U.S. SECURITIES AND EXCHANGE
                                   COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-QSB

                                   (Mark One)
 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

   For the fiscal quarter ended    June 30, 2006
                                  -------------

      [ ] 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   (IRS employer identification Number)
          or organization)


                  209 Lafayette Drive, Syosset, New York 11791
               (Address of Principal Executive Offices) (Zip code)


                                 (516) 433-4700
                           (Issuer's telephone number)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days.
Yes[ X ] No[ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 7, 2006, 5,210,950
shares of Registrant's Common Stock were issued and outstanding.

Transitional Small Business Disclosure Format (check one)   Yes[    ]    No[ X ]
<PAGE>

                                      INDEX


Part I - Financial Information (unaudited)                                 Page

   Item 1.  Financial Statements.

   Condensed Consolidated Balance Sheet at June 30, 2006                    3

   Condensed Consolidated Statements of Operations for the Three
        And Nine Months Ended June 30, 2006 and 2005                        5

   Condensed Consolidated Statements of Cash Flows for the
        Nine Months Ended June 30, 2006 and 2005                            7

   Notes to the Condensed Consolidated Financial Statements                 8

   Item 2.  Management's Discussion and Analysis or Plan of Operations     13

   Item 3.   Controls and Procedures                                       17

Part II - Other Information

   Item 1.  Legal Proceedings.                                             18

   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.   18

   Item 3.  Defaults Upon Senior Securities.                               18

   Item 4.  Submission of Matters to a Vote of Security Holders.           18

   Item 5.  Other Information.                                             18

   Item 6.  Exhibits                                                       19

   Signatures                                                              20


<PAGE>
                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET

                                   (Unaudited)


                                                                    June 30,
                                                                      2006
                                                                   ---------
ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                     $   491,630
  Accounts receivable, principally trade, less allowance
     for doubtful accounts of $323,523                            5,127,722
  Inventories, net                                                2,396,388
  Deferred taxes                                                    312,700
  Prepaid expenses and other current assets                         343,196
   Income Tax Receivable                                            226,000
                                                                 ----------
              TOTAL CURRENT ASSETS                                8,897,636
                                                                 ----------


PROPERTY AND EQUIPMENT -at cost, less
   accumulated depreciation and amortization of $1,537,063          731,731

OTHER ASSETS                                                        590,781


                                                                 ----------
              TOTAL ASSETS                                      $10,220,148
                                                                 ==========

See accompanying Notes to the  Condensed Consolidated Financial Statements


<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET

                                   (Unaudited)


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

CURRENT LIABILITIES

   Note payable to bank                                       $   909,138
   Notes payable - current portion                                $15,106
   Accounts payable and accrued expenses                        2,003,861
   Deferred revenue                                               732,991
                                                               ----------
              TOTAL CURRENT LIABILITIES                         3,661,096


   Notes payable - less current portion                            46,600
   Deferred taxes                                                  90,000
                                                               ----------
              TOTAL LIABILITIES                                 3,797,696
                                                               ----------

STOCKHOLDERS' EQUITY

  Preferred stock, 2,000,000 shares authorized-
     none issued and outstanding --
  Common stock, 10,000,000 shares authorized, $.001
     par value; issued and outstanding 5,210,950 shares             5,211
  Capital in excess of par                                      6,803,992
  Accumulated deficit                                            (386,751)
                                                               ----------
TOTAL STOCKHOLDERS' EQUITY                                      6,422,452
                                                               ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $10,220,148
                                                               ==========

See accompanying Notes to the  Condensed Consolidated Financial Statements

<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            For the  Three Months Ended June 30,
                                                                                 2006                2005
                                                                                ------              ------
<S>                                                                           <C>                 <C>
Product sales                                                                 $2,455,869          $2,919,901
Subcontract sales                                                                126,782             154,600
Service revenue                                                                1,348,117           1,220,456
                                                                               ---------           ---------
Total revenues                                                                 3,930,768           4,294,957
                                                                               ---------           ---------


Cost of product sales                                                          1,764,823           1,942,635
Cost of subcontract sales                                                        103,115             126,337
Cost of service revenue                                                          701,758             802,638
Selling, general and administrative                                            1,426,133           1,286,020
Interest expense                                                                  27,610              22,048
Depreciation and amortization                                                     37,461              44,062
Loss on equity investment                                                         18,000              33,000
                                                                               ---------           ---------
                                                                               4,078,900           4,256,740
                                                                               ---------           ---------

