# U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, 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 March 31, 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) 753-5000Issuer'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 May 4, 2006,
there were 8,636,539 shares of the Registrants Common Stock, par value $.001,
outstanding.

Exhibit index appears
on page 9.

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# TABLE OF CONTENTS

|              |   |                                                                                                                                     | PAGE
|------------- | - | ----------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I        |   | FINANCIAL INFORMATION                                                                                                               |     
|ITEM 1.       |   | FINANCIAL STATEMENTS                                                                                                                |     
|              |   | Condensed Consolidated Balance Sheets at March 31, 2006
                     (Unaudited) and December 31, 2005                      | 1   
|              |   | Condensed Consolidated Statements of Operations (Unaudited)
                     for the Three months ended March 31, 2006 and 2005 | 2   
|              |   | Condensed Consolidated Statements of Cash Flows (Unaudited)
                     for the Three months ended March 31, 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                                                     | 6   
|ITEM 4.       |   | CONTROLS AND PROCEDURES                                                                                                             | 7   
|PART II       |   | OTHER INFORMATION                                                                                                                   |     
|ITEM 3.       |   | DEFAULTS UPON SENIOR SECURITIES                                                                                                     | 7   
|ITEM 6.       |   | EXHIBITS AND REPORTS ON FORM 8-K                                                                                                    | 7   
|SIGNATURE     |   |                                                                                                                                     | 8   
|EXHIBIT INDEX | 9

i

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# PART I  FINANCIAL INFORMATION

# ITEM 1. FINANCIAL
STATEMENTS

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

# ASSETS

|                                                            | March 31,2006(Unaudited) |  | December 31,2005
|----------------------------------------------------------- | ------------------------ |  | ----------------
|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
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSIn thousands, except shares and per share amounts

|                                                        | Three Months Ended March 31,
|------------------------------------------------------- | ----------------------------
|
|Net sales                                               |                             
|Product sales and installation                          |                             
|Maintenance and service                                 |                             
|                                                        |                             
|                                                        |                             
|Cost of goods sold                                      |                             
|                                                        |                             
|Gross profit                                            |                             
|                                                        |                             
|Operating expenses:                                     |                             
|General and administrative                              |                             
|Sales and marketing                                     |                             
|Research and development                                |                             
|Depreciation                                            |                             
|                                                        |                             
|                                                        |                             
|                                                        |                             
|Loss from operations                                    |                             
|Other income (expense):                                 |                             
|Interest                                                |                             
|Other                                                   |                             
|                                                        |                             
|                                                        |                             
|                                                        |                             
|Loss before income taxes                                |                             
|Income taxes                                            |                             
|                                                        |                             
|Net loss                                                |                             
|Dividends on Preferred Series B and C Convertible stock |                             
|                                                        |                             
|Net loss available to common shareholders               |                             
|                                                        |                             
|Net loss per share:                                     |                             
|Basic and Diluted                                       |                             
|                                                        |                             
|Weighted average shares outstanding:                    |                             
|Basic and Diluted                                       |                             
|                                                        |                             

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

|                                                          | Three Months Ended March 31,
|--------------------------------------------------------- | ----------------------------
|
|NET CASH FLOWS USED IN OPERATING ACTIVITIES               |                             
|INVESTING ACTIVITIES - NET                                |                             
|FINANCING ACTIVITIES:                                     |                             
|Net borrowings on line of credit                          |                             
|Other                                                     |                             
|                                                          |                             
|Net cash flows provided by (used in) financing activities |                             
|Effect of exchange rate changes on cash                   |                             
|                                                          |                             
|Net decrease in cash and cash equivalents for the period  |                             
|                                                          |                             
|Cash and cash equivalents - Beginning of Period           |                             
|Cash and cash equivalents - End of Period                 |                             
|                                                          |                             

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 three month period
ended March 31, 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.

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 LOSS

Total comprehensive
loss is as follows:

|                             | Three Months Ended March 31,
|---------------------------- | ----------------------------
|
|Net loss                     |                             
|Foreign currency translation |                             
|                             |                             
|Total comprehensive loss     |                             
|                             |                             

# NOTE 3  NET 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 loss per share for the periods
indicated:

|                                    | Three Months Ended March 31,
|----------------------------------- | ----------------------------
|
|Basic and diluted                   |                             
|Net loss                            |                             
|Preferred dividends                 |                             
|                                    |                             
|                                    |                             
|                                    |                             
|Weighted average shares outstanding |                             
|                                    |                             
|Net loss per share                  |                             
|                                    |                             

Had FAS 148 been
adopted retroactive to January 1, 2005 the Company would have reported $33 additional
expense for the three months ended March 31, 2005 and the basic and diluted net loss per
share would have remained $0.05.

