##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 o
    
    Quarterly Report Pursuant To Section 13 or 15(d) of
the Securities Exchange Act of 1934
 For the Quarter Ended September 30, 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)
  
  þ o
  o þ o
 o þ
  CLASS
    
    OUTSTANDING AS OF NOVEMBER 8, 2006Common
    
    51,446,695Par value $.001 per share




---



##### 



SYNTAX-BRILLIAN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
 FOR QUARTER ENDED SEPTEMBER 30, 2006
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS:Condensed Consolidated Balance Sheets -
September 30, 2006 (unaudited) and June 30, 2006
    
    
    1Condensed Consolidated Statements of Operations (unaudited)-
Three Months Ended September 30, 2006 and 2005
    
    
    2Condensed Consolidated Statements of Cash Flows (unaudited)-
Three Months Ended September 30, 2006 and 2005
    
    
    3Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    22ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    29ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    29PART II  OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    30ITEM 1A.
    
    RISK FACTORS
    
    
    30ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    30ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    30ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30ITEM 5.
    
    OTHER INFORMATION
    
    
    30ITEM 6.
    
    EXHIBITS
    
    
    31SIGNATURES
    
    
    32EX-31.1EX-31.2EX-32.1EX-32.1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  SEPTEMBER 30,
    
    
    JUNE 30,2006
    
    
    2006(unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    8,266
    
    
    $
    7,375Accounts receivable and due from factor, net
    
    
    76,862
    
    
    
    50,829Inventories, net
    
    
    40,704
    
    
    
    13,151Deposit with Kolin (a related party)
    
    
    15,198
    
    
    
    5,067Deferred tax asset
    
    
    2,666
    
    
    
    2,666Other current assets
    
    
    1,131
    
    
    
    1,370Total current assets
    
    
    144,827
    
    
    
    80,458Fixed assets, net
    
    
    16,173
    
    
    
    16,703Long-term investments
    
    
    1,020
    
    
    
    1,307Intangible assets, net
    
    
    25,974
    
    
    
    20,737Goodwill
    
    
    6,990
    
    
    
    6,990Other assets
    
    
    1,229
    
    
    
    1,461Total Assets
    
    $
    196,213
    
    
    $
    127,656LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Loan payable, bank
    
    $
    32,800
    
    
    $
    30,800Notes payable
    
    
    650
    
    
    
    650Accounts payable
    
    
    59,978
    
    
    
    3,924Accrued rebates payable
    
    
    1,186
    
    
    
    4,043Deferred warranty revenue
    
    
    8,992
    
    
    
    4,551Income taxes payable
    
    
    96
    
    
    
    96Other current liabilities
    
    
    6,961
    
    
    
    5,540Current portion of redeemable convertible preferred stock
    
    
    6,165
    
    
    
    3,432Total Current Liabilities
    
    
    116,828
    
    
    
    53,036Long-term debt (net of $2,061 discount)
    
    
    3,974
    
    
    
    3,758Redeemable, convertible preferred stock (net of $6,780 discount)
    
    
    2,055
    
    
    
    3,432Deferred income taxes
    
    
    2,628
    
    
    
    2,628Stockholders Equity:Common stock, $.001 par value; 120,000,000 shares
authorized, 49,674,347 and 48,485,912 shares issued and
outstanding at September 30, 2006 and June 30, 2006
respectively
    
    
    50
    
    
    
    49Additional paid-in capital
    
    
    86,606
    
    
    
    84,489Accumulated deficit
    
    
    (15,928
    )
    
    
    (19,736
    )Total stockholders equity
    
    
    70,728
    
    
    
    64,802Total Liabilities and Stockholders Equity
    
    $
    196,213
    
    
    $
    127,656
  1




---



##### Table of Contents



SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three MonthsEnded September 30,2006
    
    
    2005Net sales
    
    $
    87,020
    
    
    $
    27,357Cost of sales
    
    
    71,244
    
    
    
    21,739Gross profit
    
    
    15,776
    
    
    
