##### Table of Contents



UNITED
STATESSECURITIES 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 December 31, 2006
 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
 (Registrants telephone number, including area code)
 þ o
  o þ o
 o þ
  CLASS
    
    OUTSTANDING AS OF FEBRUARY 9, 2007Common
    
    
    59,983,792Par value $.001 per share




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##### 



SYNTAX-BRILLIAN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
 FOR THE QUARTER ENDED
DECEMBER 31, 2006
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS:Condensed Consolidated Balance Sheets -
December 31, 2006 (unaudited) and June 30, 2006
    
    
    1Condensed Consolidated Statements of Operations (unaudited) -
Three and Six Months Ended December 31, 2006 and 2005
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended December 31, 2006 and 2005
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    24ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    33ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    33PART II  OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    34ITEM 1A.
    
    RISK FACTORS
    
    
    34ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    34ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    34ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    34ITEM 5.
    
    OTHER INFORMATION
    
    
    34ITEM 6.
    
    EXHIBITS
    
    
    35SIGNATURES
    
    
    36EX-10.53EX-10.54EX-10.55EX-10.56EX-10.57EX-10.58EX-10.59EX-10.60EX-10.61EX-10.62EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    June 30,2006
    
    
    2006(unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    23,233
    
    
    $
    7,375Accounts receivable and due from factor, net
    
    
    207,189
    
    
    
    50,829Inventories, net
    
    
    60,295
    
    
    
    13,151Deposit with Kolin (a related party)
    
    
    26,253
    
    
    
    5,067Deferred tax asset
    
    
    2,666
    
    
    
    2,666Other current assets
    
    
    4,833
    
    
    
    1,370Total current assets
    
    
    324,469
    
    
    
    80,458Fixed assets, net
    
    
    15,841
    
    
    
    16,703Long-term investments
    
    
    980
    
    
    
    1,307Intangible assets, net
    
    
    38,090
    
    
    
    20,737Goodwill
    
    
    16,278
    
    
    
    6,990Other assets
    
    
    676
    
    
    
    1,461Total Assets
    
    $
    396,334
    
    
    $
    127,656LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Loan payable, bank
    
    $
    83,835
    
    
    $
    30,800Notes payable
    
    
    
    
    
    
    650Accounts payable
    
    
    138,287
    
    
    
    3,924Accrued rebates payable
    
    
    97
    
    
    
    4,043Deferred warranty revenue
    
    
    16,139
    
    
    
    4,551Income taxes payable
    
    
    2,296
    
    
    
    96Other current liabilities
    
    
    16,083
    
    
    
    5,540Current
portion of redeemable convertible preferred stock (net of $3,483 and
$0
discount)
    
    
    6,150
    
    
    
    3,432Total Current Liabilities
    
    
    262,887
    
    
    
    53,036Long-term debt (net of $0 and $2,635 discount)
    
    
    31
    
    
    
    3,758Redeemable, convertible preferred stock (net of $6,780 discount)
    
    
    
    
    
    
    3,432Deferred income taxes
    
    
    2,628
    
    
    
    2,628Stockholders Equity:Common stock, $.001 par value; 120,000,000 shares
authorized, 58,740,057 and 48,485,912 shares issued and
outstanding at December 31, 2006 and June 30, 2006,
respectively
    
    
    59
    
    
    
    49Additional paid-in capital
    
    
    134,540
    
    
    
    84,489Accumulated deficit
    
    
    (3,811
    )
    
    
    (19,736
    )Total stockholders equity
    
    
    130,788
    
    
    
    64,802Total Liabilities and Stockholders Equity
    
    $
    396,334
    
    
    $
    127,656
  1




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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months
    
    
    Six MonthsEnded December 31,
    
    
    Ended December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    242,458
    
    
    $
    60,155
    
    
    $
    329,496
    
    
    $
    87,512Cost of sales
    
    
    204,698
    
    
    
    53,321
    
    
    
    275,953
    
    
    
    75,05937,760
    
    
    
    6,834
    
    
    
    53,543
    
    
    
    12,453Operating expenses:Selling, distribution, and marketing
    
    
    5,853
    
    
    
    1,988
    
    
    
    8,984
    
    
    
    2,926General and administrative
    
    
    7,865
    
    
    
    4,460
    
    
    
    12,056
    
    
    
    9,586Research and development
    
    
    1,950
    
    
    
    627
    
    
    
    3,351
    
    
    
    627Total operating expense
    
    
    15,668
    
    
    
    7,075
    
    
    
    24,391
    
    
    
    13,139Operating income (loss)
    
    
    22,092
    
    
    
    (241
    )
    
