U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

|[ 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                                              
|[   ]                                                                                      | 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:
0-17893

|TELTRONICS, INC.(Exact name of registrant as specified in its charter)
|----------------------------------------------------------------------

|Delaware(State or other jurisdiction of Incorporation or organization) | 59-2937938(IRS Employer Identification Number)
|---------------------------------------------------------------------- | ----------------------------------------------

|2150 Whitfield Industrial Way, Sarasota, Florida 34243
(Address of principal executive offices including zip code)
|------------------------------------------------------------------------------------------------------------------

|(941) 753-5000
Issuer'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 an  accelerated  filer (as  defined in  Exchange  Act Rule 12-b-2 of the  Exchange
Act.)    Yes  [     ]    No  [ X ]

As of August 14,
2006, there were 8,636,539 shares of the Registrants Common Stock, par value $.001,
outstanding.

Exhibit index appears
on page 10.

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TABLE OF CONTENTS

|              |                                                                                                                              | PAGE
|------------- | ---------------------------------------------------------------------------------------------------------------------------- | ----
|PART I        | FINANCIAL INFORMATION                                                                                                        |     
|ITEM 1.       | FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at June 30, 2006
(Unaudited) and December 31, 2005                | 1   
|              | Condensed Consolidated Statements of Operations (Unaudited)
for the Three months and Six months ended June 30, 2006 and 2005 | 2   
|              | Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Six  months ended June 30, 2006 and 2005                 | 3   
|              | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                             | 4   
|ITEM 2.       | MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                        | 5   
|ITEM 3.       | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK                                                                   | 7   
|ITEM 4.       | CONTROLS AND PROCEDURES                                                                                                      | 7   
|PART II       | OTHER INFORMATION                                                                                                            |     
|ITEM 1.       | LEGAL PROCEEDINGS                                                                                                            | 8   
|ITEM 3.       | DEFAULTS UPON SENIOR SECURITIES                                                                                              | 8   
|ITEM 6.       | EXHIBITS AND REPORTS ON FORM 8-K                                                                                             | 8   
|SIGNATURE     | 9                                                                                                                           
|EXHIBIT INDEX | 10                                                                                                                          

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PART I  FINANCIAL
INFORMATION

ITEM  1.  FINANCIAL STATEMENTS

TELTRONICS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED
BALANCE SHEETSIn thousands, except
shares and per share amounts

ASSETS

|                                                                                      | June 30, |  | December 31,
|------------------------------------------------------------------------------------- | -------- |  | ------------
|
|
|Current assets:                                                                      
|Cash and cash equivalents                                                             |          |  | $           
|Accounts receivable, net of allowance for doubtful accounts                           |          |  |             
|Costs and estimated earnings in excess of billings
          on uncompleted contracts |          |  |             
|Inventories, net                                                                      |          |  |             
|Other current assets                                                                  |          |  |             
|                                                                                      |          |  |             
|Total current assets                                                                  |          |  |             
|Property and equipment, net                                                           |          |  |             
|Other assets                                                                          |          |  |             
|                                                                                      |          |  |             
|Total assets                                                                          |          |  | $           
|                                                                                      |          |  |             
|LIABILITIES AND SHAREHOLDERS' DEFICIENCY                                             
|Current liabilities:                                                                  |          | 
|Line of credit                                                                        |          |  | $           
|Current portion of long-term debt and capital
          lease obligations             |          |  |             
|Accounts payable                                                                      |          |  |             
|Deferred dividends                                                                    |          |  |             
|Other current liabilities                                                             |          |  |             
|                                                                                      |          |  |             
|Total current liabilities                                                             |          |  |             
|Long-term liabilities:                                                                |          | 
|Deferred dividends                                                                    |          |  |             
|Long-term debt and capital lease obligations, net of                                  |          | 
|current portion                                                                       |          |  |             
|                                                                                      |          |  |             
|Total long-term liabilities                                                           |          |  |             
|Commitments and contingencies                                                         |          | 
|Shareholders' deficiency:                                                             |          | 
|Capital stock                                                                         |          |  |             
|Additional paid-in capital                                                            |          |  |             
|Accumulated deficit and other comprehensive loss                                      |          |  |             
|                                                                                      |          |  |             
|Total shareholders' deficiency                                                        |          |  |             
|                                                                                      |          |  |             
|Total liabilities and shareholders' deficiency                                        |          |  | $           
|                                                                                      |          |  |             

