##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the Quarter Ended September 30, 2007
 Commission file number 0-50289
 Syntax-Brillian Corporation
  Delaware
    
    05-0567906(State or Other Jurisdiction
    
    (I.R.S. Employer Identification No.)of Incorporation or Organization)1600 North Desert Drive, Tempe, Arizona
    
    85281(Address of Principal Executive Offices)
    
    (Zip Code)
 (602) 389-8888
  þ o
  Large accelerated
filer  o
  Accelerated filer þ
  Non-accelerated filer  o
 o þ
  CLASS
    
    OUTSTANDING AS OF NOVEMBER 8, 2007Common Stock, par value $.001 per share
    
    
    93,354,582




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##### 



SYNTAX-BRILLIAN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
 FOR QUARTER ENDED SEPTEMBER 30, 2007
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    1Condensed Consolidated Balance Sheets  September 30, 2007 (unaudited) and June 30, 2007
    
    
    1Condensed Consolidated Statements of Operations (unaudited)  Three Months Ended September 30, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited)  Three Months Ended September 30, 2007 and 2006
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    14ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    18ITEM 4. CONTROLS AND PROCEDURES
    
    
    19PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    20ITEM 1A. RISK FACTORS
    
    
    21ITEM 6. EXHIBITS
    
    
    21SIGNATURES
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands except for share and per share data)
 September 30,
    
    
    June 30,2007
    
    
    2007(unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    17,967
    
    
    $
    28,679Accounts receivable and due from factor, net
    
    
    266,230
    
    
    
    210,115Inventories
    
    
    56,378
    
    
    
    34,499Inventory deposit with Kolin (a related party)
    
    
    
    
    
    
    70,000Inventory deposits with vendor
    
    
    
    
    
    
    8,253Tooling deposit with Kolin
    
    
    123,308
    
    
    
    65,253Deferred tax asset
    
    
    31,141
    
    
    
    12,491Prepaid expenses
    
    
    2,753
    
    
    
    2,578Total Current Assets
    
    
    497,868
    
    
    
    431,868Property and equipment, net
    
    
    12,955
    
    
    
    13,921Investments
    
    
    2,546
    
    
    
    1,540Intangible assets, net
    
    
    16,443
    
    
    
    36,413Goodwill
    
    
    20,526
    
    
    
    30,546Other assets
    
    
    355
    
    
    
    377Total Assets
    
    $
    550,693
    
    
    $
    514,665LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Loans payable, bank
    
    $
    91,449
    
    
    $
    78,139Accounts payable
    
    
    61,753
    
    
    
    31,035Accounts payable with Kolin
    
    
    18,373
    
    
    
    40,528Accrued warranty
    
    
    15,445
    
    
    
    12,492Deferred gross profit on shipments to distributors
    
    
    10,060
    
    
    
    Income taxes payable
    
    
    8,537
    
    
    
    18,460Other current liabilities
    
    
    16,020
    
    
    
    13,903Total Current Liabilities
    
    
    221,637
    
    
    
    194,557Deferred tax liability
    
    
    5,899
    
    
    
    4,592Total Liabilities
    
    
    227,536
    
    
    
    199,149Stockholders Equity:Common stock, $.001 par value; 120,000,000
shares authorized, issued and outstanding
were 93,240,982 at September 30, 2007 and
89,882,414 at June 30, 2007
    
    
    93
    
    
    
    90Additional paid-in capital
    
    
    326,370
    
    
    
    304,929Accumulated other comprehensive income
    
    
    116
    
    
    
    441Retained earnings (accumulated deficit)
    
    
    (3,422
    )
    
    
    10,056Total Stockholders Equity
    
    
    323,157
    
    
    
    315,516Total Liabilities and Stockholders Equity
    
    $
    550,693
    
    
    $
    514,665
  1




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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands except share and per share data)
(unaudited)
 Three Months Ended September 30,2007
    