    
    29,152
    
    
    
    (686
    )Interest expense
    
    
    (7,389
    )
    
    
    (991
    )
    
    
    (10,686
    )
    
    
    (1,283
    )Interest income and other income (expense)
    
    
    92
    
    
    
    
    
    
    
    (17
    )
    
    
    Gain on sale of DigiMedia investment
    
    
    
    
    
    
    
    
    
    
    176
    
    
    
    Total non-operating expense
    
    
    (7,297
    )
    
    
    (991
    )
    
    
    (10,527
    )
    
    
    (1,283
    )Net income (loss) before income taxes
    
    
    14,795
    
    
    
    (1,232
    )
    
    
    18,625
    
    
    
    (1,969
    )Income tax expense
    
    
    (2,700
    )
    
    
    (79
    )
    
    
    (2,700
    )
    
    
    Net income (loss)
    
    $
    12,095
    
    
    $
    (1,311
    )
    
    $
    15,925
    
    
    $
    (1,969
    )Net income (loss) per common share:Basic
    
    $
    0.22
    
    
    $
    (0.04
    )
    
    $
    0.31
    
    
    $
    (0.06
    )Diluted
    
    $
    0.21
    
    
    $
    (0.04
    )
    
    $
    0.29
    
    
    $
    (0.06
    )Weighted average number of common shares:Basic
    
    
    53,892
    
    
    
    37,219
    
    
    
    51,532
    
    
    
    35,529Diluted
    
    
    59,270
    
    
    
    37,219
    
    
    
    56,306
    
    
    
    35,529
  2




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SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Six Months EndedDecember 31,2006
    
    
    2005Operating Activities:Net income (loss)
    
    $
    15,925
    
    
    $
    (1,969
    )Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    2,590
    
    
    
    485Provision for inventory reserves
    
    
    2,716
    
    
    
    6,614Provision for doubtful accounts
    
    
    1,452
    
    
    
    54Amortization of debenture discount and offering costs
    
    
    3,016
    
    
    
    521Amortization of convertible preferred stock discount and costs
    
    
    5,222
    
    
    
    Stock compensation expense
    
    
    1,996
    
    
    
    3,670Stock issued to pay interest
    
    
    
    
    
    
    175Gain on sale of assets
    
    
    (6
    )
    
    
    Gain on sale of investment
    
    
    (176
    )
    
    
    Joint venture loss
    
    
    148
    
    
    
    Income tax
expense recorded as a reduction of goodwill
    
    
    500
    
    
    
    Changes in assets and liabilities:Increase in accounts receivable and due from factor
    
    
    (126,223
    )
    
    
    (27,150
    )(Increase) in inventories
    
    
    (27,753
    )
    
    
    (16,024
    )Decrease in other current assets
    
    
    4,296
    
    
    
    688(Increase) in other assets
    
    
    (94
    )
    
    
    (1,642
    )Increase (decrease) in accrued rebates payable
    
    
    (3,946
    )
    
    
    5,715Increase in deferred warranty revenue
    
    
    11,588
    
    
    
    1,650Increase
(decrease) in income taxes payable
    
    
    2,200
    
    
    
    (1,414
    )Increase in accounts payable
    
    
    53,304
    
    
    
    11,521Increase in other accrued liabilities
    
    
    6,730
    
    
    
    143Net cash provided by (used in) operating activities
    
    
    (46,515
    )
    
    
    (18,339
    )Investing Activities:Fixed assets purchased
    
    
    (655
    )
    
    
    (456
    )Fixed assets sold
    
    
    25
    
    
    
    Long-term investments sold
    
    
    600
    
    
    
    Long-term investments purchased
    
    
    (245
    )
    
    
    License purchased
    
    
    (5,551
    )
    
    
    Net cash used in investing activities
    
    
    (5,826
    )
    
    
    (456
    )Financing Activities:Proceeds from issuance of common stock
    
    
    10,000
    
    
    
    2,528Proceeds of redeemable convertible preferred stock offering
    
    
    
    
    
    
    13,893Stock issued pursuant to Employee Stock Purchase Plan
    
    
    205
    
    
    
    Net proceeds from bank loan payable
    
    
    53,035
    
    
    
    8,744Proceeds of long-term debt and notes payable
    
    
    
    
    
    
    850Repayment of long-term debt and notes payable
    
    
    (4,728
    )
    
    
    (11
    )Cash
acquired from purchase acquisitions
    
    
    6,024
    
    
    
    1,035Proceeds
from warrants exercised
    
    
    3,004
    
    
    
    69Proceeds
from stock options exercised
    
    
    659
    
    
    
