Form 10-Q Quarterly Report

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

     [x] QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934

                For the quarterly period ended December 31, 1998

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934

     Commission File Number 0-22693

                        SYSCOMM INTERNATIONAL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

           Delaware                                    11-2889809
(State or other Jurisdiction of                      (I.R.S. Employer
 Incorporation or Organization)                       Identification Number)

                               20 Precision Drive
                               Shirley, N.Y. 11967
              (Address of Principal Executive Offices and Zip Code)

                                 (516) 205-1000
              (Registrant's telephone number, including area code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

             Yes       X                          No  ________

     Number of shares  outstanding of the issuer's Common Stock,  par value $.01
per share, as of January 15, 1999: 4,757,705 shares.



<PAGE>



                         Part I - FINANCIAL INFORMATION
                          Item 1. Financial Statements




                        SYSCOMM INTERNATIONAL CORPORATION
                      Consolidated Statements of Operations
                                   (Unaudited)


                                                   THREE MONTHS ENDED
                                          12/31/98                   12/31/97

Net sales                               $ 27,329,070              $ 28,062,283
Cost of sales                             24,489,958                25,248,026
                                       -------------             -------------
     Gross profit                          2,839,112                 2,814,257
                                       -------------             -------------

Selling & administrative expenses          1,901,450                 2,005,201
                                       -------------             -------------

Income from operations                       937,662                   809,056
                                             -------                   -------

Other income (expenses)
   Interest expenses                        (101,648)                 (247,794)
   Other                                      15,585                     2,506
                                             -------                     -----
   Total other expenses                      (86,063)                 (245,288)
                                             
Income before income taxes                   851,599                   563,768


Provision for income taxes                   341,000                   247,000

Net income                              $    510,599              $    316,768
                                        ============              =============

Net income per common share
         Basic                              $   0.11                  $   0.07
         Diluted                            $   0.11                  $   0.06

Weighted average number of common
shares outstanding
         Basic                             4,767,190                 4,555,540
         Diluted                           4,767,190                 4,996,244


The accompanying notes are an integral part of these statements.



<PAGE>


                        SYSCOMM INTERNATIONAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>



                                                                 December 31, 1998           September 30, 1998
                                                                  (Unaudited)                  (Audited)
                      ASSETS
<S>                                                     <C>                             <C>    

Cash and cash equivalents                                     $      2,109,373             $       914,509
Accounts receivable, net                                            22,272,767                  19,612,934
Inventory                                                            1,183,093                   2,586,236
Other                                                                  739,508                     894,549
                                                                    ----------                  ----------
   Total current assets                                             26,304,741                  24,008,228
                                                                    ----------                  ----------
Property, plant and equipment, net                                   3,439,768                   3,509,345
Other assets                                                           351,692                     339,692
                                                                    ----------                  ----------
   Total assets                                                $    30,096,201               $  27,857,265
                                                               ===============               =============
                 LIABILITIES AND
               STOCKHOLDERS' EQUITY

Supplier credit facility                                         $   2,842,012               $   3,020,234
Accounts payable and accrued liabilities                            13,142,822                  11,578,993
Income taxes payable                                                   393,620                       - 0 -
Other current liabilities                                               89,798                      94,764
                                                                   -----------                  ----------
   Total current liabilities                                        16,468,252                  14,693,991
Long-term liabilities                                                1,589,676                   1,611,355
                                                                   -----------                  ----------
   Total liabilities                                                18,057,928                  16,305,346
                                                                   -----------                  ----------
Stockholders' Equity:
         Preferred stock, no par value                                       -                           -
         Common stock, $.01 par value                                   55,152                      55,152
         Additional paid-in capital                                  6,317,617                   6,317,617
         Retained earnings                                           6,433,135                   5,922,536
         Less: Treasury stock (at cost)                               (767,631)                   (743,386)
                                                                    ----------                   ---------
   Total stockholders' equity                                       12,038,273                  11,551,919
                                                                 -------------                  ----------
   Total liabilities and
      stockholders' equity                                       $  30,096,201              $   27,857,265
                                                                 =============              ==============

</TABLE>



The accompanying notes are an integral part of these statements.




