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 September 30, 2006

                                  or

[ ]   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 1-8496

                       COGNITRONICS CORPORATION
        (Exact name of registrant as specified in its charter)


            NEW YORK                            13-1953544
(State or other jurisdiction of              (I.R.S. Employer
 incorporation or organization)               Identification No.)

3 Corporate Drive, Danbury, Connecticut          06810-4130
(Address of principal executive offices)         (Zip Code)

                            (203) 830-3400
         (Registrant's telephone number, including area code)

        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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.         Yes  [x]     No [ ]
        Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, or a non-accelerated
filer.  See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act.  (Check one): Large
accelerated filer ___
Accelerated filer ___     Non-Accelerated filer   x

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

        The Registrant has 6,652,370 shares of Common Stock, $.20
par value per share outstanding at October 20, 2006.
                        Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
                   COGNITRONICS CORPORATION AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                            (dollars in thousands)
                                          September 30,      December 31,
                                               2006              2005
                                          -------------      ------------
                                           (Unaudited)          (Note)
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                 $ 1,125           $ 1,750
  Marketable securities                       3,069             6,370
  Accounts receivable, net                    1,217             3,565
  Inventories                                 1,934             2,245
  Other current assets                          239               137
                                            -------           -------
      TOTAL CURRENT ASSETS                    7,584            14,067
LOANS TO OFFICERS                               473             2,029
PROPERTY, PLANT AND EQUIPMENT, NET            1,071             1,208
OTHER ASSETS, NET                             3,559             3,901
                                            -------           -------
                                            $12,687           $21,205
                                            =======           =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                          $   356           $   814
  Notes payable                                 300               300
  Accrued compensation and benefits             871             1,817
  Deferred service revenue                      823             2,976
  Income taxes payable                          497               405
  Other accrued expenses                        962               504
                                            -------           -------
      TOTAL CURRENT LIABILITIES               3,809             6,816

NON-CURRENT LIABILITIES                         868               374
STOCKHOLDERS' EQUITY
  Common Stock, par value $.20 per share,
    authorized 20,000,000 shares;
    issued 7,016,583 shares                   1,403             1,403
  Additional paid-in capital                 13,957            15,498
  Accumulated deficit                        (5,960)           (1,281)
  Accumulative other comprehensive loss        (580)             (580)
  Unearned compensation                                          (156)
                                            -------           -------
                                              8,820            14,884
  Less cost of 367,013 and 111,142
    common shares in treasury                  (810)             (869)

                                            -------           -------
     TOTAL STOCKHOLDERS' EQUITY               8,010            14,015
                                            -------           -------
                                            $12,687           $21,205
                                            =======           =======

See Note to Condensed Consolidated Financial Statements.
                  COGNITRONICS CORPORATION AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  AND COMPREHENSIVE INCOME(LOSS) (UNAUDITED)
               (dollars in thousands except per share amounts)

