##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549








Form 10-K/A








(Amendment No. 1)





|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the fiscal year ended June 30, 2006                                                 

Commission File Number 000-50289





Syntax-Brillian Corporation


(Exact Name of Registrant as Specified in Its Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 05-0567906                              
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification No.)

1600 N. Desert Drive


Tempe, Arizona 85281


(602) 389-8888


(Address including zip code, and telephone number,


including area code, of principal executive offices)


Securities registered pursuant to Section 12(b) of the
Act:


|                                        |  |                                          
|--------------------------------------- |  | -----------------------------------------
|Title of Each Class                     |  | Name of Each Exchange on Which Registered
|                                        |  |                                          
|Common Stock, par value $.001 per share |  | The Nasdaq Global Market                 
|Preferred Stock Purchase Rights         |  | The Nasdaq Global Market                 

Securities registered pursuant to Section 12(g) of the
Act:


None


o þ


þ o


S-K 10-K 10-K. o


12b-2


o þ o


12b-2 o þ






Documents Incorporated by Reference


10-K.










---



##### 



SYNTAX-BRILLIAN CORPORATION





ANNUAL REPORT ON
FORM 10-K/A





For the Fiscal Year Ended June 30, 2006





EXPLANATORY NOTE








10-K 10-K





TABLE OF CONTENTS







|                                               |  |                                                                                                                      |     |      |    | 
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                                               |  |                                                                                                                      |     | Page |   
|                                               |  |                                                                                                                      |     |      |   
|PART I                                        
|ITEM 1.                                        |  | BUSINESS                                                                                                             |     |      | 1  | 
|ITEM 1A.                                       |  | RISK FACTORS                                                                                                         |     |      | 13 | 
|ITEM 1B.                                       |  | UNRESOLVED STAFF COMMENTS                                                                                            |     |      | 27 | 
|ITEM 2.                                        |  | PROPERTIES                                                                                                           |     |      | 27 | 
|ITEM 3.                                        |  | LEGAL PROCEEDINGS                                                                                                    |     |      | 27 | 
|ITEM 4.                                        |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
    HOLDERS                                                              |     |      | 27 | 
|                                              
|PART II                                       
|ITEM 5.                                        |  | MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES |     |      | 28 | 
|ITEM 6.                                        |  | SELECTED FINANCIAL DATA                                                                                              |     |      | 29 | 
|ITEM 7.                                        |  | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                            |     |      | 30 | 
|ITEM 7A.                                       |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK                                                       |     |      | 41 | 
|ITEM 8.                                        |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA                                                                      |     |      | 41 | 
|ITEM 9.                                        |  | CHANGES IN AND DISAGREEMENTS WITH
    ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                             |     |      | 41 | 
|ITEM 9A.                                       |  | CONTROLS AND PROCEDURES                                                                                              |     |      | 41 | 
|ITEM 9B.                                       |  | OTHER INFORMATION                                                                                                    |     |      | 41 | 
|                                              
|PART III                                      
|ITEM 10.                                       |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT                                                               |     |      | 42 | 
|ITEM 11.                                       |  | EXECUTIVE COMPENSATION                                                                                               |     |      | 42 | 
|ITEM 12.                                       |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                   |     |      | 42 | 
|ITEM 13.                                       |  | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS                                                                   |     |      | 42 | 
|ITEM 14.                                       |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                               |     |      | 42 | 
|                                              
|PART IV                                       
|ITEM 15.                                       |  | EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES                                                                       |     |      | 42 | 
|SIGNATURES                                     |  |                                                                                                                      | 47  |     
|INDEX TO CONSOLIDATED FINANCIAL
    STATEMENTS |  |                                                                                                                      | F-1 |     
|EX-21.1                                       
|EX-23.1                                       
|EX-31.1                                       
|EX-31.2                                       
|EX-32.1                                       
|EX-32.2                                       





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##### Table of Contents



Statement Regarding Forward-Looking Information


10-K/A




---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Introduction


65-inch 42-inch 47-inch 65-inch


near-to




Industry Factors




| |                    
| | -------------------
| | Industry Background

over-the


50-inch




1



---



##### Table of Contents





near-to near-to




| |                  
| | -----------------
| | HDTV Technologies















2



---



##### Table of Contents





















| |                             
| | ----------------------------
| | Near-to-Eye
    Applications

near-to near-to


3



---



##### Table of Contents



near-to


near-to 3-D




near-to near-to


Strategy


near-to




| |                                                                 
| | ----------------------------------------------------------------
| | Expand Our Market Share Across Multiple HDTV Market
    Segments



4



---



##### Table of Contents





| |                                                
| | -----------------------------------------------
| | Leverage Our Global Virtual Manufacturing Model





| |                                          
| | -----------------------------------------
| | Capitalize on Our Technological Expertise

near-to near-to near-to




| |                                          
| | -----------------------------------------
| | Pursue Additional Strategic Relationships





| |                                              
| | ---------------------------------------------
| | Provide Value-Added Customer Service for OEMs



Products




| |                            
| | ---------------------------
| | High-Definition Televisions



5



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##### Table of Contents







65-inch




| |                      
| | ---------------------
| | Microdisplay Products

near-to


near-to




| |                        
| | -----------------------
| | Projection Applications





| |                             
| | ----------------------------
| | Near-to-Eye
    Applications

near-to


near-to


6



---



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near-to




Manufacturing














7



---



##### Table of Contents







Suppliers








Customers








near-to




| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | video game, personal video player, and medical head-mounted
    devices from I-Display Systems;
|
| |  | a night vision headset by Trivisio;                                                            

8



---



##### Table of Contents





| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | a headset for wearable computers designed by Shimadzu and
    currently offered in Hitachi and Xybernaut products;
|
| |  | an aircraft heads-up
    display for Rockwell;                                                                    
|
| |  | a viewer for a medical microscope by Zeiss; and                                                                   
|
| |  | a riflescope viewer by Brashear.                                                                                  



heads-up




Sales and Marketing












9



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##### Table of Contents









Competition






near-to start-up




Research and Development




10



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | silicon backplane design to reduce size and cost, increase
    resolution and performance, decrease power consumption, and
    integrate driver functionality;                                                                                                                                        
|
| |  | projection optics, color science, and display characterization
    to optimize the link between the science of LCoS and the
    end-user experience;                                                                                                                                                  
|
| |  | ASIC design to combine and enhance functionality, reduce cost,
    and improve HDTV picture quality;                                                                                                                                                                                                  
|
| |  | basic research and development to characterize, test, and
    incorporate new liquid crystal solutions, silicon substrates,
    and glass. Our engineers and scientists continue to investigate
    alternative combinations of materials to improve picture
    quality, cost, and manufacturability;
|
| |  | printed circuit board design; and                                                                                                                                                                                                                                                                     
|
| |  | LCoS package and test development programs.                                                                                                                                                                                                                                                           



Intellectual Property






Government Regulation






11



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##### Table of Contents



Backlog




Employees






Executive Officers




|                         |  |     |    |  |          |                                                                                
|------------------------ |  | --- | -- |  | -------- | -------------------------------------------------------------------------------
|Name                     |  | Age |    |  | Position
|                         |  |     |    |  |         
|Vincent F. Sollitto, Jr. |  |     | 58 |  |          | Chairman of the Board, Chief Executive Officer, and Director                   
|James Li                 |  |     | 39 |  |          | President, Chief Operating Officer, and Director                               
|Wayne A. Pratt           |  |     | 45 |  |          | Executive Vice President, Chief Financial Officer, Secretary,
    and Treasurer
|Thomas Chow              |  |     | 44 |  |          | Executive Vice President, Chief Procurement Officer and Director               
|Michael Chan             |  |     | 37 |  |          | Executive Vice President  Operations                                          
|Robert L. Melcher        |  |     | 66 |  |          | Chief Technology Officer                                                       

Vincent F. Sollitto, Jr.


James Li


12



---



##### Table of Contents



Wayne A. Pratt e-business


Thomas Chow


Michael Chan


Robert L. Melcher







|         |             
|-------- | ------------
|Item 1A. | Risk Factors

You should carefully consider the following risk factors in
addition to those discussed elsewhere in this prospectus in
evaluating our company and our business.




| |                                                             
| | ------------------------------------------------------------
| | We have never achieved profitability on an annual
    basis.



13



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##### Table of Contents





| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We derive substantially all of our revenue from sales of
    HDTVs, particularly LCD HDTVs, and any decline in demand for
    these products could severely harm our ability to generate
    revenue.





| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will be required to attain and maintain profitability
    through a combination of increased revenue or lower expenses or
    to raise additional funds.









| |                                                                        
| | -----------------------------------------------------------------------
| | Our revenue depends on sales by various retailers and
    distributors.







| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to secure and maintain favorable relationships with
    retailers and distributors;                                                  
|
| |  | our lack of control over the timing of delivery of our products
    to end-users;                                                                
|
| |  | our retailers and distributors are not subject to minimum sales
    requirements or any obligation to market our products to their
    customers;
|
| |  | our retailers and distributors may terminate their relationships
    with us at any time; and                                                    
|
| |  | our retailers and distributors market and distribute competing
    products.                                                                     





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Competing companies and technologies could reduce the
    demand for our products.



14



---



##### Table of Contents



start-up






| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely on contract manufacturers and assemblers for a
    portion of our HDTV production requirements, and any
    interruptions of these arrangements could disrupt our ability to
    fill customer orders.





| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our contract manufacturers and assemblers must maintain
    satisfactory delivery schedules and their inability to do so
    could increase our costs, disrupt our supply chain, and result
    in our inability to deliver our HDTV products, which would
    adversely affect our results of operations.





| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Shortages of components and materials may delay or reduce
    our sales and increase our costs.





15



---



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near-to








| |                                                           
| | ----------------------------------------------------------
| | Our business depends on new products and
    technologies.





| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | designing and developing new products and product enhancements
    that appeal to consumers;                                    
|
| |  | meeting the expectations of our retail and OEM customers in
    terms of product design, product cost, performance, and service;
|
| |  | expanding our manufacturing resources;                                                                                          
|
| |  | continuing research and development activities on existing and
    potential products;                                          
|
| |  | engaging additional engineering and other technical personnel;                                                                  
|
| |  | purchasing advanced design, production, and test
    equipment; and                                                             
|
| |  | maintaining and enhancing our technological capabilities.                                                                       







| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | innovative development of new products;                               
|
| |  | efficient, timely, and cost-effective manufacture of our
    products;

16



---



##### Table of Contents





| |   |                                       
| | - | --------------------------------------
| |  | the acceptance of our technology; and 
|
| |  | utilization of advances in technology.





| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | We must protect our intellectual property and could be
    subject to infringement claims by others.





| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | intellectual property laws may not protect our intellectual
    property rights;                                                                           
|
| |  | third parties may challenge, invalidate, or circumvent any
    patents issued to us;                                                                       
|
| |  | rights granted under patents issued to us may not provide
    competitive advantages to us;                                                                
|
| |  | unauthorized parties may attempt to obtain and use information
    that we regard as proprietary despite our efforts to protect our
    proprietary rights;
|
| |  | others may independently develop similar technology or design
    around any patents issued to us; and                                                     
|
| |  | effective protection of intellectual property rights may be
    limited or unavailable in some foreign countries in which we
    operate.                  







| |                                                                         
| | ------------------------------------------------------------------------
| | Our operations in foreign countries expose us to a variety
    of risks.





| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties in staffing, managing, and operating an
    international operation;                                                         
|
| |  | the burdens and costs of compliance with local laws and
    regulatory requirements as well as changes in those laws and
    requirements;

17



---



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| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | imposition of governmental controls, including trade and
    employment restrictions and restrictions on currency conversion
    or the transfer of funds;                                                                                       
|
| |  | transportation delays or interruptions and other effects of less
    developed infrastructures;                                                                                                                                                  
|
| |  | fluctuations in foreign currency exchange rates and difficulties
    in hedging foreign currency transaction exposures;                                                                                                                          
|
| |  | economic instability, such as higher interest rates and
    inflation, which could reduce our customers ability to
    obtain financing for consumer electronic products or which could
    make our products more expensive in those countries;
|
| |  | employment and severance issues, including possible employee
    turnover or labor unrest;                                                                                                                                                       
|
| |  | overlap of tax issues;                                                                                                                                                                                                                           
|
| |  | tariffs and duties;                                                                                                                                                                                                                              
|
| |  | potential loss of proprietary information as a result of piracy,
    misappropriation, or laws that may be less protective of our
    intellectual property rights;                                                                              
|
| |  | limitations on future growth or inability to maintain current
    levels of revenue from international operations if we do not
    invest sufficiently in our international operations;                                                          
|
| |  | longer payment cycles for sales in foreign countries and
    difficulties in collecting accounts receivable;                                                                                                                                     
|
| |  | difficulties in coordinating the activities of our
    geographically dispersed and culturally diverse operations;                                                                                                                               
|
| |  | seasonal reductions in business activity in the summer months in
    Asia and in other periods in other countries;                                                                                                                               
|
| |  | costs and delays associated with developing our products in
    multiple languages; and                                                                                                                                                          
|
| |  | political unrest, war, or terrorism in areas in which we do
    business.                                                                                                                                                                        



non-U.S. non-U.S.






| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | The cyclical nature of the consumer electronics industry
    may cause substantial
    period-to-period
    fluctuations in our operating results.

period-to


18



---



##### Table of Contents





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Our operating results may have significant periodic and
    seasonal fluctuations.





| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | effectiveness in managing manufacturing processes;                                                                                                                                                              
|
| |  | changes in cost and availability of labor and components;                                                                                                                                                       
|
| |  | the timing and volume of orders relative to our capacity;                                                                                                                                                       
|
| |  | market acceptance of our products;                                                                                                                                                                              
|
| |  | product introductions or enhancements by us and our competitors;                                                                                                                                                
|
| |  | evolution in the life cycles of products;                                                                                                                                                                       
|
| |  | timing of expenditures in anticipation of future orders;                                                                                                                                                        
|
| |  | product mix;                                                                                                                                                                                                    
|
| |  | pricing and availability of competitive products;                                                                                                                                                               
|
| |  | changes or anticipated changes in economic conditions;                                                                                                                                                          
|
| |  | the cancellation or deferral of product purchases as a result of
    weak or uncertain economic and industry conditions or the
    anticipation of new products or product updates by us or our
    competitors;
|
| |  | changes in the competitive landscape due to mergers,
    acquisitions, or strategic alliances that could allow our
    competitors to gain market share;                                                        
|
| |  | the unpredictability of the timing and magnitude of our sales
    through direct sales channels and indirect sales channels;                                                                                    
|
| |  | the seasonal nature of our sales;                                                                                                                                                                               
|
| |  | changes in our pricing and distribution terms or those of our
    competitors; and                                                                                                                              
|
| |  | the possibility that our business will be adversely affected as
    a result of the threat of terrorism or military actions taken by
    the United States or its allies.                                       





| |                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our products are complex and may require modifications to
    resolve undetected errors or unforeseen failures, which could
    lead to an increase in our costs, a loss of customers, or a
    delay in market acceptance of our products.



