U.S.
SECURITIES AND EXCHANGE COMMISSION
 Washington,
D. C.  20549
 
 FORM
10-Q
 (Mark
One)
 [X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF1934
 
 For
the fiscal quarter ended_________March 31,
2009_______________
 
 [   ]  TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For
the transition period
from                                         to
 
 Commission file number_____________0-17580_______________________
 
 SYNERGX SYSTEMS
    INC.(Exact name of small business
      issuer as specified in its
charter)
 
  Delaware
              11-2941299(State or
      jurisdiction of incorporation or organization)
              (IRS employer identification
      Number)
  
 
 209
Lafayette Drive, Syosset, New
York        
   11791
 (Address
of Principal Executive
Offices)        (Zip code)
 
 
 (516)
433-4700
 (Issuer’s
telephone number)
  Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes o   
No o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o    No
o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer 
              Accelerated filer Non-accelerated filer   (Do not check if a smaller reporting company)
              Smaller reporting company 
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes  
No 
  There
were 5,210,950 shares outstanding of registrant’s common stock, par value $.001
per share, as of May 13, 2009.
 
 Transitional
Small Business Disclosure Format (check one):    
Yes    No 













INDEX
 
 PART
      I: Financial InformationItem
      1:
                                                          
                                                          Financial Statements
                                                          
                                                          3Condensed Consolidated Balance Sheet at March 31, 2009and September 30,
      2008
                                                          
                                                          3Condensed
      Consolidated Statements of Operations for theThree
      Months and Six Months Ended March 31, 2009 and
      2008
                                                          
                                                          5Condensed
      Consolidated Statements of Cash Flows for theSix
      Months Ended March 31, 2009 and 2008
                                                          
                                                          7Notes
      to the Condensed Consolidated Financial Statements
                                                          
                                                          8Item
      2:
                                                          
                                                          Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
                                                          
                                                          15Item
      3 :
                                                          
                                                          Quantitative
      and Qualitative Disclosures About Market Risk
                                                          
                                                          19Item
      4:
                                                          
                                                          Controls
      and Procedures
                                                          
                                                          19PART
      II: Other InformationItem
      1
                                                          
                                                          Legal Proceedings
                                                          
                                                          19Item
      2
                                                          
                                                          Unregistered Sales of Equity Securities and Use of
Proceeds
                                                          
                                                          19Item
      3
                                                          
                                                          Defaults Upon Senior Securities
                                                          
                                                          19Item
      4
                                                          
                                                          Submission of Matters to a Vote of Security Holders
                                                          
                                                          19Item
      5.
                                                          
                                                          Other InformationItem
      6:
                                                          
                                                          EXHIBITS
                                                          
                                                          19Signatures
                                                          
                                                          20







2


SYNERGX
SYSTEMS INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)





March
      31,
                        
                        
                        September
      30,2009
                        
                        
                        2008ASSETSCURRENT
      ASSETSCash
                        
                        $
                        510,756
                        
                        
                        $
                        262,742Accounts
      receivable, principally trade, less allowance for doubtful accounts of
      $302,299 and $302,299, respectively
                        
                        
                        5,172,224
                        
                        
                        
                        5,270,911Inventories,
      net
                        
                        
                        1,983,823
                        
                        
                        
                        1,948,466Prepaid
      expenses and other current assets
                        
                        
                        316,122
                        
                        
                        
                        988,083TOTAL
      CURRENT ASSETS
                        
                        
                        7,982,925
                        
                        
                        
                        8,470,202PROPERTY
      AND EQUIPMENT -at cost, lessaccumulated
      depreciation and amortization of $2,211,364
                        
                        
                        710,991
                        
                        
                        
                        815,719and
      $2,091,000, respectivelyOTHER
      ASSETS
                        
                        
                        258,033
                        
                        
                        
                        250,195TOTAL
      ASSETS
                        
                        $
                        8,951,949
                        
                        
                        $
                        9,536,116






See
accompanying Notes to the  Condensed Consolidated Financial
Statements
 3


SYNERGX
SYSTEMS INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Unaudited)




March
      31,
                                                                    
                                                                    
                                                                    September
      30,2009
                                                                    
                                                                    
                                                                    2008LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESNote
      payable to bank
                                                                    
                                                                    $
                                                                    567,105
                                                                    
                                                                    $
                                                                    --Notes
      payable - current portion
                                                                    
                                                                    
                                                                    27,553
                                                                    
                                                                    
                                                                    
                                                                    27,553Accounts
      payable and accrued expenses
                                                                    
                                                                    
                                                                    2,645,648
                                                                    
                                                                    
                                                                    
                                                                    2,993,697Deferred
      revenue
                                                                    
                                                                    
                                                                    1,160,087
                                                                    
                                                                    
                                                                    
                                                                    1,613,453TOTAL
      CURRENT LIABILITIES
                                                                    
                                                                    
                                                                    4,400,393
                                                                    
                                                                    
                                                                    
                                                                    4,634,703Note
      payable to bank
                                                                    
                                                                    
                                                                    --
                                                                    
                                                                    
                                                                    
                                                                    517,873Notes
      payable - less current portion
                                                                    
                                                                    
                                                                    42,971
                                                                    
                                                                    
                                                                    
                                                                    56,662TOTAL
      LIABILITIES
                                                                    
                                                                    
                                                                    4,443,364
                                                                    
                                                                    
                                                                    
                                                                    5,209,238STOCKHOLDERS'
      EQUITYPreferred
      stock, 2,000,000 shares authorized-none
      issued and outstanding
                                                                    
                                                                    
                                                                    --
                                                                    
                                                                    
                                                                    
                                                                    --Common
      stock, 10,000,000 shares authorized, $.001par
      value; issued and outstanding 5,210,950 shares
                                                                    
                                                                    
                                                                    5,211
                                                                    
                                                                    
                                                                    
                                                                    5,211Additional
      paid in capital
                                                                    
                                                                    
                                                                    6,856,162
                                                                    
                                                                    
                                                                    
                                                                    6,849,706Accumulated
      deficit
                                                                    
                                                                    
                                                                    (2,352,788
                                                                    )
                                                                    
                                                                    
                                                                    (2,528,039
                                                                    )TOTAL
      STOCKHOLDERS' EQUITY
                                                                    
                                                                    
                                                                    4,508,585
                                                                    
                                                                    
                                                                    
                                                                    4,326,878TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                    
                                                                    $
                                                                    8,951,949
                                                                    