                                 Three Months Ended    Nine Months Ended
                                    September 30,         September 30,
                                    2006      2005       2006      2005
                                    ----      ----       ----      ----
REVENUES
  Sales                          $ 1,455   $  751     $ 5,676   $ 2,929
  Service                            444      235       1,264       832
                                 -------   ------     -------   -------
                                   1,899      986       6,940     3,761
COST OF REVENUES                     950      598       3,894     1,969
                                 -------  -------     -------   -------
  Gross Profit                       949      388       3,046     1,792
OTHER COSTS AND EXPENSES:
  Research and development           947      760       3,828     2,269
  Selling, general and
     administrative                1,481      772       4,169     2,510
  Other (income)expense, net        (101)     (94)       (281)     (228)
                                 -------   ------     -------   -------
  Loss before income taxes        (1,378)  (1,050)     (4,670)   (2,759)
PROVISION FOR INCOME TAXES            15       15          45        45
                                 -------   ------     -------   -------
  Loss from continuing
    operations                    (1,393)  (1,065)     (4,715)   (2,804)
  Discontinued operations:
    Loss, net of tax                         (266)                (977)
    Impairment loss                          (319)                (319)
  Cumulative effect of change in
    accounting principle,
      net of tax                                                    36
                                 -------   ------     -------   -------
NET LOSS                          (1,393)  (1,650)      (4,679)  (4,100)
Currency translation adjustment                (3)                 (28)
                                 -------   ------     -------   -------
COMPREHENSIVE LOSS               $(1,393) $(1,653)    $(4,679) $(4,128)
                                 =======  =======     =======  =======
LOSS PER BASIC AND DILUTED
 SHARE:
  Continuing operations          $ (0.20)  $(0.19)    $ (0.67) $ (0.50)
  Discontinued operations                   (0.05)               (0.17)
  Impairment loss                           (0.06)               (0.06)
  Cumulative effect of change
    in accounting principle,
    net of tax                                            .01
                                 -------   ------     -------   -------
  Net loss                       $ (0.20) $ (0.29)    $ (0.67)  $ (0.72)
                                 =======  =======     =======   =======
Weighted average number of
  basic and diluted shares
    outstanding:               6,805,277 5,685,997  6,991,153 5,657,993
                               ========= =========  ========= ========
See Note to Condensed Consolidated Financial Statements.

                  COGNITRONICS CORPORATION AND SUBSIDIARIES

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                            (dollars in thousands)

                                                   Nine Months Ended
                                                     September 30,
                                                     2006       2005
                                                     ----       ----
NET CASH PROVIDED(USED) BY
   OPERATING ACTIVITIES                           $(3,273)    $2,202
                                                  -------     ------
INVESTING ACTIVITIES
  Purchase of marketable securities                (4,753)    (8,123)
  Sales of marketable securities                    7,967      6,665
  Repayment of officers' loans                        124
  Additions to property, plant and
    equipment                                        (239)       (47)
                                                  -------     ------
     NET CASH PROVIDED(USED) BY
      INVESTING ACTIVITIES                          3,099     (1,505)
                                                  -------     ------
FINANCING ACTIVITIES
  Repurchase of shares                               (452)
  Shares issued pursuant to
    employee stock plans                                1         38
                                                  -------     ------
    NET CASH (USED)PROVIDED BY
      FINANCING ACTIVITIES                           (451)        38
                                                  -------     ------
CASH PROVIDED(USED) BY DISCONTINUED
  OPERATIONS                                            0        (90)
                                                  -------     ------
INCREASE(DECREASE)IN CASH AND
  CASH EQUIVALENTS                                   (625)       645
CASH AND CASH EQUIVALENTS - BEGINNING
   OF PERIOD                                        1,750      2,222
                                                  -------     ------

CASH AND CASH EQUIVALENTS - END OF PERIOD         $ 1,125     $2,867
                                                  =======     ======
INCOME TAXES PAID                                 $     2     $    2
                                                  =======     ======
INTEREST PAID                                      $    0     $    2
                                                  =======     ======
NON-CASH INVESTING AND FINANCING ACTIVITES
  Repayment of officers' loans and
   accumulated interest with Common Stock          $1,472     $    -
                                                  =======     ======
See Note to Condensed Consolidated Financial Statements.







       NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                              September 30, 2006

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month  and
nine-month periods ended September 30, 2006 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2006.
The balance sheet at December 31, 2005 has been derived from the audited
consolidated financial statements at that date. For further information,
refer to the consolidated financial statements and footnotes thereto and the
quarterly financial data included in the Company's Annual Report on Form
10-K for the year ended December 31, 2005.

Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans An Amendment of FASB Statements No. 87, 88, 106, and
132R" (SFAS No. 158). SFAS No. 158 requires that the funded status of
defined benefit postretirement plans be recognized on the company's balance
sheet, and changes in the funded status be reflected in comprehensive
income, effective fiscal years ending after December 15, 2006. SFAS No. 158
also requires the measurement date of the plan's funded status to be the
same as the company's fiscal year-end effective fiscal years ending after
December 15, 2008.  If the company had applied the provisions of SFAS No.
158 to the consolidated balance sheet for fiscal 2005, would have been no
impact.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
(SFAS No. 157). The purpose of SFAS No. 157 is to define fair value,
establish a framework for measuring fair value and enhance disclosures about
fair value measurements. The measurement and disclosure requirements are
effective for the company beginning in the first quarter of fiscal 2008. The
company is currently evaluating whether SFAS No. 157 will result in a change
to its fair value measurements.

In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109"
(SFAS No. 109).  The interpretation contains a two step approach to
recognizing and measuring uncertain tax positions accounted for in
accordance with SFAS No. 109. The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates
it is more likely than not that the position will be sustained on audit,
including resolution of related appeals or litigation processes, if any. The
second step is to measure the tax benefit as the largest amount which is
more than 50% likely of being realized upon ultimate settlement. The
provisions are effective for the company beginning in the first quarter of
fiscal 2007. The company is currently evaluating the impact this statement
will have on its consolidated financial statements.



Inventories (in thousands):
                                       September 30,      December 31,
                                           2006               2005
                                           ----               ----
Finished and in process                  $1,509             $1,571
Materials and purchased parts               425                674
                                         ------             ------
                                         $1,934             $2,245
                                         ======             ======

Non-Current Liabilities (in thousands):

                                       September 30,      December 31,
                                           2006               2005
                                           ----               ----
Accrued supplemental pension plan        $  273             $  313
Accrued deferred compensation               149                176
Accrued pension expense                     703                775
                                         ------             ------
                                          1,125              1,264
     Less current portion included
       in accrued compensation and
         benefits                           257                890
                                         ------             ------
                                         $  868             $  374
                                         ======             ======

Income Per Share

In computing basic earnings per share, the dilutive effect of stock options
and warrants are excluded, whereas for diluted earnings per share they are
included.  For all periods presented, options and warrants were
anti-dilutive and therefore were not included in the determination of net
loss per share.


Stock-Based Compensation

Effective January 1, 2006, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 123(R) ("SFAS No. 123(R)"),
"Share-Based Payment," which establishes accounting for equity instruments
exchanged for employee services. Under the provisions of SFAS No. 123(R),
share-based compensation cost is measured at the grant date, based on the
fair value of the award, and is recognized as an expense over the employee's
requisite service period (generally the vesting period of the equity grant).
Prior to January 1, 2006, the Company accounted for share-based compensation
to employees in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. The
Company also followed the disclosure requirements of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS No. 123"). The Company elected to adopt the modified prospective
transition method as provided by SFAS No. 123(R) and, accordingly, financial
statement amounts for the prior periods presented in this Form 10-Q have not
been restated to reflect the fair value method of expensing share-based
compensation.

The Company has recognized compensation expense for its restricted stock
grants. Upon adoption of SFAS 123(R), using the modified prospective method,
the Company recognized a benefit of $36,000  as a cumulative effect of a
change in accounting principle resulting from the requirement to estimate
forfeitures of the Company's restricted stock grants at the date of grant
instead of recognizing them as incurred. The estimated forfeiture rate was
applied to the previously recorded compensation expense of the Company's
unvested restricted stock in determining the cumulative effect of a change
in accounting principle. The cumulative benefit, net of tax, increased both
basic and diluted earnings per share by $0.01 for the nine-month period
ended September 30,2006.