19



---



##### Table of Contents





| |                                                                                 
| | --------------------------------------------------------------------------------
| | We are subject to lengthy development periods and product
    acceptance cycles.







| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | Our LCoS microdisplay products may not achieve commercial
    success or widespread market acceptance.





| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | difficulties with other suppliers of components for the products;    
|
| |  | superior technologies developed by our competitors;                  
|
| |  | price considerations;                                                
|
| |  | lack of anticipated or actual market demand for the
    products; and
|
| |  | unfavorable comparisons with products introduced by others.          



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Various target markets for our LCoS microdisplays are
    uncertain, may be slow to develop, or could use competing
    technologies.

near-to near-to




| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | We do not sell our LCoS microdisplays to end users and
    depend on the market acceptance of the products of our
    customers.



20



---



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| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to supply products for customers on a timely and
    cost-effective basis;                                                              
|
| |  | our success in maintaining customer satisfaction with our
    products;                                                                             
|
| |  | our ability to match our manufacturing capacity with customer
    demand and to maintain satisfactory delivery schedules;                           
|
| |  | customer order patterns, changes in order mix, and the level and
    timing of orders placed by customers that we can complete in a
    quarter; and
|
| |  | the cyclical nature of the industries and markets that we serve.                                                                                    





| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have not reached definitive agreements with any
    traditional consumer electronics retailers to sell our LCoS
    HDTVs, and we do not have long-term purchase commitments from
    OEM customers for our home theater or
    near-to-eye
    microdisplay products.









21



---



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| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have encountered delays in the procurement and
    production of light engines, and additional delays would harm
    our ability to manufacture LCoS HDTVs.







| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our success in developing and producing new products;                                                                                                                                                                                             
|
| |  | our ability to address the needs of our retail and OEM customers;                                                                                                                                                                                 
|
| |  | the pricing, quality, performance, reliability, features, ease
    of use, and diversity of our products;                                                                                                                                         
|
| |  | the quality of our customer service;                                                                                                                                                                                                              
|
| |  | our efficiency of production;                                                                                                                                                                                                                     
|
| |  | product or technology introductions by our competitors; and                                                                                                                                                                                       
|
| |  | foreign currency devaluations, especially in Asian currencies,
    such as the Japanese yen, the Korean won, and the Taiwanese
    dollar, which may cause a foreign competitors products to
    be priced significantly lower than our products.



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Our Arizona facility and its high-volume LCoS microdisplay
    manufacturing line are important to our success.





| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have previously experienced low manufacturing yields in
    commencing production of LCoS microdisplays, and we must achieve
    satisfactory manufacturing yields.

ramp-up






| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | the availability of a sufficient quantity of quality materials;
|
| |  | the implementation of new manufacturing techniques;            

22



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##### Table of Contents





| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | the incorporation of new handling procedures;                             
|
| |  | the maintenance of clean manufacturing environments; and                  
|
| |  | the ability to master precise tolerances in the manufacturing
    process.





| |                                       
| | --------------------------------------
| | We must effectively manage our growth.





| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enhance our operational, financial, and management systems;                                                                                                           
|
| |  | expand our facilities and equipment; and                                                                                                                              
|
| |  | successfully hire, train, and motivate additional employees,
    including the technical personnel necessary to operate our
    production facility in Tempe, Arizona.



| |                            
| | ---------------------------
| | We depend on key personnel.





| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Any acquisitions that we undertake could be difficult to
    integrate, disrupt our business, dilute stockholder value, and
    harm our operating results.







| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | problems integrating the purchased operations, technologies,
    products, or services with our own;         
|
| |  | unanticipated costs associated with the acquisition;                                                         
|
| |  | diversion of managements attention from our core
    businesses;                                            
|
| |  | adverse effects on existing business relationships with
    suppliers and customers;                         
|
| |  | risks associated with entering markets in which we have no or
    limited prior experience;                  
|
| |  | potential loss of key employees and customers of purchased
    organizations;                                
|
| |  | increased costs and efforts in connection with compliance with
    Section 404 of the Sarbanes-Oxley Act; and
|
| |  | risk of impairment charges related to potential write-downs of
    acquired assets in future acquisitions.   

23



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| |                                                                             
| | ----------------------------------------------------------------------------
| | We may not realize the benefits we expected from our
    merger with Syntax.





| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | integrating the business, operations, and technologies of the
    two companies;                                                                                                                                               
|
| |  | retaining and assimilating the key personnel of each company;                                                                                                                                                                  
|
| |  | retaining existing customers of each company and attracting
    additional customers;                                                                                                                                          
|
| |  | retaining strategic partners of each company and attracting new
    strategic partners;                                                                                                                                        
|
| |  | creating uniform standards, controls, procedures, policies, and
    information systems; and                                                                                                                                   
|
| |  | the challenges inherent in efficiently managing an increased
    number of employees over large geographic distances, including
    the need to implement appropriate systems, policies, benefits,
    and compliance programs.





| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the potential disruption of ongoing business and distraction of
    our management;                                                                
|
| |  | the potential strain on our financial and managerial controls
    and reporting systems and procedures;                                            
|
| |  | unanticipated expenses and potential delays related to
    integration of the operations, technology, and other resources
    of the two companies;
|
| |  | the impairment of relationships with employees, suppliers, and
    customers as a result of any integration of new management
    personnel;       
|
| |  | greater than anticipated costs and expenses related to the
    integration of our businesses; and                                                  
|
| |  | potential unknown liabilities associated with the merger and the
    combined operations.                                                          





| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Charges to earnings resulting from the application of the
    purchase method of accounting may adversely affect the market
    value of our common stock.



24



---



##### Table of Contents







| |                                                          
| | ---------------------------------------------------------
| | We incur costs as a result of being a public
    company.





| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | The market price for our common stock may be volatile, and
    many factors could cause the market price of our common stock to
    fall.





| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | variations in our quarterly results;                                                                                                             
|
| |  | introductions of new products or new pricing policies by us or
    by our competitors;                                                           
|
| |  | the gain or loss of significant orders;                                                                                                          
|
| |  | the gain or loss of significant customers;                                                                                                       
|
| |  | announcements of technological innovations by us or by our
    competitors;                                                                      
|
| |  | acquisitions or strategic alliances by us or by our competitors;                                                                                 
|
| |  | recruitment or departure of key personnel;                                                                                                       
|
| |  | sales of our common stock in the public market, including sales
    by former Syntax shareholders;                                               
|
| |  | changes in the estimates of our operating performance or changes
    in recommendations by any securities analysts that follow our
    stock; and
|
| |  | market conditions in our industry, the industries of our
    customers, and the economy as a whole.                                              





| |                                            
| | -------------------------------------------
| | We are subject to governmental regulations.



25



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| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions in our certificate of incorporation, our
    bylaws, and Delaware law could make it more difficult for a
    third party to acquire us, discourage a takeover, and adversely
    affect existing stockholders.









| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | Our effective tax rate may increase or fluctuate, which
    could increase our income tax expense and reduce our net
    income.





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Changes to current accounting principles could have a
    significant effect on our reported financial results or the way
    in which we conduct our business.





| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | stock-based compensation;                                                                                                                         
|
| |  | accounting for variable interest entities;                                                                                                        
|
| |  | accounting for goodwill and other intangible assets; and                                                                                          
|
| |  | accounting issues related to certain features of contingently
    convertible debt instruments and their effect on diluted
    earnings per share.



26



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##### Table of Contents








|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings












|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.



27



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##### Table of Contents






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|     |                                           |      |   |       |     |  |   |      | 
|---- | ----------------------------------------- | ---- | - | ----- | --- |  | - | ---- | 
|     |                                           | High |   |       | Low | 
|     |                                           |      |   |       |     | 
|2004 |                                           |      |   |       |     |  |   |     
|     | First quarter                             |      | $ | 12.40 |     |  | $ | 7.41 | 
|     | Second quarter                            |      | $ | 11.55 |     |  | $ | 7.25 | 
|     | Third quarter                             |      | $ | 9.10  |     |  | $ | 3.88 | 
|     | Fourth quarter                            |      | $ | 4.59  |     |  | $ | 1.49 | 
|2005 |                                           |      |   |       |     |  |   |     
|     | First quarter                             |      | $ | 3.57  |     |  | $ | 1.69 | 
|     | Second quarter                            |      | $ | 3.20  |     |  | $ | 1.12 | 
|     | Third quarter                             |      | $ | 3.86  |     |  | $ | 2.37 | 
|     | Fourth quarter                            |      | $ | 7.21  |     |  | $ | 3.02 | 
|2006 |                                           |      |   |       |     |  |   |     
|     | First quarter                             |      | $ | 5.75  |     |  | $ | 3.35 | 
|     | Second quarter                            |      | $ | 4.50  |     |  | $ | 2.02 | 
|     | Third quarter (through September 8, 2006) |      | $ | 4.50  |     |  | $ | 2.20 | 



Dividends






28



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Equity Compensation Plan Information




|                                                               |  |                      |           |  |                   |                      |      |                       |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | --------- |  | ----------------- | -------------------- | ---- | --------------------- |  |  | --------- | 
|                                                               |  |                      |           |  |                   | (c)                  |     
|                                                               |  |                      |           |  |                   | Number of Securities |     
|                                                               |  |                      |           |  |                   | Remaining Available  |     
|                                                               |  |                      |           |  |                   | for Future Issuance  |     
|                                                               |  | (a)                  |           |  | (b)               |                      |      | Under Share-Based     | 
|                                                               |  | Number of Securities |           |  | Weighted-Average  |                      |      | Compensation Plans    | 
|                                                               |  | to be Issued Upon    |           |  | Exercise Price of |                      |      | [Excluding Securities | 
|                                                               |  | Exercise of          |           |  | Outstanding       |                      |      | Reflected in Column   | 
|Plan Category                                                  |  | Outstanding Options  |           |  | Options           |                      |      | (a)]                  | 
|                                                               |  |                      |           |  |                   |                      |      |                       | 
|Share-Based Compensation Plans Approved by Stockholders        |  |                      | 3,047,733 |  |                   | $                    | 4.17 |                       |  |  | 2,048,454 | 
|Share-Based Compensation Plans Not Approved By Stockholders(1) |  |                      |          |  |                   |                      |     |                       |  |  |          | 
|                                                               |  |                      |           |  |                   |                      |      |                       | 
|Total                                                          |  |                      | 3,047,733 |  |                   | $                    | 4.17 |                       |  |  | 2,048,454 | 
|                                                               |  |                      |           |  |                   |                      |      |                       | 






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |        |  |   |       |       | 
|----------------------------- | ------------------------------------ | ------------------------------------- | ------- | ------- | ---- | - | ------ | ------ |  | - | ------ | ------ |  | - | ----- | ----- | 
|                              |                                      | Years Ended June 30,                  |        
|                              |                                      |                                       |        
|                              |                                      | 2006                                  |         |         | 2005 |   |        | 2004   |  |   | 2003   |       
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       
|                              |                                      | (In thousands, except per share data) |        
|Statement of Operations Data: |                                      |                                       |         |         |      |   |        |        |  |   |        |        |  |   |       |      
|Net sales                     |                                      | $                                     | 192,990 |         |      | $ | 82,586 |        |  | $ | 30,616 |        |  | $ | 2,428 |      
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       
|Costs and expenses:           |                                      |                                       |         |         |      |   |        |        |  |   |        |        |  |   |       |      
|                              | Cost of sales                        |                                       |         | 169,096 |      |   |        | 71,825 |  |   |        | 28,351 |  |   |       | 2,690 | 
|                              | Selling, distribution, and marketing |                                       |         | 8,320   |      |   |        | 2,801  |  |   |        | 842    |  |   |       | 6     | 
|                              | General and administrative           |                                       |         | 18,123  |      |   |        | 7,616  |  |   |        | 2,167  |  |   |       | 103   | 
|                              | Research and development             |                                       |         | 4,416   |      |   |        | -0-    |  |   |        | -0-    |  |   |       | -0-   | 
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       
|Operating income (loss)       |                                      |                                       | (6,965  | )       |      |   | 344    |        |  |   | (744   | )      |  |   | (371  | )    
|Income tax expense (benefit)  |                                      |                                       |        |         |      |   | 78     |        |  |   | (357   | )      |  |   | (152  | )    
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       
|Net loss                      |                                      | $                                     | (18,879 | )       |      | $ | (17    | )      |  | $ | (605   | )      |  | $ | (235  | )    
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       
|Loss per share                |                                      | $                                     | (0.46   | )       |      | $ | (0.00  | )      |  | $ | (0.02  | )      |  | $ | (0.01 | )    
|                              |                                      |                                       |         |         |      |   |        |        |  |   |        |       

29



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|                           |  |                |         |  |      |   |        |      |  |   |        |  |  |   |       | 
|-------------------------- |  | -------------- | ------- |  | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ----- | 
|                           |  | June 30,       |        
|                           |  |                |        
|                           |  | 2006           |         |  | 2005 |   |        | 2004 |  |   | 2003   | 
|                           |  |                |         |  |      |   |        |      |  |   |        | 
|                           |  | (In thousands) |        
|Balance Sheet Data:        |  |                |         |  |      |   |        |      |  |   |        |  |  |   |       | 
|Cash and cash equivalents  |  | $              | 7,375   |  |      | $ | 1,804  |      |  | $ | 769    |  |  | $ | 297   | 
|Total assets               |  | $              | 127,656 |  |      | $ | 37,634 |      |  | $ | 14,038 |  |  | $ | 5,045 | 
|Total stockholders equity |  | $              | 64,802  |  |      | $ | 8,234  |      |  | $ | 585    |  |  | $ | 98    | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

You should read the following discussion and analysis in
conjunction with our financial statements and related notes
contained elsewhere in this report. This discussion contains
forward-looking statements that involve risks, uncertainties,
and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a
result of a variety of factors, including those set forth under
Item 1A. Risk Factors.