                                                                    
                                                                    $
                                                                    9,536,116


See
accompanying Notes to the  Condensed Consolidated Financial
Statements
 4






SYNERGX
SYSTEMS INC. AND SUBSIDIARIES


CONDENSED  CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)




For
      the Three Months
                                              ended
                                              March
      31,2009
                                            
                                            
                                            2008Product
      sales
                                            
                                            $
                                            3,529,166
                                            
                                            
                                            $
                                            3,433,356Subcontract
      sales
                                            
                                            
                                            484,275
                                            
                                            
                                            
                                            353,155Service
      revenue
                                            
                                            
                                            1,278,053
                                            
                                            
                                            
                                            1,311,946Total
      revenues
                                            
                                            
                                            5,291,494
                                            
                                            
                                            
                                            5,098,457Cost
      of product sales
                                            
                                            
                                            2,931,455
                                            
                                            
                                            
                                            2,883,271Cost
      of subcontract sales
                                            
                                            
                                            396,138
                                            
                                            
                                            
                                            307,224Cost
      of service revenue
                                            
                                            
                                            783,119
                                            
                                            
                                            
                                            671,400Selling,
      general and administrative
                                            
                                            
                                            1,154,760
                                            
                                            
                                            
                                            1,559,271Depreciation
      and amortization
                                            
                                            
                                            60,226
                                            
                                            
                                            
                                            58,621Total
      operating expenses
                                            
                                            
                                            5,325,698
                                            
                                            
                                            
                                            5,479,787(Loss) from
      operations
                                            
                                            
                                            (34,204
                                            )
                                            
                                            
                                            (381,330
                                            )Interest
      expense
                                            
                                            
                                            (12,274
                                            )
                                            
                                            
                                            (35,284
                                            )(Loss) before
      provision for income taxes
                                            
                                            
                                            (46,478
                                            )
                                            
                                            
                                            (416,614
                                            )Provision
      for income taxes:Current
                                            
                                            
                                            2,000
                                            
                                            
                                            
                                            3,000Deferred
                                            
                                            
                                            -
                                            
                                            
                                            
                                            50,0002,000
                                            
                                            
                                            
                                            53,000Net
      (Loss)
                                            
                                            $
                                            (48,478
                                            )
                                            
                                            $
                                            (469,614
                                            )(Loss)
      Per Common Share:Basic  and
      diluted (loss) per share
                                            
                                            
                                            $
      (0.01
                                            )
                                            
                                            
                                            $
      (0.09
                                            )Basic
      and diluted weighted average number ofcommon
      shares outstanding
                                            
                                            
                                            5,210,950
                                            
                                            
                                            
                                            5,210,950




See
accompanying Notes to the  Condensed Consolidated Financial
Statements
 5


SYNERGX
SYSTEMS INC. AND SUBSIDIARIES


CONDENSED  CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





For
      the Six Months
                                      ended
                                      March 31,2009
                                    
                                    
                                    
                                    2008Product
      sales
                                    
                                    $
                                    7,322,912
                                    
                                    
                                    $
                                    7,234,564Subcontract
      sales
                                    
                                    
                                    1,053,909
                                    
                                    
                                    
                                    502,767Service
      revenue
                                    
                                    
                                    2,573,124
                                    
                                    
                                    
                                    2,632,872Total
      revenues
                                    
                                    
                                    10,949,945
                                    
                                    
                                    
                                    10,370,203Cost
      of product sales
                                    
                                    
                                    5,804,992
                                    
                                    
                                    
                                    6,017,049Cost
      of subcontract sales
                                    
                                    
                                    835,391
                                    
                                    
                                    
                                    429,824Cost
      of service revenue
                                    
                                    
                                    1,578,636
                                    
                                    
                                    
                                    1,248,152Selling,
      general and administrative
                                    
                                    
                                    2,408,079
                                    
                                    
                                    
                                    2,889,994Depreciation
      and amortization
                                    
                                    
                                    123,159
                                    
                                    
                                    
                                    108,622Total
      operating expenses
                                    
                                    
                                    10,750,257
                                    
                                    
                                    
                                    10,693,641Income
      (Loss) from operations
                                    
                                    
                                    199,688
                                    
                                    
                                    
                                    (323,438
                                    )Interest
      expense
                                    
                                    
                                    (20,437
                                    )
                                    
                                    
                                    (82,814
                                    )Income
      (Loss) before provision for income taxes
                                    
                                    
                                    179,251
                                    
                                    
                                    
                                    (406,252
                                    )Provision
      for income taxes:Current
                                    
                                    
                                    4,000
                                    
                                    
                                    
                                    3,000Deferred
                                    
                                    
                                    -
                                    
                                    
                                    
                                    50,0004,000
                                    
                                    
                                    
                                    53,000Net
      income (Loss)
                                    
                                    $
                                    175,251
                                    
                                    
                                    $
                                    (459,252
                                    )Earnings
      (Loss) Per Common Share:Basic  and
      diluted earnings (loss)  per share
                                    
                                    
                                    $0.03
                                    
                                    
                                    
                                    $(0.09
                                    )Basic
      and diluted weighted average number ofcommon
      shares outstanding
                                    
                                    
                                    5,210,950
                                    
                                    
                                    
                                    5,210,950





See
accompanying Notes to the  Condensed Consolidated Financial
Statements
 6


SYNERGX
SYSTEMS INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Six MonthsEndedMarch
      31,2008
                                                                                                                    
                                                                                                                    
                                                                                                                    2007OPERATING
      ACTIVITIESNet
      income (loss)
                                                                                                                    $
                                                                                                                    175,251
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    (459,252
                                                                                                                    )Adjustments
      to reconcile net  income  to net cash provided
      byoperating
      activities:Depreciation
      and amortization *
                                                                                                                    
                                                                                                                    137,409
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    122,872Deferred
      Taxes
                                                                                                                    
                                                                                                                    --
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    50,000Share-based
      compensation
                                                                                                                    
                                                                                                                    6,461
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    14,314Changes
      in operating assets and liabilities:Accounts receivable, net
                                                                                                                    
                                                                                                                    98,687
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,620,270Inventories, net
                                                                                                                    
                                                                                                                    (35,357
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    307,124Prepaid expenses and other current assets
                                                                                                                    
                                                                                                                    671,961
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    68,233Other
      assets
                                                                                                                    
