UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


**Washington,
      D.C. 20549**





**___________**


FORM
      10-Q


**x**
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**




For
      the Quarterly Period Ended June 30,
      2006




**o**
                **TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT OF
                    1934**




**For
      the transition period from  _________** **to
      _________**




**Commission
      file number 1-9078**





**___________**





THE
      ALPINE GROUP, INC.


(Exact
      name of registrant as specified in its charter)





**Delaware**
            
            **22-1620387**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)**One
                Meadowlands Plaza**
              **East
                Rutherford, New Jersey**
            
            **07073**(Address
                of principal executive offices)
            
            (Zip
                code)





Registrant's
      telephone number, including area code **201-549-4400**





**___________**





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months and (2) has been subject to such filing
      requirements for the past 90 days. Yes x No o





Indicate
      by check mark whether the Registrant is an accelerated filer (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x





Indicate
      by check mark whether the Registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x





*Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.*




**Class**
            
            **Outstanding
                at August 1, 2006**Common
                Stock, $.10 Par Value
            
            11,134,648











**PART
      I. FINANCIAL INFORMATION**





ITEM
      1.
      FINANCIAL STATEMENTS





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with the requirements of Section 13 or 15(d) of the
      Securities Exchange Act of 1934 and, therefore, do not include all information
      and footnotes required by accounting principles generally accepted in the United
      States of America. However, in the opinion of management, all adjustments
      necessary for a fair presentation of the results of operations for the relevant
      periods have been made. Results for the interim periods are not necessarily
      indicative of the results to be expected for the year. These financial
      statements should be read in conjunction with the summary of significant
      accounting policies and the notes to the consolidated financial statements
      included in the Company's Annual Report on Form 10-K for the year ended
      December 31, 2005.




2


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(in
      thousands, except share data)**




**(unaudited)**


**June
                30,**
            
            **December
                31,****2006**
            
            **2005****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            851
            
            $
            642Marketable
                securities, at fair value (Note 1)
            
            
            45,430
            
            
            22,976Accounts
                receivable
            
            
            2,690
            
            
            1,802Inventories,
                net (Note 2)
            
            
            1,357
            
            
            666Note
                receivable from affiliate (Note 1)
            
            
            4,000
            
            
            1,399Current
                assets of discontinued operations (Note 4)
            
            
            2,196
            
            
            89,683Other
                current assets
            
            
            2,119
            
            
            2,317Total
                current assets
            
            
            58,643
            
            
            119,485Restricted
                cash and marketable securities (Note 1)
            
            
            2,963
            
            
            150Property,
                plant and equipment, net
            
            
            834
            
            
            1,181Investment
                in affiliate (Note 1)
            
            
            10,000
            
            
            —Deferred
                income taxes
            
            
            2,635
            
            
            2,635Assets
                of discontinued operations (Note 4)
            
            
            —
            
            
            17,337Other
                long-term assets
            
            
            2,244
            
            
            2,062Total
                assets
            
            $
            77,319
            
            $
            142,850**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            993
            
            $
            1,022Accrued
                expenses
            
            
            2,792
            
            
            4,021Deferred
                income taxes and income taxes payable
            
            
            1,571
            
            
            2,024Current
                liabilities of discontinued operations (Note 4)
            
            
            19,891
            
            
            71,118Total
                current liabilities
            
            
            25,247
            
            
            78,185Long-term
                debt (Note 5)
            
            
            461
            
            
            2,456Other
                long-term liabilities (Note 6)
            
            
            18,852
            
            
            18,530Warrant
            
            
            —
            
            
            1,311Minority
                interest in subsidiary
            
            
            —
            
            
            5,528Liabilities
                of discontinued operations
            
            
            —
            
            
            2,322Mandatorily
                redeemable series A cumulative preferred stock (12,372 and 13,955
                shares
                outstandingat
                June 30, 2006 and December 31, 2005, respectively (Note 7)
            
            
            4,662
            
            
            5,263Stockholders'
                equity:9%
                cumulative convertible preferred stock at liquidation
                value
            
            
            177
            
            
            177Common
                stock, $.10 par value; (50,000,000 authorized; 26,612,550 and 25,239,696
                sharesissued
                at June 30, 2006 and December 31, 2005, respectively)
            
            
            2,661
            
            
            2,524Capital
                in excess of par value
            
            
            170,075
            
            
            169,156Accumulated
                other comprehensive income (Note 3)
            
            
            324
            
            
            219Accumulated
                deficit
            
            
            (28,676
            )
            
            (48,827
            )Treasury
                stock, at cost (17,453,299 and 10,873,427 shares at June 30, 2006
                andDecember
                31, 2005, respectively)
            
            
            (116,153
            )
            
            (93,648
            )Receivable
                from stockholders
            
            
            (311
            )
            
            (346
            )Total
                stockholders' equity
            
            
            28,097
            
            
            29,255Total
                liabilities and stockholders' equity
            
            $
            77,319
            
            $
            142,850





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.


3


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(in
      thousands, except per share data)**


**(unaudited)**




**Three
                Months Ended**
              **June
                30,****2006**
            
            
            **2005**Net
                sales
            
            $
            6,093
            
            $
            3,032Cost
                of goods sold
            
            
            6,337
            
            
            2,864Gross
                profit (loss)
            
            
            (244
            )
            
            168Selling,
                general and administrative expenses
            
            
            1,166
            
            
            1,044Operating
                loss
            
            
            (1,410
            )
            
            (876
            )Interest
                expense
            
            
            (552
            )
            
            (206
            )Gain
                on sale of stock of affiliate
            
            
            1,237
            
            
            —Dividend
                and interest income
            
            
            630
            
            
            176Realized
                gains on sales of securities
            
            
            558
            
            
            24Other
                expense, net
            
            
            (6
            )
            
            (9
            )Income
                (loss) before income taxes and discontinued operations
            
            
            457
            
            
            (891
            )Income
                tax (provision) benefit
            
            
            143
            
            
            (48
            )Income
                (loss) from continuing operations
            
            
            600
            
            
            (939
            )Discontinued
                operations (Note 4):Loss
                from operations of discontinued Essex Electric
            
            
            (784
            )
            
            (802
            )Income
                tax benefit
            
            
            313
            
            
            377Net
                loss on discontinued operations
            
            
            (471
            )
            
            (425
            )Net
                income (loss)
            
            
            129
            
            
            (1,364
            )Preferred
                stock dividends
            
            
            (98
            )
            
            (111
            )Net
                income (loss) applicable to common stock
            
            $
            31
            
            $
            (1,475
            )Net
                income (loss) per share of common stock:BasicIncome
                (loss) from continuing operations applicable to common stock
            
            $
            0.04
            
            $
            (0.07
            )Loss
                from discontinued operations, net of tax
            
            
            (0.04
            )
            
            (0.02
            )Net
                income (loss)
            
            $
            —
            
            $
            (0.09
            )DilutedIncome
                (loss) from continuing operations applicable to common
                stock
            
            $
            0.03
            
            $
            (0.07
            )Loss
                from discontinued operations, net of tax
            
            
            (0.02
            )
            
            (0.02
            )Net
                income (loss)
            
            $
            0.01
            
            $
            (0.09
            )Weighted
                average shares outstanding:Basic
            
            
            12,379
            
            
            15,821Diluted
            
            
            22,499
            
            
            15,821





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.





4


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(in
      thousands, except per share data)**


**(unaudited)**


**Six
                Months Ended**
              **June
                30,****2006**
            
            
            **2005**Net
                sales
            
            $
            14,068
            
            $
            6,750Cost
                of goods sold
            
            
            14,091
            
            
            6,490Gross
                profit (loss)
            
            
            (23
            )
            
            260Selling,
                general and administrative expenses
            
            
            2,247
            
            
            2,290Operating
                loss
            
            
            (2,270
            )
            
            (2,030
            )Interest
                expense
            
            
            (671
            )
            
            (404
            )Gain
                on sale of stock of affiliate
            
            
            1,237
            
            
            —Dividend
                and interest income
            
            
            988
            
            
            337Realized
                gains on sales of securities
            
            
            572
            
            
            27Other
                income (expense), net
            
            
            (47
            )
            
            117Loss
                before income taxes and discontinued operations
            
            
            (191
            )
            
            (1,953
            )Income
                tax benefit
            
            
            232
            
            
            397Income
                (loss) from continuing operations
            
            
            41
            
            
            (1,556
            )Discontinued
                operations (Note 4):Gain
                (loss) from operations of discontinued Essex Electric (including
                gain on
                sale of $25,638)
            
            
            34,937
            
            
            (5,127
            )Income
                tax (provision) benefit
            
            
            (14,622
            )
            
            2,059Net
                gain (loss) on discontinued operations
            
            
            20,315
            
            
            (3,068
            )Net
                income (loss)
            
            
            20,356
            
            
            (4,624
            )Preferred
                stock dividends
            
            
            (205
            )
            
            (223
            )Net
                income (loss) applicable to common stock
            
            $
            20,151
            
            $
            (4,847
            )Net
                income (loss) per share of common stock:Basic and diluted:Loss
                from continuing operations applicable to common stock
            
            $
            (0.01
            )
            $
            (0.11
            )Income
                (loss) from discontinued operations, net of tax
            
            
            1.41
            
            
            (0.20
            )Net
                income (loss)
            
            $
            1.40
            
            $
            (0.31
            )Weighted
                average shares outstanding:Basic
                and diluted
            
            
            14,350
            
            
            15,705





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.