(Loss) income before (benefit) provision for income taxes                       (148,132)             38,217
                                                                               ---------           ---------

(Benefit) provision for income taxes:
   Current                                                                         5,000              13,000
   Deferred                                                                      (55,000)              5,000
                                                                               ---------           ---------
                                                                                 (50,000)             18,000

(Loss) income from continuing operations                                         (98,132)             20,217


Discontinued operations (Note 7):
   (Loss) income  from discontinued operations                                   (12,782)             59,938
   Income tax (benefit) provision                                                 (4,000)             25,000
                                                                               ---------           ---------
(Loss) income from discontinued operations                                        (8,782)             34,938

Net (Loss) income                                                             $ (106,914)         $   55,155
                                                                               =========           =========


(Loss) income per common share
   Basic (loss) income from continuing operations                             $    (0.02)         $     0.00
   Basic (loss) income from discontinued operations                                (0.00)               0.01
   Basic  (loss) income Per Share                                                 ($0.02)         $     0.01

  Diluted (loss) income from continuing operations                                ($0.02)              $0.00
  Diluted (loss) income from discontinued operations                               (0.00)               0.01
  Diluted (loss) income Per Share                                             $    (0.02)         $     0.01


Weighted average number of common shares outstanding                           5,210,950           5,192,118

Weighted average number of common and dilutive
  common share equivalents outstanding                                         5,210,950           5,211,120
</TABLE>

See accompanying Notes to the Condensed Consolidated Financial Statements

<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  For the Nine Months Ended June 30,
                                                                      2006                2005
                                                                     ------              ------
<S>                                                              <C>                  <C>
Product sales                                                    $  7,122,271         $ 8,574,341
Subcontract sales                                                     430,067             460,133
Service revenue                                                     3,817,752           3,477,595
                                                                   ----------          ----------
Total revenues                                                     11,370,090          12,512,069
                                                                   ----------          ----------


Cost of product sales                                               5,241,970           5,924,552
Cost of subcontract sales                                             343,755             376,403
Cost of service revenue                                             2,052,553           2,268,770
Selling, general and administrative                                 4,016,175           3,657,021
Interest expense                                                       81,189              61,445
Depreciation and amortization                                         115,657             132,182
Loss on equity investment                                              60,000              55,000
                                                                   ----------          ----------
                                                                   11,911,299          12,475,373
                                                                   ----------          ----------

(Loss) income before (benefit) provision from income taxes           (541,209)             36,696
                                                                   ----------          ----------

(Benefit) provision from income taxes:
   Current                                                           (178,000)             22,000
   Deferred                                                           (35,000)
                                                                   ----------          ----------
                                                                     (213,000)             22,000
                                                                   ----------          ----------
(Loss) income from continuing operations                             (328,209)             14,696

Discontinued operations (Note 7):
   Loss from discontinued operations                                 (147,636)           (113,855)
   Income tax benefit                                                 (48,000)            (39,000)
                                                                   ----------          ----------
Loss from discontinued operations                                     (99,636)            (74,855)

Net (loss)                                                       $   (427,845)        $   (60,159)

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

(Loss) Per Common Share:
  Basic (loss) income  from continuing operations                      ($0.06)              $0.00
  Basic (loss) from discontinued operations                            ($0.02)             -$0.01
  Basic (loss) Per Share                                               ($0.08)             -$0.01
                                                                        =====               =====

  Diluted (loss) income  from continuing operations                    ($0.06)              $0.00
  Diluted (loss) from discontinued operations                          ($0.02)             -$0.01
  Diluted (loss) Per Share                                             ($0.08)             -$0.01
                                                                        =====               =====

Weighted average number of common shares outstanding                5,204,742           5,164,922

Weighted average number of common and dilutive
   common share equivalents outstanding                             5,204,742           5,164,922