SFAS 123(R) requires all share-based payments to employees, including grants
of employee stock options, to be recognized as compensation expense over the
service period (generally the vesting period) in the consolidated financial
statements based on their fair values. For options with graded vesting, the
Company values the stock option grants and recognizes compensation expense
as if each vesting portion of the award was a separate award. Under the
modified prospective method, awards that were granted, modified, or settled
on or after January 1, 2006 are measured and accounted for in accordance
with SFAS 123R. Unvested equity-classified awards that were granted prior to
January 1, 2006 will continue to be accounted for in accordance with SFAS
123, except that compensation expense for all such awards are recognized in
the results of operations over the remaining vesting periods. The impact of
forfeitures that may occur prior to vesting is also estimated and considered
in the amount recognized.

The Company has stock-based compensation plans under which directors,
officers and other eligible employees receive stock options and other
equity-based awards. The plans provide for the grant of stock options and
restricted stock awards.

Stock options are granted with an exercise price equal to the market value
of a share of common stock on the date of grant. Stock options generally
expire in 10 years and vest over thirty months.

Restricted stock awards generally vest over four to six years.

The following table summarizes stock option activity:

                       Inducement           1990 Stock         Directors'
                        Options            Option Plan        Option Plan

                            Weighted             Weighted            Weighted
                            Average              Average             Average
                            Exercise             Exercise            Exercise
                  Shares     Price       Shares   Price       Shares  Price
                  ------    --------     ------  -------      ------ --------
Outstanding
at December
31, 2005          705,000     $2.55  1,090,219     $3.95    158,750   $3.59

Granted           140,000     $2.92    342,500     $4.17     38,500   $2.11

Exercised                              (67,868)    $1.71

Forfeited/
expired          (232,500)    $2.55   (681,468)    $4.31    (17,000)  $8.40
                 --------             --------              -------
Outstanding at
September 30,
2006              612,500     $2.63    683,383     $3.92    180,250   $2.82
                  =======              =======              =======
Shares
available for
future grant                           347,483                7,250

Weighted
average                        9.20                 3.93                7.50
remaining term                 years                years               years

Intrinsic value:
Outstanding                   $2,000               $181,000           $45,000
Exercisable                   $0                   $173,000           $37,000

In 2006, the terms for 342,500 options under the 1990 Stock Option Plan were
modified to make them exercisable for a period of two years subsequent to
termination of service.  This was treated as a forfeiture and grant of new
options in the above table.  An expense of $132,000 related to such
modification was included as severance expense in selling, general and
administrative expenses.

In 2006, shares of stock were used to exercise options to purchase 65,868
shares with an intrinsic value of $82,000 and cash was used to exercise
options to purchase 1,000 shares with an intrinsic value of $2,000.
The intrinsic value for stock options is calculated based on the exercise
price of the underlying awards and the market price of our common stock as
of the reporting date.

On January 2, 2006, 395,000 common shares, which were granted in 2002,
vested.  The total value of the restricted stock awards, at the date of
grant, aggregated $612,000 and was based on the market price of $1.55 per
share.

On August 16, 2006, 200,000 restricted common shares with a market value of
$410,000 were granted.  These shares vest and the  restrictions lapse,
subject to acceleration for change in control, on the fourth anniversary of
the date of grant.  With regards to these shares, for the three months and
the nine months ended September 30, 2006, the Company recognized $13,000
of expense included in selling, general and administrative expense.

In addition, the Company has a Restricted Stock Plan, the activity of which
is summarized as follows:
                                                 Weighted Average
                                    Shares     Grant Date Fair Value
Unvested as of
December 31, 2005                  182,450               $2.58
     Granted                             -
     Vested                        (79,850)              $2.86
     Forfeited                     (52,300)              $2.54
                                   -------
Unvested as of
September 30, 2006                  50,300               $2.18
                                   =======
Shares available
for future grant                    75,200
                                   =======
The following table summarizes the pro forma effect of stock-based
compensation as if the fair value method of accounting for stock
compensation had been applied for the three-month and nine-month periods
ended September 30, 2005 (in thousands except per share amounts):

                                    Three Months Ended   Nine Months Ended
                                    September 30, 2005   September 30, 2005