    5,618Operating expenses:Selling, distribution, and marketing
    
    
    3,131
    
    
    
    937General and administrative
    
    
    4,205
    
    
    
    5,126Research and development
    
    
    1,402
    
    
    
    Total operating expenses
    
    
    8,738
    
    
    
    6,063Operating income (loss)
    
    
    7,038
    
    
    
    (445
    )Interest expense
    
    
    (3,297
    )
    
    
    (296
    )Interest
income and other income (expense)
    
    
    (109
    )
    
    
    4Gain on sale of DigiMedia investment
    
    
    176
    
    
    
    Total non-operating income (expense)
    
    
    (3,230
    )
    
    
    (292
    )Net income (loss) before income taxes
    
    
    3,808
    
    
    
    (737
    )Income tax benefit
    
    
    
    
    
    
    79Net income (loss)
    
    $
    3,808
    
    
    $
    (658
    )Net income (loss) per common share:Basic net income (loss) per share
    
    $
    0.08
    
    
    $
    (0.02
    )Diluted net income (loss) per share
    
    $
    0.07
    
    
    $
    (0.02
    )Weighted average shares outstanding:Basic
    
    
    49,172
    
    
    
    33,839Diluted
    
    
    54,775
    
    
    
    33,839
  2




---



##### Table of Contents



SYNTAX-BRILLIAN CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months EndedSeptember 30,2006
    
    
    2005Operating Activities:Net income (loss)
    
    $
    3,808
    
    
    $
    (658
    )Adjustments to reconcile net income (loss) to net cash used
in operating activities:Depreciation and amortization
    
    
    1,017
    
    
    
    89Provision for inventory reserves
    
    
    (5,319
    )
    
    
    4,165Provision for doubtful accounts
    
    
    309
    
    
    
    Amortization of debenture discount and offering costs
    
    
    642
    
    
    
    Amortization of convertible preferred stock discount and costs
    
    
    1,520
    
    
    
    Stock compensation expense
    
    
    425
    
    
    
    2,228(Gain) loss on sale of assets
    
    
    (6
    )
    
    
    (Gain) loss on sale of investment
    
    
    (176
    )
    
    
    Joint venture loss
    
    
    108
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (2,674
    )Changes in assets and liabilities:(Increase) decrease in accounts receivable and due from factor
    
    
    (26,342
    )
    
    
    1,028(Increase) in inventories
    
    
    (22,234
    )
    
    
    (27,455
    )(Increase) decrease deposits with Kolin
    
    
    
    
    
    
    847Decrease in other current assets
    
    
    5,307
    
    
    
    564(Increase) in other assets
    
    
    (2
    )
    
    
    Increase (decrease) in accrued rebates payable
    
    
    (2,857
    )
    
    
    92Increase in deferred warranty revenue
    
    
    4,441
    
    
    
    1,130Increase in income taxes payable
    
    
    
    
    
    
    2,185Increase in accounts payable
    
    
    40,856
    
    
    
    11,618Increase (decrease) in other accrued liabilities
    
    
    1,768
    
    
    
    (424
    )Net cash provided by (used in) operating activities
    
    
    3,265
    
    
    
    (7,355
    )Investing Activities:Fixed assets purchased
    
    
    (192
    )
    
    
    (152
    )Fixed assets sold
    
    
    25
    
    
    
    Long-term investments sold
    
    
    600
    
    
    
    Long-term investments purchased
    
    
    (245
    )
    
    
    (1,000
    )License purchased
    
    
    (5,551
    )
    
    
    Net cash used in investing activities
    
    
    (5,363
    )
    
    
    (1,152
    )Financing Activities:Stock issued pursuant to Employee Stock Purchase Plan
    
    
    101
    
    
    
    Net proceeds from bank loan payable
    
    
    2,000
    
    
    
    2,938Proceeds (Repayments) of long-term debt and notes payable
    
    
    (2
    )
    
    
    23Net transfers from Syntax Groups Corporation
    
    
    
    
    
