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___________December
31, 2007_______________________





[   ]  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                                                                                             
   
    1-2941299


(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)





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[    ]





Indicate
by check mark whether the registrant is a shell company (as defined in rule
12b-2 of the Exchange Act)


Yes[    ]        No[
X ]





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  As of  January 25,
2008,  5,210,950 shares of Registrant’s Common Stock were issued and
outstanding.





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








1














INDEX








Part I –
Financial Information
(unaudited)                                                                                                                                          Page





Item
1.  Financial Statements.





Condensed
Consolidated Balance Sheet at December 31,
2007                                                                                             
3





Condensed
Consolidated Statements of Operations for the Three


Months
Ended December 31, 2007 and
2006                                                                                                                        
5





Condensed
Consolidated Statements of Cash Flows for the


Three
Months Ended December 31, 2007 and
2006                                                                                                               6





Notes
to the Condensed Consolidated Financial
Statements                                                                                                 
7





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                                                                                                                                                                               18





Signatures                                                                                                                                                                                       
19




2





SYNERGX
      SYSTEMS INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEET(Unaudited)December
      31,2007ASSETSCURRENT
      ASSETSCash
            
            $
            538,676Accounts
      receivable, principally trade, less allowancefor
      doubtful accounts of $350,035
            
            
            5,220,848Inventories,
      net
            
            
            2,211,192Deferred
      taxes, less valuation allowance of  $327,500
            
            
            330,100Prepaid
      expenses and other current assets
            
            
            867,071TOTAL
      CURRENT ASSETS
            
            
            9,167,887PROPERTY
      AND EQUIPMENT -at cost, lessaccumulated
      depreciation and amortization of $1,894,440
            
            
            816,914OTHER
      ASSETS
            
            
            235,503TOTAL
      ASSETS
            
            $
            10,220,304See
      accompanying Notes to the  Condensed Consolidated Financial
      Statements




3
  SYNERGX
      SYSTEMS INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEET(Unaudited)December
      31,2007LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESNotes
      payable - current portion
              
              $
              21,310Accounts
      payable and accrued expenses
              
              
              1,475,973Deferred
      revenue
              
              
              840,033TOTAL
      CURRENT LIABILITIES
              
              
              2,337,316Note
      payable to bank
              
              
              2,218,123Notes
      payable - less current portion
              
              
              61,352TOTAL
      LIABILITIES
              
              
              4,616,791STOCKHOLDERS'
      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
              
              
              5,211Additional
      Paid in Captal
              
              
              6,839,098Accumulated
      deficit
              
              
              (1,240,796
              )TOTAL
      STOCKHOLDERS' EQUITY
              
              
              5,603,513TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              10,220,304See
      accompanying Notes to the Condensed Consolidated Financial
      Statements
   4
  SYNERGX
      SYSTEMS INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)For
      the Three Months Ended
                December
      31,2007
              
              
              2006Product
      sales
              
              $
              3,801,208
              
              
              $
              2,322,223Subcontract
      sales
              
              
              149,612
              
              
              
              107,189Service
      revenue
              
              
              1,320,926
              
              
              
              1,225,683Total
      revenues
              
              
              5,271,746
              
              
              
              3,655,095Cost
      of product sales
              
              
              3,133,778
              
              
              
              1,434,479Cost
      of subcontract sales
              
              
              122,600
              
              
              
              86,160Cost
      of service revenue
              
              
              576,752
              
              
              
              718,457Selling,
      general and administrative
              
              
              1,330,723
              
              
              
              1,477,432Depreciation
      and amortization
              
              
              50,001
              
              
              
              40,023-Total
      operating expenses
              
              
              5,213,854
              
              
              
              3,756,551Income
      (Loss) from operations
              
              
              57,892
              
              
              
              (101,456
              )Interest
      expense
              
              
              47,530
              
              
              
              24,870Income
      (Loss) before provision (benefit) for income taxes
              
              
              10,362
              
              
              
              (126,326
              )Provision
      (benefit) for income taxes:Current
              
              
              1,500
              
              
              
              1,999Deferred
              
              
              0
              
              
              
              (59,000
              )1,500
              
              
              
              (57,000
              )Net
      Income (loss)
              
              
              8,862
              
              
              
              (69,326
              )Income
      (loss) Per Common ShareBasic  income
      (loss) Per Share
              
              $
              0.00
              
              
              $
              (0.01
              )Diluted
      income (loss) Per Share
              
              $
              0.00
              
              
              $
              (0.01
              )Weighted
      average number of common shares outstanding
              
