10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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, 2008

¨ 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)

CALIFORNIA	77-0220697
(State or other jurisdiction of incorporated or organization)	(I.R.S. Employer Identification No.)
3430 W. Bayshore Road, Suite 103 Palo Alto, California	94303
(Address of principal executive office)	(Zip Code)

Registrant’s telephone number, including area code (650) 213-8550

Indicate by check mark whether the registrant (1) has filed all reports 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  ¨

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.

Large accelerated filer  ¨	Accelerated filer  ¨	Non-accelerated filer  ¨	Smaller reporting company  x
		(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock as of January 31, 2009 was 11,641,903.

OPTi Inc.

INDEX

PART I: FINANCIAL INFORMATION		3
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	10
	Liquidity and Capital Resources	14
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14
ITEM 4:	CONTROLS AND PROCEDURES	15
PART II: OTHER INFORMATION		16
ITEM 1:	LEGAL PROCEEDINGS	16
ITEM 1A:	RISK FACTORS	17
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4:	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18
ITEM 5:	OTHER INFORMATION	18
ITEM 6:	EXHIBITS	18
SIGNATURES		19

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OPTi INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands including share amounts)

	December 31, 2008			March 31, 2008*
	(unaudited)			(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	5,384		$	6,843
Short term investments		3,300			—
Accounts receivable		1,000			—
Prepaid expenses and other current assets		86			68
Total current assets		9,770			6,911
Property and equipment, at cost
Machinery and equipment		48			48
Furniture and fixtures		17			17
Total property and equipment at cost		65			65
Accumulated depreciation		(58	)		(52	)
Total property and equipment, net		7			13
Other assets		18			18
Investments – long term, net		—			3,850
Total assets	$	9,795		$	10,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,432		$	402
Accrued employee expenses		189			—
Accrued expenses		617			578
Total current liabilities		2,238			980
Stockholders’ equity:
Preferred stock, no par value Authorized shares – 5,000 No shares issued or outstanding		—			—
Common stock, no par value Authorized shares – 50,000 Issued and outstanding – 11,642 at December 31, and March 31, 2008		13,539			13,539
Accumulated deficit		(5,982	)		(3,477	)
Other comprehensive loss		—			(250	)
Total stockholders’ equity		7,557			9,812
Total liabilities and stockholders’ equity	$	9,795		$	10,792

* The balance sheet as of March 31, 2008 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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OPTi INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended December 31,						Nine Months Ended December 31,
	2008			2007			2008			2007
License and other revenue	$	—		$	—		$	3,750		$	—
Total revenue		—			—			3,750			—
Operating expenses:
General and administrative		3,159			942			7,648			2,854
Total operating expenses		3,159			942			7,648			2,854
Loss from operations		(3,159	)		(942	)		(3,898	)		(2,854	)
Interest income and other		1,049			162			1,393			510
Loss before provision for income taxes		(2,110	)		(780	)		(2,505	)		(2,344	)
Income tax provision		—			12			—			12
Net loss	$	(2,110	)		(792	)	$	(2,505	)	$	(2,356	)
Net loss per share:
Basic	$	(0.18	)	$	(0.07	)	$	(0.22	)	$	(0.20	)
Diluted		(0.18	)	$	(0.07	)	$	(0.22	)	$	(0.20	)
Weighted-average shares used in computing net loss per common share
Basic		11,642			11,642			11,642			11,642
Diluted		11,642			11,642			11,642			11,642
Cash dividend declared per common share	$	—		$	—		$	—		$	0.50

The accompanying notes are an integral part of the condensed consolidated financial statements.

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OPTi INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended December 31,
	2008			2007
Cash flows from operating activities:
Net loss	$	(2,505	)	$	(2,356	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6			6
Changes in operating assets and liabilities:
Accounts receivable		(1,000	)		—
Prepaid expenses and other assets		(18	)		19
Accounts payable		1,030			(243	)
Accrued expenses		228			64
Accrued employee compensation		—			(292	)
Net cash used in operating activities		(2,259	)		(2,802	)
Cash flows from investing activities:
Purchase of equipment		—			(2	)
Sale of auction rate securities		800			—
Purchase of auction rate securities		—			(2,050	)
Net cash provided by (used) in investing activities		800			(2,052	)
Cash flows from financing activities:
Cash dividend		—			(5,821	)
Net cash used in financing activities		—			(5,821	)
Net decrease in cash and cash equivalents		(1,459	)		(10,675	)
Cash and cash equivalents, beginning of period		6,843			18,173
Cash and cash equivalents, end of period	$	5,384		$	7,498

The accompanying notes are an integral part of these condensed consolidated financial statements.

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OPTi Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008

(Unaudited)

1. Basis of Presentation

The information at December 31, 2008 and for the three and nine-month periods ended December 31, 2008 and 2007, is unaudited, but includes all adjustments (consisting of normal recurring adjustments) which OPTi, Inc.’s (the “Company”) 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, 2008, 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.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), Fair Value Measurements. SFAS 157 provides guidance for using fair value to measure assets and liabilities. It also responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value, and does not expand the use of fair value in any new circumstances. In February 2008, the FASB approved FASB Staff Position (FSP) FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2) which allows companies to elect a one-year delay in applying SFAS 157 to certain fair value measurements of non-financial instruments, except those that are recognized or disclosed at fair value on at least an annual basis. We elected the delayed adoption date for the portions of SFAS 157 impacted by FSP 157-2 and, as a result, we partially adopted SFAS 157 on April 1, 2008. The partial adoption of SFAS 157 was prospective and did not have a significant effect on our Condensed Consolidated Financial Statements. See Note 5 for information about fair value measurements. We are currently evaluating the impact of applying the deferred portion of SFAS 157 to the nonrecurring fair value measurements of our non-financial assets and non-financial liabilities. In accordance with FSP 157-2, the fair value measurements for these items will be adopted April 1, 2009.

