SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20459

                                   FORM 10-KSB


                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 2006

                         Commission File Number 0-17580

                               SYNERGX SYSTEMS INC
              (Exact name of Small Business Issuer in its charter)

                Delaware                            11-2941299
     (State or other jurisdiction of            (I.R.S. Employer
       incorporation or organization)           Identification No.)

                  209 Lafayette Drive, Syosset, New York 11791
               (Address of principal executive offices) (zip code)

         Issuer's telephone number, including area code: (516) 433-4700

Securities registered pursuant to Section 12(b) of the Act: None

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

                     Common Stock, $.001 par value per share
                                (Title of Class)

     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 and (2) has been subject to such filing
requirements for the past 90 days. YES X NO

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements by reference in Part III of this Form 10-KSB ( )

Indicate by check mark whether the  registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act) YES NO X

     State issuer's revenues for its most recent fiscal year: $15,826,000

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the average bid and ask prices for the Registrant's
Common Stock, $.001 par value per share, as of December 12, 2006 was $4,478,363

      As of December 12, 2006, the Registrant had 5,210,950 shares of Common
Stock outstanding.

Documents Incorporated by Reference: Definitive Proxy Statement to be filed.


<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

Synergx  Systems Inc.  ("Synergx" or the  "Company")  is a Delaware  corporation
organized in October 1988 to acquire controlling  interests in companies engaged
in the design,  manufacture,  distribution,  sale and  servicing  of fire,  life
safety, security,  energy management,  intercom,  audio-video  communication and
other systems. Reference to Synergx or the Company include operations of each of
its subsidiaries except where the context otherwise requires.


Synergx's  business  is  conducted  through  subsidiaries  in the New York  City
metropolitan area. Synergx conducts its business in New York principally through
Casey Systems Inc.,  ("Casey") its wholly owned  subsidiary  located in New York
City and Long Island, New York


CASEY SYSTEMS.  Synergx's principal operating subsidiary is Casey Systems. Casey
has been in the  business  of  designing,  servicing  and  maintaining  building
communication   systems  since  1970.  Today  Casey  is  a  diversified  systems
integrator  which,  in addition to its own  proprietary  line of life safety and
building protection products, also is a premier low-voltage systems provider for
a broad  range  of  video,  teleconferencing/multimedia,  audio  visual,  public
address,  customer  information,  access control,  intercoms,  security,  closed
circuit TV (CCTV) and professional  sound systems.  In addition,  Casey designs,
markets and supports these systems for the rail and mass transit industries.


Fire and Life Safety. For over 30 years Casey has been providing fire and smoke
signaling and detection systems for institutional, municipal, commercial and
residential buildings in the New York City metropolitan area. Casey provides
services primarily as a sub-contractor to electrical and general contractors but
also acts as a general contractor from time to time as well as engages in direct
sales of products and services to building owners, managers and other users. New
and modified systems must be installed and maintained in compliance with local
law requirements. New York City in particular maintains a very comprehensive and
detailed body of regulations to govern the installation and operation of fire
alarm and life safety systems. Casey markets its expertise in putting systems on
line and servicing such systems in compliance with these regulations.


Casey has developed and markets its own proprietary signaling and fire detection
technology  known as  COMTRAK,  and also  acts as a  strategic  distributor  for
national  manufacturers such as Edwards Systems  Technology,  a General Electric
company.  Casey has  installed  a number of  generations  of  COMTRAK  and other
systems in hundreds of facilities in the New York metropolitan area. COMTRAK and
other such  systems  sold by Casey  control and monitor  smoke  detectors,  pull
stations and other devices,  supervise other building  systems such as elevators
and fans and provide  dedicated  audio  communication  channels for building and
emergency  personnel.  In many  cases  after  installation  and fire  department
approval  thereof,  Casey  continues  to provide  products  and services to such
facilities  related to the changing  requirements  of tenants in such  buildings
(e.g.  smoke  detectors  and other  devices  when tenant  spaces are altered) or
service contracts to building owners or managers.


Engineered  Sound  Systems.  Casey has  augmented  its  established  position in
marketing  engineered  life  safety  systems  (proprietary  and third  party) by
developing a significant business in engineered sound systems for application to
a  variety  of  users  including  airline  terminals,   hospitals,   educational
facilities and transit facilities (e.g. commuter terminals and subway stations).
Casey has  developed a focused unit with a high level of experience to penetrate
this niche market with significant  success as a substantial  portion of Casey's
revenues and order position derives from this effort. Casey offers simple analog
paging systems as well as state-of-the-art  computerized  systems that emphasize
speech  intelligibility  and  high  quality  music  reproduction.  Casey  is  an
authorized dealer for many leading manufacturers.


Transit.  Casey designs,  develops,  manufactures (through third party sources),
and  implements  sophisticated  security  and  communication  solutions  for the
transportation sector.  Casey's transportation  products and services are in use
by agencies such as the MTA - New York City Transit,  Long Island Rail Road, New
Jersey Transit and AMTRAK.  Casey has invested  heavily in a highly skilled team
of  engineering  professionals  who have  developed  security  systems  for mass
transit and have positioned  itself as a premier supplier of security systems to
MTA - New York City Transit.


Audio-Visual.   Casey's  engineering  and  sales  team  work  with  consultants,
architects  and  construction  managers to design,  install and integrate  audio
visual systems in buildings in the New York metropolitan areas. These facilities
include museums, auction houses, advertising agencies, houses of worship, health
care and educational facilities,  financial institutions and law firms. On these
projects Casey oversees software integration,  selects hardware and oversees all
aspects of the project  installation  and activation.  Systems include audio and
video conferencing,  video projection  systems,  media streaming and command and
control  centers.  Casey is an  authorized  supplier  of numerous  high  quality
national product lines.


Security.   Casey  provides   integrated  security  systems  for  institutional,
municipal, commercial and residential buildings handling design and engineering,
product  specification,   installation,   maintenance  and  personnel  training.
Customers  include  commercial  and  apartment  buildings,   transportation  and
educational  facilities and medical centers.  Products  include  indoor-outdoor,
perimeter,  pan-tilt-zoom cameras, monitors, wireless command and remote control
and  transmission  technology.  Casey  designs and installs a full range of card
access control systems including  scrambled  pad-biometrics,  smart cards, swipe
cards and  proximity  readers.  Casey has worked with many network  technologies
including encrypted networks.


Service.  Casey continues to put an increasing priority on the development of an
integrated  and  efficient  service  organization.  Sales  personnel  have  been
dedicated to securing  service  contracts  and to market  service of COMTRAK and
other  projects  coming out of warranty  and the renewal of such  contracts.  To
provide efficient and productive customer service,  Casey maintains an office in
New York  City  which  houses  its New York  service  management  offering  24/7
customer support with over 30 manufacturer-trained field service technicians


GENERAL  SOUND.  Synergx  conducted  business in Texas  through its  subsidiary,
General Sound (Texas) Company, which distributes, services, installs and designs
a variety of sound, fire alarm,  intercom and security systems in the Dallas/Ft.
Worth,  Texas area. In May 2006,  General Sounds sold its  inventory,  property,
trade  name,   business  and  operations.   For  information  on  the  sale  and
discontinued  operations  of  General  Sound see  "MANAGEMENT'S  DISCUSSION  AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION"


SECURE  724 LP.  Synergx  holds a 25%  investment  in Secure  724 LP, a Canadian
research,  development  and marketing  group which has  developed  technology to
transmit  alarm and other  data from a secured  site to a command  center and to
multiple  Blackberry  wireless  handheld  devices and/or  cellular phones and to
transmit  commands or  programming  instructions  to a wide  variety of building
systems.  Due to  insufficient  cash flow, lack of outside  financing,  and slow
progress and uncertainty in bringing its product to market, an impairment charge
of  $377,264  was  recorded  to fully  reserve  for the  recovery  of the equity
investment  and loans made to Secure  724.  In  addition  in 2006,  the  Company
recorded  an  adjustment  to the equity  investment  of  $60,000 to reflect  the
Company's  25%  portion  of the  net  loss of  Secure  724 LP.  The  Company  is
negotiating to sell its entire interest in Secure 724. However,  there can be no
assurance  that such sale can be made for an amount and terms  acceptable to the
Company.


RESEARCH AND  DEVELOPMENT.  During the fiscal years ended September 30, 2006 and
2005,  Synergx  spent  approximately  $114,000 and $121,000,  respectively,  for
research and development of Synergx's life safety and communication systems.


CUSTOMERS AND SUPPLIERS. For the fiscal years ended September 30, 2006 and 2005,
no customer  accounted  for more than 10% of  Synergx's  revenues.  One supplier
accounted for 7% and 10% of Synergx's cost of sales in the years ended September
30, 2006 and 2005, respectively.


REGULATIONS.  Synergx believes that it is in compliance with applicable building
codes,  zoning ordinances,  occupational,  safety and hazard standards and other
Federal,  state and local  ordinances  and  regulations  governing  its business
activities. .