              
              5,210,950
              
              
              
              5,210,950Weighted
      average number of common and dilutivecommon
      share equivalents outstanding
              
              
              5,210,950
              
              
              
              5,210,950See
      accompanying Notes to the Condensed Consolidated Financial
      Statements


5
  SYNERGX
      SYSTEMS INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)For
      the Three Months Ended
                December
      31,2007
              
              
              2006OPERATING
      ACTIVITIESNet
      Income (Loss) from  operations
              
              $
              8,862
              
              
              $
              (69,326
              )Adjustments
      to reconcile net  income (loss)  to net cash provided
      by(used
      in ) operating activities:Depreciation
      and amortization *
              
              
              57,127
              
              
              
              46,473Deferred
      taxes (benefit)
              
              
              0
              
              
              
              (59,000
              )Share-based
      compensation
              
              
              7,157
              
              
              
              7,857Changes
      in operating assets and liabilities:Accounts
      receivable, net
              
              
              1,245,463
              
              
              
              580,929Inventories,
      net
              
              
              (169,800
              )
              
              
              (291,698
              )Prepaid
      expenses and other current assets
              
              
              (47,317
              )
              
              
              (31,587
              )Income
      tax receivable
              
              
              0
              
              
              
              (936
              )Other
      assets
              
              
              (2,328
              )
              
              
              (547
              )Accounts
      payable and accrued expenses
              
              
              (989,574
              )
              
              
              (575,983
              )Deferred
      revenue
              
              
              10,029
              
              
              
              23,412NET
      CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
              
              
              119,619
              
              
              
              (370,406
              )INVESTING
      ACTIVITIESProceeds
      from note receivable
              
              
              68,182Purchases
      of property and equipment
              
              
              (43,324
              )
              
              
              (56,555
              )NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
              
              
              24,858
              
              
              
              (56,555
              )FINANCING
      ACTIVITIESPrincipal
      payments on notes payable
              
              
              (6,448
              )
              
              
              (6,742
              )Payments
      and proceeds from note payable bank - net
              
              
              147,557
              
              
              
              422,581NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              141,109
              
              
              
              415,839NET
      INCREASE (DECREASE) IN CASH
              
              
              285,586
              
              
              
              (11,122
              )Cash
      at beginning of the period
              
              
              253,091
              
              
              
              272,908Cash
      at end of the period
              
              $
              538,677
              
              
              $
              261,786SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid during the period for:Income
      taxes
              
              $
              10,800
              
              
              $
              3,100Interest
              
              $
              46,556
              
              
              $
              22,797*
      Depreciation of $7,125 and $6,450 is included in cost of product and
      service sales for the three months endedDecember
      31, 2007 and 2006, respectively.See
      accompanying Notes to the Condensed Consolidated Financial
      Statements
              
              
              
              
              
              
              7
  6


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 months ended December 31, 2007 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 2008. 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, 2007.





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 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
$747,000 at December 31, 2007 and have been included in other current
assets.  Billings in excess of costs and estimated profits were
$98,000 at December 31, 2007 and have been included in deferred
revenue.  Product sales for short term contracts are recognized when
the services are preformed or the product has been delivered, which is when
title to the product and risk of loss have been substantially transferred to the
customer and collection is reasonably assured.





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





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














7




SYNERGX
SYSTEMS INC. AND SUBSIDIARIES





NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)





3.  INVENTORIES





Inventories
are priced at the lower of cost (first-in, first-out) or market and consist
primarily of raw materials and, at December 31, 2007 reflects an inventory
allowance of $437,000 with respect to slow moving or obsolete
items.





4. NOTE
PAYABLE BANK





The
Company has a $3.5 million revolving credit facility with TD Banknorth (“the
Bank”)  (the “Credit Facility”).  The Credit Facility has an
annual interest rate of prime plus 1⁄4% on outstanding balances (7.50% at December
31, 2007) and was to expire in January 2008.  On December 28, 2007,
the credit facility was extended to expire on January 31, 2009.  In
connection with this extension, the Company agreed to pay 1% of the credit
facility ($35,000) as a commitment and closing fee.  This fee will be
amortized from February 1, 2008 through January 31, 2009.  The Credit
Facility is secured by all assets of the Company and all of its operating
subsidiaries.  Advances under this Credit Facility are measured
against a borrowing base calculated on eligible accounts receivable and
inventories.





At
December 31, 2007, the full amount of the Credit Facility was available under
the borrowing base calculation and $2,218,000 was outstanding under this
facility.