    
    2006Net sales
    
    $
    150,642
    
    
    $
    87,020Cost of sales
    
    
    130,022
    
    
    
    68,552Gross Profit
    
    
    20,620
    
    
    
    18,468Operating expenses:Selling, distribution, and marketing
    
    
    8,547
    
    
    
    3,131General and administrative
    
    
    12,611
    
    
    
    4,117Research and development
    
    
    1,249
    
    
    
    1,402Impairment
of intangible assets
    
    
    28,284
    
    
    
    Total operating expense
    
    
    50,691
    
    
    
    8,650Operating income (loss)
    
    
    (30,071
    )
    
    
    9,818Other income (expense):Interest expense
    
    
    (1,821
    )
    
    
    (3,297
    )Other income
    
    
    980
    
    
    
    67Total other expense
    
    
    (841
    )
    
    
    (3,230
    )Income (loss) before income taxes:
    
    
    (30,912
    )
    
    
    6,588Income tax (expense) benefit
    
    
    17,434
    
    
    
    (2,194
    )Net income (loss)
    
    $
    (13,478
    )
    
    $
    4,394Income (loss) per common share:Basic
    
    $
    (0.15
    )
    
    $
    0.09Diluted
    
    $
    (0.15
    )
    
    $
    0.08Weighted average number of common shares:Basic
    
    
    91,228
    
    
    
    49,172Diluted
    
    
    91,228
    
    
    
    54,775
  2




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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands except share and per share data)
 (unaudited)
 Three Months EndedSeptember 30,2007
    
    
    2006(restated)Cash Flows from Operating Activities:Net income (loss)
    
    $
    (13,478
    )
    
    $
    4,394Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    1,866
    
    
    
    1,017Provision for inventory losses
    
    
    4,583
    
    
    
    1,249Provision for doubtful accounts
    
    
    64
    
    
    
    309Impairment of intangible assets
    
    
    28,284
    
    
    
    Amortization of debenture discount and offering costs
    
    
    
    
    
    
    642Amortization of convertible preferred stock discount and costs
    
    
    
    
    
    
    1,520Deferred
Taxes
    
    
    (17,434
    )
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (6
    )Gain on sale of investment
    
    
    
    
    
    
    (176
    )Joint
venture (income) loss
    
    
    (6
    )
    
    
    108Stock compensation expense
    
    
    1,533
    
    
    
    481Changes in assets and liabilities:Increase in accounts receivable and due from factor
    
    
    (56,179
    )
    
    
    (26,342
    )Increase in inventories
    
    
    (26,462
    )
    
    
    (28,946
    )Decrease in
inventory deposit with Kolin
    
    
    70,000
    
    
    
    Increase in tooling deposit with Kolin
    
    
    (58,055
    )
    
    
    Decrease in other current assets
    
    
    8,078
    
    
    
    5,307Decrease (increase) in other assets
    
    
    24
    
    
    
    (2
    )Increase in accrued warranty
    
    
    2,953
    
    
    
    1,749Increase in
deferred gross profit on shipments to distributor
    
    
    10,060
    
    
    
    Increase (decrease) in income taxes payable
    
    
    (9,021
    )
    
    
    2,194Increase in accounts payable
    
    
    8,563
    
    
    
    40,856Increase in other accrued liabilities
    
    
    2,117
    
    
    
    (1,089
    )Net cash (used in) provided by operating activities
    
    
    (42,510
    )
    
    
    3,265Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (97
    )
    
    
    (192
    )Sale of
property and equipment
    
    
    
    
    
    
    25Sale of long-term investments
    
    
    
    
    
    
    600Investment in joint venture
    
    
    (1,000
    )
    
    
    (245
    )License purchased
    
    
    
    
    
    
    (5,551
    )Net cash used in investing activities
    
    
    (1,097
    )
    
    
    (5,363
    )Cash Flows from Financing Activities:Proceeds of
stock offerings, net
    