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

1

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TELTRONICS, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSIn thousands, except
shares and per share amounts

|                                                        | Three MonthsEnded June 30, |  | Six MonthsEnded June 30,
|------------------------------------------------------- | -------------------------- |  | ------------------------
|
|Net sales                                               |                            |  |                         
|Product sales and installation                          | $          8,020           |  | $          9,883        
|Maintenance and service                                 | 3,477                      |  | 3,091                   
|                                                        |                            |  |                         
|                                                        | 11,497                     |  | 12,974                  
|Cost of goods sold                                      | 6,438                      |  | 7,370                   
|                                                        |                            |  |                         
|Gross profit                                            | 5,059                      |  | 5,604                   
|                                                        |                            |  |                         
|Operating expenses:                                    
|General and administrative                              | 1,046                      |  | 1,204                   
|Sales and marketing                                     | 1,985                      |  | 1,749                   
|Research and development                                | 915                        |  | 975                     
|Depreciation                                            | 69                         |  | 137                     
|                                                        |                            |  |                         
|                                                        | 4,015                      |  | 4,065                   
|                                                        |                            |  |                         
|Income from operations                                  | 1,044                      |  | 1,539                   
|Other income (expense):                                
|Interest                                                | (296)                      |  | (395)                   
|Gain on sale of abandoned                              
|Technology                                              | --                         |  | --                      
|Other                                                   | 10                         |  | 51                      
|                                                        |                            |  |                         
|                                                        | (286)                      |  | (344)                   
|                                                        |                            |  |                         
|Income before income taxes                              | 758                        |  | 1,195                   
|Income taxes                                            | 3                          |  | 3                       
|                                                        |                            |  |                         
|Net lncome                                              | 755                        |  | 1,192                   
|Dividends on Preferred Series B and                    
|C Convertible stock                                     | 163                        |  | 163                     
|                                                        |                            |  |                         
|Net income (loss) available to
     common shareholders | $             592          |  | $          1,029        
|                                                        |                            |  |                         
|Net income (loss) per share:                           
|Basic                                                   | $             0.07         |  | $            0.13       
|Diluted                                                 | $             0.07         |  | $            0.11       
|                                                        |                            |  |                         
|Weighted average shares outstanding:                   
|Basic                                                   | 8,636,539                  |  | 7,874,539               
|Diluted                                                 | 11,547,058                 |  | 10,905,227              

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

2

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TELTRONICS, INC. AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSIn thousands, except shares and per share amounts

|                                                                    | Six Months Ended June 30,
|------------------------------------------------------------------- | -------------------------
|
|NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES           | $ 1,900                  
|INVESTING ACTIVITIES - NET                                          | (156)                    
|FINANCING ACTIVITIES:                                              
|Net borrowings on line of credit                                    | (1,831)                  
|Other                                                               | (509)                    
|                                                                    |                          
|Net cash flows provided by (used in) financing activities           | (2,340)                  
|Effect of exchange rate changes on cash                             | 18                       
|Net increase (decrease) in cash and cash equivalents for the period | (578)                    
|                                                                    |                          
|Cash and cash equivalents - Beginning of Period                     | 1,150                    
|Cash and cash equivalents - End of Period                           | $    572                 
|                                                                    |                          

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

3

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TELTRONICS, INC. AND
SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except
shares and per share amounts(Unaudited)

NOTE 1  BASIS OF
PRESENTATION

The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by generally
accepted accounting principles 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 six month period
ended June 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 financial statements at that date but
does not include all of the information and notes required by generally accepted
accounting principles for complete financial statements. Certain reclassifications were
made to the 2005 amounts to conform to the 2006 presentation.