</TABLE>



See accompanying Notes to the Condensed Consolidated Financial Statements


<PAGE>



                   SYNERGX SYSTEMS INC. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                For the Nine Months Ended June 30,
                                                                                   2006                2005
                                                                                  ------              ------
OPERATING ACTIVITIES
<S>                                                                            <C>                 <C>
Net  (Loss) income from continuing operations                                  $ (328,209)         $   14,696
 Adjustments to reconcile net  (loss) income to net cash
     provided by operating activities:
         Depreciation and amortization *                                          126,352             144,265
         Deferred tax  (benefit)                                                  (35,000)
         Loss on equity investment                                                 60,000              55,000
         Tax benefit from employees stock option exercise                          10,000
  Changes in operating assets and liabilities:
    Accounts receivable, net                                                    1,965,395           1,070,749
    Inventories                                                                  (188,729)           (104,220)
    Prepaid expenses and other current assets                                     (75,302)            (99,244)
    Income Tax Receivable                                                        (226,000)
    Other assets                                                                  (66,922)             (6,025)
    Accounts payable and accrued expenses                                        (907,861)           (297,885)
    Deferred revenue                                                              178,656              23,377
                                                                                ---------           ---------
Net cash provided by continuing operations                                        512,380             800,713
Net cash (used by) operating activities of discontinued operation                (369,462)            (53,941)
                                                                                ---------           ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                         142,918             746,772
                                                                                ---------           ---------
INVESTING ACTIVITIES
  Purchases of property and equipment                                            (198,463)           (269,185)
                                                                                ---------           ---------
Net cash (used in) continuing operations                                         (198,463)           (269,185)
Proceeds from sale of discontinued operations                                     518,000
                                                                                ---------           ---------
NET CASH PROVIDED BY INVESTING ACTIVITIES                                         319,537            (269,185)
                                                                                ---------           ---------
FINANCING ACTIVITIES
  Principal payments on notes payable                                             (30,723)            (41,159)
  Payments and proceeds from note payable bank - net                             (540,168)           (490,712)
  Proceeds from exercise of stock options and warrants                              9,416              27,628
                                                                                ---------           ---------
NET CASH (USED IN) FINANCING ACTIVITIES                                          (561,475)           (504,243)
                                                                                ---------           ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (99,020)            (26,656)

Cash and cash equivalents at beginning of period                                  590,650             928,507
                                                                                ---------           ---------
Cash and cash equivalents at end of period                                     $  491,630          $  901,851
                                                                                =========           =========
SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the period for:
     Income taxes                                                              $   45,070          $    6,995
     Interest                                                                  $   82,150          $   62,211
</TABLE>

NON-CASH INVESTING AND FINANCING ACTIVITIES

     Included  in the nine  months  ended June 30,  2006,  was the  purchase  of
equipment for $54,716 through financing.

*  Depreciation  of $10,695 and $12,083 is included in cost of product sales for
the nine months ended June 30, 2006 and 2005, respectively.

See accompanying Notes to the Condensed Consolidated Financial Statements

<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

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
nine months ended June 30, 2006 are not  necessarily  indicative  of the results
that may be expected for the fiscal year ending  September 30, 2006. 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,
2005.

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 on board  systems)  and  communication  (paging,
announcement and  audio/visual).  Product sales represent sales of product along
with the  integration  of  technical  services at a fixed price under a contract
with an electrical  contractor or end user customer  (building owner and tenant)
or customer  agent.  Product sales are allocated  using a constant  gross profit
percentage   over  the  entire   contract,   and  are   recognized,   using  the
percentage-of-completion   method  of   accounting.   The  Company   utilizes  a
units-of-work  performed method to measure  progress  towards  completion of the
contract.  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 not
material  at June  30,  2006  and  2005  and  have  been  included  in  accounts
receivable.  There were no billings in excess of costs and estimated  profits at
June 30, 2006 and 2005.

Subcontract   sales   principally   represent   revenue  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.  The  subcontract  revenue  element  of  the  contract
(carrying its own gross  margin) is also  recognized  during the entire  project
using  the   percentage-of-completion   method  of   accounting   as  electrical
installation is performed at the job site.

Service revenue from separate service contracts is recognized on a straight-line
basis over the term 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.

3. RECLASSIFICATION

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

<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (UNAUDITED)

4.  INVENTORIES

Inventories are priced at the lower of cost (first-in, first-out) or market and
consist primarily of raw materials and at June 30, 2006 reflects an inventory
allowance of $370,000.