    
    19,904
    
    
    
    Stock issued pursuant to Employee Stock Purchase Plan
    
    
    
    
    
    
    101Proceeds from bank loans
    
    
    104,569
    
    
    
    2,000Repayments of bank loans
    
    
    (91,259
    )
    
    
    Repayments of long-term debt and notes payable
    
    
    
    
    
    
    (2
    )Warrants exercised
    
    
    
    
    
    
    630Stock options exercised
    
    
    6
    
    
    
    260Net cash provided by financing activities
    
    
    33,220
    
    
    
    2,989Effect of exchange rates on cash
    
    
    (325
    )
    
    
    Net (decrease) increase in cash and cash equivalents
    
    
    (10,712
    )
    
    
    891Cash and cash equivalents, beginning of period
    
    
    28,679
    
    
    
    7,375Cash and cash equivalents, end of period
    
    $
    17,967
    
    
    $
    8,266Supplemental Cash Flow Information:Cash paid for interest
    
    $
    3,542
    
    
    $
    791Cash paid for income taxes
    
    $
    9,020
    
    
    $
    Supplemental Schedule of Non-Cash Investing ActivitiesIncrease in deposits with Kolin which were accrued in accounts payable
    
    $
    
    
    
    $
    15,198
 
  3




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SYNTAX-BRILLIAN CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note A  Organization:
    Note B  Basis of Presentation:
   Use
of Estimates
  Significant Accounting Policies
 Revenue Recognition 
  Restatement
  4




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##### Table of Contents



Three Months EndingSeptember 30, 2006PreviouslyReported
    
    RestatedNet income
    
    $
    3,808
    
    
    $
    4,394Adjustments to reconcile net income to net cash used in operating activities:Provision for inventory losses
    
    
    1,393
    
    
    
    1,249Stock compensation expense
    
    
    425
    
    
    
    481Changes in assets and liabilities:Increase in accrued warranty
    
    
    4,441
    
    
    
    1,749
 Note C Recent Accounting Pronouncements:
     Note D  Related Party Transactions:
   5




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##### Table of Contents



Income StatementTotal
    
    
    Cost ofPurchases
    
    
    SalesThree months ended September 30, 2006Purchases
    
    $
    107,206
    
    
    $
    66,813Less vendor allowances
    
    
    (13,785
    )
    
    
    (10,771
    )Less warranty credits
    
    
    (6,592
    )
    
    
    (2,151
    )Less price protection guaranteed minimum
    
    
    (877
    )
    
    
    Net activity, three months ended September 30, 2006
    
    
    85,952
    
    
    
    53,891Non Kolin
purchases
    
    
    12,042
    
    
    
    12,042Total
    
    $
    97,994
    
    
    $
    65,933Three months ended September 30, 2007Purchases
    
    
    162,525
    
    
    
    118,229Less vendor allowances
    
    
    (38,263
    )
    
    
    (36,887
    )Less warranty credits
    
    
    (9,620
    )
    
    
    (6,667
    )Less royalty credit
    
    
    (1,794
    )
    
    
    (1,794
    )Net activity, three months ended September 30, 2007
    
    
    112,848
    
    
    
    73,451Non Kolin
purchases
    
    
    36,761
    
    
    
    36,761Total
    
    $
    149,609
    
    
    $
    110,212
   Number of
    
    TotalModel
    
    Molds
    
    Deposit32 inch
    
    
    19
    
    
    $27.6 million37 inch
    
    
    21
    
    
    $29.8 million42 inch
    
    
    19
    
    
    $29.6 million47 inch
    
    
    12
    
    
    $16.4 million52 inch
    
    
    10
    
    
    $15.6 million65 inch
    
    
    8
    
    
    $13.7 million
  Note E  Accounts Receivable and Due from Factor:
   6




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September 30,
    
    
    June 30,2007
    
    
    2007Due from factor
    
    $
    46,478
    
    
    $
    40,511Accounts receivable not assigned to factor
    
    
    221,538
    
    
    
