UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 For the quarterly period ended September 30, 2006

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 For the transition period from _________ to __________

                         Commission File Number 0-25844

                         TAITRON COMPONENTS INCORPORATED
        (Exact name of small business issuer as specified in its charter)

         California                                              95-4249240
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

          28040 West Harrison Parkway, Valencia, California 91355-4162
                    (Address of principal executive offices)

                                 (661) 257-6060
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

           Class                                 Outstanding on October 31, 2006
-------------------------------------            -------------------------------
Class A common stock, $.001 par value                     4,716,811
Class B common stock, $.001 par value                       762,612

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]


<PAGE>

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

                         TAITRON COMPONENTS INCORPORATED

                      Condensed Consolidated Balance Sheet
                             (Dollars in Thousands)

                                                                   September 30,
                                                                       2006
                                                                   -------------
                                     Assets                         (Unaudited)

Current assets:
    Cash and cash equivalents                                         $ 2,340
    Trade accounts receivable, net                                      1,907
    Inventory, net                                                     15,597
    Prepaid expenses and other current assets                             103
                                                                      -------
           Total current assets                                        19,947

Property and equipment, net                                             4,440
Other assets                                                            1,326
                                                                      -------

           Total assets                                               $25,713
                                                                      =======

                      Liabilities and Shareholders' Equity

Current liabilities:
    Trade accounts payable                                            $ 1,058
    Accrued liabilities and other                                         535
    Current portion of long-term debt                                      89
                                                                      -------
           Total current liabilities                                    1,682

 Long-term debt, less current portion (Note 3)                            531
                                                                      -------

           Total liabilities                                            2,213
                                                                      -------

Commitments and contingencies (Note 4)

Shareholders' equity:
    Preferred stock, $.001 par value.
      Authorized 5,000,000 shares
      None issued or outstanding                                           --
      Class A common stock, $.001 par value.
      Authorized 20,000,000 shares;
      issued and outstanding 4,716,811 shares                               5
      Class B common stock, $.001 par value.
      Authorized, issued and outstanding
      762,612 shares                                                        1
    Additional paid-in capital                                         10,453
    Accumulated other comprehensive income, net of tax                     26
    Retained earnings                                                  13,015
                                                                      -------

           Total shareholders' equity                                  23,500
                                                                      -------

           Total liabilities and shareholders' equity                 $25,713
                                                                      =======

     See accompanying notes to condensed consolidated financial statements.


                                     Page 2
<PAGE>

                         TAITRON COMPONENTS INCORPORATED

                 Condensed Consolidated Statements of Operations
                (Dollars in Thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                               Three months ended September 30,     Nine months ended September 30,
                                                                    2006             2005                2006               2005
                                                                -----------       -----------        -----------        -----------
                                                                (Unaudited)       (Unaudited)        (Unaudited)        (Unaudited)
<S>                                                             <C>               <C>                <C>                <C>
Net sales                                                       $     2,892       $     2,288        $     7,877        $     6,332

Cost of goods sold                                                    2,027             1,625              5,669              4,582
                                                                -----------       -----------        -----------        -----------

         Gross profit                                                   865               663              2,208              1,750

Selling, general and administrative
    expenses                                                            729               706              2,069              1,952
                                                                -----------       -----------        -----------        -----------

     Income (loss) from operations                                      136               (43)               139               (202)

Interest income (expense), net                                           16                 6                 53                (11)
Other income (expense), net                                              21                22                (15)                61
                                                                -----------       -----------        -----------        -----------

     Income (loss) before income taxes                                  173               (15)               177               (152)

Income tax provision                                                     --                (8)                (4)                (8)
                                                                -----------       -----------        -----------        -----------

         Net income (loss)                                      $       173       $       (23)       $       173        $      (160)
                                                                ===========       ===========        ===========        ===========

Other comprehensive income (loss):

     Foreign currency translation adjustment                             20               (14)                43                (21)
                                                                -----------       -----------        -----------        -----------

Comprehensive income (loss)                                     $       193       $       (37)       $       216        $      (181)
                                                                ===========       ===========        ===========        ===========

Income (loss) per share
         Basic                                                  $       .03       $      (.00)       $       .03        $      (.03)
                                                                ===========       ===========        ===========        ===========
         Diluted                                                $       .03       $      (.00)       $       .03        $      (.03)
                                                                ===========       ===========        ===========        ===========
Weighted average common shares outstanding
         Basic                                                    5,479,423         5,462,757          5,477,016          5,461,952
                                                                ===========       ===========        ===========        ===========
         Diluted                                                  5,945,423         5,462,757          5,950,016          5,461,952
                                                                ===========       ===========        ===========        ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     Page 3
<PAGE>