5. NOTE PAYABLE TO BANK

The Company has a $3 million  revolving  credit facility with Hudson United Bank
(the "Credit Facility").  The Credit Facility carries an annual interest rate of
prime plus 1/4% on  outstanding  balances  (8.25% at June 30,  2006) and expires
June 1, 2007.  The Credit  Facility  is secured by all assets of the Company and
all of its  operating  subsidiaries.  Advances  under this Credit  Facility  are
measured  against a borrowing base calculated on eligible trade  receivables and
inventories.

At June 30, 2006, the full amount of the Credit Facility was available under the
borrowing base calculation and $909,138 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 June 30, 2006 the Company was not in
default with any of its financial covenants.

6. STOCK OPTIONS

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

In December 2005, employees exercised stock options to purchase 18,832 shares of
common stock at an exercise price of $.50 per share for a total consideration of
$9,416. Stock options for 1,492 shares were not exercised and expired on
December 29, 2005.

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

<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

      NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

6. STOCK OPTIONS (CONTINUED)

On December 31, 2002, the Financial  Accounting  Standards Board issued SFAS No.
148, "Accounting for Stock-Based  Compensation-Transition and Disclosure".  SFAS
No. 148 amends SFAS No. 123, to provide an  alternative  method of transition to
SFAS No.  123's  fair  value  method  of  accounting  for stock  based  employee
compensation.  SFAS No.148 also amends the disclosure provisions of SFAS No. 123
and APB Opinion 28, "Interim Financial  Reporting," to require disclosure in the
summary  of  significant  accounting  policies  of the  effects  of an  entity's
accounting policy with respect to stock-based employee  compensation on reported
net income and  earnings per share in annual and interim  financial  statements.
While the statement does not amend SFAS No. 123 to require  companies to account
for  employee  stock  options  using  the  fair  value  method,  the  disclosure
provisions  of SFAS No. 123 are  applicable  to all  companies  with stock based
employee compensation,  regardless of whether they account for that compensation
using the fair value  method of SFAS No. 123, or the  intrinsic  value method of
APB Opinion 25. As required under SFAS No. 148, the following table presents pro
forma net loss and diluted net loss per share as if the fair value-based  method
had been applied to all awards.
<TABLE>
<CAPTION>

                                                                 Three Months                       Nine Months
                                                                   Ended June 30,                  Ended June 30,
                                                            2006          2005                 2006            2005
                                                            ----          ----                 ----            ----
<S>                                                     <C>              <C>               <C>             <C>
Net (Loss) income as reported                           ($106,914)       $55,155           ($427,845)      $(60,159)

Less: Fair Value of Options Issued to
  Employees and Directors                                  (4,713)            --             (14,139)            --
                                                           -------         -----             -------        -------
Pro Forma Net (Loss) Income                             ($111,627)       $55,155           $(441,984)      $(60,159)
                                                         =========       =======            =========       =======

Weighted Average Basic Shares                           5,210,950      5,192,118           5,204,742      5,164,922

Weighted Average Diluted Shares                         5,210,950      5,192,120           5,204,742      5,164,922
Basic Net (Loss) Earnings Per Share as Reported             $(.02)          $.01               $(.08)         $(.01)
Basic Pro Forma Net (Loss) Earnings Per Share               $(.02)          $.01               $(.08)         $(.01)

Diluted Net (Loss) Earnings Per Share as Reported           $(.02)          $.01               $(.08)         $(.01)
Diluted Pro Forma Net (Loss) Earnings Per Share             $(.02)          $.01               $(.08)         $(.01)
</TABLE>

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


                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

      NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

6. STOCK OPTIONS (CONTINUED)

Assumptions:

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



7. DISCONTINUED OPERATIONS

On May 31, 2006, the Company's  wholly owned  subsidiary,  General Sound (Texas)
Company  ("General  Sound") that  operated in Dallas/Ft.  Worth,  Texas sold its
inventory,  property,  trade name, business and operations to LCR Sound, a Texas
company.  The operations of General Sound are reported as  discontinued  for all
periods  presented in the Condensed  Consolidated  Financial  Statements.  Under
terms of the Asset Purchase Agreement, General Sound received cash proceeds from
the buyer of $518,000 for its inventory,  property and equipment  resulting in a
gain of $267,042. The buyer assumed responsibility for the remaining term of the
lease for its office and warehouse  space.  General Sound  retained cash and all
accounts receivable and remains responsible for all existing liabilities,  which
have substantially been paid as of June 30, 2006.