                                                                                                                    (24,995
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    (37,290
                                                                                                                    )Accounts payable and accrued expenses
                                                                                                                    
                                                                                                                    (348,049
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    (413,168
                                                                                                                    )Deferred revenue
                                                                                                                    
                                                                                                                    (453,366
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    356,436NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                                                                                                                    
                                                                                                                    228,002
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    1,629,539INVESTING
      ACTIVITIESProceeds
      from note receivable
                                                                                                                    
                                                                                                                    --
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    68,182Purchases
      of property and equipment, net
                                                                                                                    
                                                                                                                    (15,524
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    (92,639
                                                                                                                    )NET
      CASH  (USED IN) INVESTING ACTIVITIES
                                                                                                                    
                                                                                                                    (15,524
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    (24,457
                                                                                                                    )FINANCING
      ACTIVITIESPrincipal
      payments on notes payable
                                                                                                                    
                                                                                                                    (13,696
                                                                                                                    )
                                                                                                                    
                                                                                                                    
                                                                                                                    (13,032
                                                                                                                    )Proceeds
      from and payments of note payable bank - net
                                                                                                                    
                                                                                                                    49,232
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (1,283,062
                                                                                                                    )NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                                                                                                                    
                                                                                                                    35,536
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    (1,296,094
                                                                                                                    )NET
      INCREASE  IN CASH
                                                                                                                    
                                                                                                                    248,014
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    308,988Cash
      at beginning of the period
                                                                                                                    
                                                                                                                    262,742
                                                                                                                    
                                                                                                                    
                                                                                                                    
                                                                                                                    253,091Cash
      at end of the period
                                                                                                                    $
                                                                                                                    510,756
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    562,079SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid during the period for:Income
      taxes
                                                                                                                    $
                                                                                                                    3,982
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    10,800Interest
                                                                                                                    $
                                                                                                                    19,233
                                                                                                                    
                                                                                                                    
                                                                                                                    $
                                                                                                                    80,937*
      Depreciation of $14,250 is included in cost of product and service
      sales for the six months endedMarch
      31, 2009 and 2008, respectively.







See
accompanying Notes to the  Condensed Consolidated Financial
Statements
 7
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)





NOTE
1.  BASIS OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial
information.  Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.  In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary in order not to make the financial statements misleading
have been included. Results for the three and six months ended March 31, 2009
are not necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2009. For further information, refer to the
consolidated financial statements and footnotes thereto included in Synergx
Systems Inc. (“Synergx” or “the Company”) and Subsidiaries’ annual report on
Form 10-KSB for the year ended September 30, 2008.





NOTE
2.  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 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 of billings, and billings in excess of costs and estimated
profits.  Costs and estimated profits in excess of billing were
$90,000 and $305,000 at March 31, 2009 and September 30, 2008, respectively and
have been included in other current assets.  Billings in excess of
costs and estimated profits were $382,000 and $411,000 at March 31, 2009 and
2008, respectively and have been included in deferred
revenue.  Product sales for short term contracts are recognized when
the services are performed 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 performed
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.


8
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)






NOTE 3.
SIGNIFICANT CUSTOMERS AND SUPPLIERS





The
Company does business directly and indirectly through electrical contractors to
New York City Transit Authority.  Net sales to this authority
represented approximately 14% and 26% of total net sales in the three months
ended March 31, 2009 and 2008, respectively and 19% and 29% of total net sales
in the six months ended March 31, 2009 and 2008.





One
customer provided sales of 10% or more of total sales (amounting to 19%) in the
three months ended March 31, 2009 and another provided sales of 10% or more of
total sales (amounting to 11%) for the three months ended March 31,
2008.  No customer provided sales of 10% or more for the six months
ended March 31, 2009 and 2008.  Accounts receivable from a significant
customer amounted to $535,000 at March 31, 2009.





Two
suppliers each accounted for more than 10% of the Company’s cost of sales for
the three and six months ended March 31, 2009 (those suppliers amounted to 23%
and 11%, respectively for the three month period and 16% and 14% for the six
month period).   Two suppliers accounted for more than 10% of the
Company’s cost of sales for the three months ended March 31, 2008 (amounting to
14% and 12%) and one supplier accounted for more than 10% of the Company’s cost
of sales for the six months ended March 31, 2008 (amounting to
13%).





NOTE
4.  INVENTORIES





Inventories
are stated at the lower of cost (first-in, first-out) or market and consist
primarily of raw materials and parts for service and at March 31, 2009 and
September 30, 2008 and are net of an inventory allowance of $649,000 and
$613,000, respectively for slow movement and obsolescence.





NOTE 5.
NOTE PAYABLE BANK





The
Company has a $2.5 million dollar revolving credit facility (the “Credit
Facility”) with TD Banknorth, N.A. (the “Bank”). This Credit Facility has an
annual interest rate of prime plus 2% (5.250% at March 31, 2009 and 5.25% at
September 30, 2008) and is to expire on October 1, 2009. Accordingly, the bank
debt is being classified as a current liability at March 31, 2009. 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.





At March
31, 2009 and September 30, 2008, the full amount of the Credit Facility was
available under the borrowing base calculation and $567,000 and $518,000,
respectively, 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 March
31, 2009, the Company was in compliance with all its financial covenant
requirements.








9
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)




NOTE
6.   STOCK OPTIONS





The
Company has a nonqualified stock option plan (“2004 Plan”), which will expire
September 30, 2009.  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.





A summary
of the option activity and changes during the six months ended March 31, 2008
and 2009 are presented below:




Shares
                                    
                                    
                                    
                                    Weighted
                                      Average
                                      Exercise
                                      Price
      ($)
                                    
                                    
                                    
                                    Weighted
                                      Average
                                      RemainingContractual  
      Term (Yrs.)
                                    