                         TAITRON COMPONENTS INCORPORATED

                 Condensed Consolidated Statements of Cash Flow
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                      Nine months ended September 30,
                                                                                          2006               2005
                                                                                      -----------        -----------
                                                                                      (Unaudited)        (Unaudited)
<S>                                                                                     <C>                <C>
Cash flows from operating activities:
    Net income (loss)                                                                   $   173            $  (160)
                                                                                        -------            -------
    Adjustments to reconcile net loss to net cash provided by operating
         activities:
    Depreciation and amortization                                                           149                173
    Provision for sales returns                                                             111                 92
    Stock-based compensation                                                                 13                 --
    Changes in assets and liabilities:
      Trade accounts receivable                                                            (466)              (493)
      Inventory, net                                                                      1,084              1,250
      Prepaid expenses and other current assets                                              48                231
      Other assets                                                                          (18)               (15)
      Trade accounts payable                                                                 38                 32
      Accrued liabilities and other                                                         (50)               165
                                                                                        -------            -------
              Total adjustments                                                             909              1,435
                                                                                        -------            -------
              Net cash provided by operating activities                                   1,082              1,275
                                                                                        -------            -------

Cash flows from investing activities:
      Deposit on real estate purchase contract (Note 3)                                  (1,230)                --
      Acquisitions of property and equipment                                               (161)                (3)
                                                                                        -------            -------
              Net cash used in investing activities                                      (1,391)                (3)
                                                                                        -------            -------

Cash flows from financing activities:
    Borrowings (payments) on notes payable                                                  620             (1,326)
    Proceeds from exercise of stock options and issuance of stock                            24                  2
                                                                                        -------            -------
              Net cash provided by (used in) financing activities                           644             (1,324)
                                                                                        -------            -------

Impact of exchange rate changes on cash                                                      43                (21)
                                                                                        -------            -------

              Net increase (decrease) in cash and cash equivalents                          378                (73)

Cash and cash equivalents, beginning of period                                            1,962              1,539
                                                                                        -------            -------

Cash and cash equivalents, end of period                                                $ 2,340            $ 1,466
                                                                                        =======            =======

Supplemental disclosure of cash flow information:
    Cash paid for interest                                                              $    --            $    48
                                                                                        =======            =======
    Cash paid for income taxes                                                          $    13            $    10
                                                                                        =======            =======
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                     Page 4
<PAGE>

                         TAITRON COMPONENTS INCORPORATED

              Notes to Condensed Consolidated Financial Statements
                               September 30, 2006
                           (All amounts are unaudited)

Note 1 - Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements of
      Taitron Components Incorporated ("the Company") were prepared in
      accordance with accounting principles generally accepted in the United
      States of America and reflect all adjustments, consisting of normal
      recurring accruals and adjustments, which are, in the opinion of
      management, necessary for a fair presentation of the consolidated
      financial position and results of operations at and for the periods
      presented. Such financial statements do not include all the information or
      notes necessary for a complete presentation. Therefore, they should be
      read in conjunction with the Company's Annual Report on Form 10-KSB for
      the fiscal year ended December 31, 2005, and the notes thereto, which
      include significant accounting policies and estimates. The results of
      operations for the interim periods are not necessarily indicative of
      results for the full year.

Note 2 - Summary of Significant Accounting Policies and Estimates

      Principles of Consolidation

      The unaudited condensed consolidated financial statements include the
      accounts of the Company and its 60% majority-owned subsidiary, Taitron
      Components Mexico SA de CV. All significant intercompany transactions and
      balances have been eliminated in consolidation.

      Revenue Recognition

      Revenue is typically recognized upon shipment of merchandise and sales are
      recorded net of discounts, rebates, and returns. Reserves for sales
      allowances and customer returns are established based upon historical
      experience and management's estimates as shipments are made. Sales returns
      for the quarters ended September 30, 2006 and 2005 were $15,000 and
      $31,000, respectively, and for the nine months ended September 30, 2006
      and 2005 aggregated $111,000 and $92,000, respectively.

      Allowance for Sales Returns and Doubtful Accounts

      On a case-by-case basis, the Company accepts returns of products from its
      customers, without restocking charges, when they can demonstrate an
      acceptable cause for the return. Requests by a distributor to return
      products purchased for its own inventory generally are not included under
      this policy. The Company will, on a case-by-case basis, accept returns of
      products upon payment of a restocking fee, which is generally 15% to 30%
      of the net sales price. The Company will not accept returns of any
      products that were special-ordered by a customer or that otherwise are not
      generally included in inventory. The allowance for sales returns and
      doubtful accounts at September 30, 2006 aggregated $73,000.