5


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY**


**(in
      thousands, except share data)**


**(unaudited)**


**Six
                Months Ended**
              **June
                30, 2006****Shares**
            
            **Amount**Common
                stock:Balance
                at beginning of period
            
            
            25,239,696
            
            $
            2,524Shares
                issued pursuant to Series A Preferred Stock conversion
            
            
            1,176,181
            
            
            117Exercise
                of stock options
            
            
            196,673
            
            
            20Balance
                at end of period
            
            
            26,612,550
            
            
            2,661Capital
                in excess of par value:Balance
                at beginning of period
            
            
            
            
            
            169,156Compensation
                expense related to restricted stock and certain stock options, less
                vested
                sharesreleased
                from Treasury
            
            
            
            
            
            277Shares
                issued pursuant to Series A Preferred Stock conversion
            
            
            
            
            
            484Exercise
                of stock options
            
            
            
            
            
            158Balance
                at end of period
            
            
            
            
            
            170,0759%
                cumulative convertible preferred stock:Balance
                at beginning of period
            
            
            177
            
            
            177Balance
                at end of period
            
            
            177
            
            
            177Accumulated
                other comprehensive income:Balance
                at beginning of period
            
            
            
            
            
            219Change
                in unrealized losses on securities, (net of tax benefit of
                $70)
            
            
            
            
            
            105Balance
                at end of period
            
            
            
            
            
            324Accumulated
                deficit:Balance
                at beginning of period
            
            
            
            
            
            (48,827
            )Net
                income
            
            
            
            
            
            20,356Dividends
                on preferred stock
            
            
            
            
            
            (205
            )Balance
                at end of period
            
            
            
            
            
            (28,676
            )Treasury
                stock:Balance
                at beginning of period
            
            
            (10,873,427
            )
            
            (93,648
            )Stock
                options and grants
            
            
            104,798
            
            
            56Modified
                Dutch Auction redemptions
            
            
            (6,684,670
            )
            
            (22,561
            )Balance
                at end of period
            
            
            (17,453,299
            )
            
            (116,153
            )Receivable
                from stockholders:Balance
                at beginning of period
            
            
            
            
            
            (346
            )Forgiveness
                of officer loans
            
            
            
            
            
            35Balance
                at end of period
            
            
            
            
            
            (311
            )Total
                stockholders' equity
            
            
            
            
            $
            28,097Comprehensive
                income
            
            
            
            
            $
            20,461





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.




6


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(in
      thousands)**


**(unaudited)**





**Six
                Months Ended**
              **June
                30,****2006**
            
            **2005**Cash
                flows from operating activities:Net
                income (loss)
            
            $
            20,356
            
            $
            (4,624
            )Adjustments
                to reconcile net income (loss) to net cash provided by (used for)
                operating activities:Gain
                on sale of Essex Electric assets
            
            
            (25,638
            )
            
            —Depreciation
            
            
            207
            
            
            662Amortization
                of deferred debt issuance costs and accretion of debt
                discount
            
            
            111
            
            
            291Compensation
                expense related to stock options and grants
            
            
            360
            
            
            178Loss
                on sale of capital assets and subsidiary stock
            
            
            160
            
            
            680Gain
                on sale of stock of affiliate
            
            
            (1,237
            )
            
            —Realized
                gains on investments in marketable securities
            
            
            (572
            )
            
            —Minority
                interest in income (loss) of subsidiary
            
            
            1,617
            
            
            (601
            )Loss
                on purchase of minority interest in subsidiary
            
            
            43
            
            
            —Decrease
                in fair value of warrant
            
            
            —
            
            
            (375
            )Change
                in assets and liabilities:Accounts
                receivable, net
            
            
            66,340
            
            
            (9,888
            )Inventories,
                net
            
            
            7,794
            
            
            8,360Other
                current and non-current assets
            
            
            (11
            )
            
            497Accounts
                payable and accrued expenses
            
            
            4,943
            
            
            4,101Income
                taxes
            
            
            (32,870
            )
            
            (7,834
            )Other,
                net
            
            
            327
            
            
            544Cash
                flows provided by (used for) operating activities
            
            
            41,930
            
            
            (8,009
            )Cash
                flows from investing activities:Capital
                expenditures
            
            
            (161
            )
            
            (1,975
            )Proceeds
                from sale of assets
            
            
            228
            
            
            1,028Proceeds
                from sale of investments
            
            
            54,121
            
            
            14,102Advances
                under loans to affiliate
            
            
            (2,601
            )
            
            (753
            )Proceeds
                from sale of Essex Electric assets, net of transaction
                costs
            
            
            53,981
            
            
            —Proceeds
                from sale of stock of affiliate
            
            
            1,237
            
            
            —Purchase
                of marketable securities
            
            
            (78,646
            )
            
            (2,362
            )Purchase
                of minority interest and warrant
            
            
            (8,500
            )
            
            —Investment
                in affiliate
            
            
            (10,000
            )
            
            —Cash
                flows provided by investing activities
            
            
            9,659
            
            
            10,040Cash
                flows from financing activities:Borrowings
                (repayments) under revolving credit facilities, net
            
            
            (26,725
            )
            
            (1,501
            )Repayments
                of long-term borrowings
            
            
            (2,075
            )
            
            (386
            )Other,
                net
            
            
            —
            
            
            (17
            )Dividends
                on preferred stock
            
            
            (205
            )
            
            (223
            )Proceeds
                from exercise of stock options
            
            
            186
            
            
            —Proceeds
                from minority interest investment in subsidiary
            
            
            —
            
            
            1,241Common
                stock redemptions from Modified Dutch Auction
            
            
            (22,561
            )
            
            —Cash
                flows provided by financing activities
            
            
            (51,380
            )
            
            (886
            )Net
                increase in cash and cash equivalents
            
            
            209
            
            
            1,145Cash
                and cash equivalents at beginning of period
            
            
            642
            
            
            611Cash
                and cash equivalents at end of period
            
            $
            851
            
            $
            1,756Supplemental
                disclosures:Cash
                paid for interest
            
            $
            441
            
            $
            1,523Cash
                paid for income taxes, net
            
            $
            9,071
            
            $
            5,008




The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.


7


**THE
      ALPINE GROUP, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2006**


**(unaudited)**





**1.
      General**





***Basis
      of presentation and description of business***





The
      accompanying condensed consolidated financial statements represent the accounts
      of The Alpine Group, Inc. and the consolidation of all of its
      majority-controlled subsidiaries (collectively "Alpine" or the "Company", unless
      the context otherwise requires). The Company accounts for all affiliate
      companies with ownership greater than 20%, but not majority-controlled on an
      ongoing basis, using the equity method of accounting.





Alpine
      was incorporated in New Jersey in 1957 and reincorporated in Delaware in 1987.
      Alpine is a holding company which over the recent past has owned and operated
      industrial manufacturing companies. Alpine's principal operations currently
      consist of Essex Electric Inc. (“Essex Electric”), a wholly owned subsidiary,
      engaged in the business of copper scrap reclamation and the manufacture and
      sale
      of plastic resin compounds and an equity investment in Superior Cables Ltd.
      (“SCL”), the largest Israeli based producer of wire and cable products. Prior to
      January 31, 2006, Essex Electric was engaged primarily in the manufacture and
      sale of electrical wire and cable. On January 31, 2006 the assets comprising
      that business were sold to the Southwire Company (“Southwire”) (see Note 4).
      During June 2006, Alpine and other investors recapitalized SCL and in connection
      therewith, Alpine purchased newly issued shares of SCL. As part of the
      recapitalization transaction, Alpine sold 5.9% of SCL shares (resulting in
      the
      current 52% ownership) to unrelated third parties and intends to sell an
      additional 3-4% to an unrelated third party (reducing its ownership to 48 -
      49%). Consequently, Alpine’s majority ownership of SCL is temporary and
      therefore the investment in SCL is accounted for on the equity method in
      accordance with Statement of Financial Accounting Standards (“SFAS”) 94, *Consolidation
      of All Majority - Owned Subsidiaries* .




***Segment
      Information***





For
      all
      periods reflected in these financial statements, the Company’s operations
      consist of only one segment - copper scrap reclamation and plastic resin
      compounding for the wire and cable industry. All consolidated net sales and
      long-lived assets for all periods presented herein were based in the United
      States. During the quarter ended June 30, 2006, two customers accounted for
      62%
      and 25% of the total net sales of the Company, respectively. During the quarter
      ended June 30, 2005 two customers accounted for 66% and 11% of net sales,
      respectively. No other customers accounted for more than 10% of
      sales.





***Marketable
      securities***





SFAS
      No.
      115, *Accounting
      for Certain Investments in Debt and Equity Securities* ,
      requires securities to be classified as held to maturity, available for sale
      or
      trading. Only those securities classified as held to maturity, which the Company
      intends and has the ability to hold until maturity, are reported at amortized
      cost. All other securities held as of June 30, 2006 have been classified as
      available for sale and are reported at fair value with unrealized gains and
      losses included in shareholders’ equity.




8




The
      following table shows the unrealized gains (losses) and fair value of the
      Company’s investments aggregated by investment category as of June 30,
      2006:




**(in
                thousands)**Description
                of Securities
            
            Cost
              Basis
            
            Unrealized
              Gains
            
            Unrealized
              Losses*
            
            Fair
              ValueMoney
                market funds
            
            $
            3,826
            
            $
            —
            
            $
            —
            
            $
            3,826Marketable
                equity securities
            
            
            2,327
            
            
            33
            
            
            (105
            )
            
            2,255Municipal
                bonds and notes
            
            
            29,922
            
            
            —
            
            
            (57
            )
            
            29,865Mutual
                funds
            
            
            10,328
            
            
            729
            
            
            —
            
            
            11,057Preferred
                securities
            
            
            250
            
            
            —
            
            
            —
            
            
            250Government
                securities
            
            
            999
            
            
            —
            
            
            (12
            )
            
            987Subtotal
            
            
            47,652
            
            
            762
            
            
            (174
            )
            
            48,240Less:
              Restricted (See Note 1 below)
            
            
            (2,810
            )
            
            —
            
            
            
            
            
            (2,810
            )Total
            
            $
            44,842
            
            $
            762
            
            $
            (174
            )
            $
            45,430




*
      None of
      the gross unrealized losses have exceeded 12 months.





The
      gross
      unrealized gains (losses) related to short-term investments are primarily due
      to
      a change in the fair market value of the various equity securities. Alpine
      has
      reviewed its securities in a loss position and believes that the gross
      unrealized losses on its short-term investments at June 30, 2006 are temporary
      in nature. Alpine reviews its investment portfolio quarterly, to identify and
      evaluate investments that have indications of possible impairment. Factors
      considered in determining whether a loss is temporary include the length of
      time
      and extent to which fair value has been less than cost basis, the financial
      condition, credit quality and near-term prospects of the investee and Alpine’s
      ability to hold the investment for a period of time sufficient to allow for
      any
      anticipated recovery in market value.





***Note
      receivable from affiliate***





Alpine
      has made short-term secured advances to the United States distribution
      subsidiary of SCL. The advances are collateralized by United States-based
      inventory and accounts receivable, at an interest rate of LIBOR plus 1.4% per
      annum. As of June 30, 2006 and December 31, 2005, $4.0 and $1.4 million were
      outstanding and due on demand. On August 1, 2006, Alpine advanced $1.0 million
      to SCL concurrently with the additional advance to SCL of $1.0 million by Bank
      Hapoalim, Ltd., SCL’s primary lender. These advances were used by SCL to fund
      its working capital requirements. Alpine’s loan is subordinate to SCL’s bank
      debt, accrues interest at LIBOR plus 1.4% per annum and matures on January
      31,
      2007.