     Net loss, as reported                   $(1,650)            $(4,100)
       Add: Stock-based compensation
         included therein                         79                 244
       Deduct: Total stock-based
         compensation under the fair
          value method                          (105)               (372)
                                             -------             -------
     Pro forma net loss                      $(1,676)            $(4,228)
                                             =======             =======
     Loss per share applicable to
       common shareowners:
     As reported: Basic and diluted           $(0.29)             $(0.72)
     Pro forma: Basic and diluted             $(0.29)             $(0.75)

The following table summarizes the components and classification of
stock-based compensation expense included in the Statements of Operations
(in thousands):
                                 Three Months Ended    Nine Months Ended
                                    September 30,         September 30,

                                   2006     2005       2006     2005

     Stock options                 $ 51     $          $442    $
     Stock options-severance        132                 132
     Restricted stock                22       76         72     233
     Other                            0        3          0      11
                                    ---     ----       ----     ---
     Total stock-based
       compensation                $205     $ 79       $646    $244
                                   ====     ====       ====    ====
     Cost of products and
       services                    $ 15     $  7       $ 41    $ 21
     Selling, general and
       administrative               156       61        390     188
     Research and development        34       11        215      35
                                   ----     ----       ----    ----
     Total stock-based
       compensation                $205     $ 79       $646    $244
                                   ====     ====       ====    ====


As a result of adopting FAS 123(R), the Company's loss before income taxes
and loss from continuing operations for the three months and nine months
ended September 30, 2006 is $51,000 and $442,000, respectively, larger than
if it had continued to account for share-based compensation under APB 25.
Basic and diluted loss per share from continuing operations for the three
months and nine months ended September 30, 2006 would have been $(0.20) and
$(0.61), respectively, if the Company had not adopted FAS 123(R), compared
to reported basic and diluted loss from continuing operations per share of
$(0.20) and $(0.67), respectively.

No tax benefits were attributed to the stock-based compensation expense
because a valuation allowance is maintained for substantially all net
deferred tax assets. The Company elected to adopt the alternative method of
calculating the historical pool of windfall tax benefits as permitted by
FASB Staff Position (FSP) No. SFAS 123(R)-3, "Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards." This is a
simplified method to determine the pool of windfall tax benefits that is
used in determining the tax effects of stock compensation in the results of
operations and cash flow reporting for awards that were outstanding as of
the adoption of SFAS 123(R).

The Company estimates the fair value of stock options using the
Black-Scholes valuation model. Key input assumptions used to estimate the
fair value of stock options include the exercise price of the award, the
expected option term, the expected volatility of the Company's stock over
the option's expected term, the risk-free interest rate over the option's
expected term, and the Company's expected annual dividend yield. The Company
believes that the valuation technique and the approach utilized to develop
the underlying assumptions are appropriate in calculating the fair values of
the Company's stock options granted during the nine months ended September
30, 2006. Estimates of fair value are not intended to predict actual future
events or the value ultimately realized by persons who receive equity
awards. The following table summarizes the assumptions used to compute the
weighted average fair value of stock option grants of $0.47 and $0.66,
respectively, during the three-month and nine-month periods ended September
30, 2006:

                                   Three Months     Nine Months

     Dividend yield                     0.0%            0.0%
     Weighted average volatility       49.7%           50.9%
     Risk-free interest rate            5.0%            4.9%
     Expected holding period
       (in years)                      2.52            2.68


No dividend yield was assumed because the Company has never paid a cash
dividend.

The weighted average volatility for the current period was developed using
historical volatility.

The risk-free interest rate was developed using the U.S. Treasury yield for
periods equal to the expected life of the options on the grant date. An
increase in the risk-free interest rate will increase stock compensation
expense.



The expected holding period was developed after considering vesting
schedules, life of the option, historical experience and estimates of future
exercise behavior patterns. An increase in this assumption would increase
stock compensation expense.