      Inventory

      Inventory, consisting principally of products held for resale, is recorded
      at the lower of cost (determined using the first in-first out method) or
      estimated market value. Inventory is presented net of valuation allowances
      of $1,033,000 at September 30, 2006.

      Income Taxes

      The Company accounts for income taxes under the asset and liability
      method. Deferred tax assets and liabilities are recognized for future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective
      tax bases. Deferred tax assets and liabilities are measured using enacted
      tax rates expected to apply to taxable income in the years in which the
      temporary differences are expected to be recovered or settled. The effect
      on deferred tax assets and liabilities of a change in tax rates is
      recognized in income in the period that includes the enactment date.
      Valuation allowances are recorded, when necessary, to reduce deferred tax
      assets to the amount expected to


                                     Page 5
<PAGE>

      be realized. The Company has fully reserved against its deferred income
      tax assets, as management could not determine that it was more likely than
      not such assets would be realized.

      Per Share Data

      Basic earnings per share data are based upon the weighted average number
      of common shares outstanding. Diluted earnings per share data are based
      upon the weighted average number of common shares outstanding, plus the
      number of common shares potentially issuable for dilutive securities such
      as stock options and warrants. The weighted average number of common
      shares outstanding for each of the three and nine month periods ended
      September 30, 2006 and 2005 is set forth in the following table:

<TABLE>
<CAPTION>
                                                        Three months ended                 Nine months ended
                                                           September 30                       September 30
                                                    ---------------------------        ---------------------------
                                                       2006             2005              2006             2005
                                                    ----------       ----------        ----------       ----------
<S>                                                  <C>              <C>               <C>              <C>
    Basic weighted average shares outstanding        5,479,423        5,462,757         5,477,016        5,461,952
    Potentially dilutive stock options                 466,000          616,000           473,000          601,000
    Anti-dilutive stock options due to net
         loss in period                                     --         (616,000)               --         (601,000)
                                                    ----------       ----------        ----------       ----------
    Diluted weighted average shares
         outstanding                                 5,945,423        5,462,757         5,950,016        5,461,952
                                                     =========        =========         =========        =========
</TABLE>

      Use of Estimates

      Management has made a number of estimates and assumptions relating to the
      reporting of assets and liabilities and the disclosure of contingent
      assets and liabilities to prepare these condensed consolidated financial
      statements in conformity with accounting principles generally accepted in
      the United States. These estimates have a significant impact on the
      Company's valuation and reserve accounts relating to the allowance for
      sales returns, doubtful accounts, inventory reserves and deferred income
      taxes. Actual results could differ from these estimates.

      Stock-Based Compensation

      In March 1995, the Company established the 1995 Stock Incentive Plan (the
      "1995 Plan") that expired in March 2005. The 1995 Plan provided for the
      issuance of an aggregate 1,080,000 incentive stock options, nonstatutory
      options or stock appreciation rights (SAR's) to directors, officers and
      other employees of the Company. Under the 1995 Plan, incentive stock
      options were granted at prices equal to at least the fair market value of
      the Company's Class A common stock at the date of grant. Nonstatutory
      options and stock appreciation rights were granted at prices equal to at
      least 85% and 100%, respectively, of the fair market value of the
      Company's Class A common stock at the date of grant. Outstanding options
      and rights vest in three equal annual installments beginning one year from
      the date of grant and are subject to termination provisions as defined in
      the 1995 Plan. The 1995 Plan also provided for automatic grants of
      nonstatutory options to purchase 5,000 shares of Class A common stock to
      all members of the committee administering the 1995 Plan, upon their
      initial election to the committee and each year thereafter. The exercise
      prices of these options are equal to the fair market value of the
      Company's Class A common stock at the date of grant. The fair value of
      options is the estimated present value at grant date using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions used for 2005: dividend yield of 0%; expected volatility of
      35%; a risk free interest rate of approximately 5% and an expected holding
      period of five years.

      In September 2006, the Company' 2005 Stock Incentive Plan (the "2005
      Plan") was approved by state regulators, which authorizes the issuance of
      up to 1,000,000 shares pursuant to options or awards granted under the
      plan. No shares have yet been granted under the 2005 Plan.

      Effective January 1, 2006, the Company adopted SFAS No. 123 (revised
      2004), "Share-Based Payment" (SFAS 123R). SFAS 123R requires that the
      Company account for all stock-based compensation using a fair-value method
      and recognize the fair value of each award as an expense over the service
      period. For the year ended December 31, 2005 and earlier years, the
      Company accounted for employee stock-based compensation


                                     Page 6
<PAGE>

      using the intrinsic value method of APB Opinion No. 25 and followed the
      disclosure requirements of SFAS No. 123, as amended by SFAS 148.