The results of the discontinued operations for the three and nine months ended
June 30, 2006 and 2005 are as follows:
<TABLE>
<CAPTION>

                               Three Months ended June 30,         Nine Months ended June 30,
                                   2006           2005            2006          2005
                                   ----           ----            ----          ----
<S>                          <C>            <C>               <C>            <C>
Sales                        $   225,024    $   853,872       $ 1,397,781    $ 2,016,110
Cost of Sales                    273,991        532,247         1,110,681      1,348,324
Operating expenses               230,857        261,687           701,778        781,641
                             -----------    -----------       -----------    -----------
Operating (loss) income      $  (279,824)   $   (59,938)      $  (414,678)   $  (113,855)

Gain on sale of assets           267,042            -0-           267,042            -0-
                             -----------    -----------       -----------    -----------

(Loss) income before taxes   $   (12,782)   $   (59,938)      $  (147,636)   $  (113,855)
                             ===========    ===========       ===========    ===========
</TABLE>
<PAGE>


                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

      NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)

8. EARNINGS (LOSS) PER SHARE

The Financial  Accounting  Standards Board 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.
<TABLE>
<CAPTION>

                                                    Three Months ended June 30,           Nine Months ended June 30,
                                                   ----------------------------          ---------------------------
                                                    2006                2005              2006             2005
                                                 --------------------------------       ------------------------------
<S>                                              <C>                   <C>              <C>                 <C>
Net (loss) income from continuing
       operations available to common
       stockholders                              $(98,132)             $20,217          $(328,209)          $14,696
Net (loss) income from discontinued
       operations available to common
       stockholders                                (8,782)              34,938            (99,636)          (74,855)
                                                ---------            ---------          ---------         ---------
Net (loss) income available to common           $(106,914)             $55,155          $(427,845)         $(60,159)
       Stockholders

Basic EPS Computation
Weighted average outstanding shares             5,210,950            5,192,118          5,204,742         5,164,922
                                                ---------            ---------          ---------         ---------
Basic (Loss) Income Per Share
        from continuing operation                   ($.02)                $.00              ($.06)             $.00
Basic (Loss) Income Per Share
       from discontinued operations                  (.00)                 .01               (.02)             (.01)
Basic net (loss) income per basic share             ($.02)                $.01              ($.08)            ($.01)
                                                    ======                ====              ======            ======

Diluted EPS Computation
Weighted-average shares-basic                   5,210,950            5,192,118          5,204,742         5,164,922
                                                ---------            ---------          -----------       ---------
   Plus:  Incremental shares from
               assumed conversions
         Employee Stock Options*                                        12,563
         Warrants*                                                       6,439
                                                                        ------
    Dilutive common shares                                              19,002
                                                                        ------
Adjusted weighted average shares diluted        5,210,950            5,211,120          5,204,742         5,164,922
                                                ---------            ---------          ---------         ---------

Diluted (Loss) Income Per Share                     ($.02)                $.00              ($.06)            ($.00)
       from continuing operations
Diluted (Loss) Income per share                      (.00)                 .01               (.02)             (.01)
      from discontinued operations
Diluted net (loss) income per share                 ($.02)                $.01              ($.08)            ($.01)
                                                    ======                ====              ======            =======

</TABLE>

* All options and warrants were antidilutive in the three and nine months ended
2006.
<PAGE>

                      SYNERGX SYSTEMS INC. AND SUBSIDIARIES

      NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

                                   (UNAUDITED)


9. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial  Accounting  Standards Board issued SFAS No. 123
(revised  2004),  "Share-Based  Payment,"  which  addresses the  accounting  for
share-based  payment  transactions  in which  an  enterprise  receives  employee
services  in  exchange  for (a)  equity  instruments  of the  enterprise  or (b)
liabilities  that  are  based  on the  fair  value  of the  enterprise's  equity
instruments  or that may be settled by the issuance of such equity  instruments.
SFAS No. 123  (revised  2004)  requires an entity to  recognize  the  grant-date
fair-value  of stock  options  and  other  equity-based  compensation  issued to
employees  in the  income  statement.  SFAS No.  123  (revised  2004)  generally
requires that an entity account for such transactions using the fair-value-based
method, and eliminates the intrinsic value method of accounting in APB 25, which
was permitted under SFAS No. 123, as originally  issued.  The revised  statement
also  requires  entities  to  disclose  information  about  the  nature  of  the
share-based  payment  transactions and the effects of those  transactions on the
financial  statements.  SFAS No.  123  (revised  2004) is  effective  for  small
business  issuers  for the first  annual  reporting  period  that  begins  after
December 15,  2005.  The Company is  currently  evaluating  the impact that this
statement will have on its financial  condition,  results of operations and cash
flows.

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

       Item 2. Management's Discussion and Analysis or Plan of Operations


LIQUIDITY AND CAPITAL RESOURCES

     The Company has a $3 million  revolving  credit facility with TD Bank North
(formerly  Hudson  United Bank) (the "Credit  Facility").  This credit  facility
carries an interest  rate of prime plus 1/4% and expires June 1, 2007.  Advances
under the Credit  Facility are measured  against a borrowing base  calculated on
eligible trade  receivables and  inventories.  The Credit Facility is secured by
all assets of the Company and all of its operating subsidiaries.

     The Credit Facility includes various  covenants,  which among other things,
impose  limitations on declaring or paying  dividends,  acquisitions and capital
expenditures.  The Company is also required to maintain certain financial ratios
and  tangible  net worth  covenants.  At June 30,  2006,  the Company was not in
default with any of its financial  covenants and at such time the full amount of
the Credit Facility was available under the borrowing base calculation.  At June
30, 2006, $909,138 was owed under the Credit Facility.

     Net cash provided by continuing  operations  for the nine months ended June
30, 2006 amounted to $512,380 as compared to $800,713 for the  comparable  prior
year.  The  decrease  in cash  provided by  operations  was  primarily  due to a
$342,905  increase in the net loss  incurred  during the nine months of 2006 and
from a $53,718  increase in cash inflows related to changes in operating  assets
and  liabilities  in 2006.  These  changes in operating  assets and  liabilities
reflect $894,646 increased collection of accounts  receivable,  $23,942 decrease
in prepaid  expenses and other  current  assets and from a $155,279  increase in
deferred  revenue.  The  increase  in  deferred  revenue  relates to a change in
billing for service  contracts to a quarterly basis rather than a monthly basis.
These positive  changes in operating assets were offset by a $84,509 increase in
inventory to take advantage of certain trade discounts, incentive awards, and to
purchase material ahead of price increases, and by a $226,000 increase in income
tax receivable  resulting from the operating  losses,  by a $607,977 decrease in
accounts  payable and accrued  expense  reflecting  pay down of balances  due to
several  subcontractors  and vendors and by a $60,897  increase in other  assets
which represents  capitalized cost of development of a new interface board for a
proprietary fire alarm system. The increase in cash used by operating activities
of the  discontinued  operation is primarily  due to an increase in an operating
loss  caused by a decline in product  revenue.  The net cash  inflow of $142,920
from  operations  during the 2006 period along with cash on hand and $518,000 of
proceeds of sales from discontinued  operations was used for equipment purchases
of $198,463 and to decrease bank borrowing by $540,168.

     The ratio of the Company's current assets to current liabilities  decreased
to  approximately  2.43 to 1 at June 30, 2006  compared to 3.49 to 1 at June 30,
2005.  The decrease in the current ratio is due to our bank debt being a current
liability  in 2006 and being a long term  liability  in 2005.  Had our bank debt
remained a long term  liability in 2006,  the current ratio would have been 3.23
to 1. The company  will be  discussing  with its bank for the  extension  of the
credit  facility beyond its June 2007 maturity date. The effect of the extension
will be to return the credit facility to a long term liability.

<PAGE>

       Item 2. Management's Discussion and Analysis or Plan of Operations


Results of Operations

Revenues and Gross Profit

The  operations  of  General  Sound are  excluded  from the table  below and are
reported as discontinued for all periods presented in the Condensed Consolidated
Financial Statements.