***Restricted
      cash and marketable securities***




Pursuant
      to the Essex Electric Sale (see Note 4), Essex Electric agreed to maintain
      encumbrance free through July 31, 2007 an amount equal to $2.8 million in (a)
      cash, (b) cash equivalents or (c) marketable securities. This amount is
      classified as restricted cash and marketable securities at June 30, 2006. At
      June 30, 2006 and December 31, 2005 $0.2 in lease security is included as
      restricted cash. Since the restriction periods for these items exceed one year
      from the balance sheet date herein, they are classified as non-current
      assets.





***Subsidiary
      stock transactions***





The
      Company's ownership percentage in subsidiary stock is impacted by the Company's
      purchase of additional subsidiary stock, as well as subsidiary stock
      transactions, including the subsidiary's purchase of its own stock and the
      subsidiary's issuance of its own stock. The Company accounts for subsidiary
      stock transactions in accordance with Staff Accounting Bulletin No. 51,
      "Accounting for sales of stock by a subsidiary" and records all gains and losses
      related to subsidiary stock transactions through other income and
      expense.




In
      January 2005, Holdco purchased 1,792 shares of Essex Electric common stock
      for a
      cash purchase price of $5.0 million and Superior purchased 445 shares of Essex
      Electric common stock for a cash purchase price of $1.2 million, resulting
      in
      Holdco and Superior owning 84.2% and 15.8% of Essex Electric, respectively.
      In
      accordance with accounting principles generally accepted in the United States
      of
      America, the Company accounted for the sale of stock of Essex Electric as a
      loss
      on sale of subsidiary stock of approximately $0.9 million and decreased the
      value of the warrant held by Superior to purchase 199 shares of Essex Electric
      common stock by $0.4 million due to the dilutive impact of the additional 2,237
      shares issued. On January 25, 2006 Alpine purchased from Superior for a purchase
      price of $8.5 million Superior’s 614 shares of Essex Electric and its warrant
      for 199 additional shares, resulting in Alpine owning 100% of the total
      outstanding capital stock of Essex Electric.





9


***Related
      party transactions***





On
      August
      8, 2006, the Company agreed to reschedule payment of three installments due
      an
      executive on account of his non-competition agreement included in his employment
      arrangement with the Company. The installments, previously payable each in
      the
      amount of $50,000 on December 31, 2006, June 30, 2007 and December 31, 2007,
      will be discounted at the prime rate and paid, $48,460 on August 10, 2006 and
      $94,513 on January 10, 2007. The liability for these payments is included in
      accrued liabilities as of June 30, 2006 in the financial statements
      herein.





***Recent
      accounting standards***




In
      July
      2006, the Financial Accounting Standards Board (“FASB”) released Interpretation
      No. 48, "Accounting for Uncertainty in Income Taxes" (“FIN 48”). This
      interpretation revises the recognition tests for tax positions taken in tax
      returns such that a tax benefit is recorded only when it is more likely than
      not
      that the tax position will be allowed upon examination by taxing authorities.
      The amount of such a tax benefit to record is the largest amount that is more
      likely than not to be allowed. Any reduction in deferred tax assets or increase
      in tax liabilities upon adoption will correspondingly reduce retained earnings.
      The Company has not yet determined the effect of adopting this Interpretation,
      which is effective for it on January 1, 2007.





**2.
      Inventories**





At
      June
      30, 2006 and December 31, 2005, the components of inventories were as follows:





**June
                30,**
              **2006**
            
            **December 31,**
              **2005****(in
                thousands)**Raw
                materials
            
            $
            224
            
            $
            651Work
                in process
            
            
            1,718
            
            
            3931,942
            
            
            1,044LIFO
                reserve
            
            
            (585
            )
            
            (378
            )$
            1,357
            
            $
            666





The
      inventories shown above are all valued using the LIFO method. An actual
      valuation of inventory under the LIFO method can be made only at the end of
      each
      year based on the inventory levels and costs at the same time. Accordingly,
      interim LIFO calculations must be based on management's estimates of expected
      year-end inventory levels and costs. Because these are subject to many factors
      beyond management's control, interim results are subject to adjustment in future periods due
      to
      the final year-end LIFO inventory valuation.





**3.
      Comprehensive income (loss)**





The
      components of comprehensive income (loss) for the three and six month periods
      ended June 30, 2006 and 2005 were as follows:




**Three
                Months Ended**
              **June
                30,****2006**
            
            **2005****(in
                thousands)**Net
                income (loss)
            
            $
            129
            
            $
            (1,364
            )Change
                in unrealized gains (losses) on securities, net of tax
            
            
            (316
            )
            
            188Comprehensive
                loss
            
            $
            (187
            )
            $
            (1,176
            )






**Six
                Months Ended**
              **June
                30,****2006**
            
            **2005****(in
                thousands)**Net
                income (loss)
            
            $
            20,356
            
            $
            (4,624
            )Change
                in unrealized gains on securities, net of tax
            
            
            105
            
            
            184Comprehensive
                income (loss)
            
            $
            20,461
            
            $
            (4,440
            )




10


**4.
      Discontinued operations - Essex Electric**





On
      January 31, 2006, Essex Electric completed the sale of certain of its assets
      comprising its building wire business to Southwire, which we refer to at times
      as the “Essex Electric Sale”. The transaction was provided for and consummated
      pursuant to an asset purchase agreement between Essex Electric, as seller and
      Southwire, as buyer, dated September 30, 2005. The agreement provided for the
      sale by Essex Electric of all of its closing date building wire related
      inventory and prepaid assets, its Florence, Alabama manufacturing plant and
      equipment, and the assumption by Southwire of certain contracts and selected
      current liabilities related to the business. Essex Electric retained
      substantially all of its other liabilities including the indebtedness under
      its
      revolving credit facility. Excluded from the sale were cash and cash equivalents
      and accounts receivable of Essex Electric, a copper scrap reclamation plant
      and
      operation based in Jonesboro, Indiana, a plastic resin compounding plant and
      operation based in Marion, Indiana, and three leased warehouse distribution
      centers. The scrap reclamation operation serviced both Essex Electric’s internal
      requirements for scrap processing, as well as external customers. The purchase
      price was the sum of (i) $27 million plus (ii) the closing date value of Essex
      Electric’s inventory and certain prepaid assets.





The
      purchase price of $55.6 million was paid in cash by Southwire at closing and
      was
      subject to customary post-closing review and adjustment by the parties in
      accordance with certain agreed upon procedures provided for under the asset
      purchase agreement, which adjustment amount was not significant. In connection
      with the consummation of the sale, Essex Electric repaid in full and terminated
      its revolving credit facility.





As
      of
      December 31, 2005, the net assets to be disposed of pursuant to the Essex
      Electric Sale did not meet all of the requirements of SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      in
      order to be classified as assets held for sale or discontinued operations as
      of
      December 31, 2005 since completion of the sale required Alpine stockholder
      approval. However, such approval occurred at a special meeting of stockholders
      of Alpine on January 26, 2006 and the Essex Electric Sale closed on January
      31,
      2006. Therefore, the assets and liabilities and results of operation related
      to
      the discontinued operations have been classified as discontinued operations
      for
      all periods presented herein.





The
      assets and liabilities included in the condensed consolidated financial
      statements relating to the operations of Essex Electric sold in the Essex
      Electric Sale are as follows:




**June
                30,**
            
            **December
                31,****ASSETS**
            
            **2006**
            
            **2005****(in
                thousands)**Current
                assets:Accounts
                receivable
            
            $
            169
            
            $
            67,398Inventories,
                net of LIFO reserve of $29,740 at December 31, 2005
            
            
            —
            
            
            20,758Other
                current assets
            
            
            2,027
            
            
            1,527Total
                current assets
            
            $
            2,196
            
            $
            89,683Property,
                plant and equipment, net
            
            
            —
            
            
            16,546Other
                assets
            
            
            —
            
            
            791Total
                assets
            
            $
            2,196
            
            $
            107,020**LIABILITIES**Current
                liabilities:Revolving
                credit facility
            
            $
            —
            
            $
            26,725Accounts
                payable
            
            
            694
            
            
            24,380Accrued
                expenses
            
            
            2,751
            
            
            11,355Deferred
                income taxes and income taxes payable
            
            
            16,446
            
            
            8,658Total
                current liabilities
            
            
            19,891
            
            
            71,118Deferred
                income taxes
            
            
            —
            
            
            2,322Total
                liabilities
            
            
            19,891
            
            
            73,440Net
                assets (liabilities)
            
            $
            (17,695
            )
            $
            33,580




11


The
      revenues and pretax income included in the accompanying statement of operations
      which is included in the condensed consolidated financial statements contained
      herein related to the operations sold in the Essex Electric Sale are as
      follows:




**Three
                Months Ended**
            
            
            **Six
                Months Ended****June
                30,**
            
            
            **June
                30,****2006**
            
            
            **2005**
            
            
            **2006**
            
            
            **2005****(in
                thousands)**Net
                Sales
            
            $
            —
            
            $
            94,779
            
            $
            60,066
            
            $
            180,894Pretax
                income (loss)
            
            
            —
            
            
            (943
            )
            
            17,304
            
            
            (5,728
            )





The
      net
      sales and pretax income for the six month periods ended June 30, 2006 represent
      the results of operations for January 2006 while the discontinued operations
      were still owned by Essex Electric. Included in the pretax income for the six
      month period ended June 30, 2006 is approximately $12.4 million of income
      resulting from a LIFO decrement due to a significant decrease in inventories
      in
      January 2006.





Below
      is
      a table with the costs associated with the activities related to the Essex
      Electric Sale:




**Total
                expected to be incurred**
            
            **Incurred
                in three months ended June 30, 2006**
            
            **Total
                costs incurred through June 30, 2006**
            
            **Liability
                as of June 30, 2006****(in
                thousands)**One
                time termination benefits (a)
            
            $
            2,926
            
            $
            648
            
            $
            2,588
            
            $
            338Contract
                termination costs (b)
            
            
            2,509
            
            
            175
            
            
            2,509
            
            
            —Write-down
                of assets (c)
            
            
            255
            
            
            —
            
            
            255
            
            
            —Transition
                and other costs (d)
            
            
            2,008
            
            
            246
            
            
            1,410
            
            
            —Totals
            
            $
            7,698
            
            $
            1,069
            
            $
            6,762
            
            $
            338






(a)
            Certain
                severance payments and transactional bonuses were accrued as of the
                January 31, 2006 closing date of the Essex Electric Sale. The remaining
                liability represents primarily unpaid severance for employees remaining
                with the Company through a transitional phase which will be completed
                in
                2006.