Overview


65-inch 42-inch 47-inch 65-inch near-to


Net Sales. near-to


Cost of Sales.


Selling, Distribution, and Marketing Expense.


General and Administrative Expense.


Research and Development Expense.


30



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##### Table of Contents





Critical Accounting Policies and Estimates
















02-16,


31



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##### Table of Contents











on-site 12-month




32



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##### Table of Contents



Results of Operations




|                                  |                                      |                          |      |      |       |  |     |      |      |  |      |      |       | 
|--------------------------------- | ------------------------------------ | ------------------------ | ---- | ---- | ----- |  | --- | ---- | ---- |  | ---- | ---- | ----- | 
|                                  |                                      | Years Ended June 30,     |     
|                                  |                                      |                          |     
|                                  |                                      | 2006                     |      |      | 2005  |  |     | 2004 |     
|                                  |                                      |                          |      |      |       |  |     |      |     
|Net sales                         |                                      |                          | 100  | %    |       |  | 100 | %    |      |  | 100  | %   
|                                  |                                      |                          |      |      |       |  |     |      |     
|Costs and expenses:               |                                      |                          |      |      |       |  |     |      |      |  |      |     
|                                  | Cost of sales                        |                          |      | 87.6 |       |  |     | 87.0 |      |  |      | 92.6 |      
|                                  | Selling, distribution, and marketing |                          |      | 4.3  |       |  |     | 3.4  |      |  |      | 2.8  |      
|                                  | General and administrative           |                          |      | 9.4  |       |  |     | 9.2  |      |  |      | 7.1  |      
|                                  | Research and development             |                          |      | 2.3  |       |  |     |     |      |  |      |     |      
|                                  |                                      |                          |      |      |       |  |     |      |     
|                                  |                                      | Total costs and expenses |      |      | 103.6 |  |     |      | 99.6 |  |      |      | 102.5 | 
|                                  |                                      |                          |      |      |       |  |     |      |     
|Operating income (loss)           |                                      |                          | (3.6 | )    |       |  | .4  |      |      |  | (2.5 | )   
|Income (loss) before income taxes |                                      |                          | (9.8 | )%   |       |  | 0   | %    |      |  | (3.1 | )%  
|                                  |                                      |                          |      |      |       |  |     |      |     



| |                                                                    
| | -------------------------------------------------------------------
| | Year ended June 30, 2006 compared with year ended
    June 30, 2005

Net Sales.




Cost of Sales.






33



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02-16,






on-site on-site 12-month




34



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##### Table of Contents





Selling, Distribution, and Marketing Expense.


General and Administrative Expense.


Research and Development Expense.


Interest Expense.


Income Taxes.




Net Loss.


35



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| |                                                                    
| | -------------------------------------------------------------------
| | Year ended June 30, 2005 compared with year ended
    June 30, 2004

Net Sales.


Cost of Sales.








Selling, Distribution, and Marketing Expense.


General and Administrative Expense.


Interest Expense.


Net Loss.


36



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##### Table of Contents



Quarterly Results of Operations




|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |        |  |   |        |        |  |   |       |       | 
|---------------------------- | ------------------------------------ | -------------- | ------ | ------ | ------- | - | ------- | ------- | - | - | ------- | ------ | - | ------- | ------ | ------ | ------- | - | ------ | ------- | - | - | ------- | ------ |  | - | ------ | ------ |  | - | ----- | ----- | 
|                             |                                      | Quarters Ended |       
|                             |                                      |                |       
|                             |                                      | 2006           |        |        | 2005    |   |         | 2004    |  
|                             |                                      |                |        |        |         |   |         |         |  
|                             |                                      | Jun. 30        |        |        | Mar. 31 |   |         | Dec. 31 |   |   | Sep. 30 |        |   | Jun. 30 |        |        | Mar. 31 |   |        | Dec. 31 |   |   | Sep. 30 |       
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|                             |                                      | (In thousands) |       
|Net sales                    |                                      | $              | 59,807 |        |         | $ | 45,671  |         |   | $ | 60,155  |        |   | $       | 27,357 |        |         | $ | 22,864 |         |   | $ | 21,255  |        |  | $ | 28,809 |        |  | $ | 9,656 |      
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|Cost and expenses:           |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |        |  |   |        |        |  |   |       |      
|                             | Cost of sales                        |                |        | 52,523 |         |   |         | 41,514  |   |   |         | 53,321 |   |         |        | 21,738 |         |   |        | 20,003  |   |   |         | 17,570 |  |   |        | 25,836 |  |   |       | 8,416 | 
|                             | Selling, distribution, and marketing |                |        | 2,867  |         |   |         | 2,527   |   |   |         | 1,988  |   |         |        | 937    |         |   |        | 805     |   |   |         | 926    |  |   |        | 698    |  |   |       | 371   | 
|                             | General and administrative           |                |        | 4,477  |         |   |         | 4,060   |   |   |         | 4,460  |   |         |        | 5,127  |         |   |        | 2,590   |   |   |         | 2,476  |  |   |        | 1,521  |  |   |       | 1,027 | 
|                             | Research and development             |                |        | 1,853  |         |   |         | 1,936   |   |   |         | 627    |   |         |        |       |         |   |        |        |   |   |         |       |  |   |        |       |  |   |       |      | 
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|                             |                                      |                | 9,197  |        |         |   | 8,523   |         |   |   | 7,075   |        |   |         | 6,064  |        |         |   | 3,395  |         |   |   | 3,402   |        |  |   | 2,219  |        |  |   | 1,398 |      
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|Operating income (loss)      |                                      |                | (1,913 | )      |         |   | (4,366  | )       |   |   | (241    | )      |   |         | (445   | )      |         |   | (534   | )       |   |   | 283     |        |  |   | 754    |        |  |   | (158  | )    
|Income tax benefit (expense) |                                      |                |       |        |         |   |        |         |   |   | (79     | )      |   |         | 79     |        |         |   | 273    |         |   |   | (95     | )      |  |   | (255   | )      |  |   | (1    | )    
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|Net income (loss)            |                                      | $              | (5,498 | )      |         | $ | (11,412 | )       |   | $ | (1,311  | )      |   | $       | (658   | )      |         | $ | (382   | )       |   | $ | 143     |        |  | $ | 414    |        |  | $ | (192  | )    
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       
|                             | Net income (loss) per share          |                | $      | (0.11  | )       |   | $       | (0.26   | ) |   | $       | (0.04  | ) |         | $      | (0.05  | )       |   | $      | (0.01   | ) |   | $       | 0.00   |  |   | $      | 0.01   |  |   | $     | 0.00  | 
|                             |                                      |                |        |        |         |   |         |         |   |   |         |        |   |         |        |        |         |   |        |         |   |   |         |       



Liquidity and Capital Resources










37



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30-day


38



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| |                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) the aggregate facility is $28,000,000 and (2) the
    Borrowing Base is the lesser of $28,000,000 or the sum of 80% of
    the accounts approved and assigned to CIT plus 40% of eligible
    inventory, up to a maximum of $12,000,000, with the following
    limitations:



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | (a) $18,000,000 limitation for the issuance of letters of
    credit not subject to the borrowing base;            
|
| | (b) $9,000,000 for trust receipts and acceptances up to
    90 days subject to the borrowing base;                 
|
| | (c) $10,000,000 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
    $18,000,000;                                                  
|
| | (e) The amounts in (a) plus (b) plus
    (c) shall not exceed $28,000,000; and                                     
|
| | (f) Interest to be charged at Preferred Banks prime
    rate (8.25% at June 30, 2006) plus .50%.                  













39



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Aggregate Contractual Obligations and Commercial
Commitments




|                                                   |  |       |        |                        |        |  |        |       |  |     |       |  |           |         |   |  |  |  |   | 
|-------------------------------------------------- |  | ----- | ------ | ---------------------- | ------ |  | ------ | ----- |  | --- | ----- |  | --------- | ------- | - |  |  |  | - | 
|                                                   |  |       |        | Payments Due by Period |       
|                                                   |  |       |        |                        |       
|                                                   |  |       |        | Less                   |        |  |       
|                                                   |  |       |        | Than                   |        |  | 1-3    |       |  | 4-5 |       |  | More Than |        
|                                                   |  | Total |        |                        | 1 Year |  |        | Years |  |     | Years |  |           | 5 Years |  
|                                                   |  |       |        |                        |        |  |        |       |  |     |       |  |           |         |  
|Long-term debt                                     |  | $     | 6,393  |                        |        |  |       |       |  |     | 6,393 |  |           |         |  |  |  |  |  | 
|Interest payments on long-term debt                |  | $     | 949    |                        |        |  | 494    |       |  |     | 455   |  |           |         |  |  |  |  |  | 
|Loans payable  bank                               |  | $     | 30,800 |                        |        |  | 30,800 |       |  |     |      |  |           |         |  |  |  |  |  | 
|Redeemable convertible preferred stock redemptions |  | $     | 15,000 |                        |        |  | 7,500  |       |  |     | 7,500 |  |           |         |  |  |  |  |  | 
|Redeemable convertible preferred stock dividends   |  | $     | 938    |                        |        |  | 806    |       |  |     | 132   |  |           |         |  |  |  |  |  | 
|Facilities leases                                  |  | $     | 4,121  |                        |        |  | 1,400  |       |  |     | 2,721 |  |           |         |  |  |  |  |  | 
|Purchase orders                                    |  | $     | 97,379 |                        |        |  | 97,379 |       |  |     |      |  |           |         |  |  |  |  |  | 
|Advertising commitments                            |  | $     | 11,760 |                        |        |  | 11,760 |       |  |     |      |  |           |         |  |  |  |  |  | 
|Investment commitments                             |  | $     | 530    |                        |        |  | 530    |       |  |     |      |  |           |         |  |  |  |  |  | 

Off-Balance Sheet Arrangements




Impact of Recently Issued Standards










40



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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk

Derivative Financial Instruments, Other Financial
Instruments, and Derivative Commodity Instruments




Primary Market Risk Exposures




Interest Rate Risk 


Foreign Currency Risk 


Credit Risk 


Equity Price Risk 







|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures








|         |                   
|-------- | ------------------
|Item 9B. | Other Information.



41



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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                          
|-------- | -----------------------------------------
|Item 15. | Exhibit and Financial Statement Schedules

Financial Statements and Financial Statement
Schedules




| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | (1) Financial Statements are listed in the Index to
    Financial Statements on page F-1 of this report.
|
| | (2) See Index to Financial Statements for financial
    statement schedules.                            

Exhibits


|        |   |         |  |                                                                                                                                                         
|------- | - | ------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |        
|Number  |   | Exhibit
|        |   |        
|        | 2 |         |  | Master Separation and Distribution Agreement(1)                                                                                                         
|        | 2 | .1      |  | Agreement and Plan of Reorganization, dated as of July 12,
    2005, by and among the Registrant, BRMC Corporation, and Syntax
    Groups Corporation(2)
|        | 3 | .1      |  | Certificate of Incorporation of the Registrant(3)                                                                                                       
|        | 3 | .2      |  | Certificate of Designation of Series A Junior Participating
    Preferred Stock(1)                                                                      
|        | 3 | .3      |  | Bylaws of the Registrant(3)                                                                                                                             
|        | 3 | .4      |  | Certificate of Designation of 6% Redeemable Convertible
    Preferred Stock(4)                                                                          
|        | 3 | .5      |  | Certificate of Amendment to Certificate of Incorporation of the
    Registrant(5)                                                                       