                                    
                                    
                                    Weighted
                                      Average
                                      Grant
      Date
                                      Fair
      Value ($)Outstanding
      October 1, 2007
                                    
                                    
                                    116,000
                                    
                                    
                                    
                                    2.43
                                    
                                    
                                    
                                    2.8
                                    
                                    
                                    
                                    1.24Outstanding
      March 31, 2008
                                    
                                    
                                    116,000
                                    
                                    
                                    
                                    2.43
                                    
                                    
                                    
                                    2.3
                                    
                                    
                                    
                                    1.21Outstanding
      October 1, 2008
                                    
                                    
                                    57,000
                                    
                                    
                                    
                                    2.43
                                    
                                    
                                    
                                    1.8
                                    
                                    
                                    
                                    1.24Expired
                                    
                                    
                                    (5,000
                                    )
                                    
                                    
                                    2.50
                                    
                                    
                                    
                                    1.0
                                    
                                    
                                    
                                    1.24Outstanding
      March 31, 2009
                                    
                                    
                                    52,000
                                    
                                    
                                    
                                    2.43
                                    
                                    
                                    
                                    1.3
                                    
                                    
                                    
                                    1.24Exercisable
      at March 31, 2009
                                    
                                    
                                    37,600
                                    
                                    
                                    
                                    2.45
                                    
                                    
                                    
                                    1.0
                                    
                                    
                                    
                                    1.21
  A summary
of the option activity of nonvested shares at March 31, 2008 and 2009 is
presented below:




Grant
      DateShares
                      
                      
                      Fair ValueNonvested
      at October 1, 2007
                      
                      
                      73,600
                      
                      
                      $
                      1.25Vested
                      
                      
                      23,200
                      
                      
                      
                      1.21Nonvested
      at March 31, 2008
                      
                      
                      50,400
                      
                      
                      
                      1.21Nonvested
      at October 1, 2008
                      
                      
                      26,800
                      
                      
                      
                      1.24Vested
                      
                      
                      12,400
                      
                      
                      
                      1.24Nonvested
      at March 31, 2009
                      
                      
                      14,400
                      
                      
                      $
                      1.24










10
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)


NOTE
7.  EARNINGS (LOSS) PER SHARE





The
Financial Accounting Standards Board (“FASB”) issued “SFAS” No. 128, “Earnings
Per Share”, which 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.









For the Three Months
                ended March
      31,
              
              
              For the Six
      Months
                ended March 31Basic EPS
      Computation
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Net
      (Loss) Income
              
              $
              (48,478
              )
              
              $
              (469,614
              )
              
              $
              175,251
              
              
              $
              (459,252
              )Weighted average
      outstanding shares
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950Basic
      net (loss) income per share
              
              $
              (.01
              )
              
              $
              (.09
              )
              
              $
              .03
              
              
              $
              (.09
              )Diluted
      EPS Computation
                Net
      (Loss) Income
              
              $
              (48,478
              )
              
              $
              (469,614
              )
              
              $
              175,251
              
              
              $
              (459,252
              )Weighted-average
      shares
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950Plus:Incremental shares
      fromassumed conversionsEmployee
      Stock Options*
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Adjusted
      weighted-average shares
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950
              
              
              
              5,210,950Diluted net
      (loss) income per share
              
              $
              (.01
              )
              
              $
              (.09
              )
              
              $
              .03
              
              
              $
              (.09
              )









*All
stock options outstanding during the three and six month period ended March 31,
2009 and March 31, 2008 were anti-dilutive.  However, in the future
the stock options may be dilutive if the market price of the Company’s common
stock increases over $1.70.













11
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)




NOTE
8  INCOME TAXES




The
effective income tax rate differs from the statutory rate for the three and six
months ended March 31, 2009 and 2008 due to the expected use of net operating
loss carryforwards.






The
Company accrues interest and penalties related to unrecognized tax benefits in
income tax expense. This methodology is consistent with previous
periods.  No accrual for interest and penalties related to uncertain
tax positions was required as of March 31, 2009.  As of March 31,
2009, the Company was subject to U.S. Federal and State Income Tax examinations
for the tax years ending September 30, 2005 through 2008, but at the present
time, no examinations are pending or in progress.







NOTE
9.  RELATED PARTY TRANSACTIONS





At
September 30, 2007, Firecom, Inc. (“Firecom”) (a privately owned company
involved in the fire alarm business) owned 1,352,544 shares or approximately 26%
of the Company’s outstanding shares of common stock.  In June 2008,
Firecom purchased an additional 225,568 shares and in January 2009, Firecom
purchased another 490,000 shares increasing its beneficial ownership to
2,068,112 shares equal to 40% of the Company’s outstanding common
stock.





Mr. Paul
Mendez, the Company’s President and Chief Executive Officer also serves as
Chairman of the Board of Directors and Chief Executive Officer of Firecom. On
June 10, 2008, the Company entered into an employment agreement with Mr. Mendez
under which the Company would pay Mr. Mendez an annual base salary of
$20,000.  The employment agreement was modified in January 2009 to
increase Mr. Mendez’s salary, retroactive to October 1, 2008, to an annual base
salary of $250,000 and, as a result, during the six months ended March 31, 2009
the Company recorded $125,000 of compensation expense for Mr.
Mendez.  Mr. Mendez does not participate in the Company’s health-care
plans.  Pursuant to the employment agreement, either the Board of
Directors of the Company or Mr. Mendez may terminate his employment without
cause and at any time. Mr. Mendez devotes approximately 50% of his time to the
affairs of the Company. In the employment agreement with the Company, Mr. Mendez
has agreed to certain non-competition and confidentiality
provisions.





Firecom
also provides the Company with a full time employee who serves as President of
the Company’s fire alarm products and services activities. For the three and six
months ending March 31, 2009 the Company paid Firecom $51,000 and $104,000,
respectively, for the services of this individual, which includes reimbursement
for salary, payroll taxes and other employee benefits for such full-time
employee.  These expenses are included in cost of service
revenue.  For the three and six months ending March 31, 2008 the
Company paid Firecom $14,000 for the same services.  For the three and
six months ending March 31, 2009 the Company paid $17,000 to Firecom for another
employee who serves in a fire alarm administrative function, no money was paid
for this employee during the three and six months ending March 31, 2008 as the
employee began work for the Company in January 2009.








12
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)




NOTE
9.  RELATED PARTY TRANSACTIONS (continued)





The
Company and Firecom have entered into several transactions that are not
financially material to the revenues, gross profit or net income (loss) of the
Company.  Firecom has provided certain sales leads to the Company for
products Firecom does not sell. These sales leads have resulted in additional
sales of products to customers. The Company has paid Firecom a 2% sales
commission related to these sales which amounted to $6,000 for the six months
ended March 31, 2009 and there were no such transactions for the six months
ended March 31, 2008.  Firecom has manufactured and sold to the
Company certain fire alarm equipment made to the Company’s specifications. This
equipment was sold to the Company for $11,000 and $14,000 during the three and
six months ended March 31, 2009, respectively and there were no such
transactions during the three and six months ended March 31,
2008.   The Company from time to time has purchased and sold
certain products used in Firecom’s business.  During the three and six
months ended March 31, 2009, these products were sold to Firecom for $101,000
and $144,000, respectively.  During the three and six months ended
March 31, 2008, these products were sold to Firecom for $20,000 and $30,000,
respectively. The Company has a consulting agreement with Firecom pursuant to
which Firecom provides certain hardware and software engineering and field
trouble-shooting services.  In offering these services, Firecom has
agreed to keep information confidential and refrain from use of the information
in its business.