COMPETITION.  Synergx business is competitive; some of Synergx's competitors may
have greater  financial  resources and may offer a broader line of fire and life
safety  products.  Synergx also faces  competition  in the  servicing of systems
which it sells. Accordingly, even though Synergx may sell and install a fire and
life safety  and/or  communications  system,  it may not receive the contract to
service that system. Synergx,  however, believes that it can effectively compete
with any entity which conforms with applicable rules and regulations.


EMPLOYEES.  As of September 30, 2006,  Synergx and its  subsidiaries had 92 full
time  employees,  including 32 New York hourly  employees  that are covered by a
Collective Bargaining Agreement expiring March 2009.


BUSINESS  CONDITIONS.  Synergx  believes that its labor and material sources are
sufficient and that other than normal competitive factors, and what is discussed
above or under "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION", Synergx's operations and industry do not have any special
characteristics  which may have a  material  impact  upon its  future  financial
performance.


PATENTS AND  TRADEMARKS.  The Company  does not have any patents on its systems,
but, it uses proprietary  technology which it seeks to protect as trade secrets.
The "Firetector,"  "Casey Systems" and "COMTRAK"  trademarks are registered with
the United States Patent and Trademark Office.


ITEM 2. DESCRIPTION OF PROPERTY

    The Company leases approximately 16,400 square feet of office, manufacturing
and warehouse space in Syosset, New York under a seven year lease that was to
expire in June 2007. In 2006, the lease was extended on similar terms to expire
June 30, 2012.The rental schedule provides for monthly rent of $16,600 during
2006 with 3.5% yearly increases through the remainder of the term of the lease.

     The Company has a lease for its service center in New York City that became
effective  August 2002 and runs  through  December  31,  2009.  The lease is for
office and warehouse  space and provides for yearly rental of $84,000 during the
first year plus expenses with yearly escalation of 2% each year thereafter.

     Management believes there is sufficient space at these facilities for its
current and intended business.

ITEM 3. LEGAL PROCEEDINGS

In the normal  course of its  operations,  the Company has been, or from time to
time may be, named in legal actions seeking monetary damages.  While the outcome
of these matters cannot be estimated with certainty, management does not expect,
based  upon  consultation  with legal  counsel,  that such  actions  will have a
material effect on the Company's business or financial condition.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         None.


<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Synergx's  Common  Stock has been  traded on the  National  Association  of
Securities  Dealer's Inc. Automated  Quotation System ("NASDAQ") since April 11,
1989 under the "FTEC"  symbol  and since May 2002 under the "SYNX"  symbol.  The
following  table shows the high and low bid and ask  quotations  for each fiscal
quarter from December 31, 2003 through  September 30, 2006 which quotations were
obtained from the National Association of Securities Dealers Inc.


Common Stock                  Bid             Ask

Quarter Ended             High    Low     High    Low

December 31, 2004        4.370   2.490   4.470   2.690
March 31, 2005           3.580   1.440   3.680   1.460
June 30, 2005            1.670   1.000   1.680   1.200
September 30, 2005       6.250   1.240   6.250   1.310
December 31, 2005        2.590   1.680   2.610   1.720
March 31, 2006           2.430   1.580   2.450   1.630
June 30, 2006            2.060   1.250   2.090   1.320
September 30, 2006       1.860   1.210   1.890   1.310



     The above  quotations  represent  prices  between  dealers,  do not include
retail  markups,   markdowns  or  commissions  and  may  not  represent   actual
transactions.  As of  December  12,  2006,  there  were 252  record  holders  of
Synergx's Common Stock.

     On December 12,  2006,  the closing bid and ask prices for the Common Stock
were $1.69 and $1.70, respectively.

     The Company has not paid any cash dividends on its Common Stock. Payment of
cash dividends in the  foreseeable  future is not  contemplated  by the Company.
Whether dividends are paid in the future will depend on the Company's  earnings,
capital  requirements,  financial  condition  along  with  economic  and  market
conditions,  industry  standard  and other  factors  considered  relevant to the
Company's  Board of  Directors.  Payment of dividends is  restricted  in certain
cases by the Company's credit facilities. Accordingly, no assurance can be given
as to the amount or timing of future dividend payments, if any.


Registration of Shares of Common Stock

     The Company filed a Form S-8 registration statement, which became effective
July 22, 2003.  The  registration  statement  provided for the  registration  of
404,885 shares issueable under the 1997 Non-Qualified Stock Option Plan.

<PAGE>



ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

LIQUIDITY AND CAPITAL RESOURCES

     The Company has a $3 million  revolving  credit facility with TD Banknorth,
N.A.  (formerly,  Hudson  United  Bank) (the  "Credit  Facility").  This  credit
facility  has an annual  interest  rate of prime  plus 1/4% and was to expire in
June 2007. On December 26, 2006,  the credit  facility was extended to expire in
January  2008.  Advances  under  the  Credit  Facility  are  measured  against a
borrowing base  calculated on eligible  receivables  and  inventory.  The Credit
Facility  is  secured  by all  assets of the  Company  and all of its  operating
subsidiaries.

     The Credit Facility includes various  covenants,  which among other things,
impose  limitations on declaring or paying  dividends,  acquisitions and capital
expenditures.  The Company is also required to maintain certain financial ratios
and tangible net worth covenants.  At September 30, 2006, the Company was not in
default with any of its financial  covenants and at such time the full amount of
the Credit  Facility was available  under the  borrowing  base  calculation.  At
September 30, 2006, $929,000 was owed under the Credit Facility.

     Net cash used in  continuing  operations  for the year ended  September 30,
2006  amounted  to $64,000 as  compared  to cash being  provided  by  continuing
operations of $11,000 for the comparable  prior year. The increase in cash being
used  in  operations  was  primarily  due to a  $613,000  loss  from  continuing
operations in 2006 which is offset by a $437,000 non-cash  impairment charge for
the  investment  in Secure 724 and also a non-cash  ($253,000)  deferred  income
taxes  (benefit).  In  contrast,  there  was a  $50,000  operating  profit  from
continuing operations in 2005.

     In 2006,  there was a net  $131,000  cash inflow  provided by  discontinued
operations  that  resulted  from the business  being sold in 2006 for  $518,000,
which funded the decline in business in 2006 of the discontinued  operation.  In
contrast, for 2005 the discontinued operation provided a cash inflow of $407,000
from operations.

     In 2006,  the net $612,000 cash inflow from the  combination  of continuing
operations and discontinued  operations (which includes the $518,000 of proceeds
from the sale of the discontinued  operation),  along with cash on hand was used
to  purchase  $256,000  of  capital  assets  (primarily  for  a  new  management
information system) and to reduce bank borrowings by $520,000.


     The ratio of the Company's current assets to current liabilities  increased
to  approximately  3.04 to 1 at  September  30,  2006  compared  to 3.01 to 1 at
September 30, 2005.



<PAGE>



RESULTS OF OPERATIONS

Revenues and Gross Profit

                                              For the years ended September 30,
                                                 2006               2005
                                                     (In thousands)
Product Sales ................................  $10,059          $12,358
Subcontract Sales ............................      665              475
Service Revenue ..............................    5,101            4,798
                                                -------          -------
       Total Revenue .........................  $15,825          $17,631
                                                -------          -------

Product Gross Margin .........................  $ 2,678          $ 3,666
Subcontract Gross Margin .....................      127               90
Service Gross Margin .........................    2,363            1,676
                                                -------          -------
        Total Gross Margin ...................  $ 5,168          $ 5,432
                                                -------          -------

Gross Profit Product % .......................       27%              30%
Gross Profit Subcontractor % .................       19%              19%
Gross Profit Service % .......................       46%              35%
                                                -------          -------
         Total Gross Profit % ................       33%              31%


Revenues

     The decrease in product revenues resulted primarily from lower shipments of
transit  products  that  reflected  a lower  level of orders  and the  timing of
releases  required by customers.  Due to the  retirement in December 2005 of key
personnel  involved  in  transit  work in New York,  the  Company  substantially
overhauled  the  management  structure  and  marketing  strategies  for  transit
products.  The benefit of the  restructuring  and marketing  strategies  has not
resulted in shipments  during 2006.  The Company  continues to bid on new orders
and has quotations  outstanding for several large transit projects. In addition,
the Company has put into effect certain cost reduction  initiatives  with a view
towards pricing business aggressively in the New York City metropolitan area.

    Subcontract revenue increased during 2006 as the Company was responsible as
prime contractor for more electrical installations in 2006 compared to similar
projects in 2005.

     Service  revenues  increased 6% during 2006 primarily due to an increase in
call-in service on fire alarm systems (replacement parts and service required by
buildings)  and from an  increase  in service  contract  revenue  related to new
customers and higher fees on renewal of contracts  compared to 2005. The service
contract base of customers continued to increase in 2006 due to new customers in
our New York City and Long Island, New York areas.