On October 10, 2008, the FASB issued FSP FAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active”. This FASB Staff Position clarifies the application of FASB Statement No. 157, “Fair Value Measurement,” in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. It is effective for financial statements issued for fiscal years beginning after November 15, 2007. This had no impact on the Company’s financial statements.

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2. Net Loss Per Share

Basic net loss per share 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 shares of common stock from the calculation of diluted net loss per share in the three month period ended December 31, 2008 and 108,000 shares of common stock from the calculation of diluted net loss per share in the three month period ended December 31, 2007 and the nine-month periods ended December 31, 2008 and 2007, because all such securities are anti-dilutive for the respective periods.

3. Taxes

The Company recorded no tax provision for the three and nine-month periods ended December 31, 2008 and $12,000 for the three and nine-month periods ended December 31, 2007. The Company’s effective tax rate differed from the federal and state statutory rates during all periods presented due to the utilization of net operating losses in profitable periods and the full valuation recorded against net operating loss deferred tax assets in loss periods because of the uncertainty of the Company maintaining profitability.

Due to uncertainty associated with our prospective ability to realize the benefits of our tax assets, we have fully reserved the value of our deferred tax assets. In addition, utilization of the net operating loss and credit carryforwards 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 carryforwards 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 an unrealized investment gain of approximately $280,000 and $250,000, respectively, relating to its investments in auction rate securities. Total comprehensive loss for the three and nine-month periods ended December 31, 2008 and 2007 were $(1,830,000), $(792,000), $(2,255,000) and $(2,356,000), respectively.

5. Cash Equivalents And Auction Rate Securities

The following is a summary as of December 31, 2008 (in thousands):

	Amortized Cost		Gross Unrealized Losses		Gross Unrealized Gains		Estimated Fair Value
Cash	$	5,384	$	—	$	—	$	5,384
Auction Rate Securities (1)		3,300		—		—		3,300
	$	8,684	$	—	$	—	$	8,684
Reported as:
Cash	$	5,384	$	—	$	—	$	5,384
Investments – Short term		3,300		—		—		3,300
	$	8,684	$	—	$	—	$	8,684

(1) On January 2, 2009, the Company received a redemption of $1,200,000 from the investment bank of a portion of its auction rate securities, and on January 12, 2009 the Company received a redemption of $2,100,000 from the investment bank of its remaining auction rate securities.

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The following is a summary as of March 31, 2008 (in thousands):

	Amortized Cost		Gross Unrealized Losses			Gross Unrealized Gains		Estimated Fair Value
Cash	$	6,843	$	—		$	—	$	6,843
Auction Rate Securities		4,100		(250	)		—		3,850
	$	10,943	$	(250	)	$	—	$	10,693
Reported as:
Cash	$	6,843	$	—		$	—	$	6,843
Investments-Long term		4,100		(250	)		—		3,850
	$	10,943	$	(250	)	$	—	$	10,693

SFAS No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level I) observable inputs such as quoted prices in active markets; (Level II) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (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.

The majority of the Company’s cash and investment instruments are classified within Level I of the fair value hierarchy because they are valued using quoted market prices, market prices for similar securities, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include the Company’s money market funds. Such instruments are generally classified within Level I of the fair value hierarchy.

The types of instruments valued based on unobservable inputs in which there is little or no market data and the unobservable inputs which are significant to the fair value measurement include the Company’s auction rate securities, or ARS, and are classified within Level III of the fair value hierarchy. The Company had approximately $3.3 million (at amortized cost) in auction rate securities as of December 31, 2008. Auction rate securities are structured with short-term interest rate reset dates of generally less than ninety days but with contractual maturities that can be well in excess of ten years. Remaining contractual maturities of our securities ranged between 23 to 39 years. At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par. In the first half of calendar 2008 certain auction rate securities failed auction due to sell orders exceeding buy orders as a result of credit crunch and other factors. Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities. We believe that the credit quality of these securities is high based on these guarantees. In October 2008, the Company received a redemption offer from one of the investment banks from which it had purchased auction rate securities. The terms of the offer are as follows: (1) the Company has the right to instruct its financial advisor to exercise its rights and sell its eligible ARS to the investment bank at par value at any time during the period from January 2, 2009 through January 4, 2011, and (2) the

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acceptance of the offer enables the investment bank to purchase the eligible ARS or to sell them on the Company’s behalf at any time in its sole discretion and without prior notice to the Company, from the date of the acceptance of the offer through January 4, 2011. On January 2, 2009, the Company received a redemption of $1,200,000 from the investment bank of a portion of its auction rate securities, and on January 12, 2009 the Company received a redemption of $2,100,000 from the investment bank of its remaining auction rate securities. Based on this, the Company has determined the fair value of these securities was par at December 31, 2008; therefore the Company had no unrealized gain or loss within accumulated comprehensive loss at December 31, 2008.

In accordance with SFAS 157, the following table represents the Company’s fair value hierarchy for its marketable securities measured at fair value as of December 31, 2008 (in thousands):

	December 31, 2008
	Level I		Level II		Level III		Total
Money market funds	$	5,384	$	—		—	$	5,384
Auction rate securities						3,300		3,300
Total available-for-sale investments	$	5,384	$	—	$	3,300	$	8,684

The following table summarizes the change in balance sheet carrying value associated with Level III financial instruments carried at fair value during the nine-months ended December 31, 2008 (In thousands):

	Nine Months Ended December 31, 2008
	March 31, 2008		Payment, Purchases (Sales), Net			Transfers In (Out), Net		Gains (Losses)			December 31, 2008
								Realized	Unrealized*
Auction Rate Securities	$	3,850	$	(800	)	$	—	$	$	250	$	3,300

* Recorded in other comprehensive loss under Stockholders’ Equity on the accompanying condensed consolidated balance sheet.