<PAGE>


                        SYSCOMM INTERNATIONAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                         Three Months Ended December 31
                                                                            1998                 1997
<S>                                                                        <C>                   <C>  
Cash Flows From Operating Activities
  Net Income                                                         $      510,599      $      316,768
  Adjustments to reconcile net income to net cash
    provided by operating activities
         Depreciation and amortization                                       82,500              68,400
         Changes in assets and liabilities
              Accounts receivable                                        (2,659.833)           (768,331)
              Inventory                                                   1,403,143           4,168,487
              Prepaid expenses                                               73,306             (40,007)
              Recoverable income taxes                                       81,735               - 0 -
              Other assets                                                 (12,000)             (6,033)
              Accounts payable and accrued liabilities                    1,563,829           1,242,111
              Income taxes payable                                          393,620            (312,597)
                                                                          ---------           ---------
                    Net Cash Provided by Operating Activities             1,436,899           4,668,798
                                                                          ---------           ---------

Cash Flows from Investing Activities
   Purchase of fixed assets                                                 (12,923)          (591,343)
                                                                          ---------           ---------
              Net Cash Used in Investing Activities                         (12,923)          (591,343)
                                                                          ---------           ---------

Cash Flows From Financing Activities
   Net payments under supplier credit facility                            (178,222)         (3,977,074)
   Payments of long-term debt                                              (26,645)            (10,479)
   Purchase of treasury stock                                              (24,245)               - 0 -
                                                                          ---------          ----------
               Net Cash Used in Financing Activities                      (229,112)         (3,987,553)
                                                                          ---------         -----------
               Net Increase in Cash and Cash Equivalents                 1,194,864              89,902

Cash and Cash Equivalents at Beginning of Period                           914,509             437,594
                                                                           --------            --------

Cash and Cash Equivalents at End of Period                            $  2,109,373         $   527,496
                                                                      =============        ============

Supplemental  Disclosures of Cash Flow Information
  Cash paid (received)during the period for:
        Income taxes                                                  $   (204,000)       $    559,740
                                                                   
        Interest                                                           101,648             247,794           

</TABLE>


The accompanying notes are an integral part of these statements.




<PAGE>


     SYSCOMM INTERNATIONAL CORPORATION

     NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     1. The condensed consolidated financial statements of SysComm International
Corporation  (the  "Company")  are  unaudited  (except  for  the  balance  sheet
information  as of  September  30,  1998,  which is derived  from the  Company's
audited  financial  statements) and reflect all adjustments  (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial  position and operating results for the
interim periods. The condensed  consolidated financial statements should be read
in conjunction  with the  consolidated  financial  statements and notes thereto,
contained in the Company's  Annual  Report.  The results of  operations  for the
three  months  ended  December 31, 1998 are not  necessarily  indicative  of the
results for the entire  fiscal year ending  September  30,  1999,  or any future
interim period.

     2. Commitments and Contingencies

     (A) Employment Agreements

     Effective  June 17,  1997,  the Company  entered into  two-year  employment
agreements  with four  senior  executives.  The  employment  agreements  include
compensation plans for fiscal 1998 as follows:  John H. Spielberger will receive
a base salary of $160,000 plus a bonus based on a percentage of pre-tax earnings
of the Company based on sales volume; Thomas J. Baehr will receive $160,000 plus
a bonus of a percentage of pre-tax earnings based on sales volume of Information
Technology Services, Inc. ("InfoTech");  the Company's wholly-owned  subsidiary;
Dennis R. Wilson will receive $140,000 plus a discretionary  bonus determined by
the Compensation  Committee;  and Norman M. Gaffney will receive $140,000 plus a
bonus of 1% of the  gross  profit  dollars  and 1% of the  pre-tax  earnings  of
InfoTech.  Notwithstanding  the  foregoing,  each of the  above-named  executive
officers  received  twenty (20%) percent  reductions in their base  compensation
during the  fiscal  year ended  September  30,  1998.  These  annual  employment
agreements contain performance incentive plans which will be reviewed during the
fiscal  year  and  new  incentive  plans  may be  implemented  by the  Company's
Compensation Committee for the fiscal year 1999, and thereafter as applicable.



