIDIA breached the terms of the License Agreement. The Company
sought payment for the past due quarters that OPTi believed NVIDIA had continued
to use the Pre-Snoop technology. The arbitrator in September 2008
ruled in OPTi’s favor and awarded the Company a total of five quarterly royalty
payment of $750,000 each for an aggregate amount of $3,750,000. This
amount was recognized as revenue in the fiscal year ended March 31,
2009. On October 10, 2009, the Company initiated another arbitration
against NVIDIA because the Company believes that NVIDIA continues to use the
pre-snoop technology, but has not made any of the required quarterly payments
since the last arbitration ruling.
On November 15, 2006, the Company announced that it had
filed a patent infringement lawsuit in the United States District Court for the
Eastern District of Texas against Advanced Micro Devices, Inc. (“AMD”) for
infringement of three U.S. patents relating to its “Predictive Snooping”
technology. See “Part II, Item 1 – Legal
Proceedings” below. The AMD case is a continuing part of the
Company’s strategy for pursuing its patent infringement claims and its outcome
will have a significant effect on the Company’s ability to realize ongoing
licensing revenue through its intellectual property licensing
efforts. Jury selection for this trial will begin the first week of
February 2010, and the trial will begin later in the month.
On January 16, 2007, the Company announced that it had
filed a patent infringement lawsuit in the United States District Court for the
Eastern District of Texas against Apple Inc. (“Apple”) for infringement of three
U.S. patents. The three patents at issue in the lawsuit are U.S. Patent No.
5,710,906, U.S. Patent No. 5,813,036 and U.S. Patent No. 6,405,291, which are
all entitled “Predictive Snooping of Cache Memory for Master-Initiated
Accesses”. The Company alleges that Apple has infringed the patents
by making, selling, and offering for sale desktop and portable computers and
servers incorporating Predictive Snooping technology.
On April 23, 2009 a jury from the
United States District Court for the Eastern District of Texas ruled in OPTi’s
favor in the patent infringement action between OPTi Inc and Apple Inc. The jury
ruled on the following four issues:
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In
the matter of willful infringement, the jury ruled that Apple willfully
infringed OPTi’s patent;
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•
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In
the matter of Apple’s defense that OPTi’s patent was invalid due to
obviousness, the jury ruled that OPTi’s patent was
valid;
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•
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In
the matter of Apple’s defense that the patent was invalid due to
anticipation, the jury ruled that the OPTi’s patent was
valid;
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•
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In
the matter of damages, the jury awarded OPTi $19 million for Apple’s
infringement of OPTi’s patent.
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The court had ruled previously that
Apple had infringed the OPTi patent at issue on April 3,
2009. Apple has filed a number of post-trial motions seeking to reverse
the jury verdict or to secure a new trial on a variety of
issues.
On December 3, 2009, the court issued the final
judgment in the patent infringement action between OPTi and Apple. The
court ordered that OPTi recover from Apple a reasonable royalty of $19.0 million
in actual damages. The court also awarded an additional $2.7 million in
pre-judgment interest for a total award of $21.7 million. The court also
found that there was no willful infringement in the case and denies any request
for reimbursement of attorney fees.
Both parties
in the case have filed for appeal and we are awaiting a date for the appellate
court case.
On July 3,
2007, the Company announced that it had filed a patent infringement lawsuit in
the United States District Court for the Eastern District of Texas against eight
companies for infringement of two U.S. patents. The two patents at
issue in the lawsuit are U.S. Patent No. 5,944,807 and U.S. Patent No.
6,098,141; both entitled “Compact ISA-Bus Interface”. The Company
alleges that AMD, Atmel Corporation, Broadcom Corporation, Renesas Technology
America, Inc., Silicon Storage Technology, Inc., Standard Microsystems
Corporation (“SMSC”), STMicroelectronics and VIA Technologies, Inc. have
infringed the patents by making, selling, and offering one or more of the
following products: core logic chipsets, Super I/O devices, Trusted
Platform Modules, certain flash memory devices, certain I/O controllers and
other semiconductor products incorporating Compact ISA-Bus Interface
technology. The Company settled with Broadcom Corporation, Renesas
Technology America, Inc., Silicon Storage Technology, Inc. and
STMicroelectronics during the fiscal year ended March 31,
2009. During the first seven months of fiscal year 2010 the Company
settled with Atmel Corporation, SMSC and VIA. The settlement amount
received from Atmel Corporation of $125,000 is included in other income for the
quarter ended June 30, 2009. The settlement amount received from SMSC
of $1,900,000 is included in other income for the quarter ended September 30,
2009. The Company has requested a jury trial in this matter for the
remaining defendant, AMD. The case against AMD relating to the
Compact ISA-Bus Interface technology is currently scheduled for August
2010.
