References to 2008 and 2007 within the Management's Discussion and Analysis of Financial Condition and Results of Operations refers to the fiscal years ended September 30, 2008 and September 30, 2007, respectively.

LIQUIDITY AND CAPITAL RESOURCES

On September 30, 2008, the Company had a $3.5 million dollar revolving credit facility with TD Banknorth, N.A. (the Bank") (the "Credit Facility"). This Credit Facility had an annual interest rate of prime plus ¼% and was to expire in January 2009. On December 23, 2008, the Company received a letter from the bank agreeing to extend the expiration date of the Credit Facility through October 1, 2009, and to revise the facility to $2.5 million with an increased interest rate of prime plus 2%. Advances under the Credit Facility are measured against a borrowing base calculated on eligible receivables and inventory. The Credit Facility is secured by all assets of the Company and all of its operating subsidiaries.

The Credit Facility includes various covenants, which among other things, impose limitations on declaring or paying dividends, and making acquisitions and capital expenditures. The Company is also required to maintain certain financial ratios and tangible net worth covenants. At September 30, 2008, the Company did not meet financial covenants related to its debt service coverage ratio and tangible net worth. However, the requirements of these covenants were waived by the bank in conjunction with the agreement to extend the Credit Facility. At September 30, 2008 the full amount of the Credit Facility was available under the borrowing base calculation and $518,000 was owed under the Credit Facility.

Net cash provided by operations for the year ended September 30, 2008 amounted to $1,739,000 as compared to $883,000 of cash being used in operations during the prior year. The increase in cash being provided by operations was primarily due to a net decrease of $2,381,000 in operating assets and liabilities in 2008 partially offset by the higher net loss in 2008. This decrease reflects a reduction in working capital from a $5.0 million transit project that was completed in 2008. This reduction in working capital was primarily due to a $1.2 million decrease in accounts receivable. The reduction in working capital was also related to an increase in deferred revenue related to a project which will be completed in the fiscal year ending September 30, 2009 and from an increase of $464,000 in accounts payable and accrued expenses which includes the deferred payment of a portion of separation costs and advance payments from tenant customers for a large retail outlet center project.

Management's Discussion and Analysis of Financial Condition and Results of Operations

In 2008, the net cash inflow of $1,739,000 from operations plus $68,000 of cash proceeds from collection of a note receivable were used for the purchases of capital assets of $224,000 (primarily for a new management information system and test equipment for a new fire alarm product) and to reduce bank borrowing by $1,553,000. The Company has working capital of $3,836,000 at September 30, 2008 and will fund its operations using this working capital and cash generated from operations.

The ratio of the Company's current assets to current liabilities decreased to approximately 1.83 to 1 at September 30, 2008 compared to 3.01 to 1 at September 30, 2007. Working capital declined to $3.8 million at September 30, 2008 compared to $6.7 million at September 30, 2007. This decline is related to funding operations during the past year, a $330,000 reduction in the deferred tax asset and a $1.5 million reduction in bank borrowing.

RESULTS OF OPERATIONS

Revenues and Gross Profit

                                    For the years ended September 30,
                                              (In thousands)
                                     2008                        2007

Product Sales                  $         13,075         $           12,953
Subcontract Sales                         1,728                        319
Service Revenue                           5,301                      5,017
    Total Revenue              $         20,104         $           18,289

Product Gross Margin           $          2,314         $            2,948
Subcontract Gross Margin                    246                         58
Service Gross Margin                      2,584                      2,485
    Total Gross Margin         $          5,144         $            5,491

Gross Profit Product %                       18 %                       23 %
Gross Profit Subcontractor %                 14 %                       18 %
Gross Profit Service %                       49 %                       50 %
     Total Gross Profit %                    26 %                       30 %

Revenues

The increase in product sales resulted from higher shipments of audio/visual, security, and fire alarm products in 2008, which offset a decline in revenues from transit products following the final stages of a $5.0 million project for a New York City subway station security system. Revenues of $3.5 million from this project where included in 2007 product sales. The improvement in fire alarm product revenue is from the installation of a fire alarm system at a major new retail outlet center and from increased revenues related to tenant changes in certain buildings.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Subcontract sales increased during 2008 as the Company was responsible as prime contractor for the electrical installation at a major new retail outlet center and for several other large electrical installation projects compared to a few smaller projects in 2007.

Service revenues increased 6% during 2008 primarily due to an increase in call-in service on fire alarm systems (replacement parts and service required by buildings).

Gross Profit

Gross profit margin from product sales decreased 22% to $2,314,000. The decline in absolute gross profit margin and the decrease in gross margin percentage are primarily attributable to a shift in product mix to lower margin sales of audio visual and security projects in 2008. Gross profit margin as a percentage of product sales was 18% in 2008 compared to 23% in 2007. This decline in gross profit percentage was due to a shift in product mix to larger projects with lower margin sales in 2008. Recent audio-visual, security, transit projects and the large fire alarm outlet center project involved a lower gross profit percentage than the Company experienced over the last few years from its product mix.

Gross profit margin related to subcontract sales for 2008 increased in absolute terms as the Company was responsible for a greater number of electrical installations by third parties (subcontract work) and one large installation at a major retail outlet center in 2008 (noted above). The gross margin percentage in 2008 is due to a lower margin percentage received on the major retail outlet center project.

Gross profit margin from service revenues increased 4% in absolute terms during 2008 due to the increase in call-in-service on fire alarm systems (noted above). Gross margin as a percentage of revenues declined due to additional costs of service administration staff in 2008.