<PAGE>


     Item 2.  Management's  Discussion and Analysis of Financial  Conditions and
Results of Operations.

     Results of  Operations:

     Three  Months  Ended  December  31,  1998  Compared to Three  Months  Ended
December 31, 1997.

     Net  income for the three  months  ended  December  31,  1998 was  $510,599
compared to $316,768 for the same period last year.  This increase in net income
was  the  result  of  slightly  higher  gross  profits  and  lower  selling  and
administrative and interest  expenses.  Diluted earnings per share were $.11 for
the three  months ended  December 31, 1998  compared to $.06 for the same period
last year.

     Revenues:

     Sales  for the three  months  ended  December  31,  1998  were  $27,329,070
compared to $28,062,283  for the same period last year a decrease of $733,213 or
approximately  3%.  The  overall  slight  decrease  in  sales is the  result  of
decreases in sales in the New York and  Massachusetts  offices,  however,  small
increases in sales were  experienced in the New Jersey,  Connecticut and Buffalo
offices.  The decreases in New York and Massachusetts  were due primarily to the
Company's strategy of avoiding low-margin personal computer business.

     Gross Profit:

     Gross  profit as a  percentage  of sales  increased  to 10.4% for the three
months ended  December  31, 1998  compared to 10% for the same period last year.
The  improvement in gross profit over the prior year and over the previous three
quarters is the result of the Company's  new  strategic  emphasis on serving the
information  technology  marketplace  with  mid-range  systems  and  value-added
services.

     Selling and Administrative Expenses:

     Selling and administrative  expenses decreased by $103,751 or approximately
5% to  $1,901,450  for the three months  ended  December 31, 1998 as compared to
$2,005,201  for the same  period  last year.  This  decrease  is the result of a
company-wide initiative focusing on cost containment and reductions.

     Interest Expense:

     Interest  expense for the three  months ended  December 31, 1998  decreased
$146,146 or approximately 59% to $101,648 from $247,794 for the same period last
year.  This  decrease is due to a  reduction  in  borrowings  as a result of the
Company's  reduction in inventory to  $1,183,093  from  $8,475,856  for the same
period last year.

     Income Before Income Taxes:

     Income before income taxes for the three months ended December 31, 1998 was
$851,599  compared to $563,768 for the same period last year.  This  increase of
$287,831 or approximately  51% was attributable to the Company's  improved gross
profit percentage and the reduction in selling and  administrative  expenses and
interest expense.


<PAGE>


     Taxes:

     The  Company's  effective  tax  rate  was 40% for the  three  months  ended
December 31, 1998 compared to 43.3% for the same period last year.

     Liquidity and Capital Resources:

     The  Company's  current  ratio at  December  31, 1998 and 1997 was 1.60 and
1.44,  respectively.  Working  capital at  December  31, 1998 was  $9,836,489  a
decrease of $296,752  from the same  period last year.  The  decrease in working
capital is the result of the losses sustained by the Company in Fiscal 1998.

     Cash  provided by  operating  activities  was  $1,436,899  and  $4,668,798,
respectively,  for the three months ended  December 31, 1998 and 1997 due mainly
to  reductions  in the  Company's  inventory  levels.  Cash  used  in  investing
activities was $12,923 and $591,343 for the three months ended December 31, 1998
and 1997, respectively,  and was used to purchase computer equipment in 1998 and
finance the  Company's new facility in 1997.  Cash used in financing  activities
during the three  months  ended  December  31,  1998 and 1997 was  $229,112  and
$3,987,553,  respectively,  and represented net payments made under the Supplier
Credit Facility and payments of long-term debt in 1998 and 1997 and the purchase
of treasury stock in 1998.