The
Credit Facility includes certain restrictive covenants, which among other
things, impose limitations on declaring or paying dividends, acquisitions, and
capital expenditures.  The Company is also required to maintain
certain financial ratios and tangible net worth covenants.  At
December 31,2007, the Company was in
compliance with all of its financial covenants.





5.   STOCK
OPTIONS





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




















8














SYNERGX
SYSTEMS INC. AND SUBSIDIARIES





NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)








Effective
October 1, 2006, the Company adopted the fair value recognition provision of
Statement of Financial Accounting Standards (“SFAS”) No. 123R “Accounting for
Share-Based Payment Compensation,” (Revised 2004), disclosure requirements of
SFAS No. 123R, using the modified-prospective-transition method for stock
options and similar equity instruments (collectively, “Options”) issued to
employees.  (As a result, share-based compensation amounted to $7,157
and $ 7,857 for the three months ended December 31, 2007 and 2006,
respectively).





The
Company has $65,576 of stock based compensation expense remaining to be expensed
over the period January 2008 through January 2012.





A summary
of the option activity under the plan as of December 31, 2007 and changes during
the three months ended December 31, 2007 are presented below:





Options


2007
              
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual
                Term
              
              Weighted
                Average
                Intrinsic
                Value
              
              
              Weighted
                Average
                Grant
      Date
                Fair ValueOutstanding
      October 1, 2007
              
              
              116,000
              
              
              $
              2.43
              
              
              
              
              
              
              $
              1.21Granted
              
              
              --Exercised
              
              
              --Outstanding
      December 31, 2007
              
              
              116,000
              
              
              $
              2.43
              
              2.8 Yrs
              
              $
              -0-
              
              
              $
              1.24Exercisable
      at December 31, 2007
              
              
              42,400
              
              
              $
              2.50
              
              2.2
      Yrs
              
              $
              -0-
              
              
              $
              1.21


A summary
of the option activity of nonvested shares at December 31, 2007, and changes
during the three months ended December 31, 2007 is presented below:




Weighted


AverageGrant
Date


Fair
Value


Nonvested
at October 1,
2007                                                                                                                            73,600                   
   $1.25


Vested                                                                                                                                                                           
--


Granted                                                                                                                                                                          --


Nonvested
at December 31,
2007                                                                                                                      73,600                        $1.25














9







SYNERGX
SYSTEMS INC. AND SUBSIDIARIES





NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)





6.  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.




For the Three Months ended December
      31,Basic
      EPS Computation
              
              2007
              
              
              2006Net
      Income (loss)
              
              $
              8,862
              
              
              $
              (69,326
              )Weighted
      average outstanding shares
              
              
              5,210,950
              
              
              
              5,210,950Basic
      (Loss) per share
              
              $
              -0-
              
              
              $
              (.01
              )Diluted
      EPS Computation
                Net
      Income (loss)
              
              $
              8,862
              
              
              $
              (69,326
              )Weighted-average
      shares
              
              
              5,210,950
              
              
              
              5,210,950Plus:  Incremental
      shares from assumed conversions
                Employee
      Stock Options*
              
              
              --
              
              
              
              --Adjusted
      weighted-average shares
              
              
              5,210,950
              
              
              
              5,210,950Diluted
      (Loss) per share
              
              $
              -0-
              
              
              $
              (.01
              )
   *All
stock options were antidilutive in 2007 and 2006.  However, there were
116,000 stock options outstanding at December 31, 2007 that may not be
antidilutive in the future.





NOTE 7.
INCOME TAXES




Effective
October 1, 2007, the Company adopted the provisions of FASB Interpretation No.
48, "Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109" ("FIN 48").  FIN 48 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and
measurement of tax positions taken or expected to be taken in a tax return. For
those benefits to be recognized, a tax position must be more-likely-than-not to
be sustained upon examination by taxing authorities.  Differences between
tax positions taken or expected to be taken in a tax return and the benefit
recognized and measured pursuant to the interpretation are referred to as
"unrecognized benefits".  A liability is recognized (or amount of net
operating loss carry forward or amount of tax refundable is reduced) for an
unrecognized tax benefit because it represents an enterprise's potential future
obligation to the taxing authority for a tax position that was not recognized as
a result of applying the provisions of FIN 48.




10








SYNERGX
SYSTEMS INC. AND SUBSIDIARIES





NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)







In
accordance with FIN 48, interest costs related to unrecognized tax benefits are
required to be calculated (if applicable) and would be classified as "Interest”
expense in the consolidated statements of operations.  Penalties would be
recognized as a component of "Other administrative expenses".