(b)
            Includes
                a prepayment penalty and other loan fees related to the revolving
                credit
                facility that was terminated concurrently with the sale, as well
                as an
                accrual for the present value of future lease obligations for discontinued
                facilities, net of estimated income from sub-lease
                arrangements.





(c)
            Represents
                the write-down of certain assets that became surplus or obsolete
                with the
                sale.





(d)
            Includes
                personnel and other costs associated with the post - Essex Electric
                Sale
                transition period. There is no accrued liability as of June 30, 2006
                because costs are being expensed as
                incurred.





The
      costs
      incurred above are included in income from discontinued operations in the
      statement of operations. Approximately $0.8 million of transaction bonus
      payments made to certain executives are being deferred and amortized over the
      period in which earned, since such amounts must be repaid should the executives
      voluntarily terminate employment prior to December 31, 2007.





**5.** **Long-term debt**





At
      June
      30, 2006 and December 31, 2005, long-term debt consists of the following:




**June
                30,**
            
            **December
                31,****2006**
            
            **2005****(in****thousands****)**Junior
                Subordinated Notes, net of $0.1 and $0.6 million discount,at
                June 30, 2006 and December 31, 2005, respectively
            
            $
            461
            
            $
            2,456




12


On
      August
      4, 2003, the Company completed an exchange offer whereby holders of its common
      stock exchanged 3,479,656 shares for $4.3 million principal amount of
      6% Junior Subordinated Notes (the "Subordinated Notes") issued by the Company
      plus a nominal amount of cash in lieu of fractional notes. The Subordinated
      Notes were initially recorded at an amount equal to the fair value of the common
      stock exchanged resulting in an initial discount of $1.4 million. The discount
      is being accreted over the term of the Subordinated Notes using the effective
      interest rate method. The Subordinated Notes accrue interest at 6% per annum
      payable in cash semiannually each December 31 and June 30. The
      Subordinated Notes are the Company's general unsecured obligations subordinated
      and subject in right of payment to all of the Company's existing and future
      senior indebtedness, which excludes trade payables incurred in the ordinary
      course of business. The Company will be required to repay one-eighth of the
      outstanding principal amount of the Subordinated Notes commencing on
      June 30, 2007 and semiannually thereafter, so that all of the Subordinated
      Notes will be repaid by December 31, 2010. The Subordinated Notes are
      redeemable, at the Company's option, in whole at any time or in part from time
      to time, at the principal amount to be redeemed plus accrued and unpaid interest
      thereon to the redemption date, together with a premium if the Subordinated
      Notes are redeemed prior to 2007. In addition, the Company must offer to redeem
      all of the Subordinated Notes at the redemption price then in effect in the
      event of a change of control. The Subordinated Notes were issued under an
      indenture which does not subject the Company to any financial covenants. During
      the three and six month periods ended June 30, 2006, the Company retired $2.6
      million of the Subordinated Notes and recorded $0.5 million of additional
      interest expense related to the acceleration of the related unamortized
      discount.





**6.
      Other long-term liabilities**





At
      June
      30, 2006 and December 31, 2005, other long-term liabilities consist of the
      following:




**June
                30,**
              **2006**
            
            **December
                31,**
              **2005****(in
                thousands)**Tax
                contingency reserve
            
            $
            17,446
            
            $
            17,106Other
                long-term liabilities
            
            
            1,406
            
            
            1,424$
            18,852
            
            $
            18,530






During
      2001, the Company entered into commercial transactions intended to offset the
      potential impact of interest rate changes on the Company’s investments,
      including the investment of the net cash proceeds from the sale of an equity
      investment. The Company claimed tax benefits from these transactions of $11.2
      million and $3.2 million in 2001 and 2002, respectively. At December 31,
      2001,
      the Company established a tax contingency reserve on its balance sheet
      corresponding to realized tax benefits. The balances in the reserve at June
      30,
      2006 and December 31, 2005 (including interest) were $17.4 and $17.1 million,
      respectively.





**7.
      Series A Cumulative Convertible Preferred Stock**





On
      June
      23, 2003, Alpine completed a private placement of 8,287 shares of a new issue
      of
      Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock")
      to its directors and certain officers for a purchase price of $380 per share,
      or
      an aggregate of approximately $3.1 million. Holders of the Series A
      Preferred Stock are entitled to receive, when, as and if declared by the board
      of directors out of funds legally available for payment, cash dividends at
      an
      annual rate of $30.40 per share. The Series A Preferred Stock originally
      was convertible into shares of Alpine common stock (par value $0.10 per share
      (the “Common Stock”)), at the option of the holder, at the rate of 691 shares of
      Common Stock per share of Series A Preferred. As a result of a special dividend
      declared by the Company on August 24, 2004, the conversion rate increased to
      743.01. Since the market price of the Common Stock on the subscription date
      (June 23, 2003) was $0.76 per share and the original conversion price was $0.55
      per share, a beneficial conversion feature of $1.2 million was recorded as
      a
      reduction to the mandatorily redeemable series A cumulative preferred stock
      line
      of the balance sheet with the offset to capital in excess of par. The beneficial
      conversion feature was recorded as a dividend as of December 29, 2004 when
      the
      privately placed Series A Preferred Stock became convertible following the
      increase in authorized but unissued shares of Common Stock from 25 million
      to 50
      million shares.





On
      November 10, 2003, the Company completed the sale of 9,977 shares of Series
      A
      Preferred Stock pursuant to a rights offering to holders of the Common Stock.
      Common stockholders were offered a right to purchase one share of Series A
      Preferred Stock at a price of $380 per share for each 500 shares of common
      stock
      held on September 29, 2003. The terms of the Series A Preferred Stock are the
      same as that purchased by the officers and directors in the private placement
      discussed above. Total proceeds received from the sale were $3.8 million. The
      recording of dividends, if any, on the Series A Preferred Stock will reduce
      the
      Company's earnings per share in the period recorded. Since the market price
      of
      the Common Stock on the date of issuance (November 10, 2003) was $0.92 per
      share
      and the original conversion price was $0.55 per share, a beneficial conversion
      feature of $2.6 million was recorded. This was recorded as a dividend since
      the
      shares were immediately convertible, offset with a credit to capital in excess
      of par. The Company may cause conversion of the Series A Preferred Stock into
      Common Stock if the Common Stock is then listed on the New York Stock Exchange
      or the American Stock Exchange or is traded on the Nasdaq National Market System
      and the average closing price of a share of the Common Stock for any 20
      consecutive trading days equals or exceeds 300% of the conversion price then
      in
      effect. The Series A Preferred Stock is subject to mandatory redemption by
      the
      Company ratably on the last day of each quarter during the three year period
      commencing on December 31, 2009 at the liquidation value of $380 per share,
      plus accrued and unpaid dividends. Additionally, if the Company experiences
      a
      change in control it will, subject to certain limitations, offer to redeem
      the
      Series A Preferred Stock at a cash price of $380 per share plus (i) accrued
      and unpaid dividends and (ii) if the change of control occurs prior to
      December 31, 2007, all dividends that would be payable from the redemption
      date through December 31, 2007.





13


There
      were 278 and 1,583 shares of the Series A Preferred Stock converted into 0.2
      and
      1.2 million shares of Common Stock for the three and six month periods ended
      June 30, 2006, respectively.





**8.
      Earnings Per Share**





The
      computation of basic and diluted income (loss) per share for the three and
      six
      month periods ended June 30, 2006 and 2005 is as follows:




**Three
                Months Ended June 30,****2006**
            
            **2005****Net
                Income**
              **(loss)**
            
            **Weighted******
              **Average**
              **Shares**
            
            **Per
                Share**
              **Amount**
            
            **Net
                Income**
              **(loss)**
            
            **Weighted**
              **Average**
              **Shares**
            
            **Per
                Share**
              **Amount****Basic
                earnings (loss) per share**Net
                income (loss) from continuing operations
            
            $
            600
            
            
            12,379
            
            $
            0.05
            
            $
            (939
            )
            
            15,821
            
            $
            (0.06
            )Adjustments:Preferred
                stock dividends
            
            
            (98
            )
            
            12,379
            
            
            (0.01
            )
            
            (111
            )
            
            15,821
            
            
            (0.01
            )Income
                (loss) attributable to common stock from continuing
                operations
            
            $
            502
            
            
            12,379
            
            $
            0.04
            
            $
            (1,050
            )
            
            15,821
            
            $
            (0.07Loss
                from discontinued operations, net of tax
            
            
            (471
            )
            
            12,379
            
            
            (0.04
            )
            
            (425
            )
            
            15,821
            
            
            (0.02
            )Net
                income (loss) applicable to common stock per basic common
                share
            
            $
            31
            
            
            12,379
            
            $
            —
            
            $
            (1,475
            )
            
            15,821
            
            $
            (0.09
            )




**Diluted
                earnings (loss) per share**Net
                income (loss) from continuing operations applicable to common
                stock
            
            $
            502
            
            
            12,379
            
            $
            0.04
            
            $
            (1,050
            )
            
            15,821
            
            $
            (0.07
            )Effect
                of dilutive securities:Restricted
                stock plans
            
            
            
            
            
            412Stock
                option plans
            
            
            
            
            
            485Convertible
                preferred stock
            
            
            98
            
            
            9,223





Income
                (loss) attributable to common stock from continuing operations and
                assumed
                conversions
            
            
            600
            
            
            22,499
            
            $
            0.03
            
            
            (1,050
            )
            
            15,821
            
            
            (0.07
            )Loss
                from discontinued operations
            
            
            (471
            )
            
            22,499
            
            
            (0.02
            )
            
            (425
            )
            
            15,821
            
            
            (0.02
            )Net
                income (loss) attributable to common stock per diluted common
                share
            
            $
            129
            
            
            22,499
            
            $
            0.01
            
            $
            (1,475
            )
            
            15,821
            
            $
            (0.09
            )






14




**Six
                Months Ended June 30,****2006**
            
            **2005****Net
                Income**
              **(loss)**
            
            **Weighted******
              **Average**
              **Shares**
            
            **Per
                Share**
              **Amount**
            
            **Net
                Income**
              **(loss)**
            
            **Weighted**
              **Average**
              **Shares**
            
            **Per
                Share**
              **Amount****Basic
                and diluted earnings (loss) per share**Income
                (loss) from continuing operations
            
            $
            41
            
            
            14,350
            
            $
            —
            
            $
            (1,556
            )
            
            15,705
            
            $
            (0.10
            )Adjustments:Preferred
                stock dividends
            
            
            (205
            )
            
            14,350
            
            
            (0.01
            )
            
            (223
            )
            
            15,705
            
            
            (0.01
            )Loss
                attributable to common stock from continuing operations
            
            $
            (164
            )
            
            14,350
            
            $
            (0.01
            )
            $
            (1,779
            )
            
            15,705
            
            $
            (0.11
            )Net
                income from sale of Essex Electric, net of tax
            
            
            15,383
            
            
            14,350
            
            
            1.07
            
            
            —
            
            
            
            
            
            —Income
                (loss) from discontinued operations, net of tax
            
            
            4,932
            
            
            14,350
            
            
            0.34
            
            
            (3,068
            )
            
            15,705
            
            
            (0.20
            )Net
                income (loss) applicable to common stock per basic and diluted common
                share
            
            $
            20,151
            
            
            14,350
            
            $
            1.40
            
            $
            (4,847
            )
            
            15,705
            
            $
            (0.31
            )





The
      Company has excluded the assumed conversion of all stock options (1.0 million),
      restricted stock grants (0.9 million) and convertible preferred stock (12,550
      preferred shares convertible into 9.2 million common shares) from the Company’s
      earnings per share calculation for the six month period ended June 30, 2006
      and
      the assumed conversion of all stock options (1.5 million), restricted stock
      grants (0.8 million) and convertible preferred stock (14,285 preferred shares
      convertible into 10.5 million common shares) from the Company’s earnings per
      share calculation for the three and six month periods ended June 30, 2005,
      as
      the impact would be anti-dilutive due to the loss from continuing operations
      for
      those periods.