6. Subsequent Events

In January 2009, the Company reached settlement with two additional parties relating to the Compact ISA litigation. The Company dismissed the litigation against Silicon Storage Technology, Inc. as the sales of the alleged infringing parts were insignificant. The Company also settled and entered into a dismissal agreement with Renesas Corporation (“Renesas”), pursuant to which Renesas agreed to pay $750,000 to the Company in consideration for the Company’s agreement to dismiss its lawsuit against Renesas. Pursuant to the terms of the dismissal agreement, Renesas has an option to acquire a license from the Company for a period of forty-five days after receiving notice from the Company of trial completion.

As noted in Note 5, on January 2, 2009, the Company received a redemption of $1,200,000 from the investment bank of a portion of its auction rate securities, and on January 12, 2009 the Company received a redemption of $2,100,000 from the investment bank of its remaining auction rate securities.

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

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 the Company’s 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. Readers are encouraged to refer to “Factors Affecting Earnings and Stock Price”.

OPTi was founded in 1989 as an independent supplier of semiconductor products to the personal computer market. During fiscal 2003, the Company sold its product fabrication, distribution and sales operations to Opti Technologies, Inc., an unrelated third party. As a result of this transaction all future revenues for the Company are expected to be generated through royalties or from the licensing of the Company’s intellectual property. The Company received approximately $52,000 of royalties during the first quarter of fiscal 2005 from Opti Technologies, Inc. and does not expect to receive additional significant revenue other than through the pursuit of its patent infringement cases and associated licensing efforts.

Prior to the sale of its product fabrication, distribution and sales operations, the Company developed and patented core logic technology which it licensed in a one-time licensing arrangement for $13,311,000. 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 2004, the Company 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 August 3, 2006, the Company entered into a license 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 was 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 had occurred and there were no future performance obligations, fees were fixed or determinable and collectibility was reasonably assured.

The License Agreement also provides that the Company shall receive quarterly royalty payments of $750,000 from NVIDIA, 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 collection of such royalties is deemed reasonably assured.

On February 5, 2007 the Company announced that it received a letter from NVIDIA stating that NVIDIA has 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 will not be remitting to the Company the quarterly royalty payment originally scheduled for February 2007.

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On October 17, 2007 the Company initiated arbitration against NVIDIA because the Company believed that NVIDIA breached the terms of the License Agreement. The Company was seeking payment for the past due quarters that OPTi believes NVIDIA continued to use the Pre-Snoop technology. The Company received the arbitrator ruling on September 19, 2008. In the ruling the arbitrator found that NVIDIA had continued to use the Pre-Snoop technology for the five quarters beginning February 1, 2007 to April 30, 2008. The total award that the Company received from the arbitrator was $3,750,000 for quarterly royalties and $205,000 for interest on the award. The Company received the payment from NVIDIA in late October 2008.

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 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.

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. The Company has requested a jury trial in this matter.

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 “Compact ISA litigation”). 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 Advanced Micro Devices, Atmel Corporation, Broadcom Corporation (“Broadcom”), Renesas Technology America, Inc., Silicon Storage Technology, Inc., 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 has requested a jury trial in this matter.

In the quarter ended December 31, 2008, the Company reached settlements with two of the defendants in the Compact ISA litigation. The Company dismissed STMicroelectronics as the sale of the alleged infringing parts was insignificant. The Company settled and entered into a dismissal agreement with Broadcom, pursuant to which Broadcom agreed pay $1,000,000 to the Company in consideration for the Company’s agreement to dismiss its lawsuit against Broadcom. Pursuant to the terms of the dismissal agreement, Broadcom has an option to acquire a license from the Company for a period of forty-five days after receiving notice from the Company of trial completion.

In January 2009, the Company reached settlement with two additional parties relating to the Compact ISA litigation. The Company dismissed Silicon Storage Technology, Inc. as the sales of the alleged infringing parts was insignificant. The Company also settled and entered into a dismissal agreement with Renesas, pursuant to which Renesas agreed to pay $750,000 to the Company in consideration for the Company’s agreement to dismiss its lawsuit against Renesas. Pursuant to the terms of the dismissal agreement, Renesas has an option to acquire a license from the Company for a period of forty-five days after receiving notice from the Company of trial completion.

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

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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.

Other than the adoption of SFAS 157 as discussed below, we believe that there have been no significant changes in our critical accounting policies and estimates during the three and nine-month periods ended December 31, 2008 as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended March 31, 2008.

Fair Value of Financial Instruments

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS 157), which defines fair value, establishes guidelines for measuring fair value, and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements and is effective for fiscal years beginning after November 15, 2007.

Beginning April 1, 2008, assets and liabilities recorded at fair value in our condensed consolidated balance sheet are categorized based upon the level of judgment associated with inputs used to measure their fair value. SFAS 157 defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 – Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 – Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

We classify inputs to derive fair values for money market funds available-for-sale as Level 1.

We classify inputs to calculate fair value of auction rate securities as Level 3.

In October 2008, the Company received a redemption offer from one of the investment banks from which it had purchased auction rate securities. The terms of the offer are as follows: (1) the Company has the right to instruct its financial advisor to exercise its rights and sell its eligible ARS to the investment bank at par value at any time during the period from January 2, 2009 through January 4, 2011, and (2) the acceptance of the offer enables the investment bank to purchase the eligible ARS or to sell them on the Company’s behalf at any time in its sole discretion and without prior notice to the Company, from the date of the acceptance of the offer through January 4, 2011. On January 2, 2009, the Company received a redemption of $1,200,000 from the investment bank of a portion of its auction rate securities, and on January 12, 2009 the Company received a redemption of $2,100,000 from the investment bank of its remaining auction rate securities. Based on this, the Company has determined the fair value of these securities was par at December 31, 2008. Therefore, the Company has no unrealized gain or loss within accumulated comprehensive loss at December 31, 2008.

For a further discussion regarding fair value measurements, see Note 5 to the Condensed Consolidated Financial Statements.

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Fiscal 2009 Compared to 2008

Revenues

The Company had no revenue in the three month period ended December 31, 2008, $3,750,000 in revenue for the nine-month period ended December 31, 2008, and no revenue for the three and nine-month periods ended December 31, 2007. The increase in revenue for the nine-month period ended December 31, 2008 relates to the arbitration award of five quarters of royalty from NVIDIA. The Company’s future revenues depend on the success of its strategy of pursuing license claims on its intellectual property position.