42



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|        |    |         |  |                                                                                                                                                                                                                                                                                                       
|------- | -- | ------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 4  | .1      |  | Specimen of Common Stock Certificate(6)                                                                                                                                                                                                                                                               
|        | 4  | .2      |  | Rights Agreement between the Registrant and The Bank of New
    York, as Rights Agent, including Form of Right Certificate(1)                                                                                                                                                                         
|        | 4  | .3      |  | Form of Amended and Restated 7% Convertible Debenture due
    April 20, 2008, executed in favor of Gamma Opportunity
    Capital Partners LP, Enable Growth Partners LP, Enable
    Opportunity Partners LP, Bushido Capital Master Fund LP,
    and SRG Capital LLC(7)                               
|        | 4  | .4      |  | Form of Amended and Restated Warrant issued to Gamma Opportunity
    Capital Partners LP, Enable Growth Partners LP, Enable
    Opportunity Partners LP, Bushido Capital Master Fund LP,
    SRG Capital LLC, and Regenmacher Holdings Ltd.(7)                                                        
|        | 4  | .5      |  | Registration Rights Agreement, dated as of April 18, 2005,
    by and among the Registrant, Gamma Opportunity Capital Partners,
    LP, Enable Growth Partners, LP, Enable Opportunity Partners, LP,
    Bushido Capital Master Fund LP, SRG Capital LLC, and
    Regenmacher Holdings Ltd.(8)        
|        | 4  | .6      |  | Registration Rights Agreement, dated as of July 12, 2005,
    by and among the Registrant, Enable Growth Partners LP, Enable
    Opportunity Partners LP, Bushido Capital Master Fund LP,
    SRG Capital LLC, Gryphon Master Fund, L.P., GSSF Master Fund,
    L.P., and Regenmacher Holdings Ltd.(7)
|        | 4  | .7      |  | Form of 4% Convertible Debenture due July 12, 2008, in
    favor of Enable Growth Partners, LP, Enable Opportunity Partners
    LP, Bushido Capital Master Fund LP, SRG Capital LLC,
    Gryphon Master Fund, L.P., and GSSF Master Fund, L.P.(7)                                                     
|        | 4  | .8      |  | Form of Warrant issued on July 12, 2005 to Enable Growth
    Partners, LP, Enable Opportunity Partners LP, Bushido Capital
    Master Fund LP, SRG Capital LLC, Gryphon Master Fund, L.P.,
    GSSF Master Fund, L.P., and Regenmacher Holdings Ltd.(7)                                               
|        | 4  | .9      |  | 9% Senior Secured Debenture Due July 12, 2008, in
    favor of Regenmacher Holdings Ltd.(7)                                                                                                                                                                                                           
|        | 4  | .10     |  | Junior Secured Subordinated Note due September 16, 2008, in
    favor of Syntax Groups Corporation(9)                                                                                                                                                                                                 
|        | 4  | .11     |  | Form of Warrant to be issued to Syntax Groups Corporation in
    connection with the Note and Warrant Purchase Agreement forming
    Exhibit 10.34(9)                                                                                                                                                 
|        | 4  | .12     |  | Amendment No. 1 to Rights Agreement, dated as of
    November 8, 2005, between the Registrant and The Bank of
    New York, as Rights Agent(10)                                                                                                                                                       
|        | 4  | .13     |  | Form of warrant issued in connection with the Securities
    Purchase Agreement forming Exhibit 10.36.(4)                                                                                                                                                                                             
|        | 4  | .14     |  | Registration Rights Agreement, dated as of December 29,
    2005, by and among the Registrant and the purchasers named
    therein.(4)                                                                                                                                                                
|        | 4  | .15     |  | Specimen of 6% Redeemable Convertible Preferred Stock
    Certificate(11)                                                                                                                                                                                                                             
|        | 4  | .16     |  | Warrant issued in connection with the Securities Purchase
    Agreement constituting Exhibit 10.42.(12)                                                                                                                                                                                               
|        | 4  | .17     |  | Registration Rights Agreement, dated as of March 29, 2006,
    between the Registrant and Taiwan Kolin Co. Ltd.(12)                                                                                                                                                                                   
|        | 10 | .1      |  | Assignment and Assumption Agreement(1)                                                                                                                                                                                                                                                                
|        | 10 | .2      |  | Intellectual Property Agreement(1)                                                                                                                                                                                                                                                                    
|        | 10 | .3      |  | Tax Sharing Agreement(1)                                                                                                                                                                                                                                                                              
|        | 10 | .4      |  | First Amended and Restated Real Property Sublease Agreement(13)                                                                                                                                                                                                                                       
|        | 10 | .5      |  | Transition Services Agreement(1)                                                                                                                                                                                                                                                                      
|        | 10 | .6      |  | 2003 Incentive Compensation Plan(14)                                                                                                                                                                                                                                                                  
|        | 10 | .7      |  | Profit Sharing/401(k) Plan(1)                                                                                                                                                                                                                                                                         
|        | 10 | .8      |  | 2003 Employee Stock Purchase Plan(15)                                                                                                                                                                                                                                                                 
|        | 10 | .9      |  | Form of Indemnity Agreement for directors and executive
    officers(3)                                                                                                                                                                                                                               

43



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|        |    |         |  |                                                                                                                                                                                                                                                                            
|------- | -- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 10 | .10     |  | Amendment No. 1 to the First Amended and Restated Real
    Property Sublease Agreement between the Registrant and
    Three-Five Systems, Inc.(16)                                                                                                                         
|        | 10 | .11     |  | Share Purchase Agreement dated as of December 10, 2004, by
    and between the Registrant and JDS Uniphase Corporation(17)                                                                                                                                                 
|        | 10 | .12     |  | Non-Exclusive License Agreement dated as of December 10,
    2004, by and between the Registrant and JDS Uniphase
    Corporation(17)**                                                                                                                                    
|        | 10 | .13     |  | Letter Agreement dated as of December 10, 2004, by and
    between the Registrant and JDS Uniphase Corporation(17)**                                                                                                                                                       
|        | 10 | .14     |  | Equipment Loan Agreement dated as of December 10, 2004, by
    and between the Registrant and JDS Uniphase Corporation(17)**                                                                                                                                               
|        | 10 | .15     |  | Restricted Stock Unit Agreement dated February 2005 by and
    between the Registrant and Vincent F. Sollitto, Jr.(18)                                                                                                                                                     
|        | 10 | .16     |  | Restricted Stock Unit Agreement dated February 2005 by and
    between the Registrant and Wayne A. Pratt(18)                                                                                                                                                               
|        | 10 | .17     |  | Restricted Stock Unit Agreement dated February 2005 by and
    between the Registrant and Robert L. Melcher(18)                                                                                                                                                            
|        | 10 | .18     |  | Second Amended and Restated Real Property Sublease Agreement(19)                                                                                                                                                                                                           
|        | 10 | .19     |  | Securities Purchase Agreement, dated as of April 18, 2005,
    by and among the Registrant, Gamma Opportunity Capital Partners,
    LP, Enable Growth Partners, LP, Enable Opportunity Partners, LP,
    Bushido Capital Master Fund LP, and SRG Capital LLC(8)            
|        | 10 | .20     |  | Securities Purchase Agreement, dated as of April 18, 2005,
    by and between the Registrant and Regenmacher Holdings Ltd.(8)                                                                                                                                              
|        | 10 | .21     |  | 9% Senior Secured Debenture Due April 18, 2008, in
    favor of Regenmacher Holdings Ltd.(8)                                                                                                                                                                               
|        | 10 | .22     |  | Security Agreement, dated as of April 18, 2008, by and
    between the Registrant and Regenmacher Holdings Ltd.(8)                                                                                                                                                         
|        | 10 | .23     |  | Voting and Lock-Up Agreement, dated as of July 12, 2005, by
    and among the Registrant, Tzu Ping Ho, Man Kit Chow, Lily Lau,
    Taiwan Kolin Company Limited, Lin-Li Wu, Ching Hua Li, and
    Michael Chan(2)                                                          
|        | 10 | .24     |  | Stockholders Voting Agreement, dated as of July 12,
    2005, by and among the Registrant, Vincent Sollitto, Wayne
    Pratt, Ching Hua Li, Man Kit Chow, Roger Kao, Tzu Ping Ho, Lily
    Lay Taiwan Kolin Company Limited, Lin-Li Wu, and Michael Chan(2)               
|        | 10 | .25     |  | Employment Agreement by and between the Registrant and Vincent
    Sollitto(2)                                                                                                                                                                                             
|        | 10 | .26     |  | Employment Agreement by and between the Registrant and Wayne
    Pratt(2)                                                                                                                                                                                                  
|        | 10 | .27     |  | Employment Agreement by and between the Registrant and James
    Li(2)                                                                                                                                                                                                     
|        | 10 | .28     |  | Employment Agreement by and between the Registrant and Thomas
    Chow(2)                                                                                                                                                                                                  
|        | 10 | .29     |  | Employment Agreement by and between the Registrant and Michael
    Chan(2)                                                                                                                                                                                                 
|        | 10 | .30     |  | Employment Agreement by and between the Registrant and Robert
    Melcher(2)                                                                                                                                                                                               
|        | 10 | .31     |  | Amendment, Extension and Waiver Agreement dated July 12,
    2005, between the Registrant and Regenmacher Holdings Ltd.(7)                                                                                                                                                 
|        | 10 | .32     |  | Agreement to Amend Debentures and Warrants dated July 12,
    2005, among the Registrant, Gamma Opportunity Capital Partners
    LP, Enable Growth Partners LP, Enable Opportunity Partners LP,
    Bushido Capital Master Fund LP, and SRG Capital LLP(7)                 
|        | 10 | .33     |  | Securities Purchase Agreement, dated as of July 12, 2005,
    by and among the Registrant, Enable Growth Partners LP, Enable
    Opportunity Partners LP, Bushido Capital Master Fund LP,
    SRG Capital LLC, Gryphon Master Fund, L.P., and GSSF Master
    Fund, L.P.(7)
|        | 10 | .34     |  | Note and Warrant Purchase Agreement dated September 16,
    2005, between the Registrant and Syntax Groups Corporation(9)                                                                                                                                                  
|        | 10 | .35     |  | Security Agreement dated September 16, 2005, between the
    Registrant and Syntax Groups Corporation(9)                                                                                                                                                                   

44



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##### Table of Contents






|        |    |         |  |                                                                                                                                                                          
|------- | -- | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        
|Number  |    | Exhibit
|        |    |        
|        | 10 | .36     |  | Securities Purchase Agreement, dated as of December 28,
    2005, among the Registrant and the purchasers named therein(4)                                               
|        | 10 | .37     |  | Syntax Groups Corporation 2005 Stock Incentive Plan 2005
    Deferred and Restricted Stock Plan(20)                                                                      
|        | 10 | .38     |  | Business Loan and Security Agreement dated as of
    September 28, 2005 among Preferred Bank, Syntax Groups
    Corporation, and Syntax Corporation(11)                  
|        | 10 | .39     |  | Change in Terms Agreement dated as of December 14, 2005
    among Preferred Bank, Syntax Groups Corporation, and Syntax
    Corporation(11)                              
|        | 10 | .40     |  | Second Amendment to Business Loan and Security Agreement dated
    as of January 31, 2006 among Preferred Bank, Syntax Groups
    Corporation, and Syntax Corporation(11)
|        | 10 | .41     |  | Form of Continuing Guaranty entered into in connection with
    Exhibit 10.40, and schedule listing signatories(11)                                                      
|        | 10 | .42     |  | Securities Purchase Agreement, dated as of March 29, 2006,
    between the Registrant and Taiwan Kolin Co. Ltd.(12)                                                      
|        | 21 |         |  | Subsidiaries*                                                                                                                                                            
|        | 23 | .1      |  | Consent of Grobstein, Horwath & Company LLP*                                                                                                                             
|        | 31 | .1      |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a)*                                                                                       
|        | 31 | .2      |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a)*                                                                                       
|        | 32 | .1      |  | Section 1350 Certification of Chief Executive Officer*                                                                                                                   
|        | 32 | .2      |  | Section 1350 Certification of Chief Financial Officer*                                                                                                                   









|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the Registration Statement on
    Form 10/ A (Amendment No. 4) as filed with the SEC on
    September 3, 2003.                
|   
|(2) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated July 12, 2005, as filed with the SEC on July 18,
    2005.          
|   
|(3) | Incorporated by reference to the Registration Statement on
    Form 10/ A (Amendment No. 1) as filed with the SEC on
    June 27, 2003.                    
|   
|(4) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated December 28, 2005, as filed with the SEC on
    January 3, 2006.    
|   
|(5) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated March 17, 2006, as filed with the SEC on
    March 21, 2006.        
|   
|(6) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated November 30, 2005, as filed with the SEC on
    December 6, 2005.   
|   
|(7) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated July 12, 2005, as filed with the SEC on July 18,
    2005.          
|   
|(8) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated April 20, 2005, as filed with the SEC on
    April 26, 2005.        
|   
|(9) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated September 16, 2005, as filed with the SEC on
    September 22, 2005.



|     |                                                                                                                                                                  
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated November 8, 2005, as filed with the SEC on
    November 10, 2005.         
|    
|(11) | Incorporated by reference to the Registrants
    Form 10-Q for the
    quarterly period ended December 31, 2005, as filed with the
    SEC on February 21, 2006.
|    
|(12) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated March 29, 2006, as filed with the SEC on
    April 3, 2006.               
|    
|(13) | Incorporated by reference to the Registrants
    Form 10-Q for the
    quarterly period ended June 30, 2004, as filed with the SEC
    on August 12, 2004.      

45



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##### Table of Contents





|     |                                                                                                                                                                               
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(14) | Incorporated by reference to the Registration Statement on
    Form S-8
    (Registration
    No. 333-108362) as
    filed with the SEC on August 29, 2003.                   
|    
|(15) | Incorporated by reference to the Registration Statement on
    Form S-8
    (Registration
    No. 333-108363) as
    filed with the SEC on August 29, 2003.                   
|    
|(16) | Incorporated by reference to the Registrants
    Form 10-Q for the
    quarterly period ended September 30, 2004, as filed with
    the SEC on November 15, 2004.            
|    
|(17) | Incorporated by reference to the Registrants Current
    Report on
    Form 8-K/ A dated
    December 10, 2004, as filed with the SEC on
    September 16, 2005.             
|    
|(18) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated February 28, 2005, as filed with the SEC on
    March 4, 2005.                         
|    
|(19) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K for
    the year ended December 31, 2004, as filed with the SEC on
    March 31, 2005.           
|    
|(20) | Incorporated by reference to Exhibit 99.1 to the
    Registration Statement on
    Form S-8
    (Registration
    No. 333-132479) as
    filed with the SEC on March 16, 2006.



| |   |                
| | - | ---------------
| | * | Filed herewith.



|   |                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Portions of this exhibit have been omitted pursuant to a
    confidential treatment request that was granted by the
    Securities and Exchange Commission pursuant to
    Rule 24b-2 of the
    Exchange Act.