    
    4,200Warrants exercised
    
    
    630
    
    
    
    Stock options exercised
    
    
    260
    
    
    
    Net cash provided by financing activities
    
    
    2,989
    
    
    
    7,160Net increase (decrease) in cash and cash equivalents
    
    
    891
    
    
    
    (1,347
    )Cash and cash equivalents, beginning of period
    
    
    7,375
    
    
    
    1,804Cash and cash equivalents, end of period
    
    $
    8,266
    
    
    $
    457Supplemental Cash Flow Information:Cash paid for interest
    
    $
    791
    
    
    $
    221Cash paid for income taxes
    
    $
    
    
    
    $
    500Supplemental Schedule of Non-cash Investing ActivitiesIncrease in deposits with Kolin and its related accounts payable
    
    $
    15,198
    
    
    $
    
  3




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



Note B
      8




---



##### Table of Contents



Balance SheetIncrease toIncrease
    
    
    Deferred(Decrease) to
    
    
    WarrantyTotal Purchases
    
    
    Cost of Sales
    
    
    Inventory
    
    
    RevenueThree months ended September 30, 2005Purchases
    
    $
    62,002
    
    
    $
    11,571
    
    
    $
    50,431
    
    
    $
    Prior year returned goods
    
    
    3,631
    
    
    
    3,631
    
    
    
    Rebates, based on percentage of purchases:Market development
    
    
    (1,626
    )
    
    
    (348
    )
    
    
    (1,278
    )
    
    
    Technical development
    
    
    (2,250
    )
    
    
    (716
    )
    
    
    (1,534
    )
    
    
    Volume incentive
    
    
    (2,063
    )
    
    
    (657
    )
    
    
    (1,406
    )
    
    
    Excess warranty expense reimbursements
    
    
    (1,896
    )
    
    
    (766
    )
    
    
    
    
    
    
    (1,130
    )Price protection
    
    
    (13,412
    )
    
    
    (13,412
    )
    
    
    
    
    
    
    Price protection guaranteed minimum
    
    
    (7,200
    )
    
    
    
    
    
    
    (7,200
    )
    
    
    Net activity, three months ended September 30, 2005
    
    
    37,186
    
    
    
    (697
    )
    
    
    39,013
    
    
    
    (1,130
    )Prior period purchases charged to cost of sales
    
    
    17,203
    
    
    
    17,203
    
    
    
    
    
    
    
    Balance, September 30, 2005
    
    $
    54,389
    
    
    
    16,506
    
    
    $
    39,013
    
    
    $
    (1,130
    )Three months ended September 30, 2006Purchases
    
    $
    107,206
    
    
    $
    66,813
    
    
    $
    40,393
    
    
    $
    Rebates, based on percentage of purchases:Market development
    
    
    (2,874
    )
    
    
    (1,961
    )
    
    
    (913
    )
    
    
    Technical development
    
    
    (3,449
    )
    
    
    (2,353
    )
    
    
    (1,096
    )
    
    
    Volume incentive
    
    
    (3,162
    )
    
    
    (2,157
    )
    
    
    (1,005
    )
    
    
    Excess warranty expense reimbursements
    
    
    (6,592
    )
    
    
    (2,151
    )
    
    
    
    
    
    
    (4,441
    )Price protection
    
    
    (4,300
    )
    
    
    (4,300
    )
    
    
    
    
    
    
    Price protection guaranteed minimum
    
    
    (877
    )
    
    
    
    
    
    
    (877
    )
    
    
    Net activity, three months ended September 30, 2006
    
    
    85,952
    
    
    
    53,891
    
    
    
    36,502
    
    
    
    (4,441
    )Prior period balances charged to cost of sales
    
    
    12,042
    
    
    
    12,042
    
    
    
    
    
    
    
    Balance, September 30, 2006
    
    $
    97,994
    
    
    $
    65,933
    
    
    $
    36,502
    
    
    $
    (4,441
    )
   Note C
  9




---



##### Table of Contents



September 30,
    
    
    June 30,2006
    
    
    2006Due from factor, net
    
    $
    12,673
    
    
    $
    17,049Accounts receivable not assigned to
factor, net
    
    
    64,789
    
    
    