<TABLE>
<CAPTION>

                                            Three Months Ended          Nine Months Ended
                                                  June 30,                    June 30,
                                              2006     2005             2006       2005
                                             ----     ----             ----       ----
                                                   (In thousands of dollars)
<S>                                        <C>        <C>            <C>        <C>
                Product Revenue            $ 2,456    $ 2,920        $ 7,122    $ 8,574
                Subcontract Revenue            127        155            430        460
                Service Revenue              1,348      1,220          3,818      3,478
                                            ------     ------         ------     ------
                Total Revenue              $ 3,931    $ 4,295        $11,370    $12,512
                                            ======     ======         ======     ======

                Gross Profit Product           691        978          1.880      2,650
                Gross Profit Subcontract        24         29             86         84
                Gross Profit Service           646        417          1,766      1,209
                                           -------    -------        -------    -------
                Total Gross Profit         $ 1,361    $ 1,424        $ 3,732    $ 3,943
                                           =======    =======        =======    =======

                Gross Margin Product %         28%        33%            26%        31%
                Gross Margin Subcontract %     19%        19%            20%        18%
                Gross Margin Service %         48%        34%            46%        35%
</TABLE>


Revenues

The Company's  product  revenues during the three and nine months ended June 30,
2006 decreased 16% and 17% from the respective 2005 periods.  These decreases in
product revenues primarily resulted from lower shipments with respect to transit
products  which  reflects a lower  level of orders  and the  timing of  releases
required by customers.  Due to the retirement of key personnel in December, 2005
and related  changes in the process for securing  transit work in New York,  the
Company had to  substantially  overhaul the  management  structure and marketing
strategies  for transit  products.  The Company  continues  to actively  bid new
orders and has quotations  outstanding  for several large projects that resulted
from the changes  noted above.  The Company has also added sales  personnel  and
products to its life safety, security, and audio visual product lines.

Subcontract revenue decreased during the current three and nine month periods as
the Company was responsible for various small electrical  installation  projects
in both the 2006 and 2005 periods.

Service  revenues  increased during the three and six month periods of 2006. The
increase in both periods is due to an increase in call-in  service on fire alarm
systems  (replacement  parts and  service  required  by  buildings)  and from an
increase in service contract revenue related to additional  customers and higher
fees on renewal of contracts compared to the prior year periods.



<PAGE>


       Item 2. Management's Discussion and Analysis or Plan of Operations


Gross Profit

Gross  profit on product  revenues  for the three and nine months ended June 30,
2006 decreased compared to the respective 2005 periods. The decrease in absolute
gross  profit is  primarily  related to the  declines  in product  sales  (noted
above).  The decrease in gross margin  percentage during the current three month
and nine periods in 2006 is related to lower sales on which to absorb  overhead,
which is relatively fixed in nature.

Gross profit related to subcontract revenues for the three months ended June 30,
2006,  decreased  in absolute  terms due to the  decrease in revenue  related to
electrical installation during this period. For the nine month period ended June
30, 2006 higher  markups were obtained on electrical  installations  than in the
prior year period.

Gross  profit on service  revenues  for the three and nine months ended June 30,
2006,  increased due to the increase in call-in  service and from higher service
contract  revenue  (noted above).  The  improvement in absolute gross profit and
gross margin  percent was primarily  related to the  additional  revenue and was
also aided by a decrease  in  technical  staff as the  Company  reevaluated  its
customer support staffing level and implemented staff reductions.

Income Before Tax

The decline in income and increase in loss before  income taxes during the three
and nine months  ended June 30, 2006 is  primarily  due to the decrease in gross
profit  caused by  anticipated  lower product  revenue.  The decrease in product
gross profit was partially offset by higher gross profit from service  revenues.
The improvement in service gross profit was attributed to higher revenue and, in
part,  by a decrease in  technical  staff.  For the three  months ended June 30,
2006, selling,  general and administrative expenses increased $140,000 primarily
due to $120,000 of  budgeted  severance  payments.  Otherwise,  the  increase in
selling, general and administrative costs was minimal compared to the prior year
three month  period as the Company  benefited  from certain  reductions  in work
force that were  implemented  in the first quarter of fiscal 2006.  For the nine
months  ended  June 30,  2006,  selling,  general  and  administrative  expenses
increased $359,000 over the prior year period as the Company incurred $66,000 of
additional  recruitment  costs (which total  $97,000 as the Company  retools its
sales, marketing, and project management disciplines) from $185,000 of increases
related to additional  staff to develop and  strengthen  our sales and marketing
(which is geared to support  higher  product  revenues) and from the $120,000 of
budgeted severance cost noted above.  Additional severance costs of $56,000 were
included in product and service  costs for the nine months  ended June 30, 2006.
Interest  expense  increased  during 2006 due to both higher  interest rates and
higher  average  borrowing  levels.  For the three and nine months of 2006,  the
Company recorded a loss of $18,000 and $60,000,  respectively,  on its equity in
the operating loss of Secure 724 LP.