For further
information, refer to the consolidated financial statements and notes thereto included in
the Companys annual report on Form 10-K for the year ended December 31, 2005.

NOTE 2 
COMPREHENSIVE INCOME

Total comprehensive
income is as follows:

|                             | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|---------------------------- | -------------------------- |  | ------------------------
|
|Net income                   | $   755                    |  | $    1,192              
|Foreign currency translation | 28                         |  | (6)                     
|                             |                            |  |                         
|Total comprehensive income   | $   783                    |  | $   1,186               
|                             |                            |  |                         

NOTE 3  NET INCOME
(LOSS) PER SHARE

Effective January 1,
2006, the Company adopted the modified prospective method, as prescribed by Financial
Accounting Standard No. 148 (FAS 148), of accounting for stock based compensation.

The following table
sets forth the computation of basic and diluted net income (loss) per share for the
periods indicated:

|                                    | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|----------------------------------- | -------------------------- |  | ------------------------
|Net income (loss) per share         | 2006                       |  | 2005                    
|                                    |                            |  |                         
|Basic                              
|Net income (loss)                   | $         755              |  | $         1,192         
|Preferred dividends                 | (163)                      |  | (163)                   
|                                    |                            |  |                         
|                                    | $         592              |  | $         1,029         
|                                    |                            |  |                         
|Weighted average shares outstanding | 8,636,539                  |  | 7,874,539               
|Net income (loss) per share         | $        0.07              |  | $          0.13         
|                                    |                            |  |                         

4

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|                                    | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|----------------------------------- | -------------------------- |  | ------------------------
|Net income (loss) per share         | 2006                       |  | 2005                    
|                                    |                            |  |                         
|Diluted                            
|Net income (loss)                   | $         755              |  | $         1,192         
|Preferred dividends                 | --                         |  | --                      
|Interest                            | --                         |  | 32                      
|                                    |                            |  |                         
|                                    | $         755              |  | $         1,224         
|                                    |                            |  |                         
|Weighted average shares outstanding | 11,547,058                 |  | 10,905,227              
|                                    |                            |  |                         
|Net income (loss) per share         | $        0.07              |  | $          0.11         
|                                    |                            |  |                         

Had FAS 148 been
adopted retroactive to January 1, 2005 the Company would have reported $33 additional
expense for the three months ended June 30, 2005 and the basic and diluted net income per
share would have remained $0.13 and $0.11, respectively. The Company would have reported
$66 additional expense for the six months ended June 30, 2005 and the basic and diluted
net income per share would have been $0.07.

For the three and six
months ended June 30, 2006 and 2005, options to purchase 1,128,691 and 1,541,350 shares of
common stock, respectively, were not included in the computation of diluted net income
(loss) per share because the effect would be anti-dilutive.

For the three and six
months ended June 30, 2006 and 2005, warrants to purchase 300,000 and 1,190,000 shares of
common stock, respectively, were not included in the computation of diluted net income
(loss) per share because the effect would be anti-dilutive.

NOTE 4 
INVENTORIES

The major classes of
inventories are as follows:

|                | June 30, 2006 |  | December 31, 2005
|--------------- | ------------- |  | -----------------
|
|Raw materials   | $   3,038     |  | $   3,325        
|Work-in-process | 766           |  | 1,168            
|Finished goods  | 1,526         |  | 1,477            
|                |               |  |                  
|                | $   5,330     |  | $   5,970        
|                |               |  |                  

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS     (In thousands, except shares and per share amounts)

FORWARD-LOOKING STATEMENTS

References in this
report to the Company, Teltronics, we. or
us mean Teltronics, Inc. together with its subsidiaries, except where the
context otherwise requires. A number of statements contained in this Quarterly Report on
Form 10-Q are forward-looking statements, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the statement will
include words such as we believe, anticipate, expect,
or words of similar import. Similarly, statements that describe our future plans,
objectives, strategies or goals are also forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties that may materially adversely
affect the anticipated results. Such risks and uncertainties include, but are not limited
to, the timely development and market acceptance of products and technologies, competitive
market conditions, successful integration of acquisitions, the ability to secure
additional sources of financing, the ability to reduce operating expenses, and other
factors described in the Companys filings with the Securities and