    34,097Other receivables
    
    
    104
    
    
    
    77Allowance for doubtful
accounts
    
    
    (704
    )
    
    
    (394
    )$
    76,862
    
    
    $
    50,829
  Note D
 September 30,
    
    
    June 30,2006
    
    
    2006Raw materials
    
    $
    3,007
    
    
    $
    2,468Work-in-process
    
    
    558
    
    
    
    425Finished goods
    
    
    37,139
    
    
    
    10,258$
    40,704
    
    
    $
    13,151
  Note E
  10




---



##### Table of Contents



Note F
 September 30,
    
    
    June 30,2006
    
    
    2006Leasehold and building improvements
    
    $
    1,164
    
    
    $
    1,163Machinery and equipment
    
    
    11,132
    
    
    
    11,068Software
    
    
    348
    
    
    
    348Furniture and fixtures
    
    
    292
    
    
    
    292Equipment not yet placed in service
    
    
    5,913
    
    
    
    5,81018,849
    
    
    
    18,681Less accumulated depreciation
    
    
    (2,676
    )
    
    
    (1,978
    )$
    16,173
    
    
    $
    16,703
 Note G
     Note H
  11




---



##### Table of Contents



Three Months Ended September 30, 2005Revenue
    
    $
    28,016Net loss
    
    $
    (10,226
    )Net loss per share
    
    $
    (0.34
    )
  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
  September 30,
    
    
    Amortizable2006
    
    
    LifeLCoS trade mark and
trade names
    
    $
    1,208
    
    
    7.5 yearsBrillian trade mark and
trade name
    
    
    148
    
    
    4.0 yearsTechnology license
    
    
    5,551
    
    
    5.0 yearsPatented
technology
    
    
    20,114
    
    
    19.0 years$
    27,021Less accumulated
amortization
    
    
    (1,047
    )$
    25,974
  12




---



##### Table of Contents



Fiscal Year2007
    
    $
    1,7772008
    
    
    2,3672009
    
    
    2,3672010
    
    
    2,3422011
    
    
    2,330Thereafter
    
    
    14,791$
    25,974
 Note I
  (a)
    
    $18 million limitation for the issuance of letters of credit,
subject to the borrowing base;(b)
    
    $9 million for trust receipts and acceptances up to 90 days,
subject to the borrowing base;(c)
    
    $10 million for trust receipts and general working capital for up
to 60 days, subject to the borrowing base;(d)
    
    the amounts in (a) plus (b) shall not exceed $18 million;(e)
    
    the amounts in (a) plus (b) plus (c) shall not exceed $28
million; and(f)
    
    the borrowings under the facility bear interest at Preferred
Banks prime rate (8.25% at September 30, 2006) plus 0.50%.
   Note S
  13




---



##### Table of Contents



Note J
  Three Months EndedSeptember 30,2006
    
    
    2005Basic earnings (loss) per share:Net Income (loss)
    
    $
    3,808
    
    
    $
    (658
    )Weighted average common shares
    
    
    49,172
    
    
    
    30,462Basic earnings (loss) per share
    
    $
    0.08
    
    
    $
    (0.02
    )Diluted earnings (loss) per share:Net Income (loss)
    
    $
    3,808
    
    
    $
    (658
    )Add back:Interest on convertible bonds
    
    
    25
    
    
    
    Dividends on convertible preferred stock
    
    
    225
    
    
    
    Adjusted net income (loss)
    
    $
    4,058
    
    
    $
    (658
    )Weighted average common shares
    
    
    49,172
    
    
    
    30,462Options and warrants assumed exercised
    
    
    1,657
    
    
    
    Assumed shares issued for convertible debt
    
    
    946
    
    
    
    Assumed shares issued for convertible preferred stock
    
    
    3,000
    
    
    