General and Administrative

General and administrative expenses for the three-months ended December 31, 2008 were $3,159,000 as compared to $942,000 for the three-months ended December 31, 2007. The increase in general and administrative costs for the three-month period ended December 31, 2008 as compared to the comparable period ended December 31, 2007 was mainly attributable to increased litigation costs relating to the preparation for the AMD and Apple litigations. General and administrative expenses for the nine-month period ended December 31, 2008 were $7,648,000 as compared to $2,854,000 for the nine-month period ended December 31, 2007. The increase in general and administrative costs for the nine-month period ended December 31, 2008 as compared to the nine-month period ended December 31, 2007 was mainly attributable to increased legal fees and litigation costs relating to the AMD and Apple litigations and the NVIDIA arbitration.

Interest and Other Income, Net

Net interest and other income for the three-month period ending December 31, 2008 was $1,049,000 as compared to $162,000 for the three-month period ended December 31, 2007. The increase in net interest and other income in the three-month period ended December 31, 2008 as compared to the comparable period in 2007 was due to other income of $1,000,000 related to a dismissal agreement that the Company signed with Broadcom in connection with the Compact ISA litigation from July 2007. This was partially offset, by a decrease in interest income due to lower average cash balances and lower interest rates during the three-months ended December 31, 2008. Net interest and other income for the nine-month period ending December 31, 2008 was $1,393,000 as compared to $510,000 for the nine-months ended December 31, 2007. The increase in net interest and other income in the nine-month period ended December 31, 2008 as compared to the comparable period in 2007 was due to the Broadcom dismissal agreement and interest awarded in the NVIDIA arbitration, offset by lower average cash balances and lower interest rates during the nine-month period ended December 31, 2008.

Income Taxes

The Company recorded no tax provision for the three and nine-month periods ended December 31, 2008 and $12,000 for the three and nine-month periods ended December 31, 2007. The Company’s effective tax rate differed from the federal and state statutory rates during all periods presented due to the utilization of net operating losses in profitable periods and the full valuation recorded against net operating loss deferred tax assets in loss periods because of the uncertainty of the Company maintaining profitability.

Due to uncertainty associated with our prospective ability to realize the benefits of our tax assets, we have fully reserved the value of our deferred tax assets. In addition, utilization of the net operating loss and credit carryforwards 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 carryforwards before utilization.

13

Liquidity and Capital Resources

Cash and cash equivalents decreased to $5.4 million at December 31, 2008 from $6.8 million at March 31, 2008. The decrease in cash and cash equivalents of approximately $1.4 million from March 31, 2008 to December 31, 2008, primarily relates to the net loss of $2.5 million for the nine-month period and an increase in accounts receivable of approximately $1.0 million, offset in part, by an increase in accounts payable and accrued expenses of $1.3 million and the sale of $0.8 million of its auction rate securities. Working capital as of December 31, 2008 was $7.5 million as compared to $5.9 million at March 31, 2008. During the first nine-months of fiscal 2009, operating activities used approximately $2.3 million of cash. Cash used in operating activities was due to the net loss during the nine-month period of $2.5 million and increased accounts receivable of $1.0 million, offset in part, by an increase in accounts payable and accrued expenses of $1.3 million. The Company sold $0.8 million of investments in the nine-month period ended December 31, 2008 and purchased $2.1 million of investment for the nine-month period ended December 31, 2007. This investing activity relates to the sale and purchases of auction rate securities. The Company used approximately $5.8 million in financing activities during the nine-month period ended December 31, 2007, relating to a $0.50 per share cash dividend paid on April 9, 2007.

As of December 31, 2008, the Company’s principal sources of liquidity included cash, cash equivalents of approximately $5.4 million and working capital of approximately $7.5 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’s current building lease agreement is scheduled to end on December 31, 2009. The total remaining commitment under the lease at December 31, 2008 is approximately $107,000.

Contractual Obligations

There was no material change as of December 31, 2008 of our contractual obligations as compared to those at March 31, 2008 as disclosed in our Annual Report on Form 10-K for the year ended March 31, 2008.

Off Balance Sheet Arrangements

None

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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, 2008, 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.

Auction Rate Securities

Auction rate securities are securities that are structured with short-term interest rate reset dates of generally less than ninety days but with contractual maturities that can be well in excess of ten years. At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par. In the fourth quarter of fiscal year 2008, certain of our auction rate securities failed auction due to sell orders exceeding buy orders. In the first quarter of 2009, we continued to see deterioration in the market for these types of securities. Our auction rate securities primarily consist of investments that are backed by pools of student loans guaranteed by the U.S. Department of Education and other asset-backed securities. We believe that the credit quality of these securities is high based on these guarantees. Based on an analysis of other-than-temporary impairment factors, we recorded a temporary gain within other accumulated comprehensive gain of approximately $280,000 for the quarter ended December 31, 2008. Our marketable securities portfolio as of December 31, 2008 was $3.3 million, at cost.

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In October 2008, the Company received a redemption offer from one of the investment banks that it had purchased auction rate securities from. The terms of the offer are as follows: (1) the Company has the right to instruct its financial advisor to exercise its rights and sell its eligible ARS to the investment bank at par value at any time during the period from January 2, 2009 through January 4, 2011, and (2) the acceptance of the offer enables the investment bank to purchase the eligible ARS or to sell them on the Company’s behalf at any time in its sole discretion and without prior notice to the Company, from the date of the acceptance of the offer through January 4, 2011. On January 2, 2009, the Company received a redemption of $1,200,000 from the investment bank of a portion of its auction rate securities, and on January 12, 2009 the Company received a redemption of $2,100,000 from the investment bank of its remaining auction rate securities. Based on this, the Company has determined the fair value of these securities was par at December 31, 2008. Therefore, the Company has no temporary gain or loss within accumulated comprehensive loss at December 31, 2008.