    23Net cash provided by financing activities
    
    
    68,199
    
    
    
    27,131Net increase in cash and cash equivalents
    
    
    15,858
    
    
    
    8,336Cash and cash equivalents, beginning of period
    
    
    7,375
    
    
    
    1,804Cash and cash equivalents, end of period
    
    $
    23,233
    
    
    $
    10,140Supplemental Cash Flow Information:Cash paid for interest
    
    $
    1,746
    
    
    $
    21Cash paid for income taxes
    
    $
    
    
    
    $
    Supplemental Schedule of Non-cash Investing ActivitiesIncrease in deposits with Kolin and its related accounts payable
    
    $
    26,253
    
    
    $
    
  3




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SYNTAX-BRILLIAN CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     Note A
 Basis of Presentation
  4




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Use of Estimates.
 Fair Value of Financial Instruments
 Reclassification
 Cash and Cash Equivalents
 Accounts Receivable / Due from Factor
 Inventories
 Vendor Allowances
 Fixed Assets
 5




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##### Table of Contents



EstimatedUseful LifeMachinery and equipment
    
    3  5 yearsOffice furniture and fixtures
    
    5 yearsBuilding improvements
    
    4 - 5 years
  Capitalized Software Costs
 Goodwill and Intangibles
 Investments
 Impairment of Long-Lived Assets
 Deferred Income Taxes
 Warranties
 Stock-Based Compensation
 Revenue Recognition
 6




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Shipping and Handling Costs
 Advertising Costs
 Segment Reporting
 Recent Accounting Pronouncements
   7




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Note B
   8




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Income Statement
    
    
    Balance SheetIncrease toIncrease
    
    
    Deferred(Decrease) to
    
    
    WarrantyTotal Purchases
    
    
    Cost of Sales
    
    
    Inventory
    
    
    RevenueSix months ended December 31, 2005Purchases
    
    $
    116,725
    
    
    $
    85,341
    
    
    $
    31,384
    
    
    $
    Rebates, based on percentage of
purchases:Market development
    
    
    (3,451
    )
    
    
    (2,696
    )
    
    
    (755
    )
    
    
    Technical development
    
    
    (4,142
    )
    
    
    (3,235
    )
    
    
    (907
    )
    
    
    Volume incentive
    
    
    (3,797
    )
    
    
    (2,966
    )
    
    
    (831
    )
    
    
    Excess warranty expense
reimbursements
    
    
    (3,538
    )
    
    
    (1,888
    )
    
    
    
    
    
    
    (1,650
    )Price protection
    
    
    (29,239
    )
    
    
    (29,239
    )
    
    
    
    
    
    
    Price protection guaranteed minimum
    
    
    (4,931
    )
    
    
    
    
    
    
    (4,931
    )
    
    
    Net activity, six months ended
December 31, 2005
    
    
    67,627
    
    
    
    45,317
    
    
    
    23,960
    
    
    
    (1,650
    )Prior period purchases charged to
cost of sales
    
    
    17,203
    
    
    
    17,203
    
    
    
    
    
    
    
    Six Month Totals
    
    $
    84,830
    
    
    
    62,520
    
    
    $
    23,960
    
    
    $
    (1,650
    )
 9




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##### Table of Contents



Income Statement
    
    
    Balance SheetIncrease toIncrease
    
    
    Deferred(Decrease) to
    
    
    WarrantyTotal Purchases
    
    
    Cost of Sales
    
    
    Inventory
    
    
    RevenueSix months ended December 31, 2006Purchases
    
    $
    319,150
    
    
    $
    284,463
    
    
    $
    34,687
    
    
    $
    Rebates, based on percentage of
purchases:Market development
    
    
    (5,812
    )
    
    
    (5,268
    )
    
    
    (544
    )
    
    
    Technical development
    
    
    (6,975
    )
    
    
    (6,321
    )
    
    
    (654
    )
    
    
    Volume incentive
    
    
    (6,393
    )
    
    
    (5,794
    )
    
    
    (599
    )
    
    
    Excess warranty expense
reimbursements
    
    
    (12,865
    )
    
    
    (1,277
    )
    
    
    
    
    
    
    (11,588
    )Price protection
    
    
    (24,700
    )
    
    
    (24,700
    )
    
    
    
    
    
    
    Price protection guaranteed
minimum
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net activity, six months ended
December 31, 2006
    
    
    262,405
    
    
    
    241,103
    
    
    
    32,890
    
    
    
    (11,588
    )Prior period purchases charged to
cost of sales
    
    
    12,042
    
    
    
    12,042
    
    
    
    
    
    
    