    Total common shares plus common stock equivalents
    
    
    54,775
    
    
    
    30,462Diluted earnings (loss) per share:
    
    $
    0.07
    
    
    $
    (0.02
    )
 Note K
   14




---



##### Table of Contents



LCD
    
    LCoS
    
    TotalThree months ended
September 30, 2006Net sales
    
    $
    85,694
    
    
    $
    1,326
    
    
    $
    87,020Operating income (loss)
    
    $
    11,273
    
    
    $
    (4,235
    )
    
    $
    7,038Depreciation and amortization
    
    $
    151
    
    
    $
    866
    
    
    $
    1,017Total assets
    
    $
    157,210
    
    
    $
    39,003
    
    
    $
    196,213Three months ended
September 30, 2005Net sales
    
    $
    27,357
    
    
    $
    
    
    
    $
    27,357Operating income (loss)
    
    $
    (445
    )
    
    $
    
    
    
    $
    (445
    )Depreciation and amortization
    
    $
    89
    
    
    $
    
    
    
    $
    89Total assets
    
    $
    61,106
    
    
    $
    
    
    
    $
    61,106
     NorthAmerica
    
    Asia
    
    Europe
    
    
    TotalThree months ended
September 30, 2006Net sales
    
    $
    38,866
    
    
    $
    48,149
    
    
    $
    5
    
    
    
    $
    87,020Three months ended
September 30, 2005Net sales
    
    $
    23,742
    
    
    $
    3,615
    
    
    $
    
    
    
    
    $
    27,357
  Note L
  15




---



##### Table of Contents



Years Ending June 30,
    
    Minimum Lease Payments2007
    
    $
    1,0042008
    
    
    1,3392009
    
    
    9252010
    
    
    385$
    3,653
 Note M
  16




---



##### Table of Contents



Three Months EndedSeptember 30,2006
    
    
    2005Expected life (in years)
    
    
    5
    
    
    
    5Expected volatility
    
    
    82
    %
    
    
    129
    %Risk-free interest rate
    
    
    4.99
    %
    
    
    4.00
    %Dividend yield
    
    
    N/A
    
    
    
    N/A
   Options OutstandingWeightedAverageNumber of
    
    Exercise PriceShares
    
    Per ShareOutstanding at June 30, 2006
    
    
    3,047,733
    
    
    $
    4.17Granted
    
    
    1,177,300
    
    
    $
    2.29Exercised
    
    
    129,608
    
    
    $
    2.03Forfeited and expired
    
    
    49,249
    
    
    $
    6.94Outstanding at September 30, 2006
    
    
    4,046,176
    
    
    $
    3.66Exercisable at September 30, 2006
    
    
    2,553,702
    
    
    $
    4.37
 17




---



##### Table of Contents



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
    
    
    
    7/3/2006
 4 01(k) Profit Sharing Plan
  Note O
  September 30,
    
    
    June 30,2006
    
    
    2006April 2005 7% Convertible Debentures
maturing April 20, 2008, convertible at
$1.57 per share
    
    $
    828
    
    
    $
    985April 2005 9% Senior Secured Debentures
maturing April 20, 2008, secured by a
lien on certain assets
    
    
    2,000
    
    
    
    2,000July 2005 4% Convertible Debentures
maturing July 12, 2008, convertible at
$2.63 per share
    
    
    1,100
    
    
    
    1,300July 2005 9% Senior Secured Debentures
maturing July 12, 2008, secured by a lien
on certain assets
    
    
    2,075
    
    
    
    2,075Other long-term debt
    
    
    32
    
    
    
    336,035
    
    
    
    6,393Less:Discount and beneficial conversion
feature on convertible debentures
    
    
    (1,297
    )
    
    
    (1,763
    )Discount on secured
debentures
    
    
    (764
    )
    
    
    (872
    )Total
    
    $
    3,974
    
    
    $
    3,758
  18




---



##### Table of Contents



Note P
       Note Q
  19




---



##### Table of Contents



Note R
  Shares of Common
    
    Per ShareExpiration
    
    Stock Issuable Under
    
    ExerciseWarrants relating to issuance of :
    