46



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##### Table of Contents






SIGNATURES






| |                                     
| | ------------------------------------
| | SYNTAX-BRILLIAN CORPORATION         
|
| | /s/ VINCENT F. SOLLITTO,
    JR.    
| |                                     
| | Vincent F. Sollitto, Jr.            
| | Chairman and Chief Executive Officer









47



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                          |  |      |     | 
|--------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                          |  | Page |    
|                                                                                                          |  |      |    
|Report of Independent Registered Accounting
    Firm                                                      |  |      | F-2 | 
|Consolidated Balance Sheets as of
    June 30, 2006 and 2005                                              |  |      | F-3 | 
|Consolidated Statements of Operations for
    the years ended June 30, 2006, 2005, and 2004               |  |      | F-4 | 
|Consolidated Statements of
    Stockholders Equity for the years ended June 30,
    2006, 2005, and 2004 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for
    the years ended June 30, 2006, 2005, and 2004               |  |      | F-6 | 
|Notes to Consolidated Financial
    Statements                                                            |  |      | F-7 | 
|Schedule II  Valuation and
    Qualifying Accounts for the years ended June 30, 2006,
    2005, and 2004 |  |      | S-1 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM














| |                                     
| | ------------------------------------
| | /s/ Grobstein, Horwath & Company LLP
| | GROBSTEIN, HORWATH & COMPANY LLP    





F-2



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





CONSOLIDATED BALANCE SHEETS





|                                                                |                                                                                                                                                                          |                            |                                            |         |          |         |     |        |        |        | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------------------------------------ | ------- | -------- | ------- | --- | ------ | ------ | ------ | 
|                                                                |                                                                                                                                                                          | June 30,                   |                                            |         | June 30, |        
|                                                                |                                                                                                                                                                          | 2006                       |                                            |         | 2005     |        
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          | (In thousands)             |                                           
|ASSETS                                                         
|Current Assets:                                                 |                                                                                                                                                                          |                            |                                            |         |          |         |     |       
|                                                                | Cash and cash equivalents                                                                                                                                                |                            | $                                          | 7,375   |          |         | $   | 1,804  |       
|                                                                | Accounts receivable and due from factor, net                                                                                                                             |                            |                                            | 50,829  |          |         |     | 15,573 |       
|                                                                | Inventories, net                                                                                                                                                         |                            |                                            | 13,151  |          |         |     | 15,139 |       
|                                                                | Deposit with Kolin (a related party)                                                                                                                                     |                            |                                            | 5,067   |          |         |     | 847    |       
|                                                                | Deferred income taxes, current portion                                                                                                                                   |                            |                                            | 2,666   |          |         |     | 2,060  |       
|                                                                | Other current assets                                                                                                                                                     |                            |                                            | 1,370   |          |         |     | 925    |       
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          | Total current assets       |                                            |         | 80,458   |         |     |        | 36,348 |       
|Property, plant and equipment, net                              |                                                                                                                                                                          |                            | 16,703                                     |         |          |         | 816 |       
|Investments                                                     |                                                                                                                                                                          |                            | 1,307                                      |         |          |         | 424 |       
|Intangible assets, net                                          |                                                                                                                                                                          |                            | 20,737                                     |         |          |         |    |       
|Goodwill                                                        |                                                                                                                                                                          |                            | 6,990                                      |         |          |         |    |       
|Other assets                                                    |                                                                                                                                                                          |                            | 1,461                                      |         |          |         | 46  |       
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          |                            | Total Assets                               |         | $        | 127,656 |     |        | $      | 37,634 | 
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                               
|LIABILITIES AND STOCKHOLDERS EQUITY                           
|Current Liabilities:                                            |                                                                                                                                                                          |                            |                                            |         |          |         |     |       
|                                                                | Loans payable, bank                                                                                                                                                      |                            | $                                          | 30,800  |          |         | $   | 12,049 |       
|                                                                | Notes payable                                                                                                                                                            |                            |                                            | 650     |          |         |     | 461    |       
|                                                                | Accounts payable                                                                                                                                                         |                            |                                            | 3,924   |          |         |     | 9,287  |       
|                                                                | Accrued rebates payable                                                                                                                                                  |                            |                                            | 4,043   |          |         |     | 1,382  |       
|                                                                | Deferred warranty revenue                                                                                                                                                |                            |                                            | 4,551   |          |         |     | 1,995  |       
|                                                                | Income taxes payable                                                                                                                                                     |                            |                                            | 96      |          |         |     | 1,510  |       
|                                                                | Other current liabilities                                                                                                                                                |                            |                                            | 5,540   |          |         |     | 2,667  |       
|                                                                | Current portion of redeemable convertible preferred stock                                                                                                                |                            |                                            | 3,432   |          |         |     |       |       
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          | Total Current Liabilities  |                                            |         | 53,036   |         |     |        | 29,351 |       
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|Long-term debt (net of $2,635 discount)                         |                                                                                                                                                                          |                            | 3,758                                      |         |          |         |    |       
|Redeemable convertible preferred stock (net of $8,137 discount) |                                                                                                                                                                          |                            | 3,432                                      |         |          |         |    |       
|Deferred income taxes                                           |                                                                                                                                                                          |                            | 2,628                                      |         |          |         | 49  |       
|Stockholders Equity:                                           |                                                                                                                                                                          |                            |                                            |         |          |         |     |       
|                                                                | Common stock, $.001 par value; 120,000,000 and
    60,000,000 shares authorized, 48,845,912 and
    32,156,950 shares issued at June 30, 2006 and 2005,
    respectively |                            |                                            | 49      |          |         |     | 7      |       
|                                                                | Additional paid-in capital                                                                                                                                               |                            |                                            | 84,489  |          |         |     | 9,084  |       
|                                                                | Accumulated deficit                                                                                                                                                      |                            |                                            | (19,736 | )        |         |     | (857   | )     
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          | Total stockholders equity |                                            |         | 64,802   |         |     |        | 8,234  |       
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        
|                                                                |                                                                                                                                                                          |                            | Total Liabilities and Stockholders Equity |         | $        | 127,656 |     |        | $      | 37,634 | 
|                                                                |                                                                                                                                                                          |                            |                                            |         |          |        






F-3



---



##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                          |                                      |                                       |         |         |        |   |        |        |     |   |        |        |      |  
|----------------------------------------- | ------------------------------------ | ------------------------------------- | ------- | ------- | ------ | - | ------ | ------ | --- | - | ------ | ------ | ---- | -
|                                          |                                      | Years Ended June 30,                  |        
|                                          |                                      |                                       |        
|                                          |                                      | 2006                                  |         |         | 2005   |   |        | 2004   |    
|                                          |                                      |                                       |         |         |        |   |        |        |    
|                                          |                                      | (In thousands, except per share data) |        
|Net sales                                 |                                      | $                                     | 192,990 |         |        | $ | 82,586 |        |     | $ | 30,616 |       
|Cost of sales                             |                                      |                                       | 169,096 |         |        |   | 71,825 |        |     |   | 28,351 |       
|                                          |                                      |                                       |         |         |        |   |        |        |    
|                                          |                                      |                                       | 23,894  |         |        |   | 10,761 |        |     |   | 2,265  |       
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Operating expenses:                       |                                      |                                       |         |         |        |   |        |        |     |   |        |       
|                                          | Selling, distribution, and marketing |                                       |         | 8,320   |        |   |        | 2,801  |     |   |        | 842    |     
|                                          | General and administrative           |                                       |         | 18,123  |        |   |        | 7,616  |     |   |        | 2,167  |     
|                                          | Research and development             |                                       |         | 4,416   |        |   |        |       |     |   |        |       |     
|                                          |                                      |                                       |         |         |        |   |        |        |    
|                                          |                                      |                                       | 30,859  |         |        |   | 10,417 |        |     |   | 3,009  |       
|                                          |                                      |                                       |         |         |        |   |        |        |    
|                                          |                                      | Operating income (loss)               |         |         | (6,965 | ) |        |        | 344 |   |        |        | (744 | )
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Other income (expense):                   |                                      |                                       |         |         |        |   |        |        |     |   |        |       
|                                          | Interest, net                        |                                       |         | (11,914 | )      |   |        | (326   | )   |   |        | (217   | )   
|                                          | Other income (expense)               |                                       |         |        |        |   |        | 43     |     |   |        |       |     
|                                          |                                      |                                       |         |         |        |   |        |        |    
|                                          |                                      |                                       | (11,914 | )       |        |   | (283   | )      |     |   | (217   | )     
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Income (loss) before income taxes:        |                                      |                                       | (18,879 | )       |        |   | 61     |        |     |   | (961   | )     
|                                          | Income tax benefit (expense)         |                                       |         |        |        |   |        | (78    | )   |   |        | 356    |     
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Net loss                                  |                                      | $                                     | (18,879 | )       |        | $ | (17    | )      |     | $ | (605   | )     
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Loss per common share:                    |                                      |                                       |         |         |        |   |        |        |     |   |        |       
|                                          | Basic and diluted                    |                                       | $       | (.46    | )      |   | $      | (0.00  | )   |   | $      | (.02   | )   
|                                          |                                      |                                       |         |         |        |   |        |        |    
|Weighted average number of common shares: |                                      |                                       |         |         |        |   |        |        |     |   |        |       
|                                          | Basic and diluted                    |                                       |         | 40,978  |        |   |        | 30,013 |     |   |        | 25,571 |     
|                                          |                                      |                                       |         |         |        |   |        |        |    



F-4



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY





For the Years Ended June, 2006, 2005, and 2004








|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  |         |  
|--------------------------------------------------------- |  | ------------------------------------------- | ---------- |  | ------ | ---------- | -- | ------- |  |  | ------------ | - |  | ---------- | ------ | - | ----------- |  | ------- | ------------- |  |  | ------- | - |  |  | ------- | -
|                                                          |  |                                             |            |  |        | Additional |    |         |  |  |              |   |  |            | Total  |  
|                                                          |  | Common                                      |            |  | Common |            |    | Paid-In |  |  | Deferred     |   |  | TFS Net    |        |   | Accumulated |  |         | Stockholders | 
|                                                          |  | Shares Issued                               |            |  | Stock  |            |    | Capital |  |  | Compensation |   |  | Investment |        |   | Deficit     |  |         | Equity        | 
|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               | 
|                                                          |  | (Amounts in thousands except share amounts) |           
|Balance at June 30, 2003                                  |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  | 25,018  |               |  |  | (235    | ) |  |  | 24,783  |  
|Net transfers from TFS prior to spin-off                  |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  | (1,724  | )             |  |  |         |   |  |  | (1,724  | )
|Initial capitalization at spin-off                        |  |                                             | 5,329,300  |  |        |            | 5  |         |  |  | 44,142       |   |  |            |        |   |             |  | (23,294 | )             |  |  |         |   |  |  | 20,853  |  
|Stock options exercised and restricted stock grants       |  |                                             | 64,932     |  |        |            |    |         |  |  | 130          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 130     |  
|Deferred compensation on employee awards                  |  |                                             |            |  |        |            |    |         |  |  | 1,532        |   |  |            | (1,532 | ) |             |  |         |               |  |  |         |   |  |  | 0       |  
|Amortization of deferred compensation                     |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            | 267    |   |             |  |         |               |  |  |         |   |  |  | 267     |  
|Employee stock purchase plan shares issued                |  |                                             | 13,502     |  |        |            |    |         |  |  | 96           |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 96      |  
|Common stock offering                                     |  |                                             | 1,500,000  |  |        |            | 2  |         |  |  | 11,967       |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 11,969  |  
|Net loss of Syntax                                        |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               |  |  | (605    | ) |  |  | (605    | )
|Equity adjustment to conform to Syntax presentation       |  |                                             |            |  |        |            |    |         |  |  | (56,449      | ) |  |            | 1,265  |   |             |  |         |               |  |  |         |   |  |  | (55,184 | )
|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               | 
|Balance at June 30, 2004                                  |  |                                             | 6,907,734  |  |        |            | 7  |         |  |  | 1,418        |   |  |            | 0      |   |             |  | 0       |               |  |  | (840    | ) |  |  | 585     |  
|Employee stock purchase plan shares issued                |  |                                             | 65,292     |  |        |            |    |         |  |  | 275          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 275     |  
|Stock options exercised and restricted stock grants       |  |                                             | 24,999     |  |        |            |    |         |  |  | 22           |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 22      |  
|Conversion of debt to equity                              |  |                                             | 74,483     |  |        |            |    |         |  |  | 173          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 173     |  
|Deferred compensation on employee awards                  |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            | 649    |   |             |  |         |               |  |  |         |   |  |  | 649     |  
|Net loss of Syntax                                        |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               |  |  | (17     | ) |  |  | (17     | )
|Equity adjustment to conform to Syntax presentation       |  |                                             |            |  |        |            |    |         |  |  | 7,196        |   |  |            | (649   | ) |             |  |         |               |  |  |         |   |  |  | 6,547   |  
|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               | 
|Balance at June 30, 2005                                  |  |                                             | 7,072,508  |  |        |            | 7  |         |  |  | 9,084        |   |  |            | 0      |   |             |  | 0       |               |  |  | (857    | ) |  |  | 8,234   |  
|Shares issued to acquire Syntax                           |  |                                             | 33,590,628 |  |        |            | 34 |         |  |  | 32,887       |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 32,921  |  
|Issuance of common stock                                  |  |                                             | 2,153,780  |  |        |            | 2  |         |  |  | 4,200        |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 4,202   |  
|Conversion of debt to equity                              |  |                                             | 1,631,294  |  |        |            | 2  |         |  |  | 4,052        |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 4,054   |  
|Conversion of preferred shares to common shares           |  |                                             | 200,000    |  |        |            |    |         |  |  | 1,000        |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 1,000   |  
|Shares issued in offering to Kolin, net of issuance costs |  |                                             | 3,000,000  |  |        |            | 3  |         |  |  | 14,730       |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 14,733  |  
|Discount on preferred stock issuance                      |  |                                             |            |  |        |            |    |         |  |  | 11,572       |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 11,572  |  
|Shares issued upon option exercises                       |  |                                             | 76,703     |  |        |            |    |         |  |  | 150          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 150     |  
|Restricted shares issued                                  |  |                                             | 100,000    |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 0       |  
|Stock based compensation                                  |  |                                             |            |  |        |            |    |         |  |  | 4,360        |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 4,360   |  
|Shares issued to pay interest                             |  |                                             | 75,250     |  |        |            |    |         |  |  | 312          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 312     |  
|Shares issued for preferred stock dividends               |  |                                             | 186,664    |  |        |            |    |         |  |  | 564          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 564     |  
|Shares issued pursuant to Employee Stock Purchase Plan    |  |                                             | 39,928     |  |        |            |    |         |  |  | 85           |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 85      |  
|Shares issued upon exercise of warrants                   |  |                                             | 719,157    |  |        |            | 1  |         |  |  | 1,367        |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 1,368   |  
|Warrant issued for commission                             |  |                                             |            |  |        |            |    |         |  |  | 126          |   |  |            |        |   |             |  |         |               |  |  |         |   |  |  | 126     |  
|Net loss                                                  |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               |  |  | (18,879 | ) |  |  | (18,879 | )
|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               | 
|Balance at June 30, 2006                                  |  |                                             | 48,845,912 |  |        |            | 49 |         |  |  | 84,489       |   |  |            | 0      |   |             |  | 0       |               |  |  | (19,736 | ) |  |  | 64,802  |  
|                                                          |  |                                             |            |  |        |            |    |         |  |  |              |   |  |            |        |   |             |  |         |               | 