Critical
Accounting Policies
The Company has had no changes in
critical accounting policies as described in our Form 10-K filed on June 29,
2009.
Revenues
The Company had $650,000 in revenue for
the three and nine-month periods ended December 31, 2009 and no revenue and $3.8
million for the three and nine-month periods ended December 31, 2008,
respectively. The revenue in the three and nine-month periods ended
December 31, 2009 relates to a license agreement that the Company signed with
VIA on October 1, 2009. The revenue in the nine-month period ended in
December 2008 relate to an arbitration award from NVIDIA. The
Company’s future revenues depend on the success of our strategy of pursuing
license claims on our intellectual property position.
General and
Administrative
General and administrative expenses for
the quarter ended December 31, 2009 were $1.5 million as compared to $3.1
million for the quarter ended December 31, 2008. The decrease
in general and administrative costs for the three-month period ended December
31, 2009 as compared to the comparable period ended December 31, 2008 was mainly
attributable to decreased litigation costs relating to the preparation of the
AMD and Apple trials and the NVIDIA arbitration. General and
administrative expenses for the nine-month period ended December 31, 2009 were
$4.9 million as compared to $7.6 million for the nine-month period ended
December 31, 2008. The decrease in general and administrative costs
related to lower legal related costs in preparation for the AMD trial and NVIDIA
arbitration, offset, in part, by higher costs related to the Apple trial in
April 2009.
Interest and Other Income,
Net
Net interest and other income for the
three-month period ending December 31, 2009 was $0.3 million as compared to $1.0
million for the three-months ended December 31, 2008. The decrease in
net interest and other income in the three-month period ended December 31, 2009
as compared to the comparable period in 2008 was due to the standstill agreement
with Broadcom signed during the quarter ended December 31, 2008, offset in part,
by a sale of a patent for $0.3 million in the quarter ended December 31,
2009. Net interest and other income for the nine-month period ending
December 31, 2009 was $2.3 million as compared to $1.4 million for the
nine-months ended December 31, 2008. The increase in net interest and
other income in the nine-month period ended December 31, 2009 as compared to the
comparable period in 2008 was due to the standstill agreements with SMSC and
Atmel Corporation signed during the nine-month period, offset in part by the
standstill agreement with Broadcom and by a decrease in interest income due to
lower average cash balances and lower interest rates during the nine- months
ended December 31, 2009.
Income
Taxes
The Company recorded no tax provision
for the three and nine-month periods ended December 31, 2009 and
2008. The Company’s effective tax rate differed from the federal and
state statutory rates during all periods presented due to the uncertainty of the
Company returning to profitability.
Due to uncertainty associated with the
Company’s prospective ability to realize the benefits of its tax assets, the
Company has fully reserved the value of its deferred tax assets. In
addition, utilization of the net operating loss and credit carry forwards may be
subject to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as amended, and
similar state provisions. The annual limitations may result in the
expiration of net operating loss carry forwards before utilization.
Cash and cash equivalents decreased to
$5.3 million at December 31, 2009 from $7.0 million at March 31,
2009. Working capital as of December 31, 2009 decreased to $3.5
million from $5.9 million at March 31, 2009. During the nine-month
period ended December 31, 2009, operating activities used approximately $1.7
million of cash due primarily to the net loss during the period. The
Company had insignificant investing activity in the nine-month periods ended
December 31, 2009 and a gain of $0.8 million, relating to the sale of auction
rate securities in the nine-months ended December 31, 2008. The
Company had no financing activity for the nine-month periods ended December 31,
2009 and 2008.
As of December 31, 2009, the Company’s
principal sources of liquidity included cash and cash equivalents of
approximately $5.3 million and working capital of approximately $3.5
million. 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.
The Company amended its current
building lease agreement during the quarter and it is currently scheduled to end
on December 31, 2011. The total remaining commitment under the
amended lease agreement at December 31, 2009 is approximately
$231,000.
Off
Balance Sheet Arrangements
None
Interest Rate
Sensitivity
We maintain our cash and cash
equivalents primarily in money market funds. We do not have any
derivative financial instruments. As of December 31, 2009, all of our
investments mature in less than one month. Accordingly, we do not
believe that our investments have significant exposure to interest rate
risk
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(a)
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We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange
Act Rules 13a-15 and 15d-15 as of the end of the Company’s quarter ended
December 31, 2009. Based upon that evaluation, our Chief
Executive Officer along with our Chief Financial Officer concluded that
our disclosure controls and procedures are effective at the reasonable
assurance level.