The
adoption of the provisions of FIN 48 did not have a material impact on the
Company's financial position and results of operations.  As of December 31,
2007, no liability for unrecognized tax benefits was required to be recorded.
However, there are certain tax years that remain subject to examination by
relevant tax authorities. The Company files income tax returns in the
United States (federal) and in various state and local jurisdictions in which
the Company does its business.   The Company is no longer subject
to federal, state and local income tax examinations by tax authorities for years
prior to the fiscal year ended September 30, 2004.  The Company
believes that its income tax positions and deductions would be sustained on
audit and does not anticipate any adjustments that would result in a material
change to its financial position.




The
Company recognized a deferred tax asset of approximately $565,000 as of December
31, 2007, relating to net operating loss carryovers of approximately $355,000,
allowance for doubtful accounts of $140,000 and inventory reserves of $148,000,
which are available to offset future taxable income through 2026.




The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible.  The Company considers projected future taxable income
and tax planning strategies in making this assessment. The Company anticipates
profitable operations to resume at a level that will result in the utilization
of a portion of the deferred tax assets. Accordingly, a partial valuation
allowance in the amount of $330,000 was established during the year ended
September 30, 2007 and such reserve amounted to $327,500 at December 31,
2007.  The valuation allowance will be maintained until sufficient positive
evidence exists to support the reversal of any portion or all of the valuation
allowance net of appropriate reserves.







8.  RECENT
PRONOUNCMENTS





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51” (“SFAS
160”). SFAS 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary (previously referred to as minority
interests). SFAS 160 also requires that a retained noncontrolling interest upon
the deconsolidation of a subsidiary be initially measured at its fair value.
Upon adoption of SFAS 160, the
Company would be required to report any noncontrolling interests as a separate
component of stockholders’ equity. The Company would also be required to present
any net income allocable to noncontrolling interests and net income attributable
to the stockholders of the Company separately in its consolidated statements of
income. SFAS 160 is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. SFAS 160 requires
retroactive adoption of the presentation and disclosure requirements for
existing minority interests. All other requirements of SFAS 160 shall be applied
prospectively. SFAS 160 would have an impact on the presentation and disclosure
of the noncontrolling interests of any non wholly-owned businesses acquired in
the future.








11


SYNERGX
SYSTEMS INC. AND SUBSIDIARIES





NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)










In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141R, “Business
Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
Combinations.” SFAS 141R establishes principles and requirements for determining
how an enterprise recognizes and measures the fair value of certain assets and
liabilities acquired in a business combination, including noncontrolling
interests, contingent consideration, and certain acquired contingencies. SFAS
141R also requires acquisition-related transaction expenses and restructuring
costs be expensed as incurred rather than capitalized as a component of the
business combination. SFAS 141R will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. SFAS 141R
would have an impact on accounting for any businesses acquired after the
effective date of this pronouncement.










Effective
February 13, 2008, an officer of Casey Systems Inc. resigned and the details
related thereto will be reported in a Form 8-K filing.









12





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








Liquidity
and Capital Resources





The
Company has a $3.5 million revolving credit facility with TD Banknorth, N.A.
(“the Bank”) (the “Credit Facility”). The Credit Facility has an annual interest
rate of prime plus 1⁄4% and was to expire in January, 2008.   On
December 28, 2007, the Credit Facility was amended to extend the facility to
expire on January 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, acquisitions and capital
expenditures. The Company is also required to maintain certain financial ratios
and tangible net worth covenants. At December 31, 2007 the full amount of the
Credit Facility was available under the borrowing base calculation and
$2,218,000 was owed under the Credit Facility.





Net cash
provided by operations for the three months ended December 31, 2007 amounted to
$119,619 as compared to cash being used in operations of $370,406 for the
comparable prior year.  The increase in cash provided by operations
was primarily due to an increase of $665,000 in the net amount of accounts
receivable collected compared to collections in the 2006 period.





In 2007,
the net cash inflow of $119,619 from operations plus $68,182 of cash proceeds
from collection of a note receivable was partially used for equipment purchases
of $43,324 and the remaining balance along with an increase in note payable to
bank of $147,557 was added to the Company’s cash balance.





The ratio
of the Company’s current assets to current liabilities decreased slightly to
approximately 3.92 to 1 at December 31, 2007 compared to 3.64 to 1 at December
31, 2006.  However, working capital increased to $6.8 million at
December 31, 2007 compared to $6.5 million at December 31, 2006.