F-5



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |         |         |     |        |        |       |  
|---------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | ----- | ------ | ------- | ------- | --- | ------ | ------ | ----- | -
|                                                     |                                                                                          | Fiscal Years Ended June 30,                                    |                                          
|                                                     |                                                                                          |                                                                |                                          
|                                                     |                                                                                          | 2006                                                           |                                           |         | 2005    |         |       | 2004   |        
|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |        
|                                                     |                                                                                          | (In thousands)                                                 |                                          
|Cash Flows from Operating Activities:                |                                                                                          |                                                                |                                           |         |         |         |       |        |         |         |     |       
|                                                     | Net loss                                                                                 |                                                                | $                                         | (18,879 | )       |         | $     | (17    | )       |         | $   | (605   | )     
|                                                     | Adjustments to reconcile net income (loss) to net cash used in
    operating activities: |                                                                |                                           |         |         |         |       |        |         |         |     |        |       
|                                                     |                                                                                          | Depreciation and amortization                                  |                                           |         | 2,474   |         |       |        | 186     |         |     |        | 48     |      
|                                                     |                                                                                          | Provision for inventory reserves                               |                                           |         | 2,876   |         |       |        | 726     |         |     |        | 704    |      
|                                                     |                                                                                          | Provision for doubtful accounts                                |                                           |         | 49      |         |       |        | 117     |         |     |        | 13     |      
|                                                     |                                                                                          | Write-off of non-cash deferred offering costs                  |                                           |         |        |         |       |        | 415     |         |     |        |       |      
|                                                     |                                                                                          | Amortization of debenture discount and offering costs          |                                           |         | 5,303   |         |       |        |        |         |     |        |       |      
|                                                     |                                                                                          | Amortization of convertible preferred stock discount and costs |                                           |         | 3,781   |         |       |        |        |         |     |        |       |      
|                                                     |                                                                                          | Deferred income taxes                                          |                                           |         |        |         |       |        | (1,429  | )       |     |        | (430   | )    
|                                                     |                                                                                          | Stock compensation expense                                     |                                           |         | 4,360   |         |       |        |        |         |     |        |       |      
|                                                     | Changes in assets and liabilities:                                                       |                                                                |                                           |         |         |         |       |        |         |         |     |        |       
|                                                     |                                                                                          | Increase in accounts receivable and due from factor            |                                           |         | (35,028 | )       |       |        | (11,518 | )       |     |        | (1,951 | )    
|                                                     |                                                                                          | Decrease (increase) in inventories                             |                                           |         | 3,584   |         |       |        | (8,782  | )       |     |        | (6,516 | )    
|                                                     |                                                                                          | Increase in other current assets                               |                                           |         | (3,975  | )       |       |        | (1,522  | )       |     |        | 773    |      
|                                                     |                                                                                          | Decrease (increase) in other assets                            |                                           |         | 69      |         |       |        |        |         |     |        |       |      
|                                                     |                                                                                          | Increase in accrued rebates payable                            |                                           |         | 2,661   |         |       |        | 300     |         |     |        | 1,083  |      
|                                                     |                                                                                          | Increase in deferred warranty revenue                          |                                           |         | 2,556   |         |       |        | 1,717   |         |     |        | 278    |      
|                                                     |                                                                                          | Increase (decrease) in income taxes payable                    |                                           |         | (1,414  | )       |       |        | 1,436   |         |     |        | 73     |      
|                                                     |                                                                                          | Increase (decrease) in accounts payable                        |                                           |         | (8,207  | )       |       |        | 1,396   |         |     |        | 4,557  |      
|                                                     |                                                                                          | Increase in other accrued liabilities                          |                                           |         | 1,007   |         |       |        | 1,404   |         |     |        | 1,261  |      
|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |        
|                                                     |                                                                                          |                                                                | Net cash used in operating activities     |         |         | (38,783 | )     |        |         | (15,571 | )   |        |        | (712  | )
|Cash Flows from Investing Activities:                |                                                                                          |                                                                |                                           |         |         |         |       |        |         |         |     |       
|                                                     | Purchases of property, plant, and equipment                                              |                                                                |                                           | (6,823  | )       |         |       | (817   | )       |         |     | (215   | )     
|                                                     | Merger costs                                                                             |                                                                |                                           | (2,081  | )       |         |       |       |         |         |     |       |       
|                                                     | Investment in joint venture                                                              |                                                                |                                           | (883    | )       |         |       |       |         |         |     |       |       
|                                                     | Restricted cash                                                                          |                                                                |                                           |        |         |         |       | 500    |         |         |     | (500   | )     
|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |        
|                                                     |                                                                                          |                                                                | Net cash used in investing activities     |         |         | (9,787  | )     |        |         | (317    | )   |        |        | (715  | )
|Cash Flows from Financing Activities:                |                                                                                          |                                                                |                                           |         |         |         |       |        |         |         |     |       
|                                                     | Proceeds of redeemable convertible preferred stock offering                              |                                                                |                                           | 14,614  |         |         |       |       |         |         |     |       |       
|                                                     | Proceeds of stock offering                                                               |                                                                |                                           | 14,750  |         |         |       |       |         |         |     |       |       
|                                                     | Stock issued pursuant to Employee Stock Purchase Plan                                    |                                                                |                                           | 85      |         |         |       |       |         |         |     |       |       
|                                                     | Net proceeds from bank loans payable                                                     |                                                                |                                           | 18,786  |         |         |       | 12,049 |         |         |     |       |       
|                                                     | Proceeds from issuance of long-term debt and notes payable                               |                                                                |                                           | 850     |         |         |       | 600    |         |         |     | 7,215  |       
|                                                     | Repayments of long-term debt and notes payable                                           |                                                                |                                           | (661    | )       |         |       | (2,977 | )       |         |     | (5,984 | )     
|                                                     | Net transfers from Syntax Groups Corporation                                             |                                                                |                                           | 4,200   |         |         |       | 7,251  |         |         |     | 668    |       
|                                                     | Warrants exercised                                                                       |                                                                |                                           | 1,367   |         |         |       |       |         |         |     |       |       
|                                                     | Stock options exercised                                                                  |                                                                |                                           | 150     |         |         |       |       |         |         |     |       |       
|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |        
|                                                     |                                                                                          |                                                                | Net cash provided by financing activities |         |         | 54,141  |       |        |         | 16,923  |     |        |        | 1,899 |  
|Net increase (decrease) in cash and cash equivalents |                                                                                          |                                                                | 5,571                                     |         |         |         | 1,035 |        |         |         | 472 |       
|Cash and cash equivalents, beginning of period       |                                                                                          |                                                                | 1,804                                     |         |         |         | 769   |        |         |         | 297 |       
|                                                     |                                                                                          |                                                                |                                           |         |         |         |       |        |        
|Cash and cash equivalents, end of period             |                                                                                          | $                                                              | 7,375                                     |         |         | $       | 1,804 |        |         | $       | 769 |       
|Supplemental Cash Flow Information:                  |                                                                                          |                                                                |                                           |         |         |         |       |        |         |         |     |       
|Cash paid for interest                               |                                                                                          | $                                                              | 1,953                                     |         |         | $       | 310   |        |         | $       | 209 |       
|Cash paid for income taxes                           |                                                                                          | $                                                              | 1,645                                     |         |         | $       | 70    |        |         | $       |    |       



F-6



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


June 30, 2006, 2005, and 2004


Note A     Organization:


65-inch 42-inch 47-inch 65-inch near-to










Note B     Summary of
Significant Accounting Policies:


Basis of Presentation.


Use of Estimates.


F-7



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##### Table of Contents



.


Fair Value of Financial Instruments.


Reclassification.


Cash and Cash Equivalents.


Accounts Receivable/ Due from Factor.


Inventories. (first-in,


Vendor Allowances. 02-16,


Property and Equipment.


F-8



---



##### Table of Contents





|                              |  |       |       | 
|----------------------------- |  | ----- | ----- | 
|                              |  | Years |      
|                              |  |       |      
|Machinery and equipment       |  |       | 3  5 | 
|Office furniture and fixtures |  |       | 5     | 
|Building improvements         |  |       | 4     | 



Capitalized Software Costs.


Goodwill and Intangibles.


Investments.


Impairment of Long-Lived Assets.


Deferred Income Taxes. .


Warranties. 12-month


Stock-Based Compensation.


F-9



---



##### Table of Contents





Revenue Recognition.


Shipping and Handling Costs. LCD-TV


Advertising Costs.


Segment Reporting.


Recent Accounting Pronouncements.




F-10



---



##### Table of Contents







Note C     Related Party
Transactions:










F-11



---



##### Table of Contents





|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |      |   |      |  
|--------------------------------------------- | --------------------- | ---------------------- | ------- | ------ | ------------- | ------------- | ------- | ----------- | -------- | - | ----------- | -------- | ------ | -------- | ------ | - | ------ | - | ---- | - | ---- | -
|                                              |                       |                        |         |        |               | Balance Sheet |        
|                                              |                       |                        |         |        |               |               |        
|                                              |                       |                        |         |        |               |               |         | Increase to |          |   | Increase to |         
|                                              |                       |                        |         |        |               | Increase      |         |             | Deferred |   |             | Unearned |       
|                                              |                       |                        |         |        |               | (Decrease) to |         |             | Warranty |   |             | Trade    |       
|                                              |                       | Total Purchases        |         |        | Cost of Sales |               |         | Inventory   |          |   | Revenue     |          |        | Discount |       
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|Fiscal year ended June 30, 2004               |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |      |  
|Purchases                                     |                       | $                      | 9,359   |        |               | $             | 3,356   |             |          | $ | 6,003       |          |        | $        |       |   |        |   |     |  
|Rebates, based on percentage of purchases:    |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |      |  
|                                              | Market development    |                        |         | (244   | )             |               |         | (97         | )        |   |             | (147     | )      |          |        |  |        |   |      |  |     
|                                              | Technical development |                        |         | (293   | )             |               |         | (116        | )        |   |             | (177     | )      |          |        |  |        |   |      |  |     
|                                              | Volume incentive      |                        |         | (157   | )             |               |         | (62         | )        |   |             | (95      | )      |          |        |  |        |   |      |  |     
|Excess warranty expense reimbursements        |                       |                        | (327    | )      |               |               | (49     | )           |          |   |            |          |        |          | (278   | ) |        |   |     |  
|Price protection                              |                       |                        | (1,260  | )      |               |               | (1,260  | )           |          |   |            |          |        |          |       |   |        |   |     |  
|Market development funds                      |                       |                        | (1,400  | )      |               |               | (336    | )           |          |   | (512        | )        |        |          |       |   |        |   | (552 | )
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|                                              |                       | Balance, June 30, 2004 |         | $      | 5,679         |               |         |             | 1,435    |   |             | $        | 5,073  |          |        | $ | (278   | ) |      | $ | (552 | )
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|Year ended June 30, 2005                      |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |      |  
|Purchases                                     |                       | $                      | 109,821 |        |               | $             | 93,303  |             |          | $ | 16,518      |          |        | $        |       |   |        |   |     |  
|Rebates, based on percentage of purchases:    |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |     |  
|                                              | Market development    |                        |         | (2,939 | )             |               |         | (2,508      | )        |   |             | (431     | )      |          |        |  |        |   |      |  |     
|                                              | Technical development |                        |         | (3,527 | )             |               |         | (3,010      | )        |   |             | (517     | )      |          |        |  |        |   |      |  |     
|                                              | Volume incentive      |                        |         | (3,247 | )             |               |         | (2,774      | )        |   |             | (474     | )      |          |        |  |        |   |      |  |     
|Excess warranty expense reimbursements        |                       |                        | (3,173  | )      |               |               | (1,178  | )           |          |   |            |          |        |          | (1,995 | ) |        |   |     |  
|Price protection                              |                       |                        | (27,910 | )      |               |               | (27,910 | )           |          |   |            |          |        |          |       |   |        |   |     |  
|Price protection guaranteed minimum           |                       |                        | (3,612  | )      |               |               |        |             |          |   | (3,612      | )        |        |          |       |   |        |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|Net activity, fiscal year ended June 30, 2005 |                       |                        | 65,413  |        |               |               | 55,923  |             |          |   | 11,484      |          |        |          | (1,995 | ) |        |   |     |  
|Prior year balances charged to cost of sales  |                       |                        | 5,073   |        |               |               | 5,073   |             |          |   |            |          |        |          |       |   |        |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|                                              |                       | Balance, June 30, 2005 |         | $      | 70,486        |               |         | $           | 60,996   |   |             | $        | 11,484 |          |        | $ | (1,995 | ) |      |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|Year ended June 30, 2006                      |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |      |  
|Purchases                                     |                       | $                      | 223,767 |        |               | $             | 210,846 |             |          | $ | 12,921      |          |        | $        |       |   |        |   |     |  
|Rebates, based on percentage of purchases:    |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |        |   |        |   |     |  
|                                              | Market development    |                        |         | (6,247 | )             |               |         | (5,981      | )        |   |             | (266     | )      |          |        |  |        |   |      |  |     
|                                              | Technical know how    |                        |         | (7,496 | )             |               |         | (7,177      | )        |   |             | (319     | )      |          |        |  |        |   |      |  |     
|                                              | Volume incentive      |                        |         | (6,872 | )             |               |         | (6,579      | )        |   |             | (293     | )      |          |        |  |        |   |      |  |     
|Excess warranty expense reimbursements        |                       |                        | (7,403  | )      |               |               | (4,847  | )           |          |   |            |          |        |          | (2,556 | ) |        |   |     |  
|Price protection                              |                       |                        | (60,953 | )      |               |               | (60,953 | )           |          |   |            |          |        |          |       |   |        |   |     |  
|Price protection guaranteed minimum           |                       |                        | (2,144  | )      |               |               |        |             |          |   | (2,144      | )        |        |          |       |   |        |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|Net activity, fiscal year ended June 30, 2006 |                       |                        | 132,652 |        |               |               | 125,309 |             |          |   | 9,899       |          |        |          | (2,556 | ) |        |   |     |  
|Prior year balances charged to cost of sales  |                       |                        | 17,203  |        |               |               | 17,203  |             |          |   |            |          |        |          |       |   |        |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       
|                                              |                       | Balance, June 30, 2006 |         | $      | 149,855       |               |         | $           | 142,512  |   |             | $        | 9,899  |          |        | $ | (2,556 | ) |      |   |     |  
|                                              |                       |                        |         |        |               |               |         |             |          |   |             |          |        |          |       