As of
March 31, 2009 and September 30, 2008, the Company owed Firecom $35,000 and
$3,000, respectively, which is included in Accounts
Payable.





As of
March 31, 2009 and September 30, 2008, Firecom owed the Company $96,000 and
$34,000 respectively, which is included in Accounts
Receivable.





NOTE
10  NEW ACCOUNTING PRONOUNCEMENTS





In
February 2008, the FASB staff issued Staff Position No. 157-2, Effective Date of FASB Statement
No. 157(“FSP 157-2”). FSP 157-2 delayed the effective date of SFAS
157 for nonfinancial assets and non-financial liabilities, except for items that
are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The provisions of FSP 157-2 are effective
for the Company’s fiscal year beginning October 1, 2009; however, the
Company does not expect the provisions to have a material impact, if any, on our
financial statements.





In
May 2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles,”(“SFAS 162”) which identifies the sources of
accounting principles and the accounting framework for selecting the principles
to be used in the preparation of financial statements of non-governmental
entities that are presented in conformity with U.S. generally accepted
accounting principles (“GAAP”). SFAS 162 is effective 60 days following the
SEC’s approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning
of Present Fairly in Conformity with GAAP.”The Company does not expect
the adoption of SFAS 162 to have an impact on its financial
statements.





Other
recently issued accounting pronouncements are not expected to have a material
impact on the Company’s financial position or results of
operations.






13
 SYNERGX
SYSTEMS INC. AND SUBSIDIARIES
  NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (UNAUDITED)




NOTE
11.  NASDAQ CONTINUED LISTING





The
Company received a letter (the “Letter”) from The NASDAQ Stock Market (“NASDAQ”)
on April 21, 2008, notifying the Company that for the 30 consecutive days prior
to April 21, 2008, the bid price of the Company’s common stock has closed below
the minimum $1.00 per share requirement for continued inclusion in the NASDAQ
Stock Market.  The Company had been provided with 180 calendar days
(until October 20, 2008) to regain compliance.





NASDAQ
has subsequently suspended the enforcement of rules requiring a minimum $1.00
closing bid price or a minimum market value of publicly held shares. NASDAQ has
said it will not take any action to delist any security for these concerns
during the suspension. NASDAQ has stated that, given the current extraordinary
market conditions, this suspension was to remain in effect through Friday, April
17, 2009 but the suspension has been extended to remain in effect through July
17, 2009, and will be reinstated on Monday, July 20, 2009.





As a
result, if, at any time before July 23, 2009, the bid price of the Company’s
common stock closes at $1.00 or greater per share for a minimum of 10
consecutive business days, then NASDAQ will provide the Company with written
notification that it has complied with the Marketplace Rule 4310(c) (4) (the
“Rule”) . If compliance with the Rule cannot be demonstrated by July 23, 2009,
then NASDAQ will decide whether the Company meets NASDAQ’s listing criteria set
forth in the Rule, except for the bid requirement.  The notification
states that, if the Company meets these criteria, then the Company will be
granted an additional 180 calendar day compliance period.  If the
Company is not granted an additional 180 calendar period, then NASDAQ will
provide written notification that the Company’s securities will be
delisted.





Management
and the Board of Directors will consider available strategies in order to
satisfy the minimum bid price requirement, however there can be no assurance
that the Company will be able to maintain the listing of its common stock on the
NASDAQ Capital Market.





In the
event the delisting of the Company’s common stock would occur, the Company would
look to have its common stock trade on a different platform or
exchange.  The Company is analyzing what effect, if any, a delisting
would have on the Company’s financial condition and liquidity.














14
 Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations


This
quarterly report contains forward-looking statements.  These are
statements that relate to future periods and include statements regarding our
future strategic, operational and financial plans, anticipated  or
projected revenues, expenses and operational growth, markets and potential
customers for our products and services, plans related to sales strategies and
efforts, the anticipated benefits of our relationships with strategic partners,
our ability to compete, the adequacy of our current facilities and the
performance of our current and future products and services.





You
can identify forward-looking statements by those that are not historical in
nature, particularly those that use terminology such as
“may”,  “should”, “expects”, “anticipates”, “estimates”,
“believes”,  ”plans”, or “projects”.  Our actual results may
differ materially from any forward-looking statements.  We caution you
not to place undue reliance on these forward-looking statements.  The
forward-looking events discussed in this quarterly report may not occur, and
actual events and results may differ materially and are subject to risks and
uncertainties.  The forward-looking statements speak only as of the
date hereof, and we expressly disclaim any obligation to publicly revise these
forward-looking statements to reflect events or circumstances after the date of
this filing.





References
to 2009 and 2008 within the Management’s Discussion and Analysis of Financial
Condition and Results of Operations refer to the three and six months ended
March 31, 2009 and March 31, 2008, respectively.





Liquidity and Capital
Resources





The
Company has a $2.5 million dollar revolving credit facility (the “Credit
Facility”) with TD Banknorth, N.A. (the “Bank”). This Credit Facility has an
annual interest rate of prime plus 2% (5.25% at March 31, 2009 and 5.25% at
September 30, 2008) and is to expire on October 1, 2009. The bank debt is being
classified as a current liability at March 31, 2009. 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, and making acquisitions and
capital expenditures. The Company is also required to maintain certain financial
ratios and tangible net worth covenants. At March 31, 2009 and September 30,
2008, the full amount of the Credit Facility was available under the borrowing
base calculation and $567,000 and $518,000, respectively, was owed under the
Credit Facility.





Net cash
provided by operations for the six months ended March 31, 2009 was $228,002 as
compared to $1,629,539 for the comparable prior year period, a decrease of
$1,401,537. This $1,401,537 decrease in cash provided by operations was
primarily due to a $74,419 net use in cash for operating assets and liabilities
in 2009 (used to fund certain projects that will be delivered after March 31,
2009) as compared to a $1,902,605 reduction in operating assets and liabilities
in 2008.  The reduction in operating assets and liabilities in 2008
primarily resulted from a $1,620,770 collection of accounts receivable due to
the timing of payments on long standing projects involving retainage. Partially
offsetting the 2009 use in cash for operating assets and liabilities was
$158,551 of net income (the 2008 period had a net loss of
$459,252).