**9.
      Stock based compensation plans**





Alpine
      currently has one long-term employee stock option incentive plan: the 1997
      Stock
      Option Plan (the "1997 Plan"). The 1997 Plan has 1,500,000 shares of common
      stock reserved for issuance. There were 105,441 and 19,436 shares of common
      stock available under the 1997 Plan as of June 30, 2006 and December 31,
      2005, respectively. Participation in the 1997 Plan is generally limited to
      key
      employees and consultants of Alpine and its subsidiaries. The 1997 Plan provides
      for the granting of incentive and non-qualified stock options and stock
      appreciation rights. The options granted under the 1997 Plan vest in equal
      annual installments over the three year period commencing on the first
      anniversary date of the grant or, if earlier, upon the occurrence of a change
      in
      control of the Company and options cannot be exercised after ten years from
      the
      date of grant. During the quarter ended June 30, 2006 no options were granted
      under the 1997 Plan.





The
      Company adopted the Stock Compensation Plan for Non-Employee Directors (the
      "Stock Plan") in January 1999. Under the Stock Plan, each non-employee
      director of the Company automatically receives 50% of the annual retainer in
      either restricted common stock or non-qualified stock options, as elected by
      the
      director. In addition, each non-employee director may also elect to receive
      all
      or a portion of the remaining amount of the annual retainer and any meeting
      fees
      in the form of restricted stock or stock options in lieu of cash payment. During
      the first quarter of 2006, 13,206 non-qualified stock options and 5,031 shares
      of restricted stock were granted to non-employee directors. During the second
      quarter of 2006, 9,603 non-qualified stock options and 4,340 shares of
      restricted stock were granted to non-employee directors. All options and
      restricted stock granted during 2006 were issued at the fair market value of
      the
      Common Stock at the date of the grant. Each stock option granted under the
      Stock
      Plan expires on the tenth anniversary of the date of the grant. Awards of
      restricted stock and stock options under the stock plan vest upon the earliest
      of the following to occur: (i) the third anniversary of the date of the grant;
      (ii) a non-employee director’s death; and (iii) a change of control of the
      Company. Any shares issued pursuant to the Stock Plan will be issued from the
      Company's treasury stock.





Alpine
      sponsors a 1984 Restricted Stock Plan under which a maximum of 600,000 shares
      of
      Common Stock have been reserved for issuance. At June 30, 2006, there are 45,064
      shares available for issuance. During the quarter ended June 30, 2006, the
      Executive Compensation and Organization Committee of the Board of Directors
      (“the Compensation Committee”) granted no new


shares
      under this plan. Shares of restricted Common Stock under this grant vest in
      equal installments over a three year period commencing with the first
      anniversary of grant.





15


Alpine
      sponsors The Alpine Group, Inc. Deferred Stock Account Plan, an unfunded
      deferred stock compensation plan whereby certain key management employee
      participants are permitted to (i) defer the receipt of all, or a portion, of
      their non-cash salary or bonus and shares issued upon stock option exercises,
      as
      defined by the plan and (ii) reinvest deemed cash dividends allocable to Common
      Stock credited to a participant’s account under the plan into additional
      deferred Common Stock. The plan also provides for matching contributions by
      the
      Company in various percentages applied to shares of Common Stock deferred
      therein. The compensation cost associated with the matching contribution is
      amortized over the vesting period of the deferral. Shares deferred into the
      deferred stock plan are held in irrevocable grantor trusts. On April 19, 2006,
      the Compensation Committee approved voluntary reductions in executive base
      compensation levels for calendar 2006 and awarded grants of 155,359 shares
      of
      restricted common stock to participating executives. All executives elected
      to
      defer the receipt of the shares under this Plan. At June 30, 2006, 1,947,521
      shares of Common Stock have been deferred and are included in the grantor
      trusts. These shares and the corresponding liability are classified as
      components of treasury stock and additional paid-in capital, respectively,
      in
      the consolidated balance sheets. The total unamortized deferred compensation
      was
      $1.2 million and $0.5 million as of June 30, 2006 and December 31, 2005,
      respectively.





The
      following table summarizes restricted stock activity for the three month periods
      ended March 31 and June 30, 2006:




**Deferred
              Stock Account Plan**
            
            **Non-Employee
                Directors Plan**
            
            **1984
                Restricted Stock Plan****Shares**
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**
            
            **Shares**
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**
            
            **Shares**
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**Nonvested
                balance at December 31, 2005
            
            
            137,763
            
            $
            0.86
            
            
            139,345
            
            $
            1.08
            
            
            29,670
            
            $
            1.65Granted
            
            
            —
            
            
            —
            
            
            5,031
            
            
            2.76
            
            
            —
            
            
            —Vested
            
            
            (20,000
            )
            
            0.86
            
            
            (19,569
            )
            
            0.63
            
            
            (5,833
            )
            
            2.01Forfeited
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (14,169
            )
            
            1.67Nonvested
                balance at March 31, 2006
            
            
            117,763
            
            
            0.86
            
            
            124,807
            
            
            1.21
            
            
            9,668
            
            
            1,41Granted
            
            
            155,359
            
            
            3.40
            
            
            4,340
            
            
            3.20
            
            
            —
            
            
            —Vested
            
            
            (94,429
            )
            
            0.85
            
            
            (20,763
            )
            
            0.60
            
            
            (4,168
            )
            
            0.76Forfeited
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (5,000
            )
            
            2.01Nonvested
                balance at June 30, 2006
            
            
            178,693
            
            $
            3.07
            
            
            108,384
            
            $
            1.41
            
            
            500
            
            $
            0.91Unrecognized
                Compensation Costs
            
            $
            504,690
            
            
            
            
            $
            73,386
            
            
            
            
            $
            49Weighted
                Average Period Remaining
            
            
            3.0
            
            
            Years
            
            
            2.0
            
            
            Years
            
            
            0.3
            
            
            Years





Excluded
      from the table above are 563,590 and 490,909 shares as of June 30 and March
      31,
      2006, respectively that represent future Company matching contributions being
      earned on account of shares deferred by participants in the Deferred Stock
      Account Plan. Under the plan, the number of matching shares contributed by
      the
      Company varies based upon the length of the deferral period(s) selected by
      plan
      participants and the contribution is earned upon expiration of the related
      deferral period(s). The amortization of the cost associated with matching
      contribution shares is, and has been, included in the compensation expense
      of
      the Company, all of which is included in selling, general and administrative
      expenses in the statement of operations. There is approximately $0.6 million
      of
      unamortized compensation expense related to such matching contribution shares
      as
      of June 30, 2006 that is expected to be recognized over a weighted average
      period of 3.9 years.


16




The
      following table summarizes stock option activity for the six months ended June
      30, 2006.




**Shares**
              **Outstanding**
            
            
            **Weighted-**
              **Average
                Exercise**
              **Price**
            
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Terms
                (in years)**
            
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at December 31, 2005
            
            
            1,295,793
            
            $
            1.17
            
            
            7.32Exercised
            
            
            (240,368
            )
            
            0.81Canceled
            
            
            (69,334
            )
            
            1.37Granted
            
            
            13,206
            
            
            2.71


Outstanding
                at March 31, 2006
            
            
            999,297
            
            $
            1.26
            
            
            7.06
            
            $
            2,088,983Exercised
            
            
            (1,667
            )
            
            0.76Canceled
            
            
            (33,171
            )
            
            2.81Granted
            
            
            9,603
            
            
            3.26


Outstanding
                  at June 30, 2006
              
              
              974,062
              
              $
              1.23
              
              
              6.93
              
              $
              1,902,068Options
                  exercisable at June 30, 2006
              
              
              727,745
              
              $
              1.19
              
              
              6.61
              
              $
              1,448,199


The
      weighted average grant-date fair value of options granted for the six month
      periods ended June 30, 2006 and 2005 was $2.68 and $1.86, respectively. The
      aggregate intrinsic value of options exercised for the six month period ended
      June 30, 2006 was $2.40.





Information
      with respect to stock-based compensation plan stock options outstanding and
      exercisable at June 30, 2006 is as follows:




**Options
                Outstanding**
            
            **Options
                Exercisable****Range
                Of**
              **Exercise
                Prices**
            
            **Number**
              **Of
                Options**
              **Outstanding**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life
                (Years)**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number**
              **Of
                Options**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$0.450-$0.650
            
            
            180,040
            
            
            6.70
            
            $
            0.600
            
            
            115,450
            
            $
            0.572$0.76
            
            
            362,521
            
            
            6.98
            
            
            0.760
            
            
            362,521
            
            
            0.760$0.875—$2.700
            
            
            383,939
            
            
            7.15
            
            
            1.289
            
            
            219,985
            
            
            1.201$3.100—$9.813
            
            
            36,356
            
            
            6.55
            
            
            4.612
            
            
            18,583
            
            
            5.965$10.438—$17.938
            
            
            11,206
            
            
            3.06
            
            
            13.329
            
            
            11,206
            
            
            13.329974,062
            
            
            6.93
            
            
            1.227
            
            
            727,745
            
            
            1.190




On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires
      the measurement and recognition of compensation expense for all share-based
      payment awards made to employees and directors including employee stock options
      based on estimated fair values. SFAS 123(R) supersedes the Company’s previous
      accounting under Accounting Principles Board Opinion No. 25, “Accounting for
      Stock Issued to Employees” (“APB 25”) for periods beginning in fiscal
      2006.