F-12



---



##### Table of Contents







Note D     Accounts Receivable
and Due from Factor:








|                                                |  |          |        |   |          |   |        |  
|----------------------------------------------- |  | -------- | ------ | - | -------- | - | ------ | -
|                                                |  | June 30, |        |   | June 30, |  
|                                                |  | 2006     |        |   | 2005     |  
|                                                |  |          |        |   |          |  
|Due from factor, net                            |  | $        | 17,049 |   |          | $ | 8,553  |  
|Accounts receivable not assigned to factor, net |  |          | 34,097 |   |          |   | 7,180  |  
|Other receivables                               |  |          | 77     |   |          |   |       |  
|Allowance for doubtful accounts                 |  |          | (394   | ) |          |   | (160   | )
|                                                |  |          |        |   |          |  
|                                                |  | $        | 50,829 |   |          | $ | 15,573 |  
|                                                |  |          |        |   |          |  



Note E     Inventories, at net
realizable value, consisted of the following (in thousands):


|                |  |          |        |  |          |   |        | 
|--------------- |  | -------- | ------ |  | -------- | - | ------ | 
|                |  | June 30, |        |  | June 30, |  
|                |  | 2006     |        |  | 2005     |  
|                |  |          |        |  |          |  
|Raw materials   |  | $        | 2,468  |  |          | $ | 1,429  | 
|Work-in-process |  |          | 425    |  |          |   |       | 
|Finished goods  |  |          | 10,258 |  |          |   | 13,710 | 
|                |  |          |        |  |          |  
|                |  | $        | 13,151 |  |          | $ | 15,139 | 
|                |  |          |        |  |          |  



F-13



---



##### Table of Contents



Note F     Property, plant, and
equipment consisted of the following (in thousands):


|                                    |  |          |        |   |          |   |       |  
|----------------------------------- |  | -------- | ------ | - | -------- | - | ----- | -
|                                    |  | June 30, |        |   | June 30, |  
|                                    |  | 2006     |        |   | 2005     |  
|                                    |  |          |        |   |          |  
|Leasehold and building improvements |  | $        | 1,163  |   |          | $ | 180   |  
|Machinery and equipment             |  |          | 11,068 |   |          |   | 550   |  
|Software                            |  |          | 348    |   |          |   | 252   |  
|Furniture and fixtures              |  |          | 292    |   |          |   | 70    |  
|Equipment not yet placed in service |  |          | 5,810  |   |          |   |      |  
|                                    |  |          |        |   |          |  
|                                    |  |          | 18,681 |   |          |   | 1,052 |  
|Less accumulated depreciation       |  |          | (1,978 | ) |          |   | (236  | )
|                                    |  |          |        |   |          |  
|                                    |  | $        | 16,703 |   |          | $ | 816   |  
|                                    |  |          |        |   |          |  

Note G     Investments:








Note H     Goodwill and
Intangible Assets:






F-14



---



##### Table of Contents





|                   |  |                     |         |   |      |   |         |  
|------------------ |  | ------------------- | ------- | - | ---- | - | ------- | -
|                   |  | Year Ended June 30, |        
|                   |  |                     |        
|                   |  | 2006                |         |   | 2005 |  
|                   |  |                     |         |   |      |  
|Revenue            |  | $                   | 193,663 |   |      | $ | 85,526  |  
|Net loss           |  | $                   | (35,052 | ) |      | $ | (35,138 | )
|Net loss per share |  | $                   | (0.86   | ) |      | $ | (1.17   | )



|                                  |  |   |         |  
|--------------------------------- |  | - | ------- | -
|Fair value of Brillian Stock      |  | $ | 29,302  |  
|Merger related costs              |  |   | 4,709   |  
|                                  |  |   |        
|Total purchase price              |  | $ | 34,011  |  
|                                  |  |   |        
|Cash                              |  | $ | 1,035   |  
|Accounts receivable               |  |   | 277     |  
|Inventories                       |  |   | 4,472   |  
|Other current assets              |  |   | 579     |  
|Property, plant and equipment     |  |   | 10,805  |  
|Intangible assets                 |  |   | 21,470  |  
|Other assets                      |  |   | 921     |  
|                                  |  |   |        
|Total assets acquired             |  |   | 39,559  |  
|Less liabilities assumed          |  |   | (12,538 | )
|                                  |  |   |        
|Fair value of net assets acquired |  |   | 27,021  |  
|Goodwill                          |  |   | 6,990   |  
|                                  |  |   |        
|Total purchase price              |  | $ | 34,011  |  
|                                  |  |   |        



|                                   |  |          |        |   |             |  |            | 
|---------------------------------- |  | -------- | ------ | - | ----------- |  | ---------- | 
|                                   |  | June 30, |        |   | Amortizable | 
|                                   |  | 2006     |        |   | Life        | 
|                                   |  |          |        |   |             | 
|LCoS trade mark and trade names    |  | $        | 1,208  |   |             |  | 7.5 years  | 
|Brillian trade mark and trade name |  |          | 148    |   |             |  | 4.0 years  | 
|Patented technology                |  |          | 20,114 |   |             |  | 19.0 years | 
|                                   |  |          |        |   |             | 
|                                   |  | $        | 21,470 |   |             |  |            | 
|                                   |  |          |        |   |             | 
|Less accumulated amortization      |  |          | (733   | ) |             |  |            | 
|                                   |  |          |        |   |             | 
|                                   |  | $        | 20,737 |   |             |  |            | 
|                                   |  |          |        |   |             | 



F-15



---



##### Table of Contents





|            |  |   |        | 
|----------- |  | - | ------ | 
|Fiscal Year |  |  
|            |  |  
|2007        |  | $ | 1,257  | 
|2008        |  |   | 1,257  | 
|2009        |  |   | 1,257  | 
|2010        |  |   | 1,232  | 
|2011        |  |   | 1,220  | 
|Thereafter  |  |   | 14,514 | 
|            |  |   |       
|            |  | $ | 20,737 | 
|            |  |   |       

Note I     Loans Payable,
Bank:






| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | (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 June 30, 2006)
    plus 0.50%.









F-16



---



##### Table of Contents



Note J     Loss per Share:




Note K     Segment Reporting,
Sales to Major Customers, and Geographic Information:






|                                |  |     |         |   |      |   |         |       |  |   |         |  
|------------------------------- |  | --- | ------- | - | ---- | - | ------- | ----- |  | - | ------- | -
|                                |  | LCD |         |   | LCoS |   |         | Total | 
|                                |  |     |         |   |      |   |         |       | 
|Fiscal year ended June 30, 2006 |  |     |         |   |      |   |         |       |  |   |         |  
|Net sales                       |  | $   | 191,184 |   |      | $ | 1,806   |       |  | $ | 192,990 |  
|Operating income (loss)         |  | $   | 8,465   |   |      | $ | (15,430 | )     |  | $ | (6,965  | )
|Depreciation and amortization   |  | $   | 454     |   |      | $ | 2,020   |       |  | $ | 2,474   |  
|Total assets                    |  | $   | 86,691  |   |      | $ | 40,965  |       |  | $ | 127,656 |  
|Fiscal year ended June 30, 2005 |  |     |         |   |      |   |         |       |  |   |         |  
|Net sales                       |  | $   | 82,586  |   |      | $ |        |       |  | $ | 82,586  |  
|Operating income (loss)         |  | $   | 344     |   |      | $ |        |       |  | $ | 344     |  
|Depreciation and amortization   |  | $   | 186     |   |      | $ |        |       |  | $ | 186     |  
|Total assets                    |  | $   | 37,634  |   |      | $ |        |       |  | $ | 37,634  |  
|Fiscal year ended June 30, 2004 |  |     |         |   |      |   |         |       |  |   |         |  
|Net sales                       |  | $   | 30,616  |   |      | $ |        |       |  | $ | 30,616  |  
|Operating income (loss)         |  | $   | (744    | ) |      | $ |        |       |  | $ | (744    | )
|Depreciation and amortization   |  | $   | 48      |   |      | $ |        |       |  | $ | 48      |  
|Total assets                    |  | $   | 14,038  |   |      | $ |        |       |  | $ | 14,038  |  







F-17



---



##### Table of Contents





|                                |  |         |         |  |      |   |        |        |  |   |       |  |  |   |         | 
|------------------------------- |  | ------- | ------- |  | ---- | - | ------ | ------ |  | - | ----- |  |  | - | ------- | 
|                                |  | North   |         |  |      |   |        |        | 
|                                |  | America |         |  | Asia |   |        | Europe |  |   | Total | 
|                                |  |         |         |  |      |   |        |        |  |   |       | 
|Fiscal year ended June 30, 2006 |  |         |         |  |      |   |        |        |  |   |       |  |  |   |         | 
|Net sales                       |  | $       | 156,994 |  |      | $ | 35,675 |        |  | $ | 321   |  |  | $ | 192,990 | 
|Fiscal year ended June 30, 2005 |  |         |         |  |      |   |        |        |  |   |       |  |  |   |         | 
|Net sales                       |  | $       | 62,574  |  |      | $ | 20,012 |        |  | $ |      |  |  | $ | 82,586  | 
|Fiscal year ended June 30, 2004 |  |         |         |  |      |   |        |        |  |   |       |  |  |   |         | 
|Net sales                       |  | $       | 28,795  |  |      | $ | 1,821  |        |  | $ |      |  |  | $ | 30,616  | 



Note L     Commitments and
Contingencies:














month-to


F-18



---



##### Table of Contents





|                      |  |   |       | 
|--------------------- |  | - | ----- | 
|Years Ending June 30, |  |   |       | 
|2007                  |  | $ | 1,400 | 
|2008                  |  |   | 1,400 | 
|2009                  |  |   | 935   | 
|2010                  |  |   | 386   | 
|                      |  |   |      
|                      |  | $ | 4,121 | 
|                      |  |   |      



Note M     Stock-Based
Compensation:










F-19



---



##### Table of Contents





|                         |  |            |      |   |      |  |   | 
|------------------------ |  | ---------- | ---- | - | ---- |  | - | 
|                         |  | Year Ended |     
|                         |  | June 30,   |     
|                         |  |            |     
|                         |  | 2006       |      |   | 2005 | 
|                         |  |            |      |   |      | 
|Expected life (in years) |  |            | 5    |   |      |  |  | 
|Expected volatility      |  |            | 113  | % |      |  |  | 
|Risk-free interest rate  |  |            | 4.04 | % |      |  |  | 
|Dividend yield           |  |            | N/A  |   |      |  |  | 





|                             |  |                     |           |          |           |   |      | 
|---------------------------- |  | ------------------- | --------- | -------- | --------- | - | ---- | 
|                             |  | Options Outstanding |          
|                             |  |                     |          
|                             |  |                     |           | Weighted |          
|                             |  |                     |           | Average  |          
|                             |  |                     |           | Exercise |          
|                             |  | Number of           |           |          | Price per |  
|                             |  | Shares              |           |          | Share     |  
|                             |  |                     |           |          |           |  
|Outstanding at June 30, 2005 |  |                     |          |          |           |   |     | 
|Granted                      |  |                     | 1,870,821 |          |           | $ | 2.20 | 
|Added as result of merger    |  |                     | 1,410,091 |          |           | $ | 6.81 | 
|Exercised                    |  |                     | 76,703    |          |           | $ | 1.96 | 
|Forfeited and expired        |  |                     | 156,476   |          |           | $ | 5.68 | 
|Outstanding at June 30, 2006 |  |                     | 3,047,733 |          |           | $ | 4.17 | 
|Exercisable at June 30, 2006 |  |                     | 2,437,027 |          |           | $ | 4.54 | 



|                         |  |                     |           |          |                     |  |     |          |  |   |             |  |  |          |           |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | -------- | ------------------- |  | --- | -------- |  | - | ----------- |  |  | -------- | --------- |  |  | - | ----- | 
|                         |  | Options Outstanding |           |          |                    
|                         |  |                     |           |          | Options Exercisable | 
|                         |  |                     |           | Weighted |                     |  |     |          |  |  
|                         |  | Number              |           |          | Average             |  |     | Weighted |  |   | Number      |  |  | Weighted |          
|                         |  | Outstanding         |           |          | Remaining           |  |     | Average  |  |   | Exercisable |  |  | Average  |          
|                         |  | at June 30,         |           |          | Contractual         |  |     | Exercise |  |   | at June 30, |  |  | Exercise |          
|Range of Exercise Prices |  | 2006                |           |          | Life                |  |     | Price    |  |   | 2006        |  |  | Price    |          
|                         |  |                     |           |          |                     |  |     |          |  |   |             |  |  |          |          
|$ 1.61 -  2.30           |  |                     | 1,748,935 |          |                     |  | 9.1 |          |  | $ | 1.99        |  |  |          | 1,308,802 |  |  | $ | 1.95  | 
|2.42 -  4.60             |  |                     | 392,991   |          |                     |  | 8.3 |          |  |   | 3.30        |  |  |          | 245,377   |  |  |   | 3.25  | 
|4.63 -  9.36             |  |                     | 754,266   |          |                     |  | 7.4 |          |  |   | 7.06        |  |  |          | 736,306   |  |  |   | 7.08  | 
|$10.20 - 67.60           |  |                     | 151,541   |          |                     |  | 7.2 |          |  |   | 17.12       |  |  |          | 146,542   |  |  |   | 17.06 | 
|                         |  |                     |           |          |                     |  |     |          |  |   |             |  |  |          |          
|                         |  |                     | 3,047,733 |          |                     |  | 8.5 |          |  | $ | 4.17        |  |  |          | 2,437,027 |  |  | $ | 4.54  | 
|                         |  |                     |           |          |                     |  |     |          |  |   |             |  |  |          |          



|       |               
|------ | --------------
|Note N | Benefit Plans:



| |                                  
| | ---------------------------------
| | 2003 Employee Stock Purchase Plan