Gross Profit

     Gross profit margin from product revenues decreased 27% to $2,678,000 due
to lower product sales (noted above) and related gross margin. Gross profit
margin as a percentage of product revenues was 27% in 2006 compared to 30% in
2005. This decline in gross profit percentage was due to lower sales on which to
absorb overhead, which is relatively fixed in nature.

     Gross profit margin related to subcontract revenues for 2006 increased in
absolute terms as the Company was responsible for a larger amount of electrical
installation by third parties (subcontract work).

     Gross profit  margin from  service  revenues  increased  during 2006 due to
higher service  revenue which resulted from the increases in call-in and service
contract revenues noted above.  Gross profit margin was also favorably  affected
by  certain  reductions  in the  number of service  technicians  as the  Company
reevaluated its customer support staffing level during 2006.

Selling, General and Administrative Expenses

     Selling,  General and Administrative Expenses ("S G &A") increased $395,000
in 2006 over 2005  primarily  due to $214,000 of expenses to upgrade the Company
sales,  marketing,  project  management and  information  technology  personnel,
systems and  procedures.  These were higher  than  normal  expenses  and include
$29,000 of additional  recruitment  fees (total of $104,000 in 2006, and $75,000
in 2005 and $13,000 in 2004),  $120,000 of budgeted severance costs;  $41,000 of
additional  computer  consulting  costs to  upgrade  the  Company's  information
technology  system,  and $24,000 of additional  professional fees related to the
sale  of  the  discontinued  operations  in  Dallas  and  employment  compliance
regarding staff reductions. There was also an increase of $123,000 due to higher
sales and  marketing  personnel  expenses  which are  geared to  support  higher
product  revenues.  Consequently,  S G & A  expenses  as a  percentage  of sales
increased  5.6% to  34.1%  in 2006 due to lower  sales  volume  compared  to the
relative  fixed  nature of these costs.  The Company will  continue to invest in
staff to  secure  and  support  sales  of new  products  in  future  years,  but
management  expects S G & A  expenses  and S G & A as a  percentage  of sales to
decline in 2007.

Income (Loss) Before Tax

     The loss before  income taxes during 2006 is primarily  due to the decrease
in gross profit  caused by lower  product  revenues.  Partially  offsetting  the
decrease in gross profit from  product  revenues was an increase in gross profit
that  resulted  from higher  service  revenues  (noted above) and a reduction in
service staff. Selling,  general and administrative  expenses increased $395,000
and remained at a high level geared to support higher  product sales.  For 2006,
the Company  recorded a loss of $437,000 on its equity in the operating  loss of
Secure 724 LP compared to a loss of $76,000 in 2005.  The loss in 2006  includes
an  impairment  charge of  $377,264  related to the  investment  in and loans to
Secure 724. These investments were deemed to be impaired because of insufficient
cash flow, lack of outside funding and slow progress and uncertainty on bringing
its product to market. The Company is negotiating to sell its entire interest in
Secure 724. However, there can be no assurance that such sale can be made for an
amount and terms acceptable to the Company.

Tax Provision

     The Company's current income tax (benefit)  provision  represents  federal,
state and local  income  taxes.  Deferred  taxes  represents  the net  change in
current and noncurrent deferred tax assets and noncurrent deferred tax liability
as it related to certain timing differences of book and tax deductions.

Discontinued Operations

     On May 31, 2006,  the  Company's  wholly owned  subsidiary,  General  Sound
(Texas) Company ("General Sound") that operated in Dallas/Ft.  Worth, Texas sold
its  inventory,  property,  trade name,  business and operations to LCR Sound, a
Texas  company.  Under  terms of the Asset  Purchase  Agreement,  General  Sound
received cash proceeds  from the buyer of $518,000 for its  inventory,  property
and equipment,  and goodwill resulting in a gain of $197,901.  The buyer assumed
responsibility  for the remaining term of the lease for its office and warehouse
space.  General  Sound  retained  cash and all accounts  receivable  and remains
responsible for all existing  liabilities which have  substantially been paid as
of September 30, 2006.

     The  operations  of General  Sound are  reported  as  discontinued  for all
periods presented in the accompanying Consolidated Financial Statements.


<PAGE>

The results of the  discontinued  operations  for the years ended  September 30,
2006 and 2005 are as follows:

                                                     Years ended September 30,
                                                    2006                2005
                                                 -----------         -----------
Sales                                            $ 1,398,809         $ 3,156,761
Cost of Sales                                      1,113,211           2,013,639
Operating expenses                                   684,584           1,009,286
                                                 -----------         -----------
Operating (loss) income                          ($  398,986)            133,836

Gain on sale of assets                               197,901                 -0-
                                                 -----------         -----------

(Loss) income before taxes                       ($  201,085)        $   133,836
                                                 ===========         ===========


Order Position

     Synergx's order position,  excluding service, was $8.0 million at September
30, 2006 compared to $7.9 million at September 30, 2005.  The order position has
been adjusted to exclude the  discontinued  operations.  The Company  expects to
fulfill a significant portion of its order position over the next twelve months.
While  quotation  activity is brisk,  there is no assurance  when orders will be
received and whether the order position will increase. Due to the fact that some
of the Company's products are sold and installed as part of larger  construction
or mass transit projects,  there is typically a delay between the booking of the
contract  and its  revenue  realization.  The order  position  from time to time
includes,   and  the  Company   continues  to  bid  on,  projects  that  include
subcontractor labor,  (electrical installation performed by others). The Company
expects to be active in seeking  orders  where the Company  would act as a prime
contractor and  responsible  for management of the project as well as electrical
installation.

Plan of Operations

     During  fiscal  2007,  management  intends  to  continue  to  focus  on its
intensified  marketing  programs  and to  continue  to contain or monitor  fixed
overhead as well as to reduce  variable  costs through  improved  efficiency and
productivity.  Specifically  management  is  pursuing a strategy  of  aggressive
marketing  of products  and systems to drive more  revenue  through  established
channels of distribution.  Management will concentrate on these initiatives with
a focus on reducing costs thereby enhancing the Company's  competitiveness which
combined with improved sales and marketing techniques should result in increased
revenues over time. However, competition remains severe in many of the Company's
product  categories.  Longer term,  management  expects increased demand for the
Company's  audio-visual,   public  address,  security  and  other  communication
products .Recent  enhancements to Synergx's  management  information systems and
methods of approving and  monitoring  project  costs have improved  management's
ability to  pinpoint  waste  and/or  third party  (supplier  or  customer)  cost
responsibility.  Further enhancements in theses areas will be in progress during
2007.

     Management will be reviewing inventory levels with a view towards generally
reducing  inventory  levels in 2007.  The Company will be  assessing  the use of
third  party  vendors  to procure  and  manufacture  products  and to reduce its
inventory levels of products distributed to and held for customer service.

Inflation

     The impact of inflation on the Company's  business  operations has not been
material in the past.  Casey's  labor  costs are  normally  controlled  by union
contracts  covering a period of three years and its material costs have remained
relatively stable. However, in July of 2005, the Company and its union agreed to
a new three year nine month contract that provides for  wage/benefits  increases
of  approximately  4% in each year.  Under  terms of previous  union  contracts,
certain union members,  upon passing certain test requirements,  began moving up
to higher paying  categories  that have multiple salary steps per year in excess
of the 4%  contractual  level.  In  addition,  the  demand  for  highly  skilled
professionals  has  resulted  in the need to  assess  salary  levels in order to
remain competitive.  It is expected that required salary adjustments will exceed
normal  increases given in the past. The Company will try to mitigate the effect
of these increases in labor costs by efficiency initiatives,  expense reductions
and, if possible, price increases.

Off-Balance Sheet Arrangements

     As of September 30, 2006,  the Company did not have any  off-balance  sheet
debt  nor did it have any  transactions,  arrangements,  obligations  (including
contingent  obligations) or other relationships with any unconsolidated entities
or other  persons,  other than as  disclosed in Note 6, that may have a material
current or future effect on financial condition, changes in financial condition,
results of operations,  liquidity,  capital expenditures,  capital resources, or
significant components of revenue or expenses.

<PAGE>



ITEM 7.  FINANCIAL STATEMENTS

     Our financial statements together with accompanying notes and the report of
Marcum & Kliegman LLP, our independent registered public accounting firm, are
set forth on the pages indicated below.

Report of Independent Registered Public Accounting Firm                      F1

Audited Consolidated Financial Statements

Consolidated Balance Sheet  September 30, 2006                          F2 - F3

Consolidated Statements of Operations
    Years Ended September 30, 2006 and 2005                                  F4

Consolidated Statements of Stockholders' Equity
    Years Ended September 30, 2006 and 2005                                  F5

Consolidated Statements of Cash Flows
     Years Ended September 30, 2006 and 2005                                 F6

Notes to Consolidated Financial Statements                              F7 - F19


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

     None

ITEM 8A.  Controls and Procedures

Evaluation of disclosure controls and procedures. At the period end of this
Annual Report on Form 10-KSB, the Company's management, including the Company's
Chief Executive Officer and Chief Financial Officer evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures.
Based on that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded, as of the end of the fiscal year covered by
this report, that:

The Company's disclosure controls and procedures are designed to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified.