The
      Company adopted SFAS 123(R) using the modified prospective transition method,
      which requires the application of the accounting standard as of January 1,
      2006,
      the first day of the Company’s fiscal year 2006. The Company’s financial
      statements as of and for the three and six months ended June 30, 2006 reflect
      the impact of SFAS 123(R). In accordance with the modified prospective
      transition method, the Company’s financial statements for prior periods have not
      been restated to reflect, and do not include, the impact of SFAS 123(R). Total
      compensation expense related to all stock based compensation plans (including
      restricted stock) for the three months ended June 30, 2006 and 2005, was $0.1
      million and less than $0.1 million, respectively. The incremental impact of
      adopting SFAS 123(R) included in the three and six month periods ended June
      30,
      2006 was $33,000 and $73,000, respectively.




17




SFAS
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service periods in the Company’s Statement of
      Operations. Prior to the adoption of SFAS 123(R), the Company accounted for
      stock-based awards to employees and directors using the intrinsic value method
      in accordance with APB 25 as allowed under Statement of Financial Accounting
      Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS
      123”).





Cash
      received from option exercises under all share-based payment arrangements for
      the six month period ended June 30, 2006 was $0.2 million. There were no options
      exercised during the three or six month periods ended June 30, 2005. As a result
      of the 1,667 options exercised during the three months ended June 30, 2006,
      1,667 shares reserved under the 1997 Plan were issued by the
      Company.





The
      fair
      value of each option award was calculated on the date of grant using the
      Black-Scholes option pricing model. This model requires the input of subjective
      assumptions that may have a significant impact on the fair value estimate.
      Expected volatility was based on historical volatility of the Company’s stock,
      and other factors. Expected dividends were based on historical dividend
      practices and no immediate plans to pay a dividend in respect of the common
      stock. The Company uses historical data to estimate option exercises and
      employee terminations within the valuation model. The risk-free rate for periods
      within the contractual life of the option were based on average U.S. Treasury
      rates in effect at the end of each quarter. The following assumptions were
      used
      for each respective period:




**Three
                and six months ended June 30,****2006**
            
            **2005**Risk
                free interest rate
            
            
            5.13
            %
            
            4.30
            %Expected
                life
            
            
            2.0
            
            
            2.0Expected
                volatility
            
            
            150
            %
            
            174
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %





**Pro
      forma Information for Periods Prior to the Adoption of FAS
      123R**





Prior
      to
      the adoption of FAS No. 123(R), disclosures with respect to stock-based
      compensation awards were provided in accordance with FAS No. 123, as amended
      by
      FAS No. 148, “Accounting for Stock-Based Compensation - Transition and
      Disclosures.” Under these guidelines, compensation expense was recognized only
      in respect of stock options granted at exercise prices set below market value.
      Since all option granted by the Company are set at exercise prices equal to
      the
      market value of the underlying common stock on the date of grant, no employee
      stock-based compensation expense with regards to employee stock options grants
      was recognizable under FAS 123(R) and, accordingly, none was reflected in the
      Company’s results of operations for the three and six month periods ended June
      30, 2005. Previously reported amounts have not been restated.





The
      pro
      forma information for the three and six month periods ended June 30, 2005 was
      as
      follows (in thousands, except per share amounts):




**Three Months Ended**
              **June
                30, 2005**
            
            **Six Months Ended**
              **June
                30, 2005**Net
                income (loss), as reported
            
            $
            (1,364
            )
            $
            (4,624
            )Add
                stock-based employee compensation expense included in reported net
                income
                (loss),net
                of tax
            
            
            22
            
            
            92Deduct
                total stock-based employee compensation expense determined under
                fair
                valuebased
                method for all awards, net of related tax effects
            
            
            (70
            )
            
            (192
            )




Pro
                forma net income (loss)
            
            
            (1,412
            )
            
            (4,724
            )Preferred
                stock dividends
            
            
            (111
            )
            
            (223
            )Proforma
                net income (loss) - applicable to common stock
            
            $
            (1,523
            )
            $
            (4,947
            )




Net
                income (loss) per share:Basic
                and diluted-as
                reported
            
            $
            (0.09
            )
            $
            (0.31
            )Basic
                and diluted-pro
                forma
            
            
            (0.10
            )
            $
            (0.32
            )





18


**10.
      Superior Cables Ltd. Share Purchase Agreement**





On
      February 22, 2006, Alpine Holdco Inc. (“Alpine Holdco”) and Superior Cables
      Holdings (1997) Ltd. (“SCH”), each wholly-owned subsidiaries of The Alpine
      Group, Inc. (the “Company”), Shrem Fudim Kelner Technologies Ltd., (“SFKT”), a
      company organized and registered under the laws of Israel, and Superior Cables
      Ltd., the Company’s then 46% indirectly owned affiliate (“SCL”), entered into a
      share purchase agreement (the “Agreement”). Subject and pursuant to the
      Agreement, Alpine Holdco agreed to invest $10 million in SCL in consideration
      for and purchase of 75 million newly issued SCL ordinary shares and SFKT agreed
      to invest $5 million in SCL in consideration for and purchase of 46,192,664
      new
      issued SCL ordinary shares and an option (the “SKFT Option”) to purchase an
      additional 4,619,266 SCL ordinary shares (the “Investment”). Also, subject and
      pursuant to the Agreement, immediately prior to consummation of the Investment,
      SCH agreed to sell 8,400,000 SCL ordinary shares to unrelated third parties
      (the
“SCH Sale”).





Also
      on
      February 22, 2006, Alpine Holdco, SCH and SFKT entered into a shareholders
      agreement (the “Shareholders Agreement”) which is effective upon consummation of
      the Investment. The Shareholders Agreement provides, among other matters, for
      (i) certain restrictions upon sale and disposition of SCL ordinary shares,
      (ii)
      rights of first offer and "tag along" rights in regard to certain proposed
      sales
      of SCL ordinary shares, (iii) mutual support and voting for candidates for
      election to the SCL board of directors, and (iv) sharing of certain management
      fees payable by SCL.





On
      February 23, 2006, SCL announced that SCL and Bank Hapoalim Ltd., (the “Bank”),
      SCL’s principal lender, entered into an agreement amending and restructuring
      SCL’s indebtedness with the Bank. Pursuant to that agreement, effective
      concurrently with and conditioned upon consummation of the Investment, the
      Bank
      agreed to refinance and extend approximately $11 million in long term
      indebtedness of SCL and convert $15 million in SCL indebtedness into a
      subordinate loan repayable only upon liquidation of SCL in consideration of
      an
      option to acquire 15% of SCL share capital at no further cost (the “Bank
      Restructure”).




During
      April, 2006, (i) SKFT assigned to Art P.E., a limited partnership investment
      fund organized under the laws of Israel and an affiliate of SKFT, and Art P.E.
      assumed all of the rights and obligations of SKFT under the Agreement and the
      Shareholders Agreement, and (ii) the number of ordinary SCL shares required
      to
      be sold by SCH pursuant to the SCH Sale was increased to 9,280,000.





On
      June
      26, 2006, all of the transactions described above, including the Investment,
      the
      SCH Sale, the Bank Restructure and the effectiveness of the Shareholder
      Agreement, were consummated by the respective parties thereto. Following this
      recapitalization, the Company owned approximately 52% of SCL. The Company
      currently intends to sell an additional 3-4% of SCL shares to an unrelated
      third
      party (or parties) during the second half of 2006 reducing its ownership to
      48 -
      49%.





**11.
      Modified “Dutch Auction” Tender Offer**





On
      March
      1, 2006, Alpine commenced a modified “Dutch Auction” tender offer (the “Tender
      Offer”) to purchase up to a maximum of 6 million shares plus, at its discretion,
      an additional number (the “overallotment”) not to exceed 2% of its outstanding
      Common Stock at a price per share of not less than $3.00 and not greater than
      $3.50. On April 4, 2006, Alpine modified its offer to increase the maximum
      number of shares to be purchased to 6.5 million plus the overallotment and
      to
      extend to April 18, 2006 the Tender Offer expiration date. Following the
      expiration date, and pursuant to the terms and conditions of the Tender Offer,
      out of the 7,698,805 validly tendered shares of Common Stock, Alpine accepted
      and purchased a total of 6,684,670 shares at a purchase price of $3.375 per
      share or approximately $22.6 million. The shares purchased represented 37.3%
      of
      Alpine’s outstanding Common Stock and 24.7% of such outstanding Common Stock
      assuming conversion of all of Alpine’s outstanding Series A Preferred Stock.




19





ITEM
      2.
      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





**General**





The
      Alpine Group, Inc. (together with its subsidiaries, “Alpine” or the “Company”,
      unless the context otherwise requires), is a holding company which over the
      past
      several years has owned controlling equity interests in industrial businesses
      that have been operated as subsidiaries. At June 30, 2006, Alpine owned 100%
      of
      Essex Electric Inc. (“Essex Electric”), which currently is engaged in the
      business of copper scrap reclamation and the manufacture and sale of plastic
      resin compounds, and 52.1% of Superior Cables Ltd. (“SCL”), the largest Israeli
      based producer of wire and cable products.





On
      January 31, 2006 Essex Electric sold certain of its assets comprising its
      building wire business (the “Essex Electric Sale”) to the Southwire Company
      (“Southwire”). The agreement provided for the sale by Essex Electric of all of
      its closing date building wire related inventory and prepaid assets, its
      Florence, Alabama manufacturing plant and equipment, and the assumption by
      Southwire of certain contracts and selected liabilities related to the business.
      Essex Electric retained substantially all of its other liabilities, including
      the indebtedness under its revolving credit facility. The revolving credit
      facility was repaid in its entirety and terminated in connection with the Essex
      Electric Sale. Excluded from the sale were cash, cash equivalents and accounts
      receivable of Essex Electric, a copper scrap reclamation plant and operation
      based in Jonesboro, Indiana, a plastic resin compounding plant and operation
      based in Marion, Indiana and three leased warehouse distribution centers. The
      purchase price was the sum of (i) $27 million plus (ii) the closing date value
      of Essex Electric’s inventory and certain prepaid assets less certain
      liabilities. The purchase price of $55.6 million was paid in cash by Southwire
      at closing and was subject to customary post-closing review and adjustment
      by
      the parties in accordance with certain agreed upon procedures provided for
      under
      the asset purchase agreement. Such review and adjustment occurred subsequent
      to
      closing, was finalized on May 3, 2006 and resulted in an immaterial post-closing
      adjustment. The estimated total net cash proceeds from the Essex Electric Sale
      were approximately $83 million, including the receipt of the net purchase price
      from Southwire Company, the collection of retained accounts receivable less
      the
      payment of retained liabilities (including repayment of the revolving credit
      facility) of the business and expenses related to the Essex Electric
      Sale.