Selling, General and Administrative Expenses

Management's Discussion and Analysis of Financial Condition and Results of Operations

Selling, General and Administrative Expenses ("S G & A") increased $134,000 in 2008 over 2007 primarily due to $547,000 in separation costs for the resignation of both the Chief Executive Officer and the President of Casey Systems. Partially offsetting these separation costs were $185,000 of savings related to the elimination of expenses for these executive positions (for the remaining part of 2008), and from a $155,000 reduction in selling costs, which primarily reflect certain staff eliminations. The Company maintained a high level of developmental costs for modernizing components of the Company's proprietary Comtrak fire alarm system. This program is expected to generate future revenue and is designed to allow a building owner to enhance the capabilities of its fire alarm system at a fraction of the cost of a new system replacement and is expected to generate future revenues to the Company as well as extend the useful life of the installed base of the Company's proprietary Comtrak system. In contrast, 2007 included $96,000 of investment banking and legal expenses related to exploring strategic options.

In 2008, S G & A continued to reflect a high level of sales and marketing personnel expenses which were geared to support higher product revenues. However, S G & A expenses as a percentage of sales declined 2.2% to 28.6% in 2008 due to higher sales volume compared to the relative fixed nature of these costs.

(Loss) Before Tax

The $541,000 increase in loss from operations during 2008 includes $347,000 of lower gross profit margin and $133,000 of higher selling, general and administrative expenses compared to 2007. The decline in gross profit was primarily due to a shift in product mix to lower margin sales of audio/visual, security and certain fire alarm revenue and related gross margin, which offset higher gross margin from additional subcontract and service revenues in 2008. The increase in selling, general and administrative expenses was primarily due to $547,000 of separation costs in 2008 from the resignation of both the Chief Executive Officer and the President of Casey Systems (noted above). In 2008, depreciation expense increased $20,000 primarily resulting from a new computer system.

Interest expense decreased $31,000 during 2008 due to the effect of both lower interest rates and lower borrowing levels.

During 2007, the Company sold its 25% equity investment in Secure 724 LP and reported a gain of $98,000 on the sale. In 2008, the Company benefited from receipt of $6,268 of contingent proceeds from this sale. The sales agreement provides for an additional variable payment based on sales of Secure 724 product up to a maximum additional payment of $73,455. The Company received $6,268 and $1,075 of the variable payment during 2008 and 2007, respectively.

Critical Accounting Policies

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company believes that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form this basis for the accounting policies deemed to be most critical to us. These relate to inventory and revenue recognition. We believe estimates and assumptions are related to these critical accounting policies are appropriate under the circumstances. However, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations.

Order Position

Synergx's order position, excluding service was $12.5 million at September 30, 2008 compared to $11.2 million level at September 30, 2007. The Company expects to fulfill a significant portion of its order position over the next twelve months. While quotation activity is brisk, there is no assurance when orders will be received and whether the order position will increase. Due to the fact that some of the Company's products are sold and installed as part of larger construction or mass transit projects, there is typically a delay between the booking of the contract and its revenue realization. The order position from time to time includes, and the Company continues to bid on, projects that include subcontractor labor, (electrical installation performed by others). The Company expects to be active in seeking orders where the Company would act as a prime contractor and responsible for management of the project as well as electrical installation.

Plan of Operations

During fiscal 2009, management intends to continue to focus on intensified marketing programs with fire, security and audio/visual products. Management has decided to be more selective in bidding on transit projects since these projects extend over long periods of time (which is problematic in the assignment of staff) and are subject to changes in funding by the agencies these projects relate to. Management intends to continue to contain or monitor fixed overhead as well as to reduce variable costs through improved efficiency and productivity. Specifically management is pursuing a strategy of aggressive marketing of products and systems to drive more revenue through established channels of distribution. Management will concentrate on these initiatives with a focus on reducing costs thereby enhancing the Company's competitiveness which combined with improved sales and marketing techniques should result in increased revenues over time. However, competition remains severe in many of the Company's product categories. Longer term, management expects increased demand for the Company's audio-visual, public address, security and other communication products. Recent enhancements to Synergx's management information systems and methods of approving and monitoring project costs have improved management's ability to pinpoint waste and/or third party (supplier or customer) cost responsibility. Further enhancements in these areas will be in progress during 2009.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Inflation

The impact of inflation on the Company's business operations has not been material in the past. Casey's labor costs are normally controlled by union contracts covering a period of three years and its material costs have remained relatively stable. However, in July of 2005, the Company and its union agreed to a new contract, which expires in March 2009, that provides for wage/benefits increases of approximately 4% in each year. Under terms of previous union contracts, certain union members, upon passing certain test requirements, began moving up to higher paying categories that have multiple salary steps per year in excess of the 4% contractual level. In addition, the demand for highly skilled professionals has resulted in the need to assess salary levels in order to remain competitive. Management can not predict the results of the upcoming union negotiation. The Company will try to mitigate the effect of any increases in labor costs by efficiency initiatives and expense reductions. Due to the current economic climate, the Company expects to have difficulty instituting price increases to offset increased costs.

Off-Balance Sheet Arrangements

As of September 30, 2008, the Company did not have any off-balance sheet debt nor did it have any material transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant resources or significant components of revenue or expenses.

Continued Listing on NASDAQ

On April 21, 2008 the Company received a letter from the NASDAQ Stock Market notifying the Company that for the last 30 days, the bid price of the Company's common stock has closed below the minimum $1.00 per share requirement for continued inclusion in the NASDAQ Stock Market.

In addition, on October 20, 2008, NASDAQ notified the Company that due to extraordinary market conditions NASDAQ decided, effective October 17, 2008, to suspend enforcement of the bid price and market value of publicly held shares requirements through Friday January 16, 2009.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations

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