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(b)
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There
have been no material changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls
or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a)
above.
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We intend to review and evaluate the
design and effectiveness of our disclosure controls and procedures on an ongoing
basis and to improve our controls and procedures over time and to correct any
deficiencies that we may discover in the future. Our goal is to
ensure that our senior management has timely access to all material financial
and non-financial information concerning our business. While we
believe the present design of our disclosure controls and procedures is
effective to achieve our goal, future events affecting our business may cause us
to significantly modify our disclosure controls and procedures.
There were no changes in our internal
controls over financial reporting during our last quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
OPTi
Inc.
On November 15, 2006, the Company filed a patent
infringement lawsuit in the United States District Court for the Eastern
District of Texas against AMD for infringement of three U.S. patents relating to
its “Predictive Snooping” technology. The AMD case is a continuing
part of the Company’s strategy for pursuing its patent infringement claims and
its outcome will have a significant effect on the Company’s ability to realize
ongoing licensing revenue through its intellectual property licensing
efforts. Jury selection for this trial will begin the first week of
February 2010, and the trial will begin later in the
month.
On January 16, 2007, the Company filed a patent
infringement lawsuit in the United States District Court for the Eastern
District of Texas against Apple for infringement of three U.S. patents. The
three patents at issue in the lawsuit are U.S. Patent No. 5,710,906, U.S. Patent
No. 5,813,036 and U.S. Patent No. 6,405,291, which are all entitled “Predictive
Snooping of Cache Memory for Master-Initiated Accesses”. The Company
alleges that Apple has infringed the patents by making, selling, and offering
for sale desktop and portable computers and servers incorporating Predictive
Snooping technology.
On April 23, 2009 a jury from the
United States District Court for the Eastern District of Texas ruled in OPTi’s
favor in the patent infringement action between OPTi and Apple. The jury ruled
on the following four issues:
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•
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In
the matter of willful infringement, the jury ruled that Apple willfully
infringed OPTi’s patent;
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•
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In
the matter of Apple’s defense that OPTi’s patent was invalid due to
obviousness, the jury ruled that OPTi’s patent was
valid;
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•
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In
the matter of Apple’s defense that the patent was invalid due to
anticipation, the jury ruled that OPTi’s patent was
valid;
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•
|
|
In
the matter of damages, the jury awarded OPTi $19 million for Apple’s
infringement of OPTi’s patent.
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The court had
ruled previously that Apple had infringed the OPTi patent at issue on
April 3, 2009. Apple has filed a number of post-trial motions seeking to reverse
the jury verdict or to secure a new trial on a variety of
issues.
On December 3,
2009, the court issued the final judgment in the patent infringement action
between OPTi and Apple. The court ordered that OPTi recover from Apple a
reasonable royalty of $19.0 million in actual damages. The court also
awarded an additional $2.7 million in pre-judgment interest for a total award of
$21.7 million. The court also found that there was no willful infringement
in the case and denies any request for reimbursement of attorney
fees.
Both parties
in the case have filed for appeal and we are awaiting a date for the appellate
court case.
OPTi
entered into a license agreement with NVIDIA dated August 3,
2006. The license agreement provided that OPTi was to receive
quarterly royalty payments of $750,000 commencing in February 2007 and
continuing as long as NVIDIA continued to use OPTi’s Predictive Snooping
technology, up to a maximum of 12 such payments. On February 5, 2007,
the Company announced that it received a letter from NVIDIA stating that NVIDIA
had discontinued the use of the Company’s Predictive Snooping technology and
that NVIDIA would not be remitting to the Company the quarterly royalty payment
originally scheduled for February 2007. OPTi filed an arbitration
against NVIDIA on October 17, 2007 because it believed that NVIDIA breached the
terms of the license agreement, and the Company was awarded five quarterly
payments, totaling $3,750,000, for the period of February 1, 2007 to April 30,
2008. OPTi believes that NVIDIA continues to use the Predictive
Snooping technology, but has not made any of the required quarterly payments
since the last arbitration ruling. On October 10, 2009, OPTi
initiated another arbitration against NVIDIA for quarterly royalty payments owed
to it since the last arbitration ruling.
On July 3, 2007, the Company filed a
patent infringement lawsuit in the United States District Court for the Eastern
District of Texas against eight companies for infringement of two U.S.
patents. The two patents at issue in the lawsuit are U.S. Patent No.
