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, 2005
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-17580
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SYNERGX SYSTEMS INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2941299
---------------------------------------- -----------------------
(State or jurisdiction of incorporation or (IRS employer
organization) 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[ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of February 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 ]
INDEX
Part I - Financial Information (unaudited) Page
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet at December 31, 2005 3
Condensed Consolidated Statements of Operations for the Three
Months Ended December 31, 2005 and 2004 5
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended December 31, 2005 and 2004 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 and Reports on Form 8-K 18
Signatures 20
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31,
2005
--------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 841,891
Accounts receivable, principally trade, less allowance
for doubtful accounts of $323,523 5,536,035
Inventories net 2,768,191
Deferred taxes 297,700
Prepaid expenses and other current assets 199,747
-----------
TOTAL CURRENT ASSETS 9,643,564
-----------
PROPERTY AND EQUIPMENT -at cost, less
accumulated depreciation and amortization of $1,700,975 697,821
OTHER ASSETS 647,820
-----------
TOTAL ASSETS $10,989,205
===========
See accompanying Notes to the Condensed Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
December 31,
2005
------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payablee - current portion $ 34,534
Accounts payable and accrued expenses 2,194,612
Deferred revenue 823,823
-----------
TOTAL CURRENT LIABILITIES 3,052,969
Note payable to bank 1,226,310
Notes payable - less current portion 16,893
Deferred taxes 90,000
-----------
TOTAL LIABILITIES 4,386,172
-----------
COMMITMENTS AND CONTINGENCIES
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 (206,170)
-----------
TOTAL STOCKHOLDERS' EQUITY 6,603,033
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,989,205
===========
See accompanying Notes to the Condensed Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended December 31,
2005 2004
------ --------
Product sales $ 2,926,693 $ 3,248,383
Subcontract sales 122,897 98,133
Service revenue 1,191,593 1,120,387
----------- -----------
Total revenues 4,241,183 4,466,903
----------- -----------
Cost of product sales 2,227,500 2,482,189
Cost of subcontract sales 92,905 79,681
Cost of service revenue 705,379 720,534
Selling, general and administrative 1,530,110 1,358,191
Interest expense 27,076 22,901
Depreciation and amortization 43,474 44,784
Loss on equity investment 25,000 10,000
----------- -----------
4,651,444 4,718,280
----------- -----------
(Loss) before (benefit) from income taxes (410,261) (251,377)
----------- -----------
(Benefi)t from income taxes:
Current (143,000) (79,000)
Deferred (20,000) (17,000)
----------- -----------
(163,000) (96,000)
----------- -----------
Net (Loss) (247,261) (155,377)
=========== ===========
(Loss) per common share
Basic (Loss) per share $(0.05) $(0.03)
=========== ===========
Diluted (Loss) per share $(0.05) $(0.03)
=========== ===========
Weighted average number of common shares outstanding 5,192,327 5,136,862
Weighted average number of common and dilutive
common share equivalents outstanding 5,192,327 5,136,862
See accompanying Notes to the Condensed Consolidated Financial Statements
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended December 31,
2005 2004
------- ------
OPERATING ACTIVITIES
Net (Loss) $ (247,261) $(155,377)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and amortization * 52,685 57,757
Deferred tax (benefit) (20,000) (17,000)
Loss on equity investment 25,000 10,000
Tax benefit from employee stock option exercise 10,000
Changes in operating assets and liabilities:
Accounts receivable, net 1,557,082 943,411
Inventories (360,288) (2,117)
Prepaid expenses and other current assets 68,147 (11,429)
Other assets (84,876) 14,252
Accounts payable and accrued expenses (717,110) (294,062)
Deferred revenue 269,488 (9,368)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 552,867 536,067
---------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (76,198) (121,070)
---------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (76,198) (121,070)
---------- ---------
FINANCING ACTIVITIES
Principal payments on notes payable (11,848) (16,767)
Payments and proceeds from note payable bank - net (222,996) (700,000)
Proceeds from exercise of stock options and warrants 9,416
---------- ---------
NET CASH (USED IN) FINANCING ACTIVITIES (225,428) (716,767)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 251,241 (301,770)
Cash and cash equivalents at beginning of period 590,650 928,507
---------- ---------
Cash and cash equivalents at end of period $ 841,891 $ 626,737
========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 42,511 $ 5,455
Interest $ 27,076 $ 22,901
NON-CASH INVESTING AND FINANCING ACTIVITIES
Included in the period ended December 31, 2005, was the purchase of an
automobile for $25,559
* Depreciation of $9,211 and $12,973 is included in cost of product sales for
the three months ended December 31, 2005 and 2004, respectively.
See accompanying Notes to the Condensed Consolidated Financial Statements
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, 2005 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 December 31, 2005 and 2004 and have been included in accounts
receivable. There were no billings in excess of costs and estimated profits at
December 31, 2005 and 2004.
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 statement. These classifications have no effect on the previously
reported net loss.
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 December 31, 2005 reflects an
inventory allowance of $370,000.
5. LONG TERM DEBT
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 (7.5% at December 31, 2005) 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 December 31, 2005, the full amount of the Credit Facility was available under
the borrowing base calculation and $1,226,310 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, 2005 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 months ended December 31, 2005.
In December 2005, employees exercised stock options to purchase 18,832 shares of
common stock at a 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.
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.