On
      June  26,
      2006,
      Alpine and other investors recapitalized SCL and in connection therewith, Alpine
      purchased newly issued shares of SCL. As part of the recapitalization
      transaction, Alpine sold 5.6% of SCL shares (resulting in its current 52%
      ownership) to unrelated third parties and intends to sell an additional 3-4%
      to
      unrelated third party(ies) (reducing its ownership to 48 - 49%).





**Results
      of Operations** **—** **Three
      Month Period Ended June 30, 2006 as Compared to the Three Month period Ended
      June 30, 2005**





Continuing
      Operations





Consolidated
      sales for the three month
      period ended June 30, 2006 were $6.1 million, an increase of 103.3% compared
      to
      sales of $3.0 million for the three month period ended June 30, 2005. The
      increase was due primarily to increased copper prices and the resultant impact
      on sales of copper scrap processed and sold from the Jonesboro, Indiana
      operation. COMEX copper prices increased from an average of $1.53 during the
      second quarter of 2005 to an average of $3.38 during the second quarter of
      2006,
      resulting in increased cost to purchase copper wire scrap and increased sales
      value of the copper recovered in the scrap reclamation process. A portion of
      the
      increase in sales was also due to the sale of resin compounds. Prior to the
      Essex Electric Sale, production and usage of resin compounds were solely for
      internal use, however the compounding plant in Marion, Indiana was not included
      in the Essex Electric Sale and is now being utilized to produce compounds for
      sale to external customers.





Gross
      profit for the three month period ended June 30, 2006 was negative
      $0.2 million, a decrease of $0.4 million as compared to gross profit
      of $0.2 million for the three month period ended June 30, 2005 due primarily
      to
      lower production volumes at the Jonesboro, IN facility primarily because of
      reduced volume related to the building wire operation that was sold. In
      addition, the Marion, IN operation operated at about 50% of the volume level
      of
      the second quarter of 2005, when all of its production was used to support
      internal requirements of the now discontinued building wire business of Essex
      Electric.




The
      Company's operating loss for the three month period ended June 30, 2006 was
      $1.4
      million compared to an operating loss of $0.9 million for the comparable
      2005 period. The increase in operating loss was due primarily to the
      aforementioned reduced gross profit and slightly higher selling, general and
      administrative expenses.





Interest
      expense of $0.6 million for the three month period ended June 30, 2006 was
      an
      increase of approximately $0.4 million compared to the $0.2 million in interest
      expense for the three months ended June 30, 2005. This increase was due
      primarily to the acceleration of $0.5 million of unamortized discounts related
      to the redemption of approximately $2.6 million of 6% subordinated notes during
      the second quarter of 2006.





20


As
      mentioned in the Liquidity and Capital Resources section below, on June 26,
      2006
      Alpine sold approximately 9.3 million ordinary shares of Superior Cables Ltd.
      (“SCL”), an unconsolidated affiliate, to unrelated third parties for $1.2
      million. Since the Company had previously written down its investment to zero
      as
      a result of incurred losses, the Company recorded a gain on the sale of $1.2
      million during the second quarter of 2006.





Dividend
      and interest income increased $0.4 million for the three month period ended
      June
      30, 2006 compared with the same period in 2005 due primarily to an increase
      in
      marketable securities in 2006 as a result of the Essex Electric Sale in January
      2006. Realized gains on the sale of securities increased $0.5 million in the
      three month period ended June 30, 2006 compared to the same period in
      2005.





**Results
      of Operations** **—Six** **Month Period Ended June 30, 2006 as Compared to the Six Month period Ended
      June
      30, 2005**





Continuing
      Operations





Consolidated
      sales for the six month
      period ended June 30, 2006 were $14.1 million, an increase of 107.4% compared
      to
      sales of $6.8 million for the six month period ended June 30, 2005. The increase
      was due primarily to the external sale of resin compounds and the impact of
      increased copper prices on the sale of copper scrap. Prior to the Essex Electric
      Sale, production and usage of resin compounds were solely for internal use,
      however the compounding plant in Marion, Indiana was not included in the Essex
      Electric Sale and is now being utilized to produce compounds for sale to
      external customers. COMEX copper prices increased from an average of $1.50
      for
      the first half of 2005 to an average of $2.81 for the first half of 2006
      resulting in increased cost to purchase copper wire scrap and increased sales
      value of the copper recovered in the scrap reclamation process.





Gross
      profit for the six month period ended June 30, 2006 was near breakeven, a
      decrease of $0.3 million as compared to gross profit of $0.3 million for
      the six month period ended June 30, 2005 due primarily to lower production
      volumes at the Jonesboro, IN facility primarily because of reduced volume
      related to the building wire operation that was sold. In addition, the Marion,
      IN operation operated at about 40% of the volume level of the first half of
      2005, when all of its production was used to support internal requirements
      of
      the now discontinued building wire business of Essex Electric. Gross profit
      as a
      percentage of net sales was near zero for the first half of 2006 compared to
      a
      positive 3.8% for the first half of 2005, due primarily to the aforementioned
      reduced production levels at Jonesboro and Marion.





The
      Company's operating loss for the six month period ended June 30, 2006 was $2.3
      million compared to an operating loss of $2.0 million for the comparable
      2005 period. The increase in operating loss was due primarily to the
      aforementioned decreased gross profit.





Interest
      expense of $0.7 million for the six month period ended June 30, 2006 was an
      increase of approximately $0.3 million compared to the $0.4 million in interest
      expense for the six months ended June 30, 2005. This increase was due primarily
      to the acceleration of $0.5 million of unamortized discounts related to the
      redemption of approximately $2.6 million of 6% subordinated notes during the
      second quarter of 2006.





As
      mentioned in the Liquidity and Capital Resources section below, on June 26,
      2006
      Alpine sold approximately 9.3 million existing ordinary shares of Superior
      Cables Ltd. (“SCL”), an unconsolidated affiliate, to unrelated third parties for
      $1.2 million. Since the Company had previously written down its investment
      to
      zero, the Company recorded a gain on the sale of $1.2 million during the second
      quarter of 2006.





Dividend
      and interest income increased $0.7 million for the six month period ended June
      30, 2006 compared with the same period in 2005 due primarily to an increase
      in
      marketable securities in 2006 as a result of the Essex Electric Sale in January
      2006. Realized gains on the sale of securities increased $0.5 million in the
      six
      month period ended June 30, 2006 compared to the same period in
      2005.




21





Discontinued
      Operations





As
      previously discussed, on January 31, 2006, Essex Electric completed the sale
      of
      certain of its assets comprising its building wire business to Southwire
      Company. The results of operations related to the business and assets associated
      with this transaction have been classified as discontinued operations in the
      financial statements contained herein. Net income from discontinued operations
      for the six-month period ended June 30, 2006 was $20.3 million, compared with
      a
      net loss of $3.1 million for the six-month period ended June 30, 2005. The
      2006
      income includes the gain on the Essex Electric Sale of $15.4 million, net of
      taxes. The increase was also due to a $21.1 million improvement in operating
      income in 2006 compared to the first half of 2005. This improvement was due
      primarily to strong sales and improved margins for the month of January 2006.
      Sales margins in the building wire markets in January 2006 were significantly
      higher than in the first half of 2005. Also, January 2006 included a $12.4
      million pre-tax benefit from a LIFO decrement as a result of the reduction
      of
      inventories in January. The first half of 2006 included approximately $6.4
      million of pre-tax operating expenses related to the discontinued operations,
      including $1.7 million of one-time employee termination benefits, $1.7 million
      of contract termination costs, $1.5 million of transitional costs and $0.8
      million of contractual lease obligations. Net income from discontinued
      operations includes $14.6 million of tax provision for the first half of 2006,
      compared with a tax benefit of $2.1 million for the first half of 2005. This
      increase was due to a $10.3 million tax provision related to the gain on the
      Essex Electric Sale and the increased operating earnings, net of expenses,
      related to the discontinued operations.








**Liquidity
      and Capital Resources**





In
      December 2002, Alpine, through its newly formed, wholly-owned subsidiary,
      Alpine Holdco, acquired the following assets and securities:
      (1) substantially all of the assets, subject to related accounts payable
      and accrued liabilities, of the electrical wire business of Superior TeleCom
      Inc. (“Superior”), which was thereafter owned and operated by Essex Electric, a
      newly formed, then wholly-owned subsidiary of Alpine Holdco; (2) all of the
      outstanding shares of capital stock of DNE Systems, and (3) approximately 47%
      of
      Superior Cables Ltd. The acquisition was financed by approximately
      $10 million of Alpine's cash and cash equivalents and borrowings by Alpine
      Holdco under a revolving credit facility.





DNE
      Systems was sold on July 29, 2004 and the Essex Electric building wire assets
      were sold on January 31, 2006 (the “Essex Electric Sale”) (see Note 4 to the
      condensed consolidated financial statements). The revolving credit facility
      was
      repaid in full and terminated on January 31, 2006.





On
      August
      4, 2003, the Company issued $4.3 million principal amount of 6% Junior
      Subordinated Notes (the "Subordinated Notes") in exchange for 3,479,656 shares
      of its Common Stock. The Subordinated Notes were initially recorded at an amount
      equal to the fair market value of the Common Stock exchanged resulting in an
      initial discount of $1.4 million. The discount is being accreted over the term
      of the Subordinated Notes using a level interest method. The Subordinated Notes
      accrue interest at 6% per annum payable in cash semiannually each
      December 31 and June 30. The Subordinated Notes are the Company's
      general unsecured obligations, subordinated and subject in right of payment
      to
      all of the Company's existing and future senior indebtedness, which excludes
      trade payables incurred in the ordinary course of business. The Company will
      be
      required to repay one-eighth  of
      the
      outstanding principal amount of the Subordinated Notes commencing on
      June 30, 2007 and semiannually thereafter, so that all of the Subordinated
      Notes will be repaid by December 31, 2010. The Company must offer to redeem
      all of the Subordinated Notes at the redemption price then in effect in the
      event of a change of control. The Subordinated Notes were issued under an
      indenture that does not subject the Company to any financial covenants. At
      June
      30, 2006, $0.5 million of the Subordinated Notes were outstanding. During the
      three month period ended June 30, 2006,$2.6 million of the Subordinated Notes
      were redeemed and the Company recorded $0.5 million of additional interest
      expense related to the acceleration of the related unamortized
      discount.