5

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Exchange
Commission. Shareholders, potential investors and other readers are urged to consider
these factors carefully in evaluating the forward-looking statements made herein and are
cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements made herein are only made as of the date of this Form 10-Q and
we disclaim any obligation to publicly update such forward-looking statements to reflect
subsequent events or circumstances.

RESULTS OF OPERATIONS

Net Sales and Gross Profit
Margin

Net sales decreased
$1,477 or 11.4% for the three month period ended June 30, 2006 as compared to the same
period in 2005.  Net sales decreased $948 or 4.2% for the six month period ended June 30,
2006 as compared to the same period in 2005. The three and six month decrease is primarily
the result of a decrease in sales of certain services and E911 markets offset
with an increase in the Intelligent Systems Management markets.

Gross profit margins
for the three month periods ended June 30, 2006 and 2005 were 44.0% and 43.2%,
respectively. Gross profit margins for the six month periods ended June 30, 2006 and 2005
were 41.6% and 43.4% respectively. The decrease in gross profit percentage was primarily
driven by sales mix, manufacturing variances and project management.

Operating Expenses

Operating expenses
were $4,015 and $4,065 for the three month periods ended June 30, 2006 and 2005,
respectively.

General and
administrative expenses decreased $158 for the three month period ended June 30, 2006 as
compared to the same period in 2005. The net decrease was primarily the result of the a
$104 decrease in rent, a $111 decrease in legal fees, a $75 decrease in professional fees,
a $16 decrease in provision for bad debt and a $24 decrease in business insurance, offset
with a $145 increase in the compensation and fringe and a $31 increase in recruiting.

Sales and marketing
expenses increased $236 for the three month period ended June 30, 2006 as compared to the
same period in 2005. The net increase was primarily a result of a $116 increase in
commissions, a $78 increase in travel, a $28 increase in demo unit expense, and a $28
increase in office expenses, offset with a $26 decrease in compensation

Research and
development expenses decreased $60 for the three month period ended June 30, 2006 as
compared to the same period in 2005. The net decrease was primarily the result of a
decrease in compensation and temporary labor expense.

Depreciation and
amortization expense decreased $68 for the three month ended June 30, 2006 as compared to
the same period in 2005.

Operating expenses
were $8,270 and $8,720 for the six month periods ended June 30, 2006 and 2005,
respectively.

General and
administrative expenses decreased $302 for the six month period ended June 30, 2006 as
compared to the same period in 2005. The net decrease was primarily the result of a $286
decrease in legal fees, a $108 decrease in rent, a $75 decrease in professional services,
a $39 decrease in telephone expense, a $50 decrease in business insurance, an $18 decrease
in equipment expense, and a $22 decrease in miscellaneous expense, offset with a $110
increase in provision for bad debt and a $190 increase in compensation and fringe.

Sales and marketing
expenses increased $138 for the six month period ended June 30, 2006 as compared to the
same period in 2005. The net increase was primarily a result of a $75 increase in
commissions, a $74 increase in compensation and fringe, and a $26 increase in demo unit
expense, offset with a $41 decrease in rent.

6

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Research and
development expenses decreased $163 for the six month period ended June 30, 2006 as
compared to the same period in 2005. The net decrease was primarily the result of a $114
decrease in compensation and temporary labor, $22 decrease in rent and telephone and a $23
decrease in outside professional services.

Depreciation and
amortization expense decreased $123 for the six month ended June 30, 2006 as compared to
the same period in 2005.

Other Income (Expense)

Other income (expense)
was ($286) for the three month period ended June 30, 2006 as compared to ($344) for the
same period in 2005. The decrease was primarily the result of a $99 decrease in interest
expense based on the new debt structure and a $41 decrease in other income.