That Company's disclosure controls and procedures are effective to ensure that
such information is accumulated and communicated to the Company's management,
and made known to the Company's Chief Executive Officer and Chief Financial
Officer, to allow timely decision regarding the required disclosure.

There have been no changes in the Company's internal controls over financial
reporting that have materially affected, or is reasonably likely to materially
affect the Company's internal controls over financial reporting during the
period covered by the Annual Report.


<PAGE>



                                  PART III

Item 9. Directors,  Executive Officers, Promoters, Control Persons and Corporate
Governance; Compliance with Section 16(a) of the Exchange Act.

The information required by this Item is incorporated by reference from our
definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item 10.  Executive Compensation

The information required by this Item is incorporated by reference from our
definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters

The information required by this Item is incorporated by reference from our
definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item  12.  Certain   Relationships  and  Related   Transactions,   and  Director
Independence

The information required by this Item is incorporated by reference from our
definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

ITEM 13.  EXHIBITS

     (a)  Exhibits

Exhibit No.            Description of Exhibit

3.1  Certificate of Incorporation of the Company, as amended (6)

3.2  By-Laws of the Company (2)

4.1  Specimen Common Stock Certificate (2)

10.1 Credit  Facility  dated  October 9, 2003  between  Synergx  Systems Inc. as
     borrower and Hudson United Bank as lender. (5)

10.2 Employment  Agreement  between Casey Systems Inc. and Al Koenig dated as of
     February 17, 2005 (7)

10.3 Employment  Agreement  between  Synergx  Systems  Inc. and Daniel S. Tamkin
     dated as of October 1, 2005. (7)

10.4 Second  Amendment to Revolving Loan  Agreement,  Promissory  Note and Other
     Loan Documents,  between Synergx Systems Inc. and TD Banknorth, N.A., dated
     as of September 29, 2006.*

10.8 Form of Lease dated  February,  2000  between  Casey  Systems as Tenant and
     First Industrial L.P. as Landlord (3)

10.9 Form of Lease dated July 23rd, 2002 between Systems Service Technology Corp
     as Tenant and Balbo Realty LLC as Landlord(4)

10.10 Form of Limited  Parnership  Agreement  dated May 29, 2003 between 3077118
     Nova Scotia ULC (a Synergx Systems owned company) and Secure 724 LP (5)

22.1 Subsidiaries of the Registrant *

23.1 Consent of Marcum & Kliegman LLP Independent  Registered  Public Accounting
     Firm *

31.1 Certification  of Daniel S. Tamkin  pursuant to 18 U.S.C.  Section 1350, as
     adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2 Certification  of John A. Poserina  pursuant to 18 U.S.C.  Section 1350, as
     adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1 Certification of Daniel S. Tamkin and John A. Poserina  pursuant to Section
     906 of the Sarbanes-Oxley Act of 2002*

- --------

*    filed herewith

(1)  Reference is made to the correspondingly  numbered Exhibit to Amendment No.
     1 to the Company's  Registration  Statement on Form S-2,  Registration  No.
     33-51472,  filed  with  the  Commission  on  December  23,  1992,  which is
     incorporated herein by reference.

(2)  Reference is made to the correspondingly  numbered Exhibit to Amendment No.
     1 to the Company's  Registration  Statement on Form S-1,  Registration  No.
     22-26050,  filed  with  the  Commission  on  January  23,  1989,  which  is
     incorporated herein by reference.

(3)  Reference is made to the correspondingly  numbered Exhibit to the Company's
     Annual Report on Form 10-KSB for the Fiscal Year Ended  September 30, 2001,
     which Exhibit is incorporated herein by reference.

(4)  Reference is made to the correspondingly  numbered Exhibit to the Company's
     Annual Report on Form 10-KSB for the Fiscal Year Ended  September 30, 2002,
     which Exhibit is incorporated herein by reference.

(5)  Reference is made to the correspondingly  numbered Exhibit to the Company's
     Annual  Report on Form 10-KSB for the Fiscal Year Ended  September 30, 2003
     which Exhibit is incorporated herein by reference.

(6)  Reference is made to the correspondingly  numbered Exhibit to the Company's
     Amendment  to Annual  Report on Form  10-KSB/A  for the  Fiscal  Year Ended
     September 30, 2002 which Exhibit is incorporated herein by reference.

(7)  Reference is made to the correspondingly  numbered Exhibit to the Company's
     Annual  Report on Form 10-KSB for the Fiscal Year Ended  September 30, 2005
     which Exhibit is incorporated herein by reference.


Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from our
definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.


<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                                  SYNERGX SYSTEMS INC.
                                  (Registrant)
                                  By: /s/ Daniel S. Tamkin
                                  Daniel S. Tamkin,
                                  Chief Executive Officer and Director

Dated: December 26, 2006

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Company and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>


                Name                                Title                                Date
<S>                                     <C>                                      <C>

/s/ Daniel S. Tamkin                        Chairman of the Board;                December 26, 2006
-------------------------                Chief Executive Officer; and
Daniel S. Tamkin                                   Director


/s/ John A. Poserina                       Chief Financial Officer                December 26, 2006
-------------------------                 (Principal Accounting and
John A. Poserina.                       Financial Officer), Secretary
                                                 And Director

/s/ Harris Epstein                                 Director                       December 26, 2006
-------------------------
Harris Epstein


/s/ Mitchell J. Sanders                            Director                       December 26, 2006
-------------------------
Mitchell J. Sanders


/s/ Mark Litwin                                    Director                       December 26, 2006
--------------------------
Mark Litwin


/s/ J. Ian Dalrymple                               Director                       December 26, 2006
--------------------------
J. Ian Dalrymple


/s/ Gary Oreman                                    Director                       December 26, 2006
--------------------------
Gary Oreman
</TABLE>



<PAGE>



             Report of Independent Registered Public Accounting Firm

To the Audit Committee of the Board of Directors of
Synergx Systems Inc.

We have audited the accompanying consolidated balance sheet of Synergx Systems
Inc. and its subsidiaries (the "Company") as of September 30, 2006 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended September 30, 2006 and 2005. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor are we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's control over financial reporting.
Accordingly, we express no opinion. An audit also includes examining on a test
basis evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Synergx
Systems Inc. and its subsidiaries as of September 30, 2006 and the consolidated
results of their operations and their cash flows for the years ended September
30, 2006 and 2005, in conformity with accounting principles generally accepted
in the United States of America.

/s/ MARCUM & KLIEGMAN LLP
New York, NY
December 12, 2006 except for Note 5 which is as of December 26, 2006
<PAGE>
                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                                                September 30,
                                                                    2006
                                                                -----------
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                     $   273,000
  Accounts receivable, principally trade, less allowance
     for doubtful accounts of $352,685                            6,019,000
  Inventories, net                                                2,040,000
  Deferred taxes                                                    516,000
  Prepaid expenses and other current assets                         213,000
  Income Tax Receivable                                              82,000
                                                                -----------
                             TOTAL CURRENT ASSETS                 9,143,000
                                                                -----------

PROPERTY AND EQUIPMENT -at cost, less
   accumulated depreciation and amortization of $1,611,000          776,000

OTHER ASSETS                                                        207,000

DEFERRED TAXES                                                        4,000
                                                                -----------
                             TOTAL ASSETS                       $10,130,000
                                                                ===========

See accompanying Notes to the  Consolidated Financial Statements

<PAGE>


                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET




                                                                September 30,
                                                                     2006
                                                                 -----------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

   Notes payable - current portion                               $    27,000
   Accounts payable and accrued expenses                           2,075,000
   Deferred revenue                                                  904,000

                                                                 -----------
                             TOTAL CURRENT LIABILITIES             3,006,000



   Note payable to bank                                              929,000
   Notes payable - less current portion                               90,000

                                                                 -----------
                             TOTAL LIABILITIES                     4,025,000
                                                                 -----------


STOCKHOLDERS' EQUITY

  Preferred stock, 2,000,000 shares authorized-
     none issued and outstanding                                          --
  Common stock, 10,000,000 shares authorized, $.001
     par value; issued and outstanding 5,210,950 shares                5,000
  Additional Paid in Capital                                       6,804,000
  Accumulated deficit                                               (704,000)
                                                                 -----------
TOTAL STOCKHOLDERS' EQUITY                                         6,105,000
                                                                 -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $10,130,000
                                                                 ===========