SFAS 123R requires the recognition of stock-based compensation for the
number of awards that are ultimately expected to vest. As a result, for most
awards, recognized stock compensation was reduced for estimated forfeitures
prior to vesting primarily based on historical annual forfeiture rates of
approximately 5%. Estimated forfeitures will be reassessed in subsequent
periods and may change based on new facts and circumstances. Prior to
January 1, 2006, actual forfeitures were accounted for as they occurred for
purposes of required pro forma stock compensation disclosures.

As of September 30, 2006, approximately $.3 million and $.4 million of
unrecognized stock compensation (net of estimated forfeitures) related to
unvested option awards and unvested stock grants, respectively, are expected
to be recognized over weighted-average periods of 1.5 and 3.4 years,
respectively.

In addition, for the purpose of the Statement of Cash Flows, the realization
of tax benefits in excess of amounts recognized for financial reporting
purposes will be recognized as a financing activity rather than an operating
activity as in the past.

Pension Plan

The Company has a defined benefit pension plan. No additional service cost
benefits were earned subsequent to June 30, 1994.  The Company's funding
policy is to contribute amounts to the plan sufficient to meet the minimum
funding requirements set forth in the Employee Retirement Income Security
Act of 1974, plus such additional amounts as the Company may determine to be
appropriate from time to time.

The components of net periodic benefit cost of the plan for the three and
nine months ended September 30 are as follows (in thousands):

                                    Three Months Ended   Nine Months Ended
                                      September 30,        September 30,
                                       2006      2005      2006       2005
Interest cost on projected
  benefit obligation                    $19       $22       $61      $67
Expected return on plan assets          (18)      (14)      (51)     (43)
Amortization of net loss                 14         8        35       23
                                        ---       ---       ---      ---
     Net periodic pension cost          $15       $16       $45      $47
                                        ===       ===       ===      ===

The Company has decided not to complete the previously announced termination
of this plan.  The Company expects funding requirements to be $150,000 in
2006, of which $117,000 was funded during the nine months ended September
30, 2006.



Acquisition

On November 18, 2005, the Company acquired ThinkEngine Networks, Inc.  The
following are unaudited pro forma results for the three-month and nine-month
periods ended September 30, 2005 as if the acquisition had taken place at
the beginning of the period (amounts in thousands):


                                       Three Months   Nine Months
                                       ------------   -----------
Revenues                                   $ 1,194       $ 4,776
                                           =======       =======
Loss from continuing operations            $(1,935)      $(5,302)
                                           =======       =======
Net loss                                   $(2,520)      $(6,598)
                                           =======       =======

Loss per share:
Loss from continuing operations              $(.28)        $(.78)
                                             =====         =====
Net loss                                     $(.37)        $(.97)
                                             =====         =====

Reclassifications

Certain prior period amounts have been reclassified to conform to the
presentation for discontinued operations required by Statement of Financial
Accounting Standards ("SFAS") No. 144 resulting from the discontinued
operations of the Company's former UK subsidiary (discussed below).

Discontinued Operations

On December 22, 2005, the Company sold its UK subsidiary, Dacon Electronics,
Plc ("Dacon") in an arms length transaction to a company owned by its former
Vice President of European Operations.  As a result, the Company has
reclassified the revenues and expenses related to Dacon's operations as
discontinued operations in its Consolidated Statement of Operations and
Comprehensive Income.

Summary results for discontinued operations for the three-month and
nine-month periods ended September 30, 2005 are as follows (in thousands).

                                       Three Months   Nine Months
                                       ------------   -----------
Revenue                                     $1,352        $2,942
Operating costs and expenses                 1,618         3,922
                                            ------        ------
Operating loss                              $ (266)       $ (980)
                                            ======        ======
Loss from discontinued
operations                                  $ (266)       $ (980)
                                            ======        ======

Related Party Transaction

During the nine-month period ended September 30, 2006, current and former
officers of the Company repaid loans and accumulated interest, aggregating
approximately $1,596,000.  Repayment consisted of $124,000 and 568,625
shares of Company common stock, valued at the closing market price at the
date of repayment of loans.



Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS
Certain Factors That May Affect Future Results

The following information, including, without limitation, the Quantitative
and Qualitative Disclosures About Market Risk that are not historical facts,
may be forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  These statements generally are characterized by the use of terms such
as "believe", "expect" and "may".  Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements.  Factors that might
cause such a difference include, but are not limited to, variability of
sales volume from quarter to quarter, product demand, pricing, market
acceptance, litigation, risk of dependence on significant customers and
third party suppliers, intellectual property rights, risks in product and
technology development and other risk factors detailed in this Quarterly
Report on Form 10-Q, the Company's Form 10-K for the year ended December 31,
2005 and in the Company's other Securities and Exchange Commission filings.

Results of Operations

The Company reported losses from continuing operations of $1.4 million ($0.
20 per basic and diluted share) and $4.7 million ($0.67 per basic and
diluted share) for the three-month and nine-month periods ended September
30, 2006, respectively versus losses of from continuing operations of $1.1
million and $2.8 million, respectively, in the prior year periods. Included
in the results from operations for the three months and nine months ended
September 30, 2006 was $.1 and $.4, respectively, of expense related to the
expensing of stock options.  Net loss was $1.4 million and $4.7 million for
the three and nine-month periods ended September 30, 2006 versus $1.6
million and $4.1 million, respectively, in the prior year periods.

A continuing shift in the wireline segment of the telecommunications market
with increasing emphasis on capital investment in next generation services
and build-out of the fiber optic infrastructure has resulted in a decreasing
amount of available capital investment funding for the legacy wireline
operations. This has impacted the demand for the Company's CX Media Servers.
 Accordingly, the Company has reduced and reassigned personnel. Reflecting
the increased demand for next generation voice services and conferencing
solutions, additional resources are being added to sales, marketing and R&D
efforts supporting the VSR1000 product, including personnel reassigned from
supporting the CX Media Server products.

Consolidated revenues for the quarter ended September 30, 2006 increased $.9
million, or 93%, from the prior year period.  Revenues increased $.5 million
due to the inclusion of ThinkEngine Networks, Inc. ("ThinkEngine") acquired
in November of 2005 and increased product sales of $.4 million to a cable
operator.  Consolidated revenues of $6.9 million for the nine months ended
September 30, 2006 increased $3.2 million (85%) from the prior year period.
Revenues increased due to increased product sales of $1.9 million to a
telecommunications service provider in 2005 and recognized as a sale in the
current year and $1.4 million due to the inclusion of ThinkEngine, offset,
in part, by lower sales of $.8 million to a world-wide telecommunications
system integrator.

The gross margin percentage was approximately 50% and 44%, respectively,  in
the quarter and nine months ended September 30, 2006 versus 46% and 48%,
respectively, in the prior year.  Included in cost of revenues for the nine
months ended September 30, 2006 are contract cancellation fees of $.4
million, amortization of intangibles of $.4 million and provision for
obsolescence of $.1 million.  There were no similar charges in the prior
year periods.

Research and development expense increased $.2 million (25%) and $1.6
million (69%), respectively, for the three-month and nine-month periods
ended September 30, 2006 as compared to the prior year's periods primarily
due to the inclusion of ThinkEngine ($.4 million and $1.5 million,
respectively), the expensing of stock options ($.2 million in the nine-month
period) and severance costs  ($.2 million in the nine-month period).

Selling, general and administrative expense increased $.7 million (91%) and
$1.7 million (66%) for the three and nine-month periods ended September 30,
2006, respectively, primarily due to the inclusion of ThinkEngine ($.3
million and $.8 million, respectively), the expensing of stock options ($.2
million in the nine-month period) and severance expense ($.6 million and $.7
million, respectively).

Other (income) expense, for the nine months ended September 30, 2006,
increased due to higher interest earned on cash balances and marketable
securities, reflecting higher interest rates, offset, in part, by lower
balances.