Item 4. Controls and Procedures

(a) The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. 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 fiscal quarter ended December 31, 2008. 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.

(b) There was no change in our internal control over financial reporting for the three months ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. 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.

15

OPTi Inc.

Part II. Other Information

Item 1. Legal Proceedings

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 AMD for infringement of three U.S. patents relating to its “Predictive Snooping” technology. 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; all entitled “Predictive Snooping of Cache Memory for Master-Initiated Accesses”. The Company alleges that AMD has infringed the patents by making, selling, and offering for sale desktop and portable computers and servers incorporating Predictive Snooping technology. On October 30, 2008, AMD amended its answer and counterclaims to include a defense that the Company’s patents are unenforceable due to inequitable conduct allegedly engaged by the Company while prosecuting the patents. On November 13, 2008, the Company filed its response denying the inequitable conduct allegations. In the event that the court determines that the Company engaged in inequitable conduct while prosecuting the patents and holds them to be unenforceable, the court may also determine whether the case is “exceptional.” If the court determines that the case is “exceptional,” it has the discretion to award AMD its attorneys’ fees. The Company has not yet been provided any information as to the amount of AMD’s attorneys’ fees. The Company has requested a jury trial in this matter and is seeking damages. The trial was scheduled for February 2009, but the Company requested and received a continuance on the trial in January 2009. The Company is working with AMD and the court in an effort to reschedule the trial for later this year.

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. 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; 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. The Company has requested a jury trial in this matter and is seeking damages. The trial is currently scheduled for April of this year.

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 Advanced Micro Devices, Atmel Corporation, Broadcom Corporation, Renesas Technology America, Inc., Silicon Storage Technology, Inc., 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 has requested a jury trial in this matter and is seeking damages.

In the quarter ended December 31, 2008, the Company reached settlements with two of the defendants in the Compact ISA litigation. The Company dismissed STMicroelectronics as the sale of the alleged infringing parts was insignificant. The Company settled and entered into a dismissal agreement with Broadcom, pursuant to which Broadcom agreed pay $1,000,000 to the Company in consideration for the Company’s agreement to dismiss its lawsuit against Broadcom. Pursuant to the terms of the dismissal agreement, Broadcom has an option to acquire a license from the Company for a period of forty-five days after receiving notice from the Company of trial completion.

In January 2009, the Company reached settlement with two additional parties relating to the Compact ISA litigation. The Company dismissed Silicon Storage Technology, Inc. as the sales of the alleged infringing parts was insignificant. The Company also settled and entered into a dismissal

16

agreement with Renesas, pursuant to which Renesas agreed to pay $750,000 to the Company in consideration for the Company’s agreement to dismiss its lawsuit against Renesas. Pursuant to the terms of the dismissal agreement, Renesas has an option to acquire a license from the Company for a period of forty-five days after receiving notice from the Company of trial completion.

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.

Please see Item 1A for discussion regarding the arbitration against NVIDIA and the recent ruling.

Item 1A. Risk Factors

The following risk factors are material changes to the risk factors set forth in our Form 10-K for the year ended March 31, 2008.

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 counterclaims with NVIDIA Corporation 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, the timing of settlements of these claims and the terms of such settlements 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 Future Royalties from NVIDIA

The Company had an arbitration hearing the last week of June 2008 with NVIDIA, as the Company believed NVIDIA breached the terms of the License Agreement. The Company was seeking payment for the past due quarters that OPTi believed NVIDIA continued to use the Pre-Snoop technology. The Company received the arbitrator ruling on September 19, 2008. In the ruling the arbitrator found that NVIDIA had continued to use the Pre-Snoop technology for the five quarters beginning February 1, 2007 to April 30, 2008, and that a change to the BIOS was a change to the infringing parts as per the License Agreement. The total award that the Company received from the arbitrator was $3,750,000 for quarterly royalties and $205,000 for interest on the award. The Company received the payment from NVIDIA in late October 2008.

The ruling of the arbitrator may not be indicative of the Company’s ability to collect future royalties from NVIDIA.

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.

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Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Not applicable and has been omitted.

Item 3. Defaults Upon Senior Securities

Not applicable and has been omitted.

Item 4. Submission of Matters to a Vote of Shareholders

Not applicable and has been omitted.

Item 5. Other Information

Not applicable and has been omitted.

Item 6. Exhibits

10.1*	Dismissal and License Option Agreement by and between the Company and Broadcom Corporation dated December 23, 2008.
31.1 and 31.2	Certification of Chief Executive Officer and Chief Financial Officer in accordance with Rules 13a-14(a) and 15d-14(a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1 and 32.2	Certification of the Chief Executive Officer and Chief Financial Officer in accordance with 8 U.S. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Omitted portions are indicated in this exhibit with [***].

18

OPTi Inc.

Signatures

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.

		OPTi Inc.
Date:	February 13, 2009	By:	/s/ Michael Mazzoni
			Michael Mazzoni
			Signed on behalf of the Registrant and as
			Chief Financial Officer

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EX-10.1

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EXHIBIT 10.1

DISMISSAL AND LICENSE OPTION AGREEMENT

This Dismissal and License Option Agreement (this “Agreement”) is made and entered into as of this 23 day of December, 2008 (the “Effective Date”), by and between OPTi, Inc., a California corporation having its place of business at 3430 W. Bayshore Road, Suite 103, Palo Alto, California 94303 (“OPTi”) and Broadcom Corporation, a California corporation having its place of business at 5300 California Avenue, Irvine, California 92617 (“Broadcom”), acting on behalf of itself and its Subsidiaries (Broadcom Corporation and its Subsidiaries, collectively, “Broadcom”). OPTi and Broadcom are individually referred to as a “Party” and collectively as the “Parties”.

WHEREAS, OPTi has filed patent infringement claims against Broadcom, Advanced Micro Devices, Inc. (“AMD”), Standard MicroSystems Corporation (“SMSC”), and other co-defendants in the Civil Action No. 2:07-cv-00278-TJW (E.D. Tex.) (the “Lawsuit”).