4

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For the three months
ended March 31, 2006 and 2005, options to purchase 1,627,000 and 1,700,000 shares of
common stock, respectively, were not included in the computation of diluted net loss per
share because the effect would be anti-dilutive.

For the three months
ended March 31, 2006 and 2005, warrants to purchase 536,236 and 1,190,000 shares of common
stock, respectively, were not included in the computation of diluted net loss per share
because the effect would be anti-dilutive.

# NOTE 4  INVENTORIES

The major classes of
inventories are as follows:

|                | March 31, 2006 |  | December 31, 2005
|--------------- | -------------- |  | -----------------
|
|Raw materials   |                |  | $                
|Work-in-process |                |  |                  
|Finished goods  |                |  |                  
|                |                |  |                  
|                |                |  | $                
|                |                |  |                  

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 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 increased
$529 or 5.4% for the three month period ended March 31, 2006 as compared to the same
period in 2005. The overall increase in net sales for the three month period ended March
31, 2006 was primarily the result of improved sales in the 20-20 market and
non-Teltronics equipment market, offset with reduced sales from the contract manufacturing
market.

Gross profit margin
for the three month periods ended March 31, 2006 and 2005 was 39.0% and 43.6%,
respectively. The decrease in gross profit percentage was primarily driven by sales mix,
manufacturing variances and project management.

5

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# Operating Expenses

Operating expenses
were $4,255 and $4,655 for the three month period ended March 31, 2006 and 2005,
respectively.

General and
administrative expenses decreased $144 for the three month period ended March 31, 2006 as
compared to the same period in 2005. The net decrease for the three month period ended
March 31, 2006 was primarily the result of the $174 decrease in legal fees as a result of
the prior year settlements of the legal issues, a $43 decrease in rent, a decrease of $26
for business insurance, offset with a $126 increase in the provision for doubtful accounts
primarily due to the three month 2005 collection of outstanding specific accounts.

Sales and marketing
expenses decreased $98 for the three month period ended March 31, 2006 as compared to the
same period in 2005. The net decrease for the three month period ended March 31, 2006 was
primarily a result of a $60 decrease in advertising and tradeshow expense, a $38 decrease
in supplies, and a $40 decrease in rent, offset with $60 of increased compensation and
temporary labor.

Research and
development expenses decreased $103 for the three month period ended March 31, 2006 as
compared to the same period in 2005. The net decrease for the three month period ended
March 31, 2006 was primarily the result of a $70 decrease in temporary labor, and a $26
reduction in consulting costs.

# Other Income (Expense)

Other income (expense)
was ($293) for the three month period ended March 31, 2006 as compared to $162 for the
same period in 2005. For the three month period ended March 31, 2006, interest expense
decreased $30 based on the new debt structure. Other income decreased $485 for the three
month period ended March 31, 2006 as a result of the 2005 gain on sale of patents of $495
related to the sale of the abandoned technology.

# LIQUIDITY AND CAPITAL
RESOURCES

Net cash used in
operating activities for the three months ended March 31, 2006 was $547, primarily the
result of the net loss, net assets used $155 primarily from an increase in accounts
receivables offset by decreases in inventory and prepaids, liabilities provided $196
primarily for a reduction in billings in excess of costs and estimated earning on
uncompleted contracts and deferred revenue, offset by in increase in accounts payable. Net
cash flow from investing activities for the three months ended March 31, 2005 was $47. Net
cash flow from financing activities for the three months ended March 31,2006 was $603
which was primarily the result of borrowings from the line of credit.

As of March 31, 2006
the Company has cash and cash equivalents of $1,148 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.

6

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# 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
March 31, 2006, in timely altering them to material information required to be included in
the Companys periodic SEC filings.

# PART II  OTHER
INFORMATION

# ITEM 3.  DEFAULTS UPON
SENIOR SECURITIES

As of March 31, 2006,
we were in arrears on dividend payments on our Series B Preferred Stock in the amounts of
$192 which amounts include interest thereon.

# 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 March 31, 2006. Information regarding the item
reported on is as follows:

|Date Filed    | Item Reported On                                                                       
|------------- | ---------------------------------------------------------------------------------------
|              |                                                                                        
|April 3, 2006 | 2.02 Results of Operation and Financial Condition9.01 Financial Statements and Exhibits

7

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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:  May 4, 2006 |  | TELTRONICS, INC.By: /s/ EWEN R. CAMERONEwen R. CameronPresident & Chief Executive Officer
|------------------- |  | -------------------------------------------------------------------------------------------------------
|Dated:  May 4, 2006 |  | By: /s/ RUSSELL R. LEE IIIRussell R. Lee IIIVice President and Chief Financial Officer   

8

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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 March 31, 2006.                                                                            

9

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