    Date
    
    Warrants
    
    PriceApr. 2005 7% Convertible Debentures
    
    
    10/10/2010
    
    
    
    299,044
    
    
    $
    1.57Jul. 2005 4% Convertible Debentures
    
    
    01/08/2011
    
    
    
    950,571
    
    
    $
    2.63Jul. 2005 9% Secured Debentures
    
    
    01/08/2011
    
    
    
    235,000
    
    
    $
    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
    
    
    $
    5.00Total Warrants Outstanding:
    
    
    
    
    
    
    3,867,615
 Note S
          20




---



##### Table of Contents



Note T Income Taxes:
   Current (net
of benefit of net operating loss carryforward of $1.5 million)
    
    $
    0Deferred
(net of decrease in valutaion allowed of $1.5 million)
    
    
    0Net income tax provision
    
    $
    0
 21




---



##### 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.
 General and Administrative Expense.
 Research and Development Expense.
 22




---



##### Table of Contents



Results of Operations
 Three months ended September 30, 2006 compared with three months ended September 30, 2005
 Net Sales.
    Cost of Sales.
    23




---



##### Table of Contents



Selling, Distribution, and Marketing Expense.
 General and Administrative Expense.
 Research and Development Expense.
 Interest Expense .
 24




---



##### Table of Contents



Net Income (Loss).
 Income Tax
 Liquidity and Capital Resources
        25




---



##### Table of Contents




    
    $18 million limitation for the issuance of letters of credit, subject to the borrowing base;
    
    $9 million for trust receipts and acceptances up to 90 days, subject to the borrowing base;
    
    $10 million for trust receipts and general working capital for up to 60 days, subject to
the borrowing base;
    
    the amounts in (a) plus (b) shall not exceed $18 million;
    
    the amounts in (a) plus (b) plus (c) shall not exceed $28 million; and
    
    the borrowings under the facility bear interest at Preferred Banks prime rate (8.25% at
September 30, 2006) plus 0.50%.
   Note S
  Aggregate Contractual Obligations and Commercial Commitments
  26




---



##### Table of Contents



Less Than 1
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsLong-term debt
    
    $
    6,003
    
    
    
    
    
    
    
    6,003
    
    
    
    
    
    
    
    Interest payments on long-term debt
    
    
    787
    
    
    
    475
    
    
    
    312
    
    
    
    
    
    
    
    Loans payable  bank
    
    
    32,800
    
    
    
    32,800
    
    
    
    
    
    
    
    
    
    
    
    Redeemable convertible preferred
stock redemptions
    
    
    15,000
    
    
    
    11,250
    
    
    
    3,750
    
    
    
    
    
    
    
    Redeemable convertible preferred
stock dividends
    
    
    712
    
    
    
    375
    
    
    
    37Facilities leases
    
    
    3,653
    
    
    
    1,339
    
    
    
    2,140
    
    
    
    174
    
    
    
    Purchase orders
    
    
    165,931
    
    
    
    165,931Advertising commitments
    
    
    9,346
    
    
    
    9,346Investment commitments
    
    
    1,600
    
    
    
    1,600
 Off Balance Sheet Arrangements
  Impact of Recently Issued Standards
      27




---



##### Table of Contents



28




---



##### 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
  29




---



##### 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
  
 ITEM 5. OTHER INFORMATION
  30




---



##### Table of Contents



ITEM 6. EXHIBITS
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer
 31




---



##### Table of Contents



SIGNATURES
  SYNTAX-BRILLIAN CORPORATIONDate:  November 9, 2006
    By:
    /s/ Vincent F. Sollitto Jr.Vincent F. Sollitto, Jr.Chief Executive OfficerDate:  November 9, 2006
    By:
    /s/ Wayne A. PrattWayne A. PrattChief Financial Officer 32




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit31.1
    
    Certification of Chief Executive Officer31.2
    
    Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of Chief Financial Officer