    171,934Other receivables
    
    
    569
    
    
    
    322Allowance for doubtful accounts
    
    
    (2,355
    )
    
    
    (2,652
    )$
    266,230
    
    
    $
    210,115
  Note F  Inventories:
  September 30,
    
    
    June 30,2007
    
    
    2007Raw materials
    
    $
    27,558
    
    
    $
    10,950Work-in-process
    
    
    421
    
    
    
    158Finished goods
    
    
    28,399
    
    
    
    23,391$
    56,378
    
    
    $
    34,499
  Note G  Investments:
     Note H  Intangible
Assets
  7




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##### Table of Contents



Note I  Loans Payable, Bank:
 Preferred Bank
     Silver Point Finance
     Note J. Income Taxes
   Federal statutory taxes
    
    $
    (10,819
    )State taxes
    
    
    (2,164
    )Permanent differences
    
    
    (1,020
    )Foreign taxes
    
    
    197Goodwill impairment
    
    
    3,869NOL benefit from built in gain
    
    
    (7,642
    )Change in valuation allowance
    
    
    145Total tax benefit
    
    $
    (17,434
    )
    Note K  Income (Loss) per Common Share:
  8




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##### Table of Contents



Three Months EndedSeptember 30,2007
    
    
    2006Basic earnings (loss) per share:Net income (loss)
    
    $
    (13,478
    )
    
    $
    4,394Weighted average common shares
    
    
    91,228
    
    
    
    49,172Basic earnings (loss) per common share
    
    $
    (0.15
    )
    
    $
    0.09Diluted earnings (loss) per share:Net income (loss)
    
    $
    (13,478
    )
    
    $
    4,394Weighted average common shares
    
    
    91,228
    
    
    
    49,172Options and warrants assumed exercised
    
    
    
    
    
    
    1,657Assumed shares issued for convertible debt
    
    
    
    
    
    
    946Assumed shares issued for convertible preferred stock
    
    
    
    
    
    
    3,000Total common shares plus common stock equivalents
    
    
    91,228
    
    
    
    54,775Diluted earnings (loss) per common share
    
    $
    (0.15
    )
    
    $
    0.08
 Note L  Segment Reporting, Sales to Major Customers, and Geographic Information:
   DigitalLCD
    
    LCoS
    
    Camera
    
    TotalThree months ended September 30, 2007Net sales
    
    $
    133,581
    
    
    $
    703
    
    
    $
    16,359
    
    
    $
    150,642Operating income (loss)
    
    $
    8,858
    
    
    $
    (37,665
    )
    
    $
    (1,264
    )
    
    $
    (30,071
    )Depreciation and amortization
    
    $
    737
    
    
    $
    892
    
    
    $
    235
    
    
    $
    1,866Total assets
    
    $
    444,278
    
    
    $
    46,815
    
    
    $
    59,600
    
    
    $
    550,693Three months ended September 30, 2006Net sales
    
    $
    85,694
    
    
    $
    1,326
    
    
    $
    
    
    
    $
    87,020Operating income (loss)
    
    $
    14,053
    
    
    $
    (4,235
    )
    
    $
    
    
    
    $
    9,818Depreciation and amortization
    
    $
    151
    
    
    $
    866
    
    
    $
    
    
    
    $
    1,017Total assets
    
    $
    157,210
    
    
    $
    39,003
    
    
    $
    
    
    
    $
    196,213
   9




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##### Table of Contents



NorthAmerica
    
    Asia
    
    Europe
    
    TotalThree months ended September 30, 2007Net sales
    
    $
    123,778
    
    
    $
    17,427
    
    
    $
    9,437
    
    
    $
    150,642Three months ended September 30, 2006Net sales
    
    $
    38,866
    
    
    $
    48,149
    
    
    $
    5
    
    
    $
    87,020
  Note M  Commitments and Contingencies:
 Legal Matters
      10




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Note N  Shareholders Equity:
 Stock-Based Compensation
     Three Months EndedSeptember 30,2007
    