In 2009,
the net cash inflow of $228,002 from operations was used for investing
activities for equipment purchases of $15,524 ($92,939 of equipment purchases in
2008) and financing activities for note payments of $13,696. This resulted in a
net cash inflow of $198,802 and with additional bank borrowing of $49,232
increased the Company’s cash balance at March 31, 2009 to
$510,756.  In the six months ended March 31, 2008, the Company used
cash for financing activities to repay $1,283,062 of our bank note
payable.





The ratio
of the Company’s current assets to current liabilities (current ratio) decreased
to approximately 1.81 to 1 at March 31, 2009 compared to 1.83 to 1 at September
30, 2008. Working capital declined to $3.6 million at March 31, 2009 compared to
$3.8 million at September 30, 2008. This decline and the decrease in the current
ratio are principally related to $567,105 of bank debt being classified as a
current liability at March 31, 2009.





The
Company expects to extend or refinance its bank loan before its maturity on
October 1, 2009. In view of the Company’s working capital collateral, which is
in excess of its present and anticipated credit line, the Company believes
suitable financing will be available from its present lender or another lender,
if necessary.  The Company anticipates that its existing capital
resources and funds expected to be received from operations will be sufficient
to satisfy its cash flow requirements through March 31, 2010.






15
 Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations


Results of
Operations














Three
      Months Ended
                                  March
      31,
                                
                                
                                Six Months
      Ended
                                  March
      31,2009
                                
                                
                                2008
                                
                                
                                2009
                                
                                
                                2008(In
      thousands of dollars)Product
      Revenue
                                
                                $
                                3,529
                                
                                
                                $
                                3,433
                                
                                
                                $
                                7,323
                                
                                
                                $
                                7,235Subcontract
      Revenue
                                
                                
                                484
                                
                                
                                
                                353
                                
                                
                                
                                1,054
                                
                                
                                
                                503Service
      Revenue
                                
                                
                                1,278
                                
                                
                                
                                1,312
                                
                                
                                
                                2,573
                                
                                
                                
                                2,633Total
      Revenue
                                
                                $
                                5,291
                                
                                
                                $
                                5,098
                                
                                
                                $
                                10,950
                                
                                
                                $
                                10,370Gross
      Profit Product
                                
                                
                                598
                                
                                
                                
                                550
                                
                                
                                
                                1,518
                                
                                
                                
                                1,218Gross
      Profit Subcontract
                                
                                
                                88
                                
                                
                                
                                46
                                
                                
                                
                                219
                                
                                
                                
                                73Gross
      Profit Service
                                
                                
                                495
                                
                                
                                
                                641
                                
                                
                                
                                994
                                
                                
                                
                                1,385Total
      Gross Profit
                                
                                $
                                1,181
                                
                                
                                $
                                1,237
                                
                                
                                $
                                2,731
                                
                                
                                $
                                2,676Gross
      Margin Product %
                                
                                
                                17
                                %
                                
                                
                                16
                                %
                                
                                
                                21
                                %
                                
                                
                                17
                                %Gross
      Margin Subcontract%
                                
                                
                                18
                                %
                                
                                
                                13
                                %
                                
                                
                                21
                                %
                                
                                
                                15
                                %Gross
      Margin Service %
                                
                                
                                39
                                %
                                
                                
                                49
                                %
                                
                                
                                39
                                %
                                
                                
                                53
                                %





Revenues





The
Company’s revenue increased by $193,000 (3.7%) for the three months ended March
31, 2009 and increased $580,000 (5.5%) for the six months then
ended.





The
Company's product sales increased slightly (3%) during the three months ended
March 31, 2009 to $3,529,000 compared to $3,433,000 for the prior year period.
The increase in product sales is due to additional revenue of $862,000 from a
signage project at a convention center which offset declines in sales of
audio/visual ,fire alarm, and security products (primarily from transit
projects).  Product sales also increased slightly (1%) during the six
months ended March 31, 2009 to $7,323,000 compared to $7,235,000 for the prior
year period. The increase in product sales in the six month period was due to
the one time sale of a $862,000 signage project at a convention center (in
addition to this product sale revenue, the Company earned subcontract revenue on
this project of $132,000 as noted below for a total contract amount of $994,000)
and from the installation of a fire alarm system (involving a building owner and
tenants) at a major new retail outlet center in our Long Island, NY territory
amounting to $635,000 (jobs of these size and nature are unusual for this area
and are not expected to occur often). These increases off set decreases in sales
of audio/visual and security products (primarily from transit
projects).  Also benefiting product revenues in 2009 was revenue from
the installation of the Company’s new Comtrak system upgrade at a large building
in New York City. Revenue from this upgrade program began in December, 2008 and
is expected to continue in future periods.  The revenues from these
projects almost entirely offset the declines in product sales from audio/visual
and security products.





Subcontract
sales increased during the current three month period to $484,000 from $353,000
in the comparable prior year period.  The increase in the three month
period of 2009 is primarily due to the Company being responsible as prime
contractor for the installation of a large display signage at a convention
center which provided subcontract revenue of $132,000. Subcontract revenues
increased during the six month period of 2009 to $1,054,000 from $503,000 in the
comparable prior year period. During the six month period of 2009, the Company
was responsible as prime contractor for the electrical installation of both the
large display signage at a convention center ($132,000 of subcontract revenue)
and for a major new retail outlet center ($387,000 of sales) and for several
other large electrical installations projects compared to a few smaller
electrical installations in 2008





Service
revenues decreased 3% and 2% during the current three and six month periods
(2009)  as compared to the comparable prior year period primarily due
to the decrease in both periods in call-in-service on fire alarm systems
(replacement parts and service required by buildings).







16
 Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations


Gross
Profit





The
Company’s gross profit decreased by $56,000 (4.5%) for the three months ended
March 31, 2009 and increased $55,000 (2.0%) for the six months then
ended.