5,944,807 and U.S. Patent No. 6,098,141; both entitled “Compact ISA-Bus
Interface”. The Company alleges that AMD, Atmel Corporation, Broadcom
Corporation, Renesas Technology America, Inc., Silicon Storage Technology, Inc.,
SMSC, STMicroelectronics and VIA Technologies, Inc. have infringed that patents
by making, selling, and offering one or more of the following
products: core logic chipsets, Super I/O devices, Trusted Platform
Modules, certain flash memory devices, certain I/O controllers and other
semiconductor products incorporating Compact ISA-Bus Interface
technology. The Company settled with Broadcom Corporation, Renesas
Technology America, Inc., Silicon Storage Technology, Inc. and
STMicroelectronics during the fiscal year ended March 31,
2009. During the first seven months of fiscal year 2010 the Company
settled with Atmel Corporation, SMSC and VIA. The Company has
requested a jury trial in this matter for the remaining defendant,
AMD. The case against AMD relating to the Compact ISA-Bus Interface
technology is currently scheduled for trial in August 2010.
The AMD, Apple and the Compact ISA-Bus
Interface cases are a continuing part of the Company’s strategy for pursuing its
patent infringement claims and their outcomes will have a significant effect on
the Company’s ability to realize ongoing licensing revenue through its
intellectual property licensing efforts.
Trading
of OPTi Common Stock on the OTC Bulletin Board
Our common stock is currently traded on
the OTC Bulletin Board. Some investors may be less likely to invest
in stocks that are not traded on recognized national markets and listing
services such as Nasdaq. Therefore, investors in our common stock may
experience reduced liquidity when attempting to trade shares of our common
stock.
Dependence
on Intellectual Property Position
The success of the Company’s current
strategy of resolving potential infringement of its patented core logic
technology can be affected by new developments in intellectual property law
generally and with respect to semiconductor patents in particular and upon the
Company’s success in defending its patent position. It is difficult
to predict developments and changes in intellectual property
law. However, such changes could have an adverse impact on the
Company’s ability to pursue infringement claims on its previously developed
technology.
Uncertain
Revenue Stream
Although the Company has commenced
legal action and continues to pursue license revenues relating to the
unauthorized use of its intellectual property, there can be no assurances
whether or when revenues will result from the pursuit of such
claims.
In addition, the Company’s focus on
pursuing claims related to its intellectual property position can result in one
time payments that may increase revenues during a single fiscal period but may
not be repeated in future periods. For example, in the fiscal quarter
ended September 30, 2006, the Company reached a settlement of certain claims and
counter claims with NVIDIA that included, among other things, a one-time cash
payment to the Company. Under the terms of the settlement, the
Company was to receive future payments from NVIDIA if they continued to use the
patented technology. Consequently, settlements of these claims will
cause our operating results to fluctuate from period to period and revenues that
we may receive from such a settlement should not be viewed as indicative of
future trends in our operating results.
Outcome
of AMD, Apple and Compact ISA-Bus Legal Actions
On November 15, 2006, the Company filed a patent
infringement lawsuit in the United States District Court for the Eastern
District of Texas against AMD for infringement of a U.S. patent relating to its
“Predictive Snooping” technology. See “Part II, Item 1 – Legal
Proceedings” above. The AMD case itself is a continuing part
of the Company’s strategy for pursuing its patent infringement claims and its
outcome will have a significant effect on the Company’s ability to realize
ongoing licensing revenue through its intellectual property licensing
efforts. Jury selection for this trial was the first week of February 2010,
and the trial will begin later in the month.
On January 16, 2007, the Company filed a patent
infringement lawsuit in the United States District Court for the Eastern
District of Texas against Apple for infringement of three U.S. patents. The
three patents at issue in the lawsuit are U.S. Patent No. 5,710,906, U.S. Patent
No. 5,813,036 and U.S. Patent No. 6,405,291, which are all entitled “Predictive
Snooping of Cache Memory for Master-Initiated Accesses”. The Company
alleges that Apple has infringed the patents by making, selling, and offering
for sale desktop and portable computers and servers incorporating Predictive
Snooping technology.
On April 23, 2009 a jury from the
United States District Court for the Eastern District of Texas ruled in OPTi’s
favor in the patent infringement action between OPTi and Apple. The jury ruled
on the following four issues:
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•
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In
the matter of willful infringement, the jury ruled that Apple willfully
infringed OPTi’s patent;
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•
|
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In
the matter of Apple’s defense that OPTi’s patent was invalid due to
obviousness, the jury ruled that OPTi's patent was valid;
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•
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In
the matter of Apple’s defense that the patent was invalid due to
anticipation, the jury ruled that the OPTi patent was valid;
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•
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|
In
the matter of damages, the jury awarded OPTi $19 million for Apple’s
infringement of OPTi’s patent.