See accompanying Notes to the  Consolidated Financial Statements
<PAGE>


                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             For the Yeasr Ended September 30,
                                                                  2006            2005
                                                                  ----            ----
<S>                                                          <C>             <C>
Product sales                                                $ 10,059,000    $ 12,358,000
Subcontract sales                                                 665,000         475,000
Service revenue                                                 5,101,000       4,798,000
                                                             ------------    ------------
Total revenues                                                 15,825,000      17,631,000
                                                             ------------    ------------

Cost of product sales                                           7,381,000       8,692,000
Cost of subcontract sales                                         538,000         384,000
Cost of service revenue                                         2,738,000       3,122,000
Selling, general and administrative                             5,389,000       4,993,000
Depreciation and amortization                                     178,000         147,000
                                                             ------------    ------------
Total operating expenses                                       16,224,000      17,338,000

(Loss) income from operations                                    (399,000)        293,000

Other expenses:
  Interest expense                                               (106,000)       (111,000)
  (Loss) on equity investment                                    (437,000)        (76,000)
                                                             ------------    ------------
Total other expenses                                             (543,000)       (187,000)
                                                             ------------    ------------

(Loss) income before (benefit) provision for income taxes        (942,000)        106,000
                                                             ------------    ------------
(Benefit) provision for income taxes:
   Current                                                        (76,000)         49,000
   Deferred                                                      (253,000)          7,000
                                                             ------------    ------------
                                                                 (329,000)         56,000
                                                             ------------    ------------
(Loss) income from continuing operations                         (613,000)         50,000

Discontinued operations (Note 3):
   (Loss) income from discontinued operations                    (201,000)        134,000
   Deferred income tax (benefit) provision                        (69,000)         54,000
                                                             ------------    ------------
(Loss) income from discontinued operations                       (132,000)         80,000

Net (loss) income                                             $  (745,000)   $    130,000

                                                             ============    ============

(Loss) Per Common Share:
  Basic (loss) income  from continuing operations             $     (0.12)   $       0.01
  Basic (loss) income from discontinued operations            $     (0.02)   $       0.02
                                                             ------------    ------------
  Basic (loss) income Per Share                               $     (0.14)   $       0.03
                                                             ============    ============

  Diluted (loss) income  from continuing operations           $     (0.12)   $       0.01
  Diluted (loss) income from discontinued operations          $     (0.02)   $       0.02
                                                             ------------    ------------
  Diluted (loss) income Per Share                             $     (0.14)   $       0.03
                                                             ============    ============

Weighted average number of common shares outstanding-basic      5,206,453       5,171,721

Weighted average number of common and
   common shares equivalents outstanding-diluted                5,206,453       5,193,276

</TABLE>



See accompanying Notes to the  Consolidated Financial Statements
<PAGE>

                      SYNERGX SYSTEMS INC. and SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                 FOR THE YEARS ENDED SEPTEMBER 30, 2006 and 2005

<TABLE>
<CAPTION>
                                                                                                  (ACCUMULATED
                                           TOTAL                                     ADDITIONAL      DEFICIT)/
                                       STOCKHOLDERS'        COMMON  STOCK            PAID IN        RETAINED
                                         EQUITY          SHARES         AMOUNT       CAPITAL        EARNINGS
                                       -----------    -----------    -----------   -----------    -----------
<S>                                    <C>              <C>                <C>     <C>           <C>
Balance at September 30, 2004          $ 6,648,000      5,136,862          5,000   $ 6,732,000   $    (89,000)

Exercise of employee stock options          28,000         55,256              0        28,000

Tax benefit of stock option exercise        25,000                                      25,000

Net Income                                 130,000                                                    130,000
                                       -----------    -----------    -----------   -----------    -----------
Balance at September 30, 2005          $ 6,831,000      5,192,118          5,000   $ 6,785,000   $     41,000

Exercise of employee stock options     $     9,000         18,832              0   $     9,000

Tax benefit of stock option exercise   $    10,000                                 $    10,000

Net (Loss)                                (745,000)                                                  (745,000)
                                       -----------    -----------    -----------   -----------    -----------
Balance at September 30, 2006          $ 6,105,000    $ 5,210,950          5,000   $ 6,804,000   $   (704,000)
                                       ===========    ===========    ===========   ===========    ===========
</TABLE>

See accompanying Notes to the Consolidated Financial Statements.
<PAGE>
                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                           For the Years Ended September 30,
                                                                                  2006          2005
                                                                                  -----         -----
OPERATING ACTIVITIES
<S>                                                                            <C>          <C>
Net  (Loss) income from continuing operations                                  $(613,000)   $  50,000
 Adjustments to reconcile net  (loss) income to net cash
     provided by operating activities:
         Depreciation and amortization *                                         193,000      161,000
         Deferred tax  (benefit)                                                (253,000)      32,000
         Loss on equity investment                                               437,000       76,000
  Changes in operating assets and liabilities:
    Accounts receivable, net                                                     290,000     (884,000)
    Inventories                                                                  167,000      255,000
    Prepaid expenses and other current assets                                     43,000       (9,000)
    Income Tax Receivable                                                        (82,000)
    Other assets                                                                  24,000      (27,000)
    Accounts payable and accrued expenses                                       (464,000)     275,000
    Deferred revenue                                                             194,000       82,000
                                                                               ---------    ---------
Net cash (used in) provided by continuing operations                             (64,000)      11,000
Net cash provided by operating activities of discontinued operation              158,000      407,000
                                                                               ---------    ---------
NET CASH PROVIDED BY  OPERATING ACTIVITIES                                        94,000      418,000
                                                                               ---------    ---------
INVESTING ACTIVITIES
  Restricted cash                                                                             (51,000)
  Purchases of property and equipment                                           (256,000)    (280,000)
                                                                               ---------    ---------
Net cash (used in) continuing operations                                        (256,000)    (331,000)
Net cash (used in) provided by investing activies of discontinued operations     518,000       (8,000)
                                                                               ---------    ---------
NET CASH PROVIDED BY  (USED IN)  INVESTING ACTIVITIES                            262,000     (339,000)
                                                                               ---------    ---------
FINANCING ACTIVITIES
  Principal payments on notes payable                                            (11,000)      (8,000)
  Payments and proceeds from note payable bank - net                            (520,000)    (466,000)
  Proceeds from exercise of stock options and warrants                             9,000       28,000
                                                                               ---------    ---------
Net cash (used in) continuing operations                                        (522,000)    (446,000)
Net cash (used in) financing activites of discontinued operations                (27,000)     (21,000)
                                                                               ---------    ---------
NET CASH (USED IN) FINANCING ACTIVITIES                                         (549,000)    (467,000)

NET (DECREASE) IN CASH AND CASH EQUIVALENTS                                     (193,000)    (388,000)

Cash and cash equivalents at beginning of the year                               466,000      854,000
                                                                               ---------    ---------
Cash and cash equivalents at end of the year                                   $ 273,000    $ 466,000
                                                                               =========    =========
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year for:
     Income taxes                                                              $  48,000    $   7,000
     Interest                                                                  $ 105,000    $  89,000
</TABLE>

NON-CASH INVESTING AND FINANCING ACTIVITIES
  Included in the year ended September 30, 2006, was the purchase of equipment
for $116,000 through financing.

Tax benefits of $10,000 and $25,000 from employees stock options exercise were
   recorded in the years ended September 30, 2006 and 2005, respectively.

* Depreciation of $15,000 and $14,000 is included in cost of product sales for
the years ended September 30, 2006 and 2005, respectively.

See accompanying Notes to the Consolidated Financial Statements
<PAGE>
                      Synergx Systems Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements


1. Summary of Significant Accounting Policies

Business

Synergx Systems Inc. and Subsidiaries  (the "Company")  operates in one industry
segment:  the  design,  manufacture,  distribution,  marketing  and service of a
variety of data  communications  products and systems with  applications  in the
fire alarm, life safety,  transit,  security and  communications  industry.  The
Company conducts its business principally in the New York Metropolitan area.

Principles of Consolidation

The consolidated  financial  statements  include the accounts of Synergx Systems
Inc.  and its  subsidiaries,  all of  which  are  wholly  owned.  The  principal
operating  subsidiaries are: Casey Systems Inc.  ("Casey"),  and Systems Service
Technology Corp.  ("SST").  And General Sound (Texa) Company ("General  Sound"),
which was sold in May 2006 and is reflected  as a  discontinued  operation.  See
Note 3 Discontinued Operations. In addition the Company has a payroll disbursing
subsidiary FT Clearing Inc. and a subsidiary that holds the investment in Secure
724 LP, Comco Technologies Inc. Significant  intercompany items and transactions
have been eliminated in consolidation.

Reclassification

Certain accounts in the prior period  financial  statements have be reclassified
for  comparison  purposes to conform to the  presentation  in the current period
financial  statements.  These  classifications  have no effect on the previously
reported net income.