    2006Expected life (in years)
    
    
    6.0
    
    
    
    5.0Expected volatility
    
    
    77
    %
    
    
    82
    %Risk-free interest rate
    
    
    4.38
    %
    
    
    4.99
    %Dividend yield
    
    
    N/A
    
    
    
    N/A
  11




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WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term
    
    
    Value(in thousands)Outstanding at June 30, 2007
    
    
    4,122,296
    
    
    $
    4.06Granted
    
    
    262,050
    
    
    
    5.03Exercised
    
    
    3,288
    
    
    
    2.14Forfeited and expired
    
    
    157,563
    
    
    
    2.58Outstanding at September 30, 2007
    
    
    4,223,495
    
    
    $
    4.17
    
    
    
    7.9
    
    
    $
    5,767Vested and expected to vest at September 30, 2007
    
    
    4,171,530
    
    
    $
    4.17
    
    
    
    7.8
    
    
    $
    5,696Exercisable at September 30, 2007
    
    
    3,184,190
    
    
    $
    4.32
    
    
    
    7.6
    
    
    $
    4,042
   Warrants
  Shares of
    
    PerCommon
    
    ShareExpiration
    
    Stock Issuable
    
    ExerciseWarrants Relating to Issuance of:
    
    Date
    
    Under Warrants
    
    PriceApril 2005 7% Convertible Debentures
    
    
    10/10/2010
    
    
    
    25,988
    
    
    $
    1.57July 2005 4% Convertible Debentures
    
    
    01/08/2011
    
    
    
    225,000
    
    
    $
    2.63July 2005 9% Secured Debentures
    
    
    01/08/2011
    
    
    
    76,656
    
    
    $
    2.63December 2005 Convertible Preferred Stock
    
    
    06/27/2011
    
    
    
    1,482,500
    
    
    $
    5.00March 2006 Common Stock
    
    
    09/26/2010
    
    
    
    750,000
    
    
    $
    5.00December 2006 Common Stock
    
    
    05/31/2010
    
    
    
    64,683
    
    
    $
    9.28March 2007 Common Stock
    
    
    09/24/2010
    
    
    
    211,817
    
    
    $
    8.78Total Warrants Outstanding
    
    
    
    
    
    
    2,836,644
 Note O  Subsequent
Events:
   12




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Results of Operations
  Three Months EndedSeptember 30,2007
    
    2006Net revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    86.3
    %
    
    
    78.8
    %Gross margin
    
    
    13.7
    %
    
    
    21.2
    %Operating Expenses:Selling, distribution and marketing
    
    
    5.7
    %
    
    
    3.6
    %General and administrative
    
    
    8.4
    %
    
    
    4.7
    %Research and development
    
    
    0.8
    %
    
    
    1.6
    %Impairment
of intangible assets
    
    
    18.8
    %
    
    
    0.0
    %Operating income
    
    
    (20.0
    )%
    
    
    11.3
    %Other expense, net
    
    
    (0.5
    )%
    
    
    (3.7
    )%Income (loss) before income taxes
    
    
    (20.5
    )%
    
    
    7.6
    %Income tax (expense) benefit
    
    
    11.6
    %
    
    
    (2.5
    )%Net income
(loss)
    
    
    (8.9
    )%
    
    
    5.1
    %
 Three months ended September 30, 2007 compared with three months ended September 30, 2006
 Net Sales.
      13




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##### Table of Contents



Cost of Sales.
      Selling, Distribution, and Marketing Expense.
 General and Administrative Expense.
 Impairment
of Intangible Assets.
 Research and Development Expense.
 14