WHEREAS, Broadcom denies that it does now or has ever infringed any of the patents asserted in the Lawsuit or committed any act that would entitle OPTi to any of the relief it is seeking from Broadcom in the Lawsuit; and

WHEREAS, OPTi and Broadcom desire to avoid the time and expense of litigation, and in compromise of the disputed claims, to dismiss the Lawsuit against Broadcom and grant Broadcom an option to acquire a license from OPTi as set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the undertakings and options granted herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the aforementioned Parties agree as follows:

1. Definitions

As used herein:

a. “Asserted Patents” shall mean any and all patents asserted by OPTi in the Lawsuit, including without limitation U.S. Patent No. 5,944,807 and U.S. Patent No. 6,098,141, and any patent or patent application that claims priority directly or indirectly to, or from which priority is directly or indirectly claimed with respect to, any of the foregoing patents or any patent or application to which the foregoing patents claim priority, whether or not pending, issued, expired, abandoned or closed, including without limitation any and all reexaminations, reissues, continuations, divisions, continuations-in-part and foreign counterparts of any of the foregoing patents anywhere in the world.

b. “Dismissal Period” shall mean the period commencing on the Effective Date and ending on the later of: (i) eighteen (18) months after the Effective Date; or (ii) two (2) months after a final (but appealable) judgment is issued by the District Court in the Lawsuit addressing all remaining claims in such Lawsuit.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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c. “Subsidiary” shall mean any corporation or other entity that is directly or indirectly controlled by the specified Party. For purposes of this definition, control means (i) direct or indirect ownership of, or the exclusive right to acquire ownership of, more than fifty percent (50%) of the outstanding shares or securities entitled to vote for the election of directors or similar managing authority of an entity; or (ii) the direct or indirect right to vote or to direct the vote (by written proxy or otherwise) of more than fifty percent (50%) of the ownership interest representing the right to elect directors or similar managing authority of an entity. An entity shall be deemed to be a Subsidiary under this Agreement at any time that the requisite conditions of being a Subsidiary are met, except that entities which are co-defendants in the Lawsuit may not become Subsidiaries of Broadcom for the purposes of this Agreement.

2. Dismissal

a. The Parties hereby agree that the Lawsuit between the Parties, including all claims made by OPTi against Broadcom therein, shall be fully and promptly dismissed without prejudice. Within five (5) business days after the Effective Date, each Party shall cause its counsel to have signed and filed all necessary dismissals, stipulations, orders and other documents with respect to the Lawsuit to effect a complete dismissal without prejudice of all claims, demands and causes of action brought by OPTi against Broadcom and all claims by Broadcom against OPTi in the Lawsuit. The Parties shall proceed with any and all additional procedures necessary to dismiss such claim without prejudice.

b. In accordance with Section 2.a above, Broadcom shall pay OPTi one million U.S. dollars ($1,000,000) (the “Dismissal Payment”) within fifteen days after such dismissal.

c. During the Dismissal Period, OPTi will not bring any claim or suit alleging infringement of or to otherwise assert any of the Asserted Patents: (i) against Broadcom or any Subsidiary of Broadcom; or (ii) against any direct or indirect Broadcom customer, distributor, OEM, dealer, reseller, user, vendor, manufacturing or assembly facility, assembly or testing facility or other third party with respect to any Broadcom product or service (alone or in combination with other components) manufactured, used, sold, offered for sale, imported or otherwise exploited by such entity. (The “Standstill Obligation.”) The Standstill Obligation shall run with the title of the Asserted Patents, and shall be binding on OPTi’s successors, assigns, licensees, and any other person or entity who obtains from OPTi a direct or indirect ownership or other interest (including any enforcement right) in or to the Asserted Patents. The Standstill Obligation shall not constitute and shall not be deemed to constitute a release of or license to Broadcom or any of its customers, and any injunctive or monetary relief that OPTi may be entitled to recover against Broadcom or its customers shall continue accrue during the Dismissal Period and shall not be limited, diminished or abated by OPTi’s compliance with the Standstill Obligation. Neither shall OPTi’s compliance with the Standstill Obligation be deemed to constitute a waiver or estoppel of or laches as to any monetary or equitable right of recovery that OPTi may have against Broadcom or its customers.

d. During the Standstill Period, Broadcom shall refrain from bringing suit seeking a declaration as to the noninfringement, invalidity, or unenforceability of the Asserted Patents, or seeking reexamination or reissuance of the Asserted Patents or similar relief.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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3. Lawsuit Notices

a. In the event that a final (but appealable) judgment is issued by the District Court in the Lawsuit addressing all remaining claims in such Lawsuit, OPTi shall notify Broadcom of such judgment in writing within ten (10) business days thereafter (the “Trial Completion Notice”).

b. In the event that a final judgment is issued after all appeals have completed or been waived in the Lawsuit addressing all remaining claims in such Lawsuit, OPTi shall notify Broadcom of such judgment in writing within ten (10) business days thereafter (the “Appeal Completion Notice”).

c. In the event that OPTi settles and dismisses with prejudice all remaining claims against all of Broadcom’s co-defendants in the Lawsuit, OPTi shall notify Broadcom of such settlement in writing within ten (10) business days thereafter (the “Settlement Completion Notice”), and such notice shall include a summary of all material terms of the settlements with each co-defendant, including the fees paid or to be paid to OPTi by AMD and SMSC.