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The court had ruled previously that
Apple had infringed the OPTi patent at issue on April 3,
2009. Apple has filed a number of post-trial motions seeking to reverse
the jury verdict or to secure a new trial on a variety of
issues.
On December 3, 2009,
the court issued the final judgment in the patent infringement action between
OPTi and Apple. The court ordered that OPTi recover from Apple a
reasonable royalty of $19.0 million in actual damages. The court also
awarded an additional $2.7 million in pre-judgement interest for a total reward
of $21.7 million. The court also found that there was no willful
infringement in the case and denies any request for reimbursement of attorney
fees.
Both parties
in the case have filed for appeal and we are awaiting a date for the appellate
court case.
On July 3,
2007, the Company filed a patent infringement lawsuit in the United States
District Court for the Eastern District of Texas against eight companies for
infringement of two U.S. patents. The two patents at issue in the
lawsuit are U.S. Patent No. 5,944,807 and U.S. Patent No. 6,098,141, both
entitled “Compact ISA-Bus Interface”. The Company alleges that AMD,
Atmel Corporation, Broadcom Corporation, Renesas Technology America, Inc.,
Silicon Storage Technology, Inc., SMSC, STMicroelectronics and VIA Technologies,
Inc. have infringed those patents by making, selling, and offering one or more
of the following products: core logic chipsets, Super I/O devices,
Trusted Platform Modules, certain flash memory devices, certain I/O controllers
and other semiconductor products incorporating Compact ISA-Bus Interface
technology. The Company settled with Broadcom Corporation, Renesas
Technology America, Inc., Silicon Storage Technology, Inc. and
STMicroelectronics during the fiscal year ended March 31,
2009. During the first seven months of fiscal year 2010 the Company
settled with Atmel Corporation, SMSC and VIA. The Company has
requested a jury trial in this matter for the remaining defendant,
AMD. The case against AMD relating to the Compact ISA-Bus Interface
technology is currently scheduled for trial in August 2010.
The outcomes
in the AMD, Apple and the Compact ISA-Bus legal actions will have significant
effects on the Company’s ability to realize ongoing license
revenue.
Fluctuations
in Operating Results
The Company has experienced significant
fluctuations in its operating results in the past and expects that it will
experience such fluctuations in the future. In the past, these
fluctuations have been caused by a variety of factors including increased
competition, price competition, changes in customer demand, ability to continue
to sell existing products, inventory adjustments, changes in the availability of
foundry capacity, changes in the mix of products sold and litigation
expenses. In the future, the Company’s operating results will largely
be dependent on its ability to generate revenue from its pursuit of license and
patent infringement claims.
Limited
Trading Volume
Daily trading volume in our shares has
varied from zero to over one hundred thousand shares during the last two
years. Therefore, investors in our stock may find liquidity in our
shares to be limited and difficult to predict.
Possible
Volatility of Stock Price
There can be no assurances as to the
Company’s operating results in any given period. The Company expects
that the trading price of its common stock will continue to be subject to
significant volatility.
Uncertainty
of Future Distributions to Shareholders
From time to time, the Company has made
distributions to its shareholders of funds that it believed unlikely to be
required for the pursuit of its legal strategy. On April 9, 2007 the
Company paid a dividend of $0.50 per share of common stock to its
shareholders. Its most recent previous cash distribution had occurred
in 2002. The amount and frequency of future distributions to
shareholders depends upon a number of factors including the Company’s ability to
achieve future revenues from its patent infringement claims, the amount of the
Company’s legal, operating and compensation costs, tax treatment of such
dividends and changes to the Company’s intellectual property position or
strategy. Accordingly, there can be no assurance regarding the amount
or frequency of future distributions or whether they may occur at
all.
10.1 Amendment No.1 to lease agreement between OPTi
Inc and John Arillaga Survivor’s Trust, dated as of December 16,
2009.
31.1 and 31.2
Certification of the Chief Executive Officer and Chief Financial Officer in
accordance with 8 U.S. 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 and 32.2
Certification of Chief Executive Officer and Chief Financial Officer in
accordance with rule 15d-14, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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Date: February
12, 2010
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By: /s/ Michael Mazzoni
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Michael
Mazzoni
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Signed
on behalf of the Registrant and as
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Chief
Financial Officer
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