13





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








Results
of Operations





Revenues
and Gross Profit





Three
      Months EndedDecember
      31,2007
            
            
            2006(In
      thousands of dollars)Product
      Revenue
            
            $
            3,801
            
            
            $
            2,322Subcontract
      Revenue
            
            
            150
            
            
            
            107Service
      Revenue
            
            
            1,321
            
            
            
            1,226Total
      Revenue
            
            $
            5,272
            
            
            $
            3,655Gross
      Profit Product
            
            $
            667
            
            
            $
            888Gross
      Profit Subcontract
            
            
            27
            
            
            
            21Gross
      Profit Service
            
            
            744
            
            
            
            507Total
      Gross Profit
            
            $
            1,438
            
            
            $
            1,416Gross
      Profit Product %
            
            
            18
            %
            
            
            38
            %Gross
      Profit Subcontract %
            
            
            18
            %
            
            
            20
            %Gross
      Profit Service %
            
            
            56
            %
            
            
            41
            %Total
      Gross Profit %
            
            
            27
            %
            
            
            39
            %





Revenues





The
Company's product revenues increased 64% during the three months ended December
31, 2007 to $3,801,000 compared to $2,322,000 for the prior year period. This
increase in product revenues primarily resulted from higher transit and
audio/visual products particularly from a $5.0 million project for a New York
City subway station security system. Revenues of $1.2 million from this project
were included in the three month period of 2007.  There is
approximately $350,000 remaining on the contract and the contract is currently
anticipated to be completed by April 1, 2008. Product revenues of $312,000 were
also included in the three month period of 2007 from a large public address
system.





Subcontract
revenue increased during the current three month period to $150,000 from
$107,000 in the comparable prior year period.  The Company was
responsible for various small electrical installations during both the 2007 and
2006 periods.





Service
revenues increased 8% during the current three month period primarily due to an
increase in call-in-service on fire alarm systems (replacement parts and service
required by buildings).








14




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





Gross
Profit





Gross
profit from product revenues for the three months ended December 31, 2007
decreased 25% to $667,000 compared to $888,000 for the prior year period
notwithstanding increased revenues.  The decline in absolute gross
margin and the 20% decrease in gross margin percentage are primarily related to
a shift in product mix to lower margin sales in 2007. In particular, the 2007
period included a very low gross margin public address system. The Company is
attempting to increase markups where it offers unique or specialty capabilities
while maintaining a focus on revenue growth.





Gross
profit related to subcontract revenues for the three months ended December 31,
2007 increased in absolute terms due to the increase in revenue related to
electrical installation.  However, the gross profit percentage was
lower during the three months of 2007 as mark ups on electrical installations
were lower than the prior year period.





Gross
profit from service revenues increased $237,000 to $744,000 during the three
months ended December 31, 2007 as a result of a combination of additional
revenue from call-in-service on fire alarm systems (replacement parts and
service required by buildings) and from certain reductions in the number of
service technicians as the Company reduced its customer support staffing levels
during 2007.








Income
(Loss) Before Tax





The
$137,000 increase in income before income taxes during the three months ended
December 31, 2007 reflects an $213,000 improvement in gross margin from service
revenues related to higher call-n-service revenue and the effect of certain
staff reductions. This improvement was offset by the decrease in gross margin
from product revenues caused by projects with low gross margins. Accordingly,
the improvement in income before taxes is primarily attributed to a decrease of
$147,000 or 10% in selling, general and administrative expenses, which resulted
from savings related to certain reductions in administrative and marketing
personnel. The 2006 three month period include $96,000 of investment banking and
legal expenses related to exploring strategic options.  The above
selling, general and administrative savings were partially offset by an increase
in interest expense caused by higher borrowing levels during 2007.





Tax
Provision





The
Company’s current income tax expense for 2007 represents state and local income
taxes. There was no federal income tax provision in 2007 due to the use of the
company’s net operating loss carryforward and the reduction in the valuation
allowance.








15





Management's
Discussion and Analysis of Financial


Condition
and Results of Operations





Product
Order Position





The
Company’s order position, excluding service contracts, at December 31, 2007 was
$9,800,000 as compared to $11,100,000 at September 30, 2007 and $7,500,000 at
December 31, 2006. The Company has secured letters of intent on a number of
large projects but contract negotiations continue and there can be no assurance
that all or any such work will be secured. 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
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.











16







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.







17








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 and Reports on Form 8-K.





(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







18








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:  February   ,
2008