    Six Month Totals
    
    $
    274,447
    
    
    $
    253,145
    
    
    $
    32,890
    
    
    $
    (11,588
    )
 Note C
    December 31,
    
    
    June 30,2006
    
    
    2006Due from factor, net
    
    $
    42,160
    
    
    $
    17,049Accounts receivable not assigned to
factor, net
    
    
    171,305
    
    
    
    34,097Other receivables
    
    
    114
    
    
    
    77Allowance for doubtful accounts
    
    
    (2,513
    )
    
    
    (394
    )Total accounts receivable and due
from factor
    
    $
    211,066
    
    
    $
    50,829
  Note D
 December 31,
    
    
    June 30,2006
    
    
    2006Raw materials
    
    $
    7,035
    
    
    $
    2,468Work-in-process
    
    
    7
    
    
    
    425Finished goods
    
    
    50,104
    
    
    
    10,258Total inventories
    
    $
    57,146
    
    
    $
    13,151
 10




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Note E
   Note F
 December 31,
    
    
    June 30,2006
    
    
    2006Leasehold and building improvements
    
    $
    1,170
    
    
    $
    1,163Machinery and equipment
    
    
    16,609
    
    
    
    11,068Software
    
    
    348
    
    
    
    348Furniture and fixtures
    
    
    528
    
    
    
    292Equipment not yet placed in service
    
    
    843
    
    
    
    5,810Total fixed assets
    
    
    19,498
    
    
    
    18,681Less accumulated depreciation
    
    
    (3,657
    )
    
    
    (1,978
    )Total net fixed assets
    
    $
    15,841
    
    
    $
    16,703
 Note G
    11




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Note H
    Three Months Ended
    
    Six Months EndedDecember 31, 2005
    
    December 31, 2005Revenue
    
    $
    59,510
    
    
    $
    87,526Net loss
    
    $
    (8,474
    )
    
    $
    (18,070
    )Net loss per share
    
    $
    (0.23
    )
    
    $
    (0.57
    )
  Fair value of Brillian stock
    
    $
    29,302Merger related costs
    
    
    4,709Total purchase price
    
    $
    34,011Cash
    
    $
    1,035Accounts receivable
    
    
    277Inventories
    
    
    4,472Other current assets
    
    
    579Property, plant and equipment
    
    
    10,805Intangible assets
    
    
    21,470Other assets
    
    
    921Total assets acquired
    
    $
    39,559Less liabilities assumed
    
    
    (12,538
    )Fair value of net assets acquired
    
    $
    27,021Goodwill
    
    
    6,990Total purchase price
    
    $
    34,011
 12




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##### Table of Contents



Three Months Ended December 31,
    
    Six Months Ended December 31,2006
    
    2005
    
    2006
    
    2005Revenue
    
    $
    269,585
    
    
    $
    110,188
    
    
    $
    388.884
    
    
    $
    166,791Net profit (loss)
    
    $
    12,714
    
    
    $
    1,452
    
    
    $
    19,739
    
    
    $
    (5,179
    )Net profit (loss) per share
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.32
    
    
    $
    (0.13
    )
  Fair value
of stock issued to acquire Vivitar
    
    $
    26,000Acquisition related costs
    
    
    160Total purchase price
    
    $
    26,160Cash
    
    $
    6,024Accounts receivable
    
    
    31,589Inventories
    
    
    22,107Other current assets
    
    
    2,692Property, plant and equipment
    
    
    186Intangible assets
    
    
    12,708Other assets
    
    
    70Total assets acquired
    
    $
    75,376Less liabilities assumed
    
    
    (59,004
    )Fair value of net assets acquired
    
    $
    16,372Goodwill
    
    
    9,788Total purchase price
    
    $
    26,160
   December 31,
    
    
    June 30,
    
    
    Amortizable2006
    
    

2006
    
    
    LifeLCoS trademark and trade names
    
    $
    1,208
    
    
    $
    1,208
    
    
    7.5 yearsBrillian trademark and trade name
    
    
    148
    
    
    
    148
    
    
    4.0 yearsTechnology license
    
    
    5,551
    
    
    
    
    
    
    5.0 yearsVivitar trade name
    
    
    11,095
    
    
    
    
    
    
    15.0 yearsVivitar customer list
    
    
    1,613
    
    
    
    
    
    
    15.0 yearsPatented technology
    
    
    20,114
    
    
    
    20,114
    
    
    19.0 yearsTotal intangible assets
    
    $
    39,729
    
    
    $
    21,470Less accumulated amortization
    
    
    (1,639
    )
    