Revenue Recognition

Product  sales  include  sales of  systems,  which are  similar in nature,  that
involve fire alarm,  life safety and security  (CCTV and card  access),  transit
(train  station  platforms  and on board  systems)  and  communication  (paging,
announcement and audio/visual).  Product sales represent sales of products along
with the  integration  of  technical  services at a fixed price under a contract
with an electrical  contractor or end user customer  (building owner or tenant),
or customer agent.  Product sales for long term contracts are recognized,  using
the  percentage-of-completion  method of  accounting.  The effects of changes in
contract  terms are  reflected  in the  accounting  period in which they  become
known.  Contract  terms provide for billing  schedules  that differ from revenue
recognition and give rise to costs and estimated profits in excess billings, and
billings in excess of costs and estimated  profits.  Costs and estimated profits
in excess of billing were $47,000 at September  30, 2006 and have been  included
in other current assets.  Billings in excess of costs and estimated profits were
$109,000 at September 30, 2006
<PAGE>

Revenue Recognition (continued)

and have been  included  in  deferred  revenue.  Product  sales  for short  term
contracts are recognized when the services are preformed or the product has been
delivered,  which  is when  title to the  product  and  risk of loss  have  been
substantially transferred to the customer and collection is reasonably assured.

Subcontract   sales  principally   represent   revenues  related  to  electrical
installation  of wiring and piping  performed by others for the Company when the
Company  acts  as the  prime  contractor  and  sells  its  products  along  with
electrical installation. Revenue is recognized when these services are preformed
at the job site.

Service  revenue  from  separate  maintenance   contracts  is  recognized  on  a
straight-line  basis  over  the  terms  of the  respective  contract,  which  is
generally  one year.  The  unearned  service  revenue  from these  contracts  is
included  in current  liabilities  as  deferred  revenue.  Non-contract  service
revenue is recognized when services are performed.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial  statements and reported  amounts of revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

Accounts Receivable

Accounts receivable are reported net of an allowance for doubtful accounts.  The
adequacy of the allowance is determined by management based on a periodic review
of the status of the individual accounts receivable.

Inventories

Inventories are priced at the lower of cost (first-in,  first-out) or market and
consist  primarily  of raw  materials  and at  September  30,  2006  reflects an
inventory allowance of $392,000.

<PAGE>

Property and Equipment

Property  and  equipment  are stated at  historical  cost.  Leases  meeting  the
criteria for  capitalization  are recorded at the present  value of future lease
payments.

Depreciation  and  amortization  of machinery  and  equipment  and furniture and
fixtures are provided primarily by the straight-line method over their estimated
useful lives. The Company depreciates  machinery and equipment over periods of 3
to 10 years and  amortizes  leasehold  improvements  and assets  acquired  under
capitalized leases utilizing the straight-line method over the life of the lease
or the economic useful life, whichever is shorter.

Other Assets

Other assets consist of security deposits of $48,000 and goodwill related to the
acquisition of Casey Systems of  approximately  $34,000 and  restricted  cash on
deposit with the Company's bank of $125,000.

The Company does not amortize  goodwill but evaluates whether the carrying value
of goodwill has become  impaired.  This  evaluation is performed on annual basis
each fiscal year end. The Company has determined that there was no impairment of
goodwill at September 30, 2006.

Advertising Costs

Advertising  costs are  expensed as  incurred.  Advertising  costs for the years
ended September 30, 2006 and 2005 amounted to $45,000 and $35,000, respectively.

Research and Development Costs

Research  and  development   costs  are  expensed  as  incurred.   Research  and
development  costs for the years ended  September  30, 2006 and 2005 amounted to
$114,000 and $121,000, respectively.

Income Taxes

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards  ("SFAS") No. 109,  "Accounting for Income Taxes." Under SFAS No. 109,
the asset and  liability  method is used to  determine  deferred  tax assets and
liabilities based on the differences  between financial  reporting and tax bases
of assets and  liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.


Earnings Per Share

SFAS No. 128 "Earnings Per Share" requires companies to report basic and diluted
earnings per share ("EPS") computations. Basic EPS excludes dilution and is
based on the weighted-average common shares outstanding and diluted EPS gives
effect to potential dilution of securities that could share in the earnings of
the Company. Diluted EPS reflects the assumed issuance of shares with respect to
the Company's employee stock options, non-employee stock options, and warrants.

Cash Equivalents

The Company considers all investments with original maturities of three months
or less when purchased to be cash equivalents.

Restricted Cash

In connection with the Credit Facility with its bank, the Company has on deposit
$125,000 that is restricted as to use that has been included in other assets.

Concentration of Credit Risk

The Company grants credit to its customers, principally all of which are general
or specialized construction contractors,  none of which individually constitutes
a significant portion of outstanding  receivables.  The Company does not require
collateral to support financial instruments subject to credit risk.

At September 30, 2006, the Company had cash of approximately $92,000, that is in
excess of insured amount limitations.

Stock Options and Similar Equity Instruments

The Company adopted the disclosure requirements of SFAS No. 123, "Accounting for
Stock-Based  Compensation,"  for stock  options and similar  equity  instruments
(collectively,  "Options")  issued  to  employees;  however,  the  Company  will
continue to apply the  intrinsic  value based method of  accounting  for options
issued to employees  prescribed by Accounting  Principles  Board ("APB") Opinion
25, "Accounting for Stock Issues to Employees," rather than the fair value based
method of  accounting  prescribed  by SFAS No. 123. SFAS No. 123 also applies to
transactions  in which an entity issues its equity  instruments to acquire goods
or services from  non-employees.  Those transactions must be accounted for based
on the fair value of the consideration  received or the fair value of the equity
instruments issued, whichever is more reliably measured.

On December 31, 2002, the Financial  Accounting  Standards Board issued SFAS No.
148, Accounting for Stock-Based Compensation-Transition and Disclosure. SFAS No.
148 amends SFAS No. 123, to provide an alternative  method of transition to SFAS
No. 123's fair value method of accounting for stock based employee compensation.
SFAS Stock Options and Similar Equity Instruments (continued)

No.148 also amends the disclosure provisions of SFAS No. 123 and APB Opinion 28,
"Interim Financial Reporting," to require disclosure in the summary of
significant accounting policies of the effects of an entity's accounting policy
with respect to stock-based employee compensation on reported net income and
earnings per share in annual and interim financial statements. While the
statement does not amend SFAS No. 123 to require companies to account for
employee stock options using the fair value method, the disclosure provisions of
SFAS No. 123 are applicable to all companies with stock based employee
compensation, regardless of whether they account for that compensation using the
fair value method of SFAS No. 123, or the intrinsic value method of APB Opinion
25. As required under SFAS No. 148, the following table presents pro forma net
income and diluted net earnings per share as if the fair value-based method had
been applied to all awards.

                                                      Years Ended September 30,
                                                        2006           2005

Net (Loss) Income                                   $ (745,000)   $   130,000
Less: Fair Value of Options issued to
      employees and directors, net of income tax       (16,000)       (13,000)
                                                   -----------    -----------
Pro Forma Net (loss) Income                         $ (761,000)   $   117,000
                                                   ===========    ===========

Weighted Average Basic Shares                        5,206,493      5,171,721

Weighted Average Diluted Shares                      5,206,493      5,193,276

Basic Net Income Per Share as Reported              $     (.14)   $       .03
Basic Pro Forma Net Income per share                $     (.15)   $       .02

Diluted Net Income Per Share as Reported            $     (.14)   $       .03
Diluted Pro Forma Net Income per share              $     (.15)   $       .02

The Black-Scholes  option valuation model was used to estimate the fair value of
the options  granted  during the year ended  September  30, 2005.  There were no
options granted to employees during the year ended September 30, 2006. The model
includes  subjective input assumptions that can materially affect the fair value
estimates.  The model was  developed  for use in  estimating  the fair  value of
traded   options  that  have  no  vesting   restrictions   and  that  are  fully
transferable.  The expected  volatility  is  estimated  based on the most recent
historical  period of time equal to the  weighted  average  life of the  options
granted.  Principal  assumptions used in applying the Black-Scholes  model along
with the results  from the model for the year ended  September  30, 2005 were as
follows:

Assumptions:
Risk-free interest rate                        3.58%
Dividend                                          0
Expected life in years                      5 years
Expected volatility                             84%

2. Property and Equipment

Property and equipment at September 30, 2006 are summarized as follows:

              Machinery and equipment                            $2,112,000
              Furniture and fixtures                                164,000
              Leasehold improvements                                111,000
                                                                ------------
                                                                  2,387,000
              Less accumulated depreciation and amortization
                                                                  1,611,000
                                                                ------------
                                                                  $ 776,000
                                                                ============


Depreciation and amortization expense related to these assets were $189,000 and
$129,000 for the years ended September 30, 2006 and 2005, respectively.