During 2003,
      Alpine completed the sale of 18,264 shares of a new issue of Series A Cumulative
      Convertible Preferred Stock (the "Series A Preferred Stock") for a purchase
      price of $380 per share, or an aggregate of approximately $6.9 million. Holders
      of the Series A Preferred Stock are entitled to receive, when, as and if
      declared by the board of directors out of funds legally available for payment,
      cash dividends at an annual rate of $30.40 per share. The Series A
      Preferred Stock, originally was convertible into Common Stock, at the option
      of
      the holder, at the rate of 691 shares of Common Stock per share of Series A
      Preferred. As a result of a special dividend declared by the Company discussed
      below, the conversion rate increased to 743.01 shares of Common Stock per share
      of Series A Preferred Stock.





The
      Company may cause conversion of the Series A Preferred Stock into Common Stock
      if the Common Stock is then listed on the New York Stock Exchange (NYSE) or
      the
      American Stock Exchange or is traded on the Nasdaq National Market System and
      the average closing price per share of the Common Stock for any 20 consecutive
      trading days equals or exceeds 300% of the conversion price then in effect.
      The
      Series A Preferred Stock is subject to mandatory redemption by the Company
      ratably on the last day of each quarter during the three-year period commencing
      on December 31, 2009 at the liquidation value of $380 per share, plus accrued
      and unpaid dividends. Additionally, if the Company experiences a change in
      control it will, subject to certain limitations, offer to redeem the Series
      A
      Preferred Stock at a cash price of $380 per share plus (i) accrued and
      unpaid dividends and (ii) if the change of control occurs prior to
      December 31, 2007, all dividends that would be payable from the redemption
      date through December 31, 2007.





22


Holders
      of the Series A Preferred Stock are entitled to vote their shares on an
      as-converted basis together with the Company's common stockholders. In addition,
      the Company may not (a) enter into a merger, sale of all or substantially
      all of its assets or similar transaction without the approval of holders of
      at
      least a majority of the shares of Series A Preferred Stock, or
      (b) alter or change the powers, preferences or special rights (including,
      without limitation, those relating to dividends, redemption, conversion,
      liquidation preference or voting) of the shares of Series A Preferred Stock
      so as to affect them materially and adversely, or issue any senior stock,
      without the approval of holders of at least a majority of the shares of
      Series A Preferred Stock. In the event of any liquidation, dissolution or
      winding up of Alpine, after the payment of the liquidation preference in respect
      of any senior stock, holders of the Series A Preferred Stock will be
      entitled to receive the liquidation price of $380 per share plus an amount
      equal
      to (a) if the liquidation, dissolution or winding up occurs prior to
      December 31, 2007, all dividends that would be payable on a share of
      Series A Preferred Stock from the date of liquidation, dissolution or
      winding up through December 31, 2007 and (b) any accrued and unpaid
      dividends to the payment date, before any payment is made to the holders of
      common stock or any other junior securities, subject to certain exceptions.
      Proceeds from the sale of the Series A Preferred Stock were used to reduce
      existing indebtedness and for general corporate purposes.





During
      the three and six month periods ended June 30, 2006, 278 and 1,583 shares,
      respectively, of Series A Preferred Stock were converted into approximately
      0.2
      and 1.2 million shares of Common Stock.





On
      March
      1, 2006, the Company commenced a modified “Dutch Auction” tender offer (the
“Tender Offer”) to purchase up to a maximum of 6 million shares plus, at its
      discretion, an additional number (the “overallotment”) not to exceed 2% of its
      outstanding Common Stock at a price per share of not less than $3.00 and not
      greater than $3.50. On April 4, 2006, the Company modified its offer to increase
      the maximum number of shares to be purchased to 6.5 million plus the
      overallotment and to extend to April 18, 2006 the Tender Offer expiration date.
      Following the expiration date, and pursuant to the terms and conditions of
      the
      Tender Offer, out of the 7,698,805 validly tendered shares of Common Stock,
      the
      Company accepted and purchased a total of 6,684,670 shares at a purchase price
      of $3.375 per share or approximately $22.6 million. The shares purchased
      represented 37.3% of the outstanding Common Stock of the Company and 24.7%
      of
      such outstanding Common Stock assuming conversion of all of the Company’s
      outstanding Series A Preferred Stock.





During
      2001 and 2002, the Company entered into commercial transactions intended to
      offset the potential impact of interest rate changes on the Company’s
      investments, including the investment of the net cash proceeds from the sale
      of
      an equity investment and established a tax contingency reserve on its balance
      sheet corresponding to the realized tax benefits. At June 30, 2006, the Company
      has reserved $17.4 million of the related benefit and interest and the amount
      has been recorded under other long-term liabilities. The Company does not
      anticipate that any portion of the tax contingency reserve will become payable
      in the next twelve months.




Since
      1993, Alpine has been a party to a guaranty of obligations of a former
      affiliate, Superior, under a lease by Superior of a manufacturing facility
      in
      Brownwood, Texas. The lease currently provides for monthly payments of $56,000
      subject to adjustments for changes in the consumer price index. The lease term
      expires in 2018 but may be extended through 2033. As such, the maximum potential
      amount of future payments under the guaranty through 2018 would be approximately
      $8.4 million. Any further extensions would amount to a guarantee of
      approximately $0.7 million per year. Since
      the
      guarantee was issued prior to and has not been modified after December 31,
      2002,
      a liability for the fair value of the obligation is not recorded in the
      condensed consolidated financial statements. While
      Alpine's continuing obligations, if any, under the guaranty are not free from
      doubt, the Company believes the facility and underlying lease are valuable
      assets of Superior and expects that Superior will perform as tenant thereunder
      and continue to pay its obligations. In addition, Alpine would have a claim
      for
      indemnification and reimbursement from Superior in respect of any amounts paid
      by Alpine as guarantor.





Alpine
      has made short-term advances to the United States subsidiary of SCL, secured
      by
      United States-based inventory and accounts receivable, at an interest rate
      of
      LIBOR plus 1.4% per annum, to augment funding of that affiliate’s growth and
      working capital, particularly in the United States. There was $4.0 and $1.4
      million of advances included as note receivable from affiliate as of June 30,
      2006 and December 31, 2005, respectively. Total advances are not to exceed
      a
      maximum of $4.0 million and all advances must be repaid on demand. On August
      1,
      2006, Alpine made a separate short-term loan of $1.0 million to SCL concurrently
      with the additional advance to SCL of $1.0 million by Bank Hapoalim, Ltd.,
      SCL’s
      primary lender. These funds are being utilized by SCL for additional working
      capital purposes. Alpine’s loan is subordinate to SCL’s bank debt, accrues
      interest at LIBOR plus 1.4% per annum and matures on January 31, 2007.
      Otherwise, the operations of Superior Cables Ltd. are funded and financed
      separately, with recourse to Superior Cables Ltd. but otherwise on a
      non-recourse basis to Alpine.


23




On
      June
      26, 2006, Alpine Holdco invested $10.0 million in SCL in consideration for
      and
      purchase of 75 million newly issued SCL ordinary shares. Concurrently with
      this
      transaction, a wholly owned subsidiary of Alpine Holdco sold approximately
      9.3
      million of existing ordinary shares of SCL to unrelated third parties for $1.2
      million. This transaction was funded with existing cash and cash equivalents.
      Alpine Holdco, through this wholly owned subsidiary, currently intends to sell
      all or a portion of their remaining existing ordinary shares (7.1 million
      shares) to unrelated parties during 2006.





As
      of
      June 30, 2006, Alpine had cash, cash equivalents and marketable securities
      of
      approximately $49.2 million including $3.0 million of restricted cash.
      Management believes these funds are sufficient to meet the Company’s liquidity
      needs during the next twelve months, including payment of income taxes which
      may
      be payable as a result of the Essex Electric Sale. It is anticipated that
      earnings from cash, cash equivalents and investments will be sufficient to
      fund
      continuing operating expenses. A deficit, if any, would be funded by available
      cash resources.





Additionally,
      the Company continues to explore and consider utilizing its available liquid
      assets for a range of investment and business acquisitions.




ITEM
      3.
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Currently,
      the Company’s exposure to market risk primarily relates to the Company’s
      investments in marketable securities. A hypothetical one percent change in
      the
      value of marketable securities would have an impact on the asset values of
      approximately $0.5 million.





ITEM
      4.
      CONTROLS AND PROCEDURES





*Evaluation
      of Controls and Procedures*





As
      of the
      end of the period covered by this Quarterly Report on Form 10-Q, an
      evaluation of the effectiveness of the design and operation of the Company's
      disclosure controls and procedures was carried out by the Company under the
      supervision and with the participation of the Company's management, including
      the Chief Executive Officer and Chief Financial Officer. Based on that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that the Company's disclosure controls and procedures were effective at a
      reasonable assurance level as of the end of the period covered by this Quarterly
      Report on form 10-Q. A system of controls, no matter how well designed and
      operated, cannot provide absolute assurance that the objectives of the system
      of
      controls are met, and no evaluation of controls can provide absolute assurance
      that all control issues and instances of fraud, if any, within a company have
      been detected. There have been no changes in the Company's internal control
      over
      financial reporting that occurred during the most recent fiscal quarter that
      have materially affected, or are reasonably likely to materially affect, the
      Company's internal control over financial reporting.





*Except
      for the historical information herein, the matters discussed in this quarterly
      report on form 10-Q include forward-looking statements that may involve a
      number of risks and uncertainties. Actual results may vary significantly based
      on a number of factors, including, but not limited to, risks related to changing
      economic conditions, including changes in short term interest rates and other
      risk factors detailed in the Company’s most recent filings with the Securities
      and Exchange Commission.*




24





**PART
      II. OTHER INFORMATION**








ITEM
      6.
      EXHIBITS





**(a)**
            **Exhibits**


31.1*
            Certification
                of the Company's Chief Executive Officer 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 the Company's Chief Financial Officer pursuant to 18 U.S.C.
                Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32*
            Certification
                of the Company's Chief Executive Officer and Chief Financial Officer
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.




___________





*
            Filed
                herewith






25





**SIGNATURES**





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






THE
                ALPINE GROUP, INC.Date: August
              14, 2006
            By:
            /s/ David
              A.
              OwenDavid
              A. Owen*Chief
              Financial Officer*(duly
                authorized officer and principal financial and accounting
                officer)


26