    
    (733
    )Total net intangible assets
    
    $
    38,090
    
    
    $
    20,737
 13




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##### Table of Contents



EstimatedannualamortizationFiscal Year
    
    expense2007
    
    $
    1,6782008
    
    
    3,2162009
    
    
    3,2162010
    
    
    3,1942011
    
    
    3,178Thereafter
    
    
    23,608Total
    
    $
    38,090
 Note I
        14




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December 31,
    
    
    June 30,2006
    
    
    2006Preferred Bank $55.0 million promissory
note
    
    $
    50,800
    
    
    $
    Preferred Bank $10.0 million promissory
note
    
    
    10,000
    
    
    
    Preferred Bank $2.0 million promissory
note
    
    
    2,000
    
    
    
    CIT $15.0 million credit facility
    
    
    14,992
    
    
    
    DBS Bank Ltd. $20.0 million credit
facility
    
    
    6,043
    
    
    
    Previous
Preferred Bank credit facility
    
    
    
    
    
    
    30,800Total
    
    $
    83,835
    
    
    $
    30,800
 Note J
  15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Basic earnings (loss) per share:Net Income (loss)
    
    $
    12,095
    
    
    $
    (1,311
    )
    
    $
    15,925
    
    
    $
    (1,969
    )Weighted average common shares
    
    
    53,892
    
    
    
    37,219
    
    
    
    51,532
    
    
    
    35,529Basic earnings (loss) per share
    
    $
    0.22
    
    
    $
    (0.04
    )
    
    $
    0.31
    
    
    $
    (0.06
    )Diluted earnings (loss) per share:Net Income (loss)
    
    $
    12,095
    
    
    $
    (1,311
    )
    
    $
    15,925
    
    
    $
    (1,969
    )Add back:Dividends on convertible preferred
stock
    
    
    170
    
    
    
    
    
    
    
    395
    
    
    
    Adjusted net income (loss)
    
    $
    12,265
    
    
    $
    (1,311
    )
    
    $
    16,320
    
    
    $
    Weighted average common shares
    
    
    53,892
    
    
    
    37,219
    
    
    
    51,532
    
    
    
    35,529Options and warrants assumed exercised
    
    
    3,111
    
    
    
    
    
    
    
    2,140
    
    
    
    Assumed shares issued for convertible
preferred stock
    
    
    2,267
    
    
    
    
    
    
    
    2,634
    
    
    
    Total common shares plus common stock
equivalents
    
    
    59,270
    
    
    
    37,219
    
    
    
    56,306
    
    
    
    35,529Diluted earnings (loss) per share:
    
    $
    0.21
    
    
    $
    (0.04
    )
    
    $
    0.29
    
    
    $
    (0.06
    )
 Note K
    16




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##### Table of Contents



DigitalLCD
    
    LCoS
    
    Camera
    
    TotalThree months ended
December 31, 2006Net sales
    
    $
    227,196
    
    
    $
    1,870
    
    
    $
    13,392
    
    
    $
    242,458Operating income (loss)
    
    $
    28,959
    
    
    $
    (6,603
    )
    
    $
    (264
    )
    
    $
    22,092Depreciation and amortization
    
    $
    678
    
    
    $
    892
    
    
    $
    5
    
    
    $
    1,575Total assets
    
    $
    281,770
    
    
    $
    69,073
    
    
    $
    46,719
    
    
    $
    397,562Three months ended
December 31, 2005Net sales
    
    $
    59,861
    
    
    $
    294
    
    
    $
    
    
    
    $
    60,155Operating income (loss)
    
    $
    2,535
    
    
    $
    (2,776
    )
    
    $
    
    
    
    $
    (241
    )Depreciation and amortization
    
    $
    107
    
    
    $
    289
    
    
    $
    
    
    
    $
    396Total assets
    
    $
    72,738
    
    
    $
    53,712
    
    
    $
    
    
    
    $
    126,450Six months ended
December 31, 2006Net sales
    
    $
    312,890
    
    
    $
    3,214
    
    
    $
    13,392
    
    
    $
    329,496Operating income (loss)
    
    $
    40,231
    
    
    $
    (10,815
    )
    
    $
    (264
    )
    
    $
    29,152Depreciation and amortization
    
    $
    830
    
    
    $
    1,759
    
    
    $
    5
    
    
    $
    2,594Total assets
    
    $
    281,770
    
    
    $
    69,073
    
    
    $
    46,719
    
    
    $
    397,562Six months ended
December 31, 2005Net sales
    
    $
    87,218
    
    
    $
    294
    
    
    $
    
    
    
    $
    87,512Operating income (loss)
    
    $
    2,090
    
    
    $
    (2,776
    )
    