3. DISCONTINUED OPERATIONS

On May 31, 2006, the Company's  wholly owned  subsidiary,  General Sound (Texas)
Company  ("General  Sound") that  operated in Dallas/Ft.  Worth,  Texas sold its
inventory,  property,  trade name, business and operations to LCR Sound, a Texas
company.  The operations of General Sound are reported as  discontinued  for all
periods presented in the Consolidated  Financial Statements.  Under terms of the
asset purchase agreement, General Sound received cash proceeds from the buyer of
$518,000 for its  inventory  ($203,215),  property and  equipment  ($47,744) and
goodwill  ($69,140)  resulting  in  a  gain  of  $197,901.   The  buyer  assumed
responsibility  for the remaining term of the lease for its office and warehouse
space.  General  Sound  retained  cash and all accounts  receivable  and remains
responsible for all existing liabilities,  which have substantially been paid as
of September 30, 2006.




3. DISCONTINUED OPERATIONS (continued)

The results of the discontinued operations for the years ended September 30,
2006 and 2005 are as follows:


         Years ended September 30,
                                                       2006             2005
                Sales                              $1,398,809        $3,156,761
                Cost of Sales                       1,113,211         2,013,639
                Operating expenses                    684,584         1,009,286
                                                      -------         ---------
                Operating (loss) income             ($398,986)          133,836
                                                                      ---------

                Gain on sale of assets                197,901               -0-
                                                      -------         ---------

               (Loss) income before taxes          $ (201,085)       $ 133,836
                                                    ==========        ========

4. Investment in Secure 724 L.P.

In May 2003, the Company acquired a 25% equity interest in Secure 724 LP
("Secure 724 LP"), an Ontario limited partnership. The investment in Secure 724
L.P. was valued at $432,500 and the investment is accounted for utilizing the
equity method. The underlying equity of this investment on the date of the
transaction was approximately $73,000; resulting in goodwill of approximately
$360,000. For the years ended September 30, 2006 and 2005, an adjustment to the
equity investment of $60,000 and $52,000, respectively was recorded to reflect
the Company's 25% portion of the net loss of Secure 724 LP. The cumulative
impact that was recorded for the 25% portion of the net loss from inception
amounts to approximately $223,000.

In  connection  with  the  initial  capital  contribution  per  the  partnership
agreement, the Company also entered into note agreements and advanced $18,000 to
Secure 724 LP in May 2003 and upon  reaching  milestones  advanced  $125,089  in
August 2003.  Additional  advances were made to Secure 724 LP in October 2004 of
$7,969  in  December  2004 of  $12,140  and July  2006 of  $4,407.  These  notes
receivable  bear  interest  at a rate of 4% per annum and  matures  in May 2006,
August 2006, October 2007, December 2007 and on demand, respectively.

Due to insufficient cash flow, lack of outside financing,  and slow progress and
uncertainty of bringing its product to market,  the 25% equity  investment,  and
loans to Secure 724 were  deemed to be  impaired  at  September  30, 2006 and an
impairment


4. Investment in Secure 724 L.P )continued)

charge  of  $377,264  was  recorded  to  fully  reserve  for  recovery  of these
investments.  The Company is negotiating  to sell its entire  interest in Secure
724. However, there can be no assurance that such sale can be made for an amount
and terms acceptable to the Company.

5.  Long-Term Debt

The  Company  has a $3  million  revolving  credit  facility  with TD  Banknorth
(formerly Hudson United Bank) (the "Credit  Facility").  The Credit Facility has
an annual  interest rate of prime plus 1/4% on  outstanding  balances  (8.50% at
September  30, 2006) and was to expire in June 2007.  On December 26, 2006,  the
credit  facility was extended to expire in January 2008. The Credit  Facility is
secured  by all assets of the  Company  and all of its  operating  subsidiaries.
Advances  under this Credit  Facility  are  measured  against a  borrowing  base
calculated on eligible accounts receivable and inventories.

At September  30,  2006,  the full amount of the Credit  Facility was  available
under the borrowing base  calculation  and $929,000 was  outstanding  under this
facility.

The Credit Facility includes certain restrictive covenants, which among other
things, impose limitations on declaring or paying dividends, acquisitions, and
capital expenditures. The Company is also required to maintain certain financial
ratios and tangible net worth covenants. At September 30, 2006 the Company was
not in default with any of its financial covenants.
<PAGE>

Annual maturities of Notes Payable to Bank and Notes and Capital Leases Payable
are as follows:

                       Note Payable         Other Notes and          Total
                          Bank              Capital Leases
                                                Payable
                  ----------------       ------------------    -------------

        2007                                 $  27,000           $   27,000
        2008          $929,000                  23,000              952,000
        2009                                    23,000               23,000
        2010                                    23,000               23,000
        2011                                    21,000               21,000
                  ----------------       ------------------    -------------
        Total         $929,000               $ 117,000           $1,046,000
                  ================       ==================    =============



6.  Lease Commitments

The Company  leases  certain  office and  warehouse  space under non  cancelable
operating  leases  expiring at various times through 2012 In February  2000, the
Company signed a lease for office, manufacturing and warehouse space in Syosset,
New  York.  An  additional  700  square  feet of space was added to the lease in
August 2004.  The rental  schedule  provides for monthly rent of $16,600  during
2006 with 3.3%  yearly  increases  through the  expiration  of the lease in June
2012. In 2006, the lease was extended on similar terms to expire June 30, 2012.

The Company has a  non-cancelable  lease for its service center in New York City
that became  effective August 2002 and runs through December 31, 2009. The lease
is for office and  warehouse  space and  provides  for yearly  rental of $84,000
during the first  year plus  expenses  with  yearly  escalation  of 2% each year
thereafter.

The  following  is a schedule  of future  minimum  payments,  by year and in the
aggregate, under operating leases with initial or remaining terms of one year or
more at September 30, 2006:

                                                            Total Operating
                                                                Leases

2007                                                              301,000
2008                                                              310,000
2009                                                              344,000
2010                                                              232,000
2011                                                              241,000
2012                                                              186,000
                                                           ------------------
Total minimum lease payments                                   $1,614,000
                                                           ==================

Rental expense amounted to $299,000 and $305,000, for 2006 and 2005,
respectively.

7. Significant Customers and Suppliers

During fiscal 2006 and 2005, no customer accounted for more than 10% of sales.
One supplier accounted for 7% and 10% of the Company's cost of sales during
fiscal 2006 and 2005, respectively.




8  Income Taxes

During the years ended September 30, 2006 and 2005, the Company recorded a tax
(benefit)/provision of $(329,000) and $56,000, respectively. A reconciliation of
such provision with the amounts computed by applying the statutory federal
income tax rate is as follows:
<TABLE>
<CAPTION>

                                                                       Year Ended September 30,
                                                                        2006          2005
                                                                    ---------------------------

<S>                                                                         <C>           <C>
Statutory federal income tax rate                                           34%           34%
Computed expected tax (benefit) from income (loss) from continuing
    operations before  income tax                                    ($320,000)    $  36,000
Increase (decrease)in taxes resulting from:
   State and local income tax (benefit), net of Federal income tax     (72,000)       12,000
    Nondeductible expenses                                               3,000         2,000
Other                                                                   60,000         6,000
                                                                     -----------------------
Income tax (benefit) expense                                         ($329,000)    $  56,000
                                                                     =======================
</TABLE>

The Company provided $4,000 and $6,000 for state and local franchise and capital
taxes for the years  ended  September  30,  2006 and 2005,  respectively.  These
expenses have been included in selling,  general and administrative expenses for
each of the years presented.

The Company has recorded a current deferred tax asset and a non current deferred
tax asset at September  30, 2006 and a current  deferred tax asset and a current
deferred  tax  liability at September  30, 2005.  These  deferred tax assets and
liabilities  relate to certain  accelerated tax deductions or book provisions to
be deducted in future tax returns and utilization of the 2006 net operating loss
carryforward.  Management anticipates profitable operations to resume at a level
that will result in the utilization of the entire deferred tax asset.

The components of deferred tax assets and liabilities at September 30, 2006
consist of the following:

Deferred Tax Assets
-------------------
Allowance for doubtful accounts                  $141,000
Inventory reserve                                 157,000
Net operating loss carryforward                   218,000
                                                  -------
Total deferred tax asset                          $516,000

Non Current Deferred Tax Asset/Liability
-----------------------------------------
Impairment of equity investment and
  Notes receivable in Secure 724                   150,000
Depreciation and amortization                     (146,000)
                                                 ---------
Total Non Current Deferred Tax Asset/Liability   $   4,000
                                                 =========


9. Earnings Per Share

The computation of basic earnings per share, diluted earnings per share,
weighted shares outstanding, and weighted average shares after potential
dilution is as follows:

                                                    Year Ended September 30
Basic EPS Computation                                2006             2005
                                                    --------------------------
Net (loss) income from continuing
       operations                                $  (613,000)   $      50,000
Net (loss) income from discontinued
       operations                                   (132,000)          80,000
                                                 -----------    -------------
Net (loss) income                                ($  745,000)   $     130,000
                                                 ===========    =============


Basic EPS Computation
Weighted average outstanding shares                5,206,453        5,171,721
                                                 -----------    -------------
Basic (Loss) Income Per Share
        from continuing operation                 $     (.12)   $         .01
Basic (Loss) Income Per Share
       from discontinued operations               $     (.02)   $         .02
                                                 -----------    -------------
Basic net (loss) income per basic share           $     (.14)   $         .03
                                                 ===========    =============

Diluted EPS Computation
Weighted-average shares-basic                      5,206,453        5,171,721
 Plus:  Incremental shares from
               assumed conversions
         Employee Stock Options*                                       14,036
         Warrants*                                                      7,520
                                                                -------------
    Dilutive common shares                                             21,555
                                                                -------------
      adjusted weighted average shares diluted     5,206,453        5,193,276
                                                 -----------    -------------

Diluted (Loss) Income Per Share                   $     (.12)   $         .01
       from continuing operations
Diluted (Loss) Income per share                   $     (.02)   $         .02
                                                 -----------    -------------
      from discontinued operations
Diluted net (loss) income per share               $     (.14)   $         .03
                                                 ===========    =============

   * All options and warrants were antidilutive in the year ended September
2006.