Gross
profit from product sales for the three months ended March 31, 2009 increased 9%
to $598,000 compared to $550,000 for the prior year period. The improvement in
absolute gross profit and the 1% increase in gross margin percentage are
primarily attributable to certain reductions in project engineering and direct
labor staff in 2009. Gross profit margin as a percentage of product sales was
17% in 2009 compared to 16% in 2008. Gross profit from product sales for the six
months ended March 31, 2009 increased 21% to $1,518,000 compared to $1,218,000
for the prior year period. Gross profit margin as a percentage of product sales
for the six months was 21% in 2009 compared to 17% in 2008.The improvement in
absolute gross profit and the 4% increase in gross margin percentage are
primarily attributable to certain reductions in project engineering and direct
labor staff in 2009 and a shift in product mix to higher margin sales of fire
alarm projects in 2009 whereas the 2008 period included sales from a very low
gross margin public address system.





Gross
profit related to subcontract sales for the three months ended March 31, 2009
increased in absolute terms as the Company was responsible for a greater number
of electrical installations by third parties (subcontract work) which included
one large installation at a convention center of a large display signage in 2009
(noted above). For the six month period of 2009, gross profit from subcontract
revenues increased from both the installation of a large display signage at a
convention center and from the electrical installation (subcontract work) at a
major retail outlet center (noted above).  The higher gross profit
margin percentage in the three and six months of 2009 is due to higher margin
percentage received on the installation of the large display signage and
electrical installation at a major retail outlet center compared to the three
months of 2008 as mark ups on electrical installations were lower on the few
smaller electrical installation in 2008.





Gross
profit from service revenues decreased $146,000 to $495,000 during the three
months ended March 31, 2009 and decreased $391,000 to $994,000 during the six
months ended March 31, 2009 as a result of a decline in call-in-service on fire
alarm systems (replacement parts and service required by
buildings).  Gross profit in 2009 was also negatively affected by
additions in the number of service technicians as the Company increased its
customer support staffing levels (during 2009) and rebalanced its staff to
better serve customer requirements. In addition, the Company added certain
service administration staff in 2009, which included a dedicated operating
executive whose expenses are included in cost of service.





Profit Before
Taxes





The
$370,000 decrease in loss before income taxes during the three months ended
March 31, 2009 is primarily attributed to $405,000 of lower selling, general and
administrative expenses and from $23,000 of lower interest expense compared to
2008. These cost reductions amounting to $428,000 were offset by $56,000 of
lower gross profit, which was primarily due to a decline in gross profit from
service revenue (noted above). Selling, general and administrative expenses
during the 2008 period included a provision of $192,000 for separation costs
related to the resignation of the President of Casey Systems. Further savings in
2009 came from reductions of personnel in sales, administration, information
technology, and research and development, all in an effort to lower overhead
expenses. The decrease in interest is due to the effect of both lower interest
rates, as a result of a lower prime rate, and lower borrowing levels during
2009.





The
$586,000 increase in income before taxes during the six months ended March 31,
2009 is primarily attributed to $482,000 of lower selling, general and
administrative expenses and from $62,000 of lower interest expense compared to
2008. Selling, general and administrative expenses during the 2008 period
included a provision of $192,000 for separation costs (noted above). Further
savings in 2009 came from reductions of personnel in sales, administration,
information technology and research and development, all in an effort to lower
overhead expenses. The decrease in interest was due to the effect of both lower
interest rates as a result of a lower prime rate and lower borrowing levels
during 2009.






17
 Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations


Tax
Provision





The
Company’s income tax expense for the three and six month periods of 2009 and
2008 represent minimum state and local income or franchise taxes. No income tax
expense was recorded for the operating profit for the three and six months ended
March 31, 2009 and 2008 due to the expected use of the net operating loss
carryforwards.





Order
Position





The
Company’s order position, excluding service, at March 31, 2009 was $9,119,000 as
compared to $12,500,000 at September 30, 2008 and $12,900,000 at March 31,
2008.  The Company expects to fulfill a significant portion of its
order position over the next twelve months. Due to the fact that the Company’s
products are sold and installed as part of larger mass transit construction
projects, there is typically a delay between the booking of the contract and its
revenue realization.  The order position includes, and the Company
continues to bid on projects that might include, significant 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 be
responsible for management of the project as well as electrical
installation.





Significant Customers and
Suppliers





The
Company does business directly and indirectly through electrical contractors to
New York City Transit Authority.  Net sales to this authority
represented approximately 14% and 26% of total net sales in the three months
ended March 31, 2009 and 2008, respectively and 19% and 29% of total net sales
in the six months ended March 31, 2009 and 2008.





One
customer provided sales of 10% or more of total sales (amounting to 19%) in the
three months ended March 31, 20098 and another provided sales of 10% or more of
total sales (amounting to 11%) for the three months ended March 31,
2008.  No customer provided sales of 10% or more for the six months
ended March 31, 2009 and 2008.  Accounts receivable from a significant
customer amounted to $535,000 at March 31, 2009.  The Company does not
anticipate any problem in collecting this customer receivable.





Two
suppliers each accounted for more than 10% of the Company’s cost of sales for
the three and months ended March 31. 2009 (those suppliers amounted to 23% and
11%, respectively for the three month period and 16% and 14% for the six month
periods).   Two suppliers accounted for more than 10% of the
Company’s cost of sales for the three months ended March 31, 2008 (amounting to
14% and 12%) and one supplier accounted for more than 10% of the Company’s cost
of sales for the six months ended March 31, 2008 (amounting to
13%).





Related Party
Transactions





At
September 30, 2007, Firecom, Inc. (“Firecom”) (a privately owned company
involved in the fire alarm business) owned 1,352,544 shares or approximately 26%
of the Company’s outstanding shares of common stock.  In June 2008,
Firecom purchased an additional 225,568 shares and in January 2009, Firecom
purchased another 490,000 shares increasing its beneficial ownership to
2,068,112 shares equal to 40% of the Company’s outstanding common
stock.





Mr. Paul
Mendez, the Company’s President and Chief Executive Officer also serves as
Chairman of the Board of Directors and Chief Executive Officer of Firecom. On
June 10, 2008, the Company entered into an employment agreement with Mr. Mendez
under which the Company would pay Mr. Mendez an annual base salary of
$20,000.  The employment agreement was modified in January 2009 to
increase Mr. Mendez’s salary, retroactive to October 1, 2008, to an annual base
salary of $250,000 and, as a result, during the six months ended March 31, 2009
the Company recorded $125,000 of compensation expense for Mr.
Mendez.  Mr. Mendez does not participate in the Company’s health-care
plans.  Pursuant to the employment agreement, either the Board of
Directors of the Company or Mr. Mendez may terminate his employment without
cause and at any time. Mr. Mendez devotes approximately 50% of his time to the
affairs of the Company. In the employment agreement with the Company, Mr. Mendez
has agreed to certain non-competition and confidentiality
provisions.