     The Company has a credit arrangement with IBM Credit  Corporation  pursuant
to  which  it may  borrow  up to 85% of its  eligible  receivables  and  100% of
eligible  inventory to a maximum of  $27,500,000.  In addition to the  permanent
credit line,  there are various credit line uplifts  during the year,  which can
increase the line of credit by as much as 50%. As of December 31, 1998, interest
on  outstanding  borrowings was prime or prime plus 6.5% should the Company fail
to meet certain  collateral  requirements.  Throughout fiscal 1998 and the first
three  months of fiscal  1999,  the  Company  has been in a positive  collateral
position with IBM Credit.  The Company  believes that its present line of credit
with IBM Credit Corporation, coupled with its current earnings capacity, will be
sufficient  to meet its capital and  operational  requirements  for at least the
next twelve months.

     Year 2000 Compliance

     The Year 2000 issue is the result of computer  programs being written using
two  digits  rather  than four to define  the  applicable  year.  The  Company's
computer  equipment and software and devices with embedded  technology  that are
time-sensitive may recognize a date using "00" as the year 1900, rather than the
year 2000.  This could  result in a system  failure  or  miscalculation  causing
disruptions of operations,  including, among other things, a temporary inability
to process transactions, send invoices, or engage in normal business activities.

     The Company has undertaken various initiatives  intended to ensure that its
computer  equipment and software will function properly with respect to dates in
the year 2000 and thereafter. For this purpose, the term "computer equipment and
software"   includes  systems  that  are  commonly  thought  of  as  information
technology ("IT") systems,  including  accounting,  data processing and scanning
equipment.

<PAGE>

     Based upon its  identification  and assessment efforts to date, the Company
believes  that certain of its computer  equipment and software that it currently
uses will require  replacement  or  modification.  In addition,  in the ordinary
course of replacing  computer  equipment and software,  the Company  attempts to
obtain replacements that it believes are Year 2000 compliant. Utilizing internal
resources to identify and assess needed Year 2000 remediation, the Company began
its Year 2000 identification,  assessment,  remediation,  and testing efforts in
October 1997 and  anticipates  it will be completed by September  30, 1999.  The
Company  estimates that as of December 31, 1998, it had completed  approximately
75% of the  initiatives  that it believes  will be  necessary  to fully  address
potential Year 2000 issues relating to its computer equipment and software.  The
projects  comprising the remaining 25% of the initiatives are in process and are
expected to be completed on or about September 30, 1999.

<TABLE>
<CAPTION>

Year 2000 Initiative                                                          Percent Completed
-----------------------------------------------------------------------------------------------
<S>                                                                            <C> 
Initial IT systems identification and assessment                                95%
Remediation and testing regarding central system issues                         80%
Remediation and testing regarding branch departmental system issues             60%
Electronic data interchange trading partners conversions                        50%
Identification, assessment, remediation, and testing regarding
   desktop and individual system issues                                         60%
</TABLE>


     The Company has surveyed its significant  vendors and service  providers to
determine the extent to which  interfaces  with such entities and supply sources
are  vulnerable  to Year 2000  issues and  whether  the  products  and  services
purchased from or by such entities are Year 2000 compliant.  The Company expects
all its vendors and service  providers to address all such significant Year 2000
issues  on a timely  basis.  Thus  far,  for  vendor or  service  providers  who
responded  to  our  Year  2000  readiness  survey,  no  one  has  indicated  any
anticipation of a disruption in our business dealings due to Year 2000 concerns.