4. License Option and Releases

a. Broadcom shall have the right and option, in its sole discretion and without any obligation to exercise such option, to acquire the license to the Asserted Patents described below upon payment of the License Fee defined below and execution by Broadcom and delivery to OPTi of the exercise notice attached as Exhibit A hereto (the “License Option Exercise Notice”). This option shall run with the title of the Asserted Patents, and shall be binding on OPTi’s successors, assigns, licensees, and any other person or entity who obtains from OPTi a direct or indirect ownership or other interest (including any enforcement right) in or to the Asserted Patents.

b. For purposes of this Agreement, the “License Fee” shall mean:

(i) [***];

(ii) [***]; or

(iii) [***].

c. Upon payment of the Licensee Fee and execution by Broadcom and delivery to OPTi of the License Option Exercise Notice, OPTi automatically and without the need for any further action or documentation grants to Broadcom, and Broadcom automatically and without the need for any further action or documentation receives a non-exclusive, worldwide, perpetual, irrevocable, paid up and royalty-free license, without the right to sublicense, under the Asserted Patents (and any related patents/filings) to make, have made, use, offer for sale, import and sell (directly and indirectly through multiple tiers of distribution) any products or services. For the avoidance of doubt, the restriction on sublicensing set forth herein shall not be interpreted to restrict Broadcom’s right to engage with third parties in connection with the design, development, manufacturing, packaging, assembly, testing, sale, distribution and other similar activities with respect to Broadcom’s products and services.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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d. Upon Broadcom’s payment of the License Fee and exercise of the license option as set forth in Section 4.c:

(i) OPTi releases, acquits and discharges Broadcom and all of its officers, directors, employees and agents from and against any and all claims, demands, liabilities and rights of action of any kind and nature, at law, in equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, which OPTi may have or obtain relating to the Asserted Patents or the Lawsuit, including without limitation those arising on account of any infringement or alleged infringement of any Asserted Patent (whether direct, contributory or by inducement, and whether or not willful); and

(ii) OPTi releases, acquits and discharges Broadcom’s direct and indirect past, present and future customers, retailers, wholesalers, distributors, dealers, resellers, users, OEMs, vendors, manufacturing or assembly facilities, assembly or testing facilities, and other similar companies from and against any and all claims, demands, liabilities and rights of action of any kind and nature, at law, in equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, relating to any infringement or alleged infringement of any of the Asserted Patents (whether direct, contributory or by inducement, and whether or not willful) or otherwise related to the Lawsuit, to the extent such claim, demand, liability or right of action arises out of or relates to the manufacture, sale, use or other exploitation of a Broadcom product or service; and

(iii) Broadcom releases, acquits and discharges OPTi and all of its officers, directors, employees and agents from and against any and all claims, demands, liabilities and rights of action of any kind and nature, at law, in equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, which Broadcom may have or obtain relating to the Asserted Patents or the Lawsuit, including without limitation those arising on account of OPTi’s assertion that Broadcom has infringed any Asserted Patent (whether direct, contributory or by inducement, and whether or not willful).

(iv) For the purpose of the releases set forth above, upon such releases becoming effective, the Parties shall be deemed to have expressly, knowingly and intentionally waived for themselves and for their respective legal successors and assigns, the benefits and rights of section 1542 of the California Civil Code, which states as follows:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.” Cal. Civ. Code § 1542.”

The Parties each acknowledge that they have received independent legal advice from their attorneys with respect to waiving the provisions of California Civil Code § 1542 and acknowledge that this waiver is a material inducement to and consideration for each party’s execution of the Agreement. Each of the Parties shall likewise be deemed to have waived the benefits of any statute, rule or doctrine, or common law principle of any jurisdiction whatsoever of similar effect to section 1542 of the California Civil Code.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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5. Assignment or Transfer

a. OPTi agrees that all of the options, licenses, covenants, restrictions and other obligations of OPTi set forth in or arising from this Agreement (the “Patent Obligations”) shall run with the Asserted Patents, and that OPTI shall ensure that any assignee, transferee or successor to any of the Asserted Patents (including the acquiring or surviving entity in connection with any change of control of OPTi), or any other entity (such as an exclusive licensee) that obtains any enforcement rights with the respect to any of the Asserted Patents agrees in writing, prior to such assignment, transfer or grant, to be bound by all such Patent Obligations (including the obligation to obtain such written agreement from any subsequent assignee, transferee, successor or grantee), including without limitation the Standstill Obligation set forth in Section 2.c, the notice obligations in Section 3, and the options and, if granted, the license set forth in Section 4. If OPTi or any of its Subsidiaries assigns (directly or by operation of law) ownership or any enforcement right under any Asserted Patent(s) to any person or entity that is not previously bound in writing by the foregoing Patent Obligations, then effective immediately prior to such assignment, OPTi automatically and without the need for any further action or documentation grants to Broadcom, and Broadcom automatically and without the need for any further action or documentation receives a license of the same scope, terms and duration as the license set forth in Section 4.c (without, for the avoidance of doubt, the requirement to deliver any notice or pay any fee).

b. Neither party may assign, transfer or delegate this Agreement or its rights or obligations hereunder without the other Party’s prior written consent, except that either Party may assign this Agreement in connection with an assignment or transfer of substantially all of the business or assets to which this Agreement relates (subject, in OPTi’s case, to compliance with Section 5.a above). Subject to the foregoing, this Agreement shall inure to the benefit of each Party’s permitted successors and assigns.

6. Representations and Warranties

a. Each party represents and warrants that it has the right, power and authority to enter into this Agreement and to fully perform and comply with its obligations hereunder.

b. OPTi represents and warrants that (i) it is the sole and exclusive owner of the Assigned Patents and has the unencumbered right to grant the licenses, rights, options and covenants under the Asserted Patents of the full scope set forth in this Agreement, and (ii) no other person or entity has any claims, demands or rights of action arising out of or relating to the Asserted Patents, including without limitation any claims for past damages.

7. Term and Termination

a. This Agreement shall commence on the Effective Date and shall continue in force thereafter unless and until terminated as set forth in this Section 7.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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b. If Broadcom fails to pay the Dismissal Fee pursuant to Section 2.b and does not cure such failure within ten (10) business days after written notice thereof from OPTi, then OPTi may terminate this Agreement upon written notice to Broadcom. Except for an uncured breach of Broadcom’s obligation to pay the Dismissal Fee as set forth in this paragraph 7.b, OPTi shall have no right to terminate this Agreement for any reason.

c. If OPTi materially breaches this Agreement and does not cure such failure within ninety (90) days after written notice thereof from Broadcom, then Broadcom may terminate this Agreement upon written notice to OPTi.

d. Upon payment by Broadcom of the License Fee pursuant to Section 4.c, the license shall be paid-up in full and this Agreement shall thereafter be incontestable, perpetual, non-terminable and irrevocable.

