Steve Smith

Syntax-Brillian: A Classic Bottom

Equity, as you know, is simply Assets-Liabilities. For a company with very little fixed assets, its relevance is that it gives some indication as how much working capital (beyond a line of credit) is available based upon the value of the company.

You missed my point about growth getting squeezed. We all know that it is harder to grow the same percentage as the base line number gets bigger and bigger. My point was that BRLC isn't showing the type of growth that the working capital available to BRLC makes possible -- not by a long shot.

Negative margins results from sales (i.e., revenues) being greater than costs of sales (i.e., COGS). To be clear, COGS includes both external costs (e.g., the cost of a panel) and internal costs (i.e., the salaries of people making the product). Last quarter there were $0.7M in LCoS revenues, the cost of those revenues were $4.0M, which resulted in $-3.3M in gross profit. The question over whether to characterize a particular expense as a cost of sale (which affects both margins and gross profit or as an SG&A expense (which doesn't affect margins and gross profit) is constantly being asked by accountants in every company. In the end, it doesn't effect net margins, but it is a cosmetic difference that could change how a company is evaluated.

Over 4 quarters, the resulting savings from divesting the LCoS unit, based upon better margins, is 4 x $3.3M or $13.2M. As such, it is possible that most of the expenses that were associated with LCoS were considered part of COGS instead of SG&A. Therefore, the savings to SG&A, based upon the sale of the LCoS unit, could be minimal.