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##### Table of Contents



Interest Expense .
 Income Tax
  Net Income
(Loss).
 Liquidity and Capital Resources
       15




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##### Table of Contents



Preferred Bank
     CIT Group/Commercial Services
  Silver Point Finance
   16




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##### Table of Contents



September 30,
    
    
    June 30,2007
    
    
    2006Preferred Bank revolving credit facility
    
    $
    64,700
    
    
    $
    49,276Preferred Bank $17.8 million promissory note
    
    
    17,800
    
    
    
    17,800CIT $15 million credit facility
    
    
    8,949
    
    
    
    11,063Total
    
    $
    91,449
    
    
    $
    78,139
 Aggregate Contractual Obligations and Commercial Commitments
  Less than 1
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsLoans payable  bank
    
    $
    91,449
    
    
    $
    91,449
    
    
    
    
    
    
    
    
    
    
    
    Advertising commitments
    
    
    39,651
    
    
    
    19,751
    
    
    $
    19,900
    
    
    
    
    
    
    
    Purchase orders
    
    
    86,805
    
    
    
    86,805
    
    
    
    
    
    
    
    
    
    
    
    Facilities leases
    
    
    15,858
    
    
    
    3,898
    
    
    
    9,596
    
    
    $
    2,026
    
    
    $
    338Investment Commitments
    
    
    2,546
    
    
    
    2,546
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    236,309
    
    
    $
    204,449
    
    
    $
    29,496
    
    
    $
    2,026
    
    
    $
    338
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
  Revenue Recognition 
  Deferred Taxes and Uncertain Tax Position 
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109
        Impact of Recently Issued Standards
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  17




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Interest Rate Risk
  Foreign Currency Risk
  Credit Risk
  Equity Price Risk
  Cautionary Factors That May Affect Future Results
    18




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ITEM 4. CONTROLS AND PROCEDURES
    
    
    Inventory Process  Controls over physical inventory receiving, counting and movement
as well as inventory cut-off, and valuation were inadequate.
    
    Revenue Process  Controls over the revenue recognition cut-off were inadequate. Our
revenue cut-off procedures at June 30, 2007 improperly reversed product in transit that
should have been recorded as sales in the appropriate accounting period.
    
    Income Tax Provision Process  Controls over the review and preparation of our income
tax provision were inadequate. Our provision improperly understated our income taxes
payable balance by a material amount.
    
    Financial Statement Close Procedures  Our independent registered public accounting
firm identified a number of adjustments which were in addition to those relating to the
material weaknesses identified above. This has caused us to conclude that controls
related to our analysis, evaluation, and review of our 2007 financial information which
gave rise to the adjustments has resulted in a material weakness. The specific control
deficiencies consisted of the following:
 
    
    The review and analysis of the subjective areas of reserves and allowances has
insufficient controls over certain subjective estimates in evaluating the propriety of
the related ending balances. The review control did not call for a critical evaluation
of the inputs that should be used in the estimation process to evaluate the propriety of
the period ending balances which weakness resulted in material reductions to the related
allowance for doubtful accounts and warranty reserve in our 2007 financial statements.
    
    An inappropriate level of review of certain significant financial statement accounts
and financial statement disclosures in non-subjective areas to verify the propriety of
the recorded and reported amounts; insufficient analysis, documentation, review, and
oversight of the financial statements of foreign subsidiary financial information during
consolidation; and
    
    Insufficient staffing of the accounting and financial reporting function.
  Changes
in Internal Control Over Financial Reporting
    19




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
      
 ITEM 1A. RISK FACTORS
  20




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Exhibit31.1
    
    Rule 13a14 (a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a14 (a)/15d14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 21




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##### Table of Contents



SIGNATURES
   Date: November 14, 2007
    By:
    /s/ John S. HodgsonJohn S. HodgsonExecutive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer and Principal Accounting Officer) 22




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit31.1
    
    Rule 13a14 (a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a14 (a)/15d14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 23