8. Confidentiality

The Parties shall keep the terms of this Agreement confidential and shall not now or hereafter divulge the text or terms of this Agreement or any part thereof to any third party except:

a. to Subsidiaries of the parties in confidence;

b. with the prior written consent of the other party;

c. to any governmental body having jurisdiction and specifically requiring such disclosure;

d. in response to a valid subpoena or as otherwise may be required by law;

e. for the purposes of disclosure in connection with the Securities and Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, and any other reports filed with the Securities and Exchange Commission, or any other filings, reports or disclosures that may be required under applicable laws or regulations;

f. to a party’s accountants, legal counsel and other financial and legal advisors, subject to obligations of confidentiality and/or privilege;

g. as required during the course of litigation, subject to protective order or other similar protections as applicable; or

h. in confidence, in connection with a proposed merger, acquisition or similar transaction;

provided, however, that prior to any such disclosure pursuant to paragraphs c, d, e and/or g hereof, the party seeking disclosure shall give the other party reasonable prior written notice thereof to permit the other party to seek a protective order, request confidential treatment or take other reasonable steps to prevent or limit the nature and extent of such disclosure, and the disclosing party shall provide reasonable cooperation in connection therewith.

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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9. Notices

All notices required or permitted to be given hereunder shall be in writing and shall be delivered by hand, or if dispatched by prepaid air courier or by registered or certified airmail, postage prepaid, addressed as follows:

If to Broadcom:	If to OPTi:
Broadcom Corporation 5300 California Avenue Irvine, California 92617 Attn.: General Counsel	OPTi, Inc. 3430 W. Bayshore Road, Suite 103 Palo Alto, California 94303 Attn: Chief Executive Officer

Such notices shall be deemed to have been served when received by addressee as evidenced by a proof of delivery provided by a courier service or the U.S. Postal Servive or, if delivery is not accomplished by reason of some fault of the addressee, when tendered for delivery. Either party may give written notice of a change of address and, after notice of such change has been received, any notice or request shall thereafter be given to such party as above provided at such changed address.

10. Miscellaneous

a. This Agreement constitutes and embodies the entire Agreement between the Parties with respect to the subject matter hereof, and supersedes all previous agreements, understandings, negotiations, discussions, offers and acceptances with respect to such subject matter. This Agreement may not be modified except in writing signed by authorized representatives of both parties.

b. The Parties hereby agree to execute any further documents and take other reasonable steps, including executing any declaration, oath, affidavit, assignment, confirmation, license or other instrument, as necessary or appropriate to complete, effectuate or give full effect to the licenses, rights and covenants granted herein.

c. This Agreement shall be governed by, construed and enforced in accordance with the substantive and procedural laws of the state of California without reference to conflict of laws principles. All disputes, controversies, or differences that may arise between the parties out of, or in relation to, or in connection with this Agreement, or for the breach thereof, shall be subject to the exclusive jurisdiction of the federal and state courts located in Santa Ana County, California.

d. Each party acknowledges that all rights and licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Bankruptcy Code”), licenses or executory licenses of rights to “intellectual property” as defined under Section 101(56) of the Bankruptcy Code. Each party acknowledges that if such party, as a debtor in possession or a trustee-in-bankruptcy in a case under the Bankruptcy Code, rejects this Agreement, the other party may elect to retain its rights under this Agreement as provided in Section 365(n) of the Bankruptcy Code

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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e. This Agreement does not constitute either party hereto the agent of the other party for any purpose whatsoever, nor does either party thereto have the right or authority to assume, create or incur any liability of any kind, express or implied, against or in the name or on behalf of the other party.

f. If any provision of this Agreement shall be deemed by a court of competent jurisdiction to be invalid or unenforceable as against public policy or for any other reason, such provision shall be deemed stricken from this Agreement. This Agreement shall remain valid and enforceable as to all other provisions.

g. This Agreement may be executed in counterparts or duplicate originals, both of which shall be regarded as one and the same instrument, and which shall be the official and governing version in the interpretation of this Agreement. This Agreement may be executed by facsimile signatures and such signatures shall be deemed to bind each Party as if they were original signatures.

OPTi and Broadcom have caused this Agreement to be executed by their respective duly authorized representatives on the dates and places indicated below.

OPTi, Inc.		Broadcom Corporation
Signed:	/s/ Bernard Marren	Signed:	/s/ Nariman Vousefi
Name:	Bernard Marren	Name:	Nariman Vousefi
Title:	President / CEO	Title:	Senior Vice President
Date:	December 23, 2008	Date:	December 23, 2008

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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EXHIBIT A

LICENSE OPTION EXERCISE NOTICE

[***] Confidential treatment requested under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Confidential portion omitted and filed separately with the Commission.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 15d-14

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bernard T. Marren, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OPTi Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any, fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 13, 2009	/s/ Bernard T. Marren
	Bernard T. Marren
	President, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 15d-14

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Mazzoni, certify that:

1. I have reviewed this quarterly report on Form 10-Q of OPTi Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d) disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any, fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

February 13, 2009	/s/ Michael Mazzoni
	Michael Mazzoni
	Chief Financial Officer

EX-32.1

Exhibit 32.1

OPTi Inc.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OPTi Inc. (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”). I, Bernard T. Marren, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Bernard T. Marren	Date: February 13, 2009
Bernard T. Marren, President & Chief Executive Officer

EX-32.2

Exhibit 32.2

OPTi Inc.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of OPTi Inc. (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”). I, Michael F. Mazzoni, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Michael F. Mazzoni	Date: February 13, 2009
Michael F. Mazzoni, Chief Financial Officer