No tax benefit was provided for the losses incurred in 2006 since the
Company cannot determine that the realization of the net deferred tax asset
is more likely than not.

Liquidity and Sources of Capital

Net cash used by operations for the nine months ended September 30, 2006 was
$3.3 million versus cash provided by operations of $2.2 million in the
comparable period of 2005; this variance from the prior year is primarily
attributable to increased loss from continuing operations and the decrease
in deferred revenue of $2.1 million in the 2006 period versus a $2 million
increase in the 2005 period.  The cash provided by investing activities of
$3.1 million in 2006 primarily reflects net sales of marketable securities
and repayment of officers loans.  The cash used by financing activities of
$.5 million primarily represents the acceptance of the Company's Common
Stock by the Company for the payment of withholding tax liabilities.

Working capital and the ratio of current assets to current liabilities was
$3.8 million and 2.0:1 at September 30, 2006 compared to $7.2 million and
2.1:1 at December 31, 2005.

During the remainder of 2006, the Company anticipates purchasing $.1 million
of equipment.  Management believes that its cash and cash equivalents and
marketable securities will be sufficient to meet these needs in 2006.
However, to meet its longer-term capital needs, the Company may in the
future be required to seek new sources of debt or equity financing or may
seek to sell certain Company assets.  The Company may also be required to
further reduce operating costs in order to meet its obligations.  The
Company's ability to fund its operations is heavily dependent on the growth
of its revenues over current levels to achieve profitable operations.  No
assurance can be given that management's initiatives will be successful or
that any such additional sources of financing will be available on
acceptable terms or at all.



Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company does not use derivative financial instruments.  The Company has
Marketable Securities, which are exposed to changes in interest rates.  Due
to the term of these securities and/or their variable rate provisions, a
change in interest rates would not have a material impact on their value.

Item 4.  CONTROLS AND PROCEDURES

Cognitronics Corporation's management, including the Chief Executive Officer
and Chief Financial Officer, have conducted an evaluation of the
effectiveness of disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14.  Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the disclosure controls and
procedures are effective as of the end of the period covered by this report
in ensuring that all material information required to be disclosed in this
quarterly report and all information required to be disclosed by the Company
under the Securities Exchange Act of 1934 has been made known to them in a
timely fashion.  During the three months ended September 30, 2006, there
were no changes in the Company's internal control over financial reporting
that have materially affected, or are reasonably likely to materially
affect, the Company's internal controls over financial reporting.


                         Part II.  OTHER INFORMATION

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company, on July 10, 2006, granted to an employee inducement options to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$2.30.  The options become exercisable over a 30-month period in three
installments (the earliest being 6 months from date of grant) and expire 10
years from date of grant.  In addition, the Company, on August 16, 2006,
granted to an employee 200,000 inducement restricted shares of the Company's
Common Stock. The restrictions will lapse on the fourth anniversary of the
date of grant, subject to acceleration due to a change in control of the
Company. The issuance of inducement options and restricted shares were not
registered under the Securities Act in reliance on the exceptions set forth
in Section 4(2) of the Securities Act.

In July and August of 2006, the company accepted 66,363 and 259,472 shares
of its Common Stock (valued at $2.42 and $2.02 a share, respectively) in
repayment of loans to officers of $161,000 and $524,000, respectively.

Item 6.  EXHIBITS

     Index to Exhibits

     Exhibit

     31.1 Certification of the Chief Executive Officer Pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2 Certification of the Chief Financial Officer Pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

     32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
          Section 1350 as Adopted Pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002.

     32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C.
          Section 1350 as Adopted Pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002.




                                  SIGNATURE

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.



                                       COGNITRONICS CORPORATION
                                        Registrant



Date: November 14, 2006                By/s/ Garrett Sullivan
                                         Garrett Sullivan, Treasurer
                                         and Chief Financial Officer