    $
    
    
    
    $
    (686
    )Depreciation and amortization
    
    $
    213
    
    
    $
    289
    
    
    $
    
    
    
    $
    502Total assets
    
    $
    72,738
    
    
    $
    53,712
    
    
    $
    
    
    
    $
    126,450
     17




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##### Table of Contents



NorthAmerica
    
    Asia
    
    Europe
    
    TotalThree months ended
December 31, 2006Net sales
    
    $
    101,382
    
    
    $
    134,161
    
    
    $
    6,915
    
    
    $
    242,458Three months ended
December 31, 2005Net sales
    
    $
    52,659
    
    
    $
    7,460
    
    
    $
    36
    
    
    $
    60,155Six months ended
December 31, 2006Net sales
    
    $
    140,276
    
    
    $
    182,253
    
    
    $
    6,967
    
    
    $
    329,496Six months ended
December 31, 2005Net sales
    
    $
    76,400
    
    
    $
    11,076
    
    
    $
    36
    
    
    $
    87,512
 Note L
       18




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##### Table of Contents



Years Ending June 30,
    
    Minimum Lease Payments2007
    
    $
    9632008
    
    
    1,8952009
    
    
    1,2732010
    
    
    5272011 and beyond
    
    
    Total lease commitments
    
    $
    4,658
 Note M
     19




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##### Table of Contents



Three Months Ended
    
    Six Months EndedDecember 31,
    
    December 31,2006
    
    2005
    
    2006
    
    2005Expected life (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5Expected volatility
    
    
    80
    %
    
    
    129
    %
    
    
    82
    %
    
    
    123
    %Risk-free interest rate
    
    
    4.55
    %
    
    
    3.85
    %
    
    
    4.93
    %
    
    
    3.85
    %Dividend yield
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
   Options OutstandingWeightedAverageNumber of
    
    
    Exercise PriceShares
    
    
    Per ShareOutstanding at June 30, 2006
    
    
    3,047,733
    
    
    $
    4.17Granted
    
    
    1,377,400
    
    
    $
    3.07Exercised
    
    
    (327,825
    )
    
    $
    2.01Forfeited and expired
    
    
    (64,981
    )
    
    $
    7.24Outstanding at December 31, 2006
    
    
    4,032,327
    
    
    $
    3.92Exercisable at December 31, 2006
    
    
    2,420,368
    
    
    $
    4.53
 Note N
 2003 Employee Stock Purchase Plan
  OfferingPeriod
    
    Start Date
    
    End Date
    
    Offering Price
    
    Shares issued
    
    Date Issued1st
    
    
    9/16/2003
    
    
    
    12/31/2003
    
    
    $
    7.14
    
    
    
    13,502
    
    
    
    1/2/20042nd
    
    
    1/1/2004
    
    
    
    6/30/2004
    
    
    $
    6.83
    
    
    
    21,389
    
    
    
    7/1/20043rd
    
    
    7/1/2004
    
    
    
    12/31/2004
    
    
    $
    2.93
    
    
    
    43,903
    
    
    
    1/3/20054th
    
    
    1/1/2005
    
    
    
    6/30/2005
    
    
    $
    2.24
    
    
    
    36,329
    
    
    
    7/1/20055th
    
    
    7/1/2005
    
    
    
    12/31/2005
    
    
    $
    2.13
    
    
    
    39,928
    
    
    
    1/3/20066th
    
    
    1/1/2006
    
    
    
    6/30/2006
    
    
    $
    2.04
    
    
    
    49,538
    
    
    
    7/3/20067th
    
    
    7/1/2006
    
    
    
    12/31/2006
    
    
    $
    2.04
    
    
    
    51,254
    
    
    
    12/29/2006
 20




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##### Table of Contents



4 01(k) Profit Sharing Plan
  Note O
  December 31,
    
    
    June 30,2006
    
    
    2006April 2005 7% Convertible Debentures
maturing April 20, 2008, convertible at
$1.57 per share
    
    $
    
    
    
    $
    985April 2005 9% Senior Secured Debentures
maturing April 20, 2008, secured by a
lien on certain assets
    
    
    
    
    
    
    2,000July 2005 4% Convertible Debentures
maturing July 12, 2008, convertible at
$2.63 per share
    
    
    
    
    
    
    1,300July 2005 9% Senior Secured Debentures
maturing July 12, 2008, secured by a lien
on certain assets
    
    
    
    
    
    
    2,075Other long-term debt
    
    
    31
    
    
    
    33Total long-term debt
    
    
    31
    
    
    
    6,393Less:Discount and beneficial conversion
feature on convertible debentures
    
    
    