Tax Provision

The Company's  current  income tax provision  represents  the benefit from a net
operating loss carryback as it relates to federal, state and local income taxes.
Deferred  taxes  represent  the net  change  in  deferred  tax  assets  and is a
non-current  deferred  tax  liability  as  it  relates  to  differences  between
financial reporting and tax bases of assets and liabilities.



<PAGE>

          2. Management's Discussion and Analysis or Plan of Operations


Discontinued Operations

On May 31, 2006, the Company's  wholly owned  subsidiary,  General Sound (Texas)
Company  ("General  Sound") that  operated in Dallas/Ft.  Worth,  Texas sold its
inventory,  property,  trade name, business and operations to LCR Sound, a Texas
company.  Under terms of the Asset  Purchase  Agreement,  General Sound received
cash  proceeds  from the  buyer of  $518,000  for its  inventory,  property  and
equipment resulting in a gain of $267,042.  The buyer assumed responsibility for
the  remaining  term of the lease for its office and  warehouse  space.  General
Sound retained cash and all accounts  receivable and remains responsible for all
existing liabilities which have substantially been paid as of June 30, 2006.

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

For the three  and nine  months  ended  June 30,  2006 and  2005,  the loss from
discontinued operations consists of the following:
<TABLE>
<CAPTION>

                                        Three months ended June 30,      Nine months ended June 30,
                                           2006         2005                 2006          2005
                                           ----         ----                 ----          ----
<S>                                     <C>          <C>                 <C>           <C>
          Operating (Loss) income       ($279,824)   ($59,938)           ($414,678)    ($113,855)
          Gain on sales of assets         267,042          --              267,042            --
                                       ----------    ---------             -------       --------
          (Loss) income before taxes    ($12,782)    ($59,938)           ($147,636)     ($113,855)
                                       ----------    ---------            ---------      --------
</TABLE>

Order Position

The Company's order position, excluding service, at June 30, 2006 was $7,007,000
as compared to $7,972,000 at September 30, 2005 and $9,719,000 at June 30, 2005.
The order position has been restated to exclude the discontinued operations.
This order position includes large orders received for several subway complexes
which will be deliverable over several years as the projects are released. While
quotation activity is brisk, there is no assurance when orders will be received
and whether the order position will increase. Due to the fact that 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 is actively seeking orders where
the Company would act as a prime contractor and be responsible for management of
the project as well as electrical installation. The Company is also looking for
potential acquisitions that would enable it to add incremental products and
customers to over absorb fixed overheads.


<PAGE>

                         Item 3. Controls and Procedures

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

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

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

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

A control  system,  no matter how well conceived and operated,  can provide only
reasonable,  not absolute,  assurance that the objectives of the control systems
are  met.  Because  of the  inherent  limitations  in  all  control  systems  no
evaluation of control can provide absolute assurance that all control issues, if
any, within a company have been detected. Such limitations include the fact that
human judgment in decision-making  can be faulty and that breakdowns in internal
control can occur because of human  failures,  such as simple errors or mistakes
or intentional circumvention of the established process.

<PAGE>


                           Part II - OTHER INFORMATION

Item 1.  Legal Proceedings.

     Not Applicable

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

     Not applicable

Item 3.  Defaults Upon Senior Securities.

     Not applicable

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

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

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

<PAGE>

                                   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)


                                                 /S/ John A. Poserina
                                                 ------------------------------
                                                 John A. Poserina,
                                                 Chief Financial Officer
                                                 (Principal Accounting and
                                                 Financial Officer), Secretary
                                                 And Director
Date:  August 11, 2006