Other expense
was $579 for the six month periods ended June 30, 2006 as compared to $182 for the
same period in 2005. The increase was primarily the result of a $129 decrease in interest
expense based on the new debt structure, and a $526 decrease in other income based on the
2005 gain on sale of patents of $495 related to the sale of the iCommunicator product
line.

LIQUIDITY AND CAPITAL
RESOURCES

Net cash provided by
operating activities for the six months ended June 30, 2006 was $1,900 primarily the
result of an $822 decrease in inventory, a $248 decrease in billings in excess of cost, a
$407 adjustment for depreciation and amortization, a $177 decrease in costs and estimated
earnings in excess billings, a $176 increase in accrued expenses, and a $155 increase in
prepaid expenses offset with a $286 decrease in accounts payable. Net cashflow from
investing activities for the six months ended June 30, 2005 was $156. Net cashflow from
financing activities for the six months ended June 30, 2006 was $2,340 which was primarily
the result of repayment of borrowings from the line of credit.

As of June 30, 2006
the Company had cash and cash equivalents of $572 as compared to $1,150 as of December 31,
2005.

Seasonality

The Company has
experienced seasonality due in part to purchasing tendencies of our customers during the
fourth and first quarters of each calendar year. Consequently, net sales for the fourth
and first quarters of each calendar year are typically not as strong as results during the
other quarters.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no material
changes to the disclosure under the caption Quantitative and Qualitative Disclosures
About Market Risks in our Annual Report on Form 10-K for the year ended December 31,
2005, and incorporated herein by reference.

ITEM 4.  CONTROLS AND PROCEDURES

The Companys
management, under the direction of its Chief Executive Officer and the Chief Financial
Officer, carried out an evaluation of the effectiveness of the design and operation of the
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon the
evaluation, the Companys Chief Executive Officer and the Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective as of
June 30, 2006, in timely alerting them to material information required to be included in
the Companys periodic SEC filings.

7

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PART II  OTHER
INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is party to a dispute pending in Delaware Chancellory Court in which the Preferred Series B
shareholder is seeking reimbursement of legal fees incurred in connection with his pursuit of a position on the
Company's Board of Directors.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

As of June 30, 2006,
we were in arrears on dividend payments on our Series B Preferred Stock in the amounts of
$192 which amounts include interest thereon.

The Company is subject to certain financial covenants under its Revolving Credit, Term Loan and Security
Agreement, one of which stipulates that the Company maintain a fixed charge coverage ratio of at least 1.15 to 1.
The Company's fixed charge ratio at the end of April 2006 was slightly below the required ratio but was in excess
of the required ratios in May and June 2006.

ITEM 6(a).  EXHIBITS

|31.1 | Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.2 | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|32   | Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

ITEM 6(b).  REPORTS ON FORM 8-K

The Company filed one
report on Form 8-K during the quarter ended June 30, 2006. Information regarding the item
reported on is as follows:

|Date Filed   | Item Reported On                                                                                                               
|------------ | -------------------------------------------------------------------------------------------------------------------------------
|May 10, 2006 | Item 2.02:  Results of Operations and Financial Condition
                        Item 9.01:  Financial Statements and Exhibits

8

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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.

|Dated:  August 14, 2006 |  | TELTRONICS, INC.By: /s/ EWEN R. CAMERONEwen R. CameronPresident & Chief Executive Officer
|----------------------- |  | -------------------------------------------------------------------------------------------------------
|Dated:  Auust 14, 2006  |  | By: /s/ RUSSELL R. LEE IIIRussell R. Lee IIIVice President and Chief Financial Officer   

9

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EXHIBIT INDEX

|ExhibitNumber | Description                                                                                                                                                     
|------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1*         | Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|31.2*         | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|32*           | Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|_______       |                                                                                                                                                                 
|(*)           | Filed as an Exhibit to this Report on Form 10-Q for the period ended June 30, 2006.                                                                             

10

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