    
    
    
    (1,763
    )Discount on secured
debentures
    
    
    
    
    
    
    (872
    )Total net long-term debt
    
    $
    31
    
    
    $
    3,758
  Note P
     21




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Note Q
   22




---



##### Table of Contents



Note R
  Shares of Common
    
    Per ShareExpiration
    
    Stock Issuable
    
    ExerciseWarrants relating to issuance of:
    
    Date
    
    Under Warrants
    
    PriceApr. 2005 7% Convertible Debentures
    
    
    10/10/2010
    
    
    
    299,043
    
    
    $
    1.57Jul. 2005 4% Convertible Debentures
    
    
    01/08/2011
    
    
    
    427,758
    
    
    $
    2.63Jul. 2005 9% Secured Debentures
    
    
    01/08/2011
    
    
    
    45,000
    
    
    $
    2.63Dec. 2005 Convertible Preferred
Stock
    
    
    06/27/2011
    
    
    
    1,533,000
    
    
    $
    5.00Jan. 2006 Convertible Preferred
Stock
    
    
    07/02/2011
    
    
    
    100,000
    
    
    $
    5.00Mar. 2006 Common Stock
    
    
    09/26/2010
    
    
    
    750,000
    
    
    $
    5.00Dec. 2006 Common Stock
    
    
    12/01/2011
    
    
    
    64,683
    
    
    $
    9.28Total Warrants Outstanding:
    
    
    
    
    
    
    3,219,484
 Note S
  Note T :
    23




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Overview
     Net Sales
 Cost of Sales.
 Selling, Distribution, and Marketing Expense.
 24




---



##### Table of Contents



General and Administrative Expense.
 Research and Development Expense.
 Results of Operations
 Three months ended December 31, 2006 compared with three months ended December 31, 2005
 Net
Sales.
     Cost of Sales.
   25




---



##### Table of Contents



Selling, Distribution, and Marketing Expense.
 General and Administrative Expense.
 Research and Development Expense.
 26




---



##### Table of Contents



Interest Expense .
 Net Income (Loss).
 Income Tax
  Six months ended December 31, 2006 compared with six months ended December 31, 2005
 Net Sales.
     Cost of Sales.
  27




---



##### Table of Contents



Selling, Distribution, and Marketing Expense.
 General and Administrative Expense.
 Research and Development Expense.
 Interest Expense .
 28




---



##### Table of Contents



Net Income (Loss).
 Income Tax
  Liquidity and Capital Resources
       29




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30




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##### Table of Contents



December 31,
    
    
    June 30,2006
    
    
    2006Preferred Bank $55.0 million promissory
note
    
    $
    50,800
    
    
    $
    Preferred Bank $10.0 million promissory
note
    
    
    10,000
    
    
    
    Preferred Bank $2.0 million promissory
note
    
    
    2,000
    
    
    
    CIT $15.0million credit facility
    
    
      14,992
    
    
    
    DBS Bank Ltd $20.0 million credit
facility
    
    
    6,043
    
    
    
    Previous
Preferred Bank credit facility
    
    
      
    
    
    
    30,800Total
    
    $
    83,835
    
    
    $
    30,800
 Aggregate
Contractual Obligations and Commercial Commitments
  Less Than 1
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsLong-term debt
    
    $
    31
    
    
    $
    31
    
    
    $
    
    
    
    $
    
    
    
    $
    Loans payable  bank
    
    
    83,835
    
    
    
    83,835
    
    
    
    
    
    
    
    
    
    
    
    Redeemable convertible
preferred stock
redemptions
    
    
    9,633
    
    
    
    9,633
    
    
    
    
    
    
    
    
    
    
    
    Redeemable convertible
preferred stock
dividends
    
    
    313
    
    
    
    313
    
    
    
    
    
    
    
    
    
    
    
    Facilities leases
    
    
    4,658
    
    
    
    1,922
    
    
    
    2,628
    
    
    
    108
    
    
    
    Purchase orders
    
    
    146,108
    
    
    
    146,108
    
    
    
    
    
    
    
    
    
    
    
    Advertising commitments
    
    
    6,246
    
    
    
    6,246
    
    
    
    
    
    
    
    
    
    
    
    Investment commitments
    
    
    1,600
    
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    
 Off Balance Sheet Arrangements
  Impact of Recently Issued Standards
   31




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##### Table of Contents



32




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Risk
  Credit Risk
  Equity Price Risk
  
 ITEM 4. CONTROLS AND PROCEDURES
  33




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
    
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Nominees
    
    
    Votes
in Favor
    

Votes
WithheldVincent
F. Sollitto Jr.
    