     The  Company  believes  that  the  cost of its  Year  2000  identification,
assessment,  remediation,  and testing efforts, as well as currently anticipated
costs to be incurred by the  Company  with  respect to Year 2000 issues of third
parties, will not be material. The Company presently believes that the Year 2000
issue will not pose significant  operational problems for the Company.  However,
if all Year 2000 issues are not properly identified, or assessment, remediation,
and testing are not effected  timely with respect to Year 2000 problems that are
identified,  there  can be no  assurance  that  the  Year  2000  issue  will not
materially  adversely  impact the  Company's  results of operations or adversely
affect  the  Company's   relationships   with  customers,   vendors  or  others.
Additionally,  there  can be no  assurance  that the Year  2000  issues of other
entities will not have a material  adverse  impact on the  Company's  systems or
results of operations.


<PAGE>


     The  Company  has  begun,  but  not  yet  completed,  an  analysis  of  the
operational  problems  and  costs  (including  loss of  revenue)  that  would be
reasonably  likely to result from the  failure by the Company and certain  third
parties to complete efforts to achieve Year 2000 compliance on a timely basis. A
contingency  plan has not been  developed  for dealing with the most  reasonably
likely  worst  case  scenario,  and  such  scenario  has  not yet  been  clearly
identified.   The  Company   currently  plans  to  complete  such  analysis  and
contingency planning by September 30, 1999.

     The  costs  of  the  Company's   Year  2000   identification,   assessment,
remediation,  and testing efforts and the dates on which the Company believes it
will complete  such efforts are based upon  management's  good-faith  estimates,
which were derived using numerous assumptions regarding future events, including
the  continued   availability  of  certain   resources,   possible   third-party
remediation  plans,  and other  factors.  There can be no  assurance  that these
estimates will prove to be accurate,  and actual results could differ materially
from  those  currently  anticipated.  Specific  factors  that  could  cause such
material  differences include, but are not limited to, the availability and cost
of  personnel  trained in Year 2000  issues,  the ability to  identify,  assess,
remediate,  and test all relevant  computer codes and imbedded  technology,  and
similar  uncertainties.  In addition,  variability  of definitions of "Year 2000
Compliant" and the myriad of different  products and services,  and combinations
thereof,  sold by the Company may lead to claims  whose impact on the Company is
not currently estimateable. No assurance can be given that the aggregate cost of
defending  and resolving  such claims,  if any,  will not  materially  adversely
affect the  Company's  results of  operations.  Although  some of the  Company's
agreements  with  manufacturers  and others from whom it purchases  products for
resale contain provisions  requiring such parties to indemnify the Company under
such  circumstances,  there  can  be  no  assurance  that  such  indemnification
arrangements  will cover all of the Company's  liabilities  and costs related to
claims by third parties related to Year 2000 issues.

     Forward-Looking Statements

     Certain  information  contained  in this  Quarterly  Report  on Form  10-Q,
including,  without  limitation,  information  appearing  under  Part I, Item 2,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations," are  forward-looking  statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities  Exchange Act of
1934).  Factors set forth in the Company's Prospectus filed June 17, 1997, or in
the Company's other Securities and Exchange Commission filings, could affect the
Company's  actual results and could cause the Company's actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company in this Quarterly Report on Form 10-Q.



<PAGE>



                           PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

          None

Item 2.   Changes in Securities

          None

Item 3.   Defaults Upon Senior Securities

          None

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

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  *3.1     Amended and Restated Certificate of Incorporation
                  *3.2     Amended and Restated By-Laws
                  *4.1     Form of Common Stock Certificate
                  *4.2     Form of Representative Warrant
                  11       Statement Re:    Computation of Per Share Earnings
                  27       Financial Data Schedule

         (b)      Reports on Form 8-K

                  None
-------------------

     *Incorporated by reference from the Registrant's  Registration Statement on
Form S-1, Registration No. 333-25593







<PAGE>






                                   Signatures


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                     SYSCOMM INTERNATIONAL CORPORATION
                                          (Registrant)


                                    /s/John H. Spielberger
                                    ------------------------------------------
                                    John H. Spielberger
                                    President and Chief Executive Officer


                                    /s/Dennis R. Wilson
                                    ------------------------------------------
                                    Dennis R. Wilson
                                    Vice President, Chief Financial Officer
                                        And Secretary