F-20



---



##### Table of Contents





|                |  |            |           |  |          |  |            |                |  |   |               |  |  |             |        |  |  |  |          | 
|--------------- |  | ---------- | --------- |  | -------- |  | ---------- | -------------- |  | - | ------------- |  |  | ----------- | ------ |  |  |  | -------- | 
|Offering Period |  | Start Date |           |  | End Date |  |            | Offering Price |  |   | Shares issued |  |  | Date Issued |       
|                |  |            |           |  |          |  |            |                |  |   |               |  |  |             |       
|1st             |  |            | 9/16/2003 |  |          |  | 12/31/2003 |                |  | $ | 7.14          |  |  |             | 13,502 |  |  |  | 1/2/2004 | 
|2nd             |  |            | 1/1/2004  |  |          |  | 6/30/2004  |                |  | $ | 6.83          |  |  |             | 21,389 |  |  |  | 7/1/2004 | 
|3rd             |  |            | 7/1/2004  |  |          |  | 12/31/2004 |                |  | $ | 2.93          |  |  |             | 43,903 |  |  |  | 1/3/2005 | 
|4th             |  |            | 1/1/2005  |  |          |  | 6/30/2005  |                |  | $ | 2.24          |  |  |             | 36,329 |  |  |  | 7/1/2005 | 
|5th             |  |            | 7/1/2005  |  |          |  | 12/31/2005 |                |  | $ | 2.13          |  |  |             | 39,928 |  |  |  | 1/3/2006 | 
|6th             |  |            | 1/1/2006  |  |          |  | 6/30/2006  |                |  | $ | 2.04          |  |  |             | 49,538 |  |  |  | 7/3/2006 | 



| |                           
| | --------------------------
| | 401(k) Profit Sharing Plan



Note O     Long-term Debt:




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



F-21



---



##### Table of Contents



Note P     Redeemable
Convertible Preferred Stock:
















Note Q     Issuance of Common
Stock and Warrants:




F-22



---



##### Table of Contents



Note R     Warrants:




|                                      |                             |            |            |                  |                |  |           |           |  |   |      |  | 
|------------------------------------- | --------------------------- | ---------- | ---------- | ---------------- | -------------- |  | --------- | --------- |  | - | ---- |  | 
|                                      |                             |            |            | Shares of Common |                |  | Per Share |          
|                                      |                             | Expiration |            |                  | Stock Issuable |  |           | Exercise  | 
|Warrants Relating to Issuance of:     |                             | Date       |            |                  | Under Warrants |  |           | Price     | 
|                                      |                             |            |            |                  |                |  |           |           | 
|Apr. 2005 7% Convertible Debentures   |                             |            | 10/10/2010 |                  |                |  | 743,837   |           |  | $ | 1.57 | 
|Jul. 2005 4% Convertible Debentures   |                             |            | 01/08/2011 |                  |                |  | 770,571   |           |  | $ | 2.63 | 
|Jul. 2005 9% Secured Debentures       |                             |            | 01/08/2011 |                  |                |  | 415,000   |           |  | $ | 2.63 | 
|Dec. 2005 Convertible Preferred Stock |                             |            | 06/27/2011 |                  |                |  | 1,533,000 |           |  | $ | 5.00 | 
|Jan. 2006 Convertible Preferred Stock |                             |            | 07/02/2011 |                  |                |  | 100,000   |           |  | $ | 5.00 | 
|Mar. 2006 Common Stock                |                             |            | 09/26/2010 |                  |                |  | 750,000   |           |  | $ | 5.00 | 
|                                      |                             |            |            |                  |                |  |           |           | 
|                                      | Total Warrants Outstanding: |            |            |                  |                |  |           | 4,312,408 |  |   |      |  | 
|                                      |                             |            |            |                  |                |  |           |           | 

Note S     Subsequent Event:




Note T     Income Taxes:




|                                |       |      |     |    |      |  |    |      |   |  |    |    |  
|------------------------------- | ----- | ---- | --- | -- | ---- |  | -- | ---- | - |  | -- | -- | -
|                                |       | 2006 |     |    | 2005 |  |    | 2004 |  
|                                |       |      |     |    |      |  |    |      |  
|Federal tax at statutory rates  |       |      | 34  | %  |      |  | 34 | %    |   |  | 34 | % 
|State tax at statutory rates    |       |      | 5   | %  |      |  | 20 | %    |   |  | 5  | % 
|Meals and entertainment         |       |      |    |    |      |  | 85 | %    |   |  | (4 | )%
|Stock option expense            |       |      | (2  | )% |      |  |   |      |   |  |   |   
|Other                           |       |      |    |    |      |  | (9 | )%   |   |  |   |   
|Increase in valuation allowance |       |      | (37 | )% |      |  |   |      |   |  |   |   
|                                |       |      |     |    |      |  |    |      |  
|                                | Total |      |     | 0  | %    |  |    | 130  | % |  |    | 35 | %
|                                |       |      |     |    |      |  |    |      |  

F-23



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##### Table of Contents





|                          |                                  |      |        |         |      |   |       |     |  
|------------------------- | -------------------------------- | ---- | ------ | ------- | ---- | - | ----- | --- | -
|                          |                                  | 2006 |        |         | 2005 |  
|                          |                                  |      |        |         |      |  
|Deferred tax assets:      |                                  |      |        |         |      |   |       |    
|                          | Inventories reserve              |      | $      | 3,748   |      |   | $     | 688 |  
|                          | Inventory capitalization         |      |        | 158     |      |   |       | 116 |  
|                          | Accrued expenses                 |      |        | 487     |      |   |       |    |  
|                          | Allowances and reserves          |      |        | 778     |      |   |       | 193 |  
|                          | Deferred offering costs          |      |        | 177     |      |   |       | 177 |  
|                          | Other                            |      |        | 99      |      |   |       | 31  |  
|                          | Deferred warranty                |      |        | 1,963   |      |   |       | 855 |  
|                          | Depreciation and amortization    |      |        | 3,575   |      |   |       |    |  
|                          | Net operating loss               |      |        | 13,040  |      |   |       |    |  
|                          |                                  |      |        |         |      |  
|                          |                                  |      | 24,025 |         |      |   | 2,060 |    
|                          | Deferred tax valuation allowance |      |        | (21,359 | )    |   |       |    |  
|                          |                                  |      |        |         |      |  
|Total                     |                                  | $    | 2,666  |         |      | $ | 2,060 |    
|                          |                                  |      |        |         |      |  
|Deferred tax liabilities: |                                  |      |        |         |      |   |       |    
|                          | Depreciation and amortization    |      | $      |        |      |   | $     | (71 | )
|                          | Prepaid expenses                 |      |        | (142    | )    |   |       |    |  
|                          | Step-up basis from merger        |      |        | (1,973  | )    |   |       |    |  
|                          | Other                            |      |        | (513    | )    |   |       | 22  |  
|                          |                                  |      |        |         |      |  
|Total                     |                                  | $    | (2,628 | )       |      | $ | (49   | )  
|                          |                                  |      |        |         |      |  





F-24



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##### Table of Contents





|       |                                              
|------ | ---------------------------------------------
|Note U | Selected Quarterly Financial Data (Unaudited)



|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |        |  |   |        |        |  |   |       |       | 
|---------------------------- | ------------------------------------ | -------------- | ------ | ------ | ------- | - | ------- | ------- |  | - | ------- | ------ |  | ------- | ------ | ------ | ------- | - | ------ | ------- |  | - | ------- | ------ |  | - | ------ | ------ |  | - | ----- | ----- | 
|                             |                                      | Quarters Ended |       
|                             |                                      |                |       
|                             |                                      | 2006           |        |        | 2005    |   |         | 2004    | 
|                             |                                      |                |        |        |         |   |         |         | 
|                             |                                      | Jun. 30        |        |        | Mar. 31 |   |         | Dec. 31 |  |   | Sep. 30 |        |  | Jun. 30 |        |        | Mar. 31 |   |        | Dec. 31 |  |   | Sep. 30 |       
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                             |                                      | (In thousands) |       
|Net sales                    |                                      | $              | 59,807 |        |         | $ | 45,671  |         |  | $ | 60,155  |        |  | $       | 27,357 |        |         | $ | 22,864 |         |  | $ | 21,255  |        |  | $ | 28,809 |        |  | $ | 9,656 |      
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Cost and expenses:           |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |        |  |   |        |        |  |   |       |      
|                             | Cost of sales                        |                |        | 52,523 |         |   |         | 41,514  |  |   |         | 53,321 |  |         |        | 21,738 |         |   |        | 20,003  |  |   |         | 17,570 |  |   |        | 25,836 |  |   |       | 8,416 | 
|                             | Selling, distribution, and marketing |                |        | 2,867  |         |   |         | 2,527   |  |   |         | 1,988  |  |         |        | 937    |         |   |        | 805     |  |   |         | 926    |  |   |        | 698    |  |   |       | 371   | 
|                             | General and administrative           |                |        | 4,477  |         |   |         | 4,060   |  |   |         | 4,460  |  |         |        | 5,127  |         |   |        | 2,590   |  |   |         | 2,476  |  |   |        | 1,521  |  |   |       | 1,027 | 
|                             | Research and development             |                |        | 1,853  |         |   |         | 1,936   |  |   |         | 627    |  |         |        |       |         |   |        |        |  |   |         |       |  |   |        |       |  |   |       |      | 
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|                             |                                      |                | 9,197  |        |         |   | 8,523   |         |  |   | 7,075   |        |  |         | 6,064  |        |         |   | 3,395  |         |  |   | 3,402   |        |  |   | 2,219  |        |  |   | 1,398 |      
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Operating income (loss)      |                                      |                | (1,913 | )      |         |   | (4,366  | )       |  |   | (241    | )      |  |         | (445   | )      |         |   | (534   | )       |  |   | 283     |        |  |   | 754    |        |  |   | (158  | )    
|Other income (expense)       |                                      |                | (3,585 | )      |         |   | (7,046  | )       |  |   | (991    | )      |  |         | (292   | )      |         |   | (121   | )       |  |   | (45     | )      |  |   | (85    | )      |  |   | (33   | )    
|Income tax benefit (expense) |                                      |                |       |        |         |   |        |         |  |   | (79     | )      |  |         | 79     |        |         |   | 273    |         |  |   | (95     | )      |  |   | (255   | )      |  |   | (1    | )    
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Net income (loss)            |                                      | $              | (5,498 | )      |         | $ | (11,412 | )       |  | $ | (1,311  | )      |  | $       | (658   | )      |         | $ | (382   | )       |  | $ | 143     |        |  | $ | 414    |        |  | $ | (192  | )    
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       
|Net income (loss) per share  |                                      | $              | (0.11  | )      |         | $ | (0.26   | )       |  | $ | (0.04   | )      |  | $       | (0.05  | )      |         | $ | (0.01  | )       |  | $ | 0.00    |        |  | $ | 0.01   |        |  | $ | 0.00  |      
|                             |                                      |                |        |        |         |   |         |         |  |   |         |        |  |         |        |        |         |   |        |         |  |   |         |       

F-25



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##### Table of Contents



SYNTAX-BRILLIAN CORPORATION





SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS


For the Years Ended June 30, 2006, 2005, and 2004


|                                            |                           |                |   |              |            |  |   |            |  |  |            |        |            |               |   |     |   |  |   |        | 
|------------------------------------------- | ------------------------- | -------------- | - | ------------ | ---------- |  | - | ---------- |  |  | ---------- | ------ | ---------- | ------------- | - | --- | - |  | - | ------ | 
|                                            |                           |                |   | Increases    |            |  |   |            |  |  |           
|                                            |                           |                |   | (Reductions) |            |  |   |            |  |  |           
|                                            |                           | Balance at     |   |              | Charged to |  |   | Charged to |  |  |            |        |           
|                                            |                           | Beginning      |   |              | Costs and  |  |   | Other      |  |  |            |        | Balance at |              
|                                            |                           | of Period      |   |              | Expenses   |  |   | Accounts   |  |  | Write-Offs |        |            | End of Period |  
|                                            |                           |                |   |              |            |  |   |            |  |  |            |        |            |               |  
|                                            |                           | (In thousands) |  
|Allowance for doubtful accounts:            |                           |                |   |              |            |  |   |            |  |  |            |        |            |               |   |     |   |  |   |       
|                                            | Fiscal year ended 6/30/06 |                | $ | 160          |            |  | $ | 318        |  |  | $          |       |            |               | $ | (84 | ) |  | $ | 394    | 
|                                            | Fiscal year ended 6/30/05 |                |   | 42           |            |  |   | 120        |  |  |            |       |            |               |   | (2  | ) |  |   | 160    | 
|                                            | Fiscal year ended 6/30/04 |                |   | 29           |            |  |   | 13         |  |  |            |       |            |               |   |    |   |  |   | 42     | 
|Valuation allowance for deferred tax asset: |                           |                |   |              |            |  |   |            |  |  |            |        |            |               |   |     |   |  |   |       
|                                            | Fiscal year ended 6/30/06 |                | $ |             |            |  | $ |           |  |  | $          | 21,359 |            |               | $ |    |   |  | $ | 21,359 | 
|                                            | Fiscal year ended 6/30/05 |                |   |             |            |  |   |           |  |  |            |       |            |               |   |    |   |  |   |       | 
|                                            | Fiscal year ended 6/30/04 |                |   |             |            |  |   |           |  |  |            |       |            |               |   |    |   |  |   |       | 

S-1