Quarter Ended December 31,
2005 2004
Net (Loss) as reported
$(247,261) $(155,377)
Less: Fair Value of Options issued to
employees and directors, net of income tax (4,713) -
-------- ----------
Pro Forma Net (Loss) $(251,974) $(155,377)
========== ==========
Weighted Average Basic Shares 5,192,327 5,136,862
Weighted Average Diluted Shares 5,192,327 5,136,862
Basic Net (Loss) Per Share as Reported $(.05) $(.03)
Basic Pro Forma Net (Loss) per share $(.05) $(.03)
Diluted Net (Loss) Per Share as Reported $(.05) $(.03)
Diluted Pro Forma Net (Loss) per share $(.05) $(.03)
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 quarters ended December 31, 2005 and
2004. 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:
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. 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 2005 2004
---- ----
Net (Loss) $ (247,261) $(155,377)
Weighted average outstanding shares 5,192,327 5,136,862
Basic (Loss) per share $(.05) $(.03)
====== ======
Diluted EPS Computation
Net (loss) $(247,261) $(155,377)
---------- ----------
Weighted-average shares 5,192,327 5,136,862
---------- ----------
Plus: Incremental shares from assumed conversions
Employee Stock Options*
Warrants*
Dilutive potential common shares N/A N/A
---- ----
Adjusted weighted-average shares 5,192,327 5,136,862
========== ==========
Diluted (Loss) per share $(.05) $(.03)
====== ======
*Warrants were only outstanding in 2004.
SYNERGX SYSTEMS INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
8. RECENT ACCOUNTING PRONOUNCEMENT
In December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(revised 2004), "Shared-Based Payment," which addresses the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
SFAS 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.
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 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 December 31, 2005, 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
December 31, 2005, $1,226,310 was owed under the Credit Facility.
Net cash provided by operations for the three months December 31, 2005
amounted to $552,867 as compared to $536,067 for the comparable prior year. The
increase in cash provided by operations was primarily due to a $613,671 increase
in collection of accounts receivable and from a $278,856 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 charges in operating assets were offset by a $358,171 increase in
inventory to take advantage of certain trade discounts, incentive awards, and to
purchase material ahead of price increases; by a $423,048 decrease in accounts
payable and accrued expense; and by a $99,128 increase in other assets which
represents capitalized cost of development of a new interface board for a
proprietary fire alarm system. The net cash inflow of $552,867 from operations
during the 2005 period along with cash on hand was used for equipment purchases
of $76,198 and to decrease bank borrowing by $222,996.
The ratio of the Company's current assets to current liabilities increased
to approximately 3.15 to 1 at December 31, 2005 compared to 2.35 to 1 at
December 31, 2004. The increase in the current ratio is due to our bank debt
being a long-term liability in 2005 and a current liability in 2004.
Item 2. Management's Discussion and Analysis or Plan of Operations
Results of Operations
Revenues and Gross Profit
Three Months Ended
December 31,
------------
2005 2004
(In thousands of dollars)
Product Revenue $2,927 $3,249
Subcontract Revenue 123 98
Service Revenue 1,191 1,120
----- -----
Total Revenue $4,241 $4,467
Gross Profit Product $699 $ 766
Gross Profit Subcontract 30 18
Gross Profit Service 486 400
--- ---
Total Gross Profit $1,215 $1,184
Gross Profit Product % 24% 24%
Gross Profit Subcontract % 24% 18%
Gross Profit Service % 41% 36%
--- ---
Total Gross Profit % 29% 27%
Revenues
The Company's product revenues during the three months ended December 31, 2005
were $2,927,000 compared to $3,249,000 for the prior year period. This decrease
of 10% is primarily due to lower shipments with respect to New York City Transit
projects compared to the prior year period.
Subcontract revenue increased during the current three month period to $123,000
from $98,000 in the comparable prior year period. The Company was responsible
for various small electrical installations during both the 2005 and 2004
periods.
Service revenues increased 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).
2. Management's Discussion and Analysis or Plan of Operations
Gross Profit
Gross profit on product revenues for the three months ended December 31, 2005,
decreased 9% to $699,000 compared to $766,000 for the prior year period. This
decrease in absolute gross profit is primarily related to the 10% decline in
product revenues in 2005. The gross profit percentage in 2005 of 24% is
consistent with 2004.
Gross profit related to subcontract revenues for the three months ended December
31, 2005 increased in absolute terms due to the increase in revenue related to
electrical installation. In addition, the gross profit percentage was higher
during the three months of 2005 as mark ups on electrical installations were
higher than the prior year period.
Gross profit from service revenues increased during the three months ended
December 31, 2005 due to the increase in call-in service revenue. The absolute
gross profit and gross margin percent increases were primarily related to this
additional revenue and from a decrease in technical staff as the Company
reevaluated its customer support staffing level.
Income Before Tax
The increase in loss before income taxes during the three months ended December
31, 2005 was consistent with budget and is due to a decrease in gross profit
caused by anticipated lower product revenues and from $56,000 of budgeted
severance payments (included in product and service costs) incurred in 2005. The
decrease in product gross margin was offset by higher gross margin from
subcontract and service revenues (noted above). In addition, selling, general
and administrative expenses increased $172,000, or 13%, and reflects $106,000 of
budgeted cost increases related to additional sales staff to develop and
strengthen our sales and marketing and is geared to support higher product
revenues, and from a $43,000 increase in recruitment costs. Interest expense
increased during 2005 due to higher interest rates. For 2005, the Company also
recorded a loss of $25,000 on its equity in the operating loss of Secure 724 LP
compared to a loss of $10,000 in 2004.
Tax Provision
The Company's current income tax benefit represents the benefit from 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 non current
deferred tax liability as it relates to certain timing differences of book and
tax deductions.
2. Management's Discussion and Analysis or Plan of Operations
Order Position
The Company's order position, excluding service, at December 31, 2005 was
$8,605,000 as compared to $8,800,000 at September 30, 2005 and $11,568,000 at
December 31, 2004. 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.
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.
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
(b) Reports on Form 8-K
None
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 14, 2006