    
    34,562,538
    
    
    
    96,626James Ching Hua Li
    
    
    34,559,033
    
    
    
    100,131Man Kit (Thomas) Chow
    
    
    34,554,902
    
    
    
    104,262David P. Chavoustie
    
    
    34,546,038
    
    
    
    113,126Shih-Jye Cheng
    
    
    34,517,102
    
    
    
    142,062Yasushi Chikagami
    
    
    34,544,795
    
    
    
    114,369Max Fang
    
    
    34,545,595
    
    
    
    113,569John S. Hodgson
    
    
    34,513,445
    
    
    
    145,719Christopher C. L. Liu
    
    
    34,495,077
    
    
    
    164,087
 
 ITEM 5. OTHER INFORMATION
  34




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##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Exhibit10.53
    
    Manufacturing Agreement, dated March 9, 2004, between Syntax
Groups Corporation and Taiwan Kolin Company Limited, as amended on March 12, 2004 and February 1, 200510.54
    
    Distribution Agreement, dated September 8, 2004, between
Taiwan Kolin Company Limited and Syntax Groups Corporation10.55
    
    Price Protection for Channels Agreement, dated March 9, 2004,
between Taiwan Kolin Company Limited and Syntax Groups Corporation, as amended on December 31, 2004 and July 1, 200610.56
    
    Volume Incentive Agreement, dated March 9, 2004, between Taiwan Kolin Company Limited and Syntax Groups Corporation10.57
    
    Letter Agreements re shipment terms and duty payments, dated June 16, 2005 and June 20, 200510.58
    
    Warranty and Repair Services Agreement, dated April 1, 2004, between
Taiwan Kolin Company Limited and Syntax Groups Corporation, as amended on January 1, 200610.59
    
    Marketing Development Agreement, dated March 1, 2004, between Taiwan Kolin Company Limited and Syntax Groups Corporation10.60
    
    Technology Research and Development Agreement, dated March 9, 2004,
between Taiwan Kolin Company Limited and Syntax Groups Corporation10.61
    
    Property Disbursement Sharing Agreement, dated June 14, 2004, between
Taiwan Kolin Company Limited and Syntax Groups Corporation10.62
    
    Property Disbursement Sharing Agreement, dated March 1, 2006,
between Taiwan Kolin Company Limited and Syntax-Brillian Corporation31.1
    
    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
  
    
    An application has been submitted to the SEC for confidential treatment, pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, of portions of this exhibit. These portions have been omitted from this exhibit.
 35




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##### Table of Contents



SIGNATURES
  SYNTAX-BRILLIAN CORPORATIONDate:  February 14, 2007
    By:
    /s/ Vincent F. Sollitto Jr.Vincent F. Sollitto Jr.Chief Executive Officer Date:  February 14, 2007
    By:
    /s/ Wayne A. PrattWayne A. PrattChief Financial Officer 36




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit10.53
    
    Manufacturing Agreement, dated March 9, 2004, between Syntax Groups Corporation and Taiwan
Kolin Company Limited, as amended on March 12, 2004 and February 1, 200510.54
    
    Distribution Agreement, dated September 8, 2004, between Taiwan Kolin Company Limited and
Syntax Groups Corporation10.55
    
    Price Protection for Channels Agreement, dated March 9, 2004, between Taiwan Kolin Company
Limited and Syntax Groups Corporation, as amended on December 31, 2004 and July 1, 200610.56
    
    Volume Incentive Agreement, dated March 9, 2004, between Taiwan Kolin Company Limited and
Syntax Groups Corporation10.57
    
    Letter Agreements re shipment terms and duty payments, dated June 16, 2005 and June 20, 200510.58
    
    Warranty and Repair Services Agreement, dated April 1, 2004, between Taiwan Kolin Company
Limited and Syntax Groups Corporation, as amended on January 1, 200610.59
    
    Marketing Development Agreement, dated March 1, 2004, between Taiwan Kolin Company Limited
and Syntax Groups Corporation10.60
    
    Technology Research and Development Agreement, dated March 9, 2004, between Taiwan Kolin
Company Limited and Syntax Groups Corporation10.61
    
    Property Disbursement Sharing Agreement, dated June 14, 2004, between Taiwan Kolin Company
Limited and Syntax Groups Corporation10.62
    
    Property Disbursement Sharing Agreement, dated March 1, 2006, between Taiwan Kolin Company
Limited and Syntax-Brillian Corporation31.1
    
    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
 
 
    
   An application has been submitted to the SEC for confidential treatment, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, of portions of this exhibit. These portions
have been omitted from this exhibit.