Firecom
also provides the Company with a full time employee who serves as President of
the Company’s fire alarm products and services activities. For the three and six
months ending March 31, 2009 the Company paid Firecom $51,000 and $104,000,
respectively, for the services of this individual, which includes reimbursement
for salary, payroll taxes and other employee benefits for such full-time
employee.  These expenses are included in cost of service
revenue.  For the three and six months ending March 31, 2008 the
Company paid Firecom $14,000 for the same services.  For the three and
six months ending March 31, 2009 the Company paid $17,000 to Firecom for another
employee who serves in a fire alarm administrative function, no money was paid
for this employee during the three and six months ending March 31, 2008 as the
employee began work for the Company in January 2009.





The
Company and Firecom have entered into several transactions that are not
financially material to the revenues, gross profit or net income of the
Company.  Firecom has provided certain sales leads to the Company for
products Firecom does not sell. These sales leads have resulted in additional
sales of products to customers. The Company has paid Firecom a 2% sales
commission related to these sales which amounted to $6,000 for the six months
ended March 31, 2009 and there were no such transactions for the six months
ended March 31, 2008.  Firecom has manufactured and sold to the
Company certain fire alarm equipment made to the Company’s specifications. This
equipment was sold to the Company for $11,000 and $14,000 during the three and
six months ended March 31, 2009, respectively and there were no such
transactions during the three and six months ended March 31,
2008.   The Company from time to time has purchased and sold
certain products used in Firecom’s business.  During the three and six
months ended March 31, 2009, these products were sold to Firecom for $101,000
and $144,000, respectively.  During the three and six months ended
March 31, 2008, these products  were sold to Firecom for $20,000 and
$30,000, respectively. The Company has a consulting agreement with Firecom
pursuant to which Firecom provides certain hardware and software engineering and
field trouble-shooting services.  In offering these services, Firecom
has agreed to keep information confidential and refrain from use of the
information in its business





As of
March 31, 2009 and September 30, 2008, the Company owed Firecom $35,000 and
$3,000, respectively, which is included in Accounts
Payable.   As of March 31, 2009 and September 30, 2008,
Firecom owed the Company $96,000 and $34,000 respectively, which is included in
Accounts
Receivable.





Other





Approximately
32% of the Company’s employees are covered by collective bargaining
agreements.  On March 9, 2009, the union representing hourly employees
and the Company ratified a Collective Bargaining Agreement expiring March 9,
2012, providing for an increase in salaries and benefits averaging approximately
4% per year over the life of the contract, but with no increase in the first
year of the contract.





NASDAQ Continued
Listing





The
Company received a letter (the “Letter”) from The NASDAQ Stock Market (“NASDAQ”)
on April 21, 2008, notifying the Company that for the 30 consecutive days prior
to April 21, 2008, the bid price of the Company’s common stock has closed below
the minimum $1.00 per share requirement for continued inclusion in the NASDAQ
Stock Market.  The Company had been provided with 180 calendar days
(until October 20, 2008) to regain compliance.





NASDAQ
has subsequently suspended the enforcement of rules requiring a minimum $1.00
closing bid price or a minimum market value of publicly held shares. NASDAQ has
said it will not take any action to delist any security for these concerns
during the suspension. NASDAQ has stated that, given the current extraordinary
market conditions, this suspension was to remain in effect through Friday, April
17, 2009 but has been extended to remain in effect through July 17, 2009, and
will be reinstated on Monday, July 20, 2009.





As a
result, if, at any time before July 23, 2009, the bid price of the Company’s
common stock closes at $1.00 or greater per share for a minimum of 10
consecutive business days, then NASDAQ will provide the Company with written
notification that it has complied with the Marketplace Rule 4310(c) (4) (the
“Rule”) . If compliance with the Rule cannot be demonstrated by April 23, 2009,
then NASDAQ will decide whether the Company meets NASDAQ’s listing criteria set
forth in the Rule, except for the bid requirement.  The notification
states that, if the Company meets these criteria, then the Company will be
granted an additional 180 calendar day compliance period.  If the
Company is not granted an additional 180 calendar period, then NASDAQ will
provide written notification that the Company’s securities will be
delisted.





Management
and the Board of Directors will consider available strategies in order to
satisfy the minimum bid price requirement, however there can be no assurance
that the Company will be able to maintain the listing of its common stock on the
NASDAQ Capital Market.





In the
event the delisting of the Company’s common stock would occur, the Company would
look to have its common stock trade on a different platform or
exchange.  The Company is analyzing what effect, if any, a delisting
would have on the Company’s financial condition and liquidity.


18


Item
3  Quantitative and Qualitative Disclosures About Market
Risk





Not
applicable





Item
4.  Controls and Procedures Evaluation of disclosure controls and
procedures.





(a)Disclosure
      Controls and Procedures




The
Company’s management, with the participation of its principal executive officer
and principal financial officer, has evaluated the effectiveness of the
Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) as of the end of the period covered by
this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s
principal executive officer and principal financial officer have concluded that,
as of the end of such period, the Company’s disclosure controls and procedures
were adequate and effective.




(b)Changes in
      Internal Controls




There
have not been any changes in the Company’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the quarter ended March 31,
2009 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.





Part II –
OTHER INFORMATION





Item
1.  Legal Proceedings.





From time to time we may be a party to
various legal proceedings arising in the ordinary course of our business. We are
not currently subject to any material legal proceedings.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.





None.





Item
3.  Defaults Upon Senior Securities.





None.





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





None.





Item
5.   Other Information.





None.





Item
6.  Exhibits





(a)  Exhibits





31.1
            Certification
      of Paul Mendez 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
            Certifications
      of Paul Mendez and John A. Poserina pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


19


SIGNATURES








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


SYNERGX
      SYSTEMS INC
                (Registrant)By:
              /s/ Paul
      MendezName Paul
      MendezChief
      Executive OfficerDate:  May
      14, 2009
 By:
                /s/ John
      A. PoserinaName John
      A. PoserinaChief
      Financial Officer(Principal
      Accounting and Financial Officer), Secretary and DirectorDate: May
      14, 2009
























20