10.  Employee Stock Options and Warrants

In March 2004, the Company and its stockholders adopted a nonqualified stock
option plan ("2004 Plan"), which will expire March 10, 2009, except as to
options outstanding under a prior 1997 Plan. Under the 2004 Plan, the Board of
Directors may grant options to eligible employees at exercise prices not less
than 100% of the fair market value of the common shares at the time the options
are granted. The number of shares of Common Stock that may be issued shall not
exceed an aggregate of up to 10% of the Company's issued and outstanding shares
from time to time. Options vest at a rate of 20% per year commencing one year
after date of grant. Issuances under the 2004 Plan are to be reduced by options
outstanding under the prior 1997 nonqualified stock option plan.

In February 2005, the Board of Directors approved a grant of 130,000 stock
options with a fair market value of $157,094 to certain employees, officers and
directors of the Company under the 2004 Plan. The stock options vest ratably
over five years and are exercisable at $2.50 per share, which exercise price was
above the market price at the time of grant. There were no stock options granted
during the year ended September 30, 2006.

Transactions involving stock options are summarized as follows:
                                                  Weighted Average
                             Stock Options       Exercise Price of
                             Outstanding        Options Outstanding
Balance September 30, 2004     75,580                 .50
   Options granted            130,000                2.50
   Options exercised          (55,256)                .50
                              -------
Balance September 30, 2005    150,324                2.23
                              =======
  Options exercised           (18,832)                .50
  Options expired             (23,492)               2.37
                              -------
Balance September 30, 2006    108,000                2.50
                              =======

There were 21,600 exercisable options at September 30, 2006 and 20,324
exercisable options at September 30, 2005.
..
During the years ended September 30, 2006 and 2005, employees exercised stock
options to purchase 18,832 and 55,256 shares of Common Stock, respectively, for
total consideration of $9,000 and $28,000, respectively.





10. Employee Stock Options and Warrants (continued)

Outstanding and exercisable stock options are as follows:

                    Outstanding at      Weighted Average       Exercisable at
Exercise Price    September 30, 2005    Contractual Life     September 30, 2006
--------------    ------------------    ----------------     ------------------
  2.50                108,000              3.5 years              21,600

In May 2003, the Company issued 50,000 warrants in connection with its 25%
investment in Secure 724 LP. The warrants expired in May 2005. (See Note 4 -
Investment in Secure 724 LP)

Transactions involving non-employee stock warrants are summarized as follows:

                                                           Weighted Average
                                     Warrants               Exercise Price of
                                   Outstanding          Warrants Outstanding
Balance September 30, 2004           50,000                      1.15
   Warrants expired                 (50,000)                     1.15
                                  ----------
Balance September 30, 2005           - 0 -
Balance September 30, 2006           - 0 -

11. Contingencies

In the normal  course of its  operations,  the Company has been, or from time to
time may be, named in legal actions seeking  monetary  damages.  Management does
not expect,  based upon  consultation  with legal counsel,  that any item exists
that will have a  significant  impact on the  Company's  business  or  financial
condition.

12. Other

Approximately  34%  of  the  Company's   employees  are  covered  by  collective
bargaining agreements. On July 10, 2005, the union representing hourly employees
and the Company  ratified a Collective  Bargaining  Agreement  expiring March 9,
2009, providing for an increase in salaries and benefits averaging approximately
4% per year over the life of the contract.

Effective  January 1, 1996,  the Board of  Directors  instituted a 401K plan for
non-union  employees.  The plan  includes  a  profit  sharing  provision  at the
discretion of the Board of Directors.  There was no profit sharing  contribution
in 2006 and for 2005 a profit sharing contribution of $41,000 was authorized and
charged to expense.


13. Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," requires
disclosing fair value to the extent practicable for financial  instruments which
are  recognized  or  unrecognized  in the balance  sheet.  The fair value of the
financial instruments disclosed herein is not necessarily  representative of the
amount  that  could be  realized  or  settled,  nor does the fair  value  amount
consider the tax consequences of realization or settlement.

The  carrying  amount  of cash  and  cash  equivalents,  trade  receivables  and
payables, and short-term debt,  approximates fair value because of the near term
maturities of such obligations.  The fair value of long-term debt was determined
based on current  rates at which the Company  could  borrow  funds with  similar
remaining maturities, which amount approximates its carrying value.

14  New Accounting Pronouncement

In December 2004, the Financial  Accounting  Standards Board issued Statement of
Accounting  Financial Standards ("SFAS") No. 123R (revised 2004),  "Shared-Based
Payment," which addresses the accounting for share-based payment transactions in
which an  enterprise  receives  employee  services  in  exchange  for (a) equity
instruments  of the  enterprise  or (b)  liabilities  that are based on the fair
value of the  enterprise's  equity  instruments  or that may be  settled  by the
issuance of such equity  instruments.  SFAS 123R requires an entity to recognize
the grant-date  fair-value of stock options and other equity-based  compensation
issued to employees in the income statement.  SFAS 123R generally  requires that
an entity account for such transactions using the  fair-value-based  method, and
eliminates  the  intrinsic  value  method  of  accounting  in APB 25,  which was
permitted  under SFAS 123, as originally  issued.  The revised  statement  also
requires  entities to disclose  information  about the nature of the share-based
payment  transactions  and the effects of those  transactions  on the  financial
statements.  SFAS No. 123R is effective for small business issuers for the first
annual  reporting  period that begins after December 15, 2005. The Company plans
to adopt SFAS No.  123R as of October  1, 2006  using the  modified  prospective
transition  method. As a result of adopting SFAS 123R the Company will recognize
approximately  $65,000  of  compensation  costs that will be  expensed  over the
remaining vesting period.

In July 2006, the Financial  Acoounting  Standard  Board ("FASB")  released FASB
Interpretation   No.  48,  "Accounting  for  Uncertainty  in  Income  Taxes,  an
interpretation  of SFAS No. 109" ("FIN 48"). FIN 48 clarifies the accounting and
reporting for uncertainties in income tax law. FIN 48 prescribes a comprehensive
model for the financial  statement  recognition,  measurement,  presentation and
disclosure of uncertain  tax  positions  taken or expected to be taken in income
tax returns. FIN 48 shall be effective for fiscal years beginning after December
15, 2006.  Earlier  adoption is permitted as of the beginning of an enterprise's
fiscal year,  provided the enterprise has not yet issued  financial  statements,
including financial  statements for any interim period for that fiscal year. The
cumulative effects, if any, of applying FIN 48 will be recorded as an adjustment
to retained earnings as of the beginning of the period of adoption.  The Company
has  commenced the process of  evaluating  the expected  effect of FIN 48 on its
financial  position and results of operations  and has not yet  determined  such
effects.

In  September  2006,  the FASB issued SFAS No.  157,  "Fair Value  Measurements"
("SFAS 157").  This  statement  defines fair value,  establishes a framework for
measuring fair value in accordance with accounting principles generally accepted
in the  United  States  ("GAAP"),  and  expands  disclosures  about  fair  value
measurements.  SFAS 157  does  not  require  any new  fair  value  measurements.
However,  for some  entities,  the  application  of SFAS 157 will change current
practice. SFAS 157 is effective for financial statements issued for fiscal years
beginning  after  November 15,  2007,  and interim  periods  within those fiscal
years, with earlier application permitted.  The Company does not expect SFAS 157
to have a material  impact on the  Company's  financial  position  or results of
operations.

In September  2006, the staff of the Securities and Exchange  Commission  issued
Staff  Accounting  Bulletin  No. 108 ("SAB  108")  which  provides  interpretive
guidance  on how  the  effects  of the  carryover  or  reversal  of  prior  year
misstatements  should be considered in quantifying a current year  misstatement.
SAB 108 becomes effective in fiscal 2007. Adoption of SAB 108 is not expected to
have a material impact on the Company's consolidated financial position, results
of operations or cash flows.