      The Company elected to adopt SFAS 123R using the "modified prospective
      application." Under that method, compensation expense includes the fair
      value of new awards, modified awards and any unvested awards outstanding
      at January 1, 2006. However, the consolidated financial statements for
      periods prior to the adoption of SFAS 123R have not been restated to
      reflect the fair value method of accounting for stock-based compensation,
      but rather disclosed the cost in accordance with APB 25.

      The following table illustrates the effect on net loss and net loss per
      share as if compensation expense for all awards of stock-based employee
      compensation had been determined under the fair value-based method
      prescribed by SFAS 123 for periods prior to the adoption of SFAS 123R:

                                      Three months ended      Nine months ended
                                      September 30, 2005      September 30, 2005
                                      ------------------      ------------------

        Net loss, as reported              $(23,000)            $  (160,000)
        Net loss, pro forma                $(17,000)            $  (142,000)

        Diluted loss, as reported                --             $     (0.03)
        Diluted loss,  pro forma                 --             $     (0.03)

      Stock option activity during the nine months ended September 30, 2006 is
      as follows:

                                                                     Weighted
                                                                      Average
                                                        Number       Exercise
                                                       of Shares      Price
                                                       ---------     --------

        Balance at December 31, 2005                    526,166       $ 1.78
           Exercised                                    (16,666)      $ 1.41
           Forfeitures                                   (1,000)      $ 2.08
                                                        =======
        Balance at September 30, 2006 (Unaudited)       508,500       $ 1.80
                                                        =======

      The weighted average fair value of options granted in the three months and
      nine months periods ended September 30, 2006 and 2005 was $0, as there
      were no options granted during these periods.

      At September 30, 2006, the range of individual weighted average exercise
      prices was $1.29 to $2.17. The remaining contractual life of outstanding
      options is 90 days after termination of employment of option holder. At
      September 30, 2006, the approximate number of options exercisable was
      466,000 and the weighted average exercise price of those exercisable
      options was $1.80.

Note 3 - Long-Term Debt

                                                                   September 30,
                                                                   -------------
                                                                       2006
                                                                   -------------
      Bank loan payable in fixed monthly principal
      installments of $7,381, plus interest at the rate               620,000
      of one year LIBOR + 1.8% per annum, due
       September  20, 2013

           Less current portion                                       (89,000)
                                                                     --------
      Long-term debt, less current portion                            531,000

      On September 21, 2006, the Company borrowed $620,000 in connection with
      its deposit on a real estate purchase contract related to the acquisition
      of approximately 4,500 square feet of office space (consisting of 2
      separate units on same floor) in Shanghai, China with a total purchase
      price of $1,230,000. The overall office building project is under
      construction and is estimated to be completed in March 2007. The
      investment will be used as rental property for lease to others and for the
      Company's project design and engineering center.


                                     Page 7
<PAGE>

Note 4 - Commitments and Contingencies

      Effective July 1, 2006, the European Union ("EU") began restricting the
      distribution of products within the EU containing certain substances,
      including lead. At the present time, much of the Company's inventory
      contains substances prohibited by the RoHS directive and management
      believes it is likely that the Company will not be able to distribute
      non-RoHS compliant products to most customers who intend to sell their
      finished goods in the EU after the effective date. Therefore, the non-RoHS
      compliant products may become obsolete and unsaleable and, as a result,
      have to be written off. However, Management believes the demand from our
      customers requiring only the RoHS compliant products has already been
      experienced during the periods leading up to the directive's restriction
      date.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

      The following discussion should be read in conjunction with the condensed
consolidated financial statements, including the related notes, appearing in
Item 1 of this report as well as our most recent annual report on Form 10-KSB
for the year ended December 31, 2005. Also, several of the matters discussed in
this document contain forward-looking statements that involve risks and
uncertainties. Forward-looking statements usually are denoted by words or
phrases such as "believes," "expects," "projects," "estimates," "anticipates,"
"will likely result" or similar expressions. We wish to caution readers that all
forward-looking statements are necessarily speculative and not to place undue
reliance on forward-looking statements, which speak only as of the date made,
and to advise readers that actual results could vary due to a variety of risks
and uncertainties. Factors associated with the forward looking statements that
could cause the forward looking statements to be inaccurate and could otherwise
impact our future results are set forth in detail in our most recent annual
report on Form 10-KSB. In addition to the other information contained in this
document, readers should carefully consider the information contained in our
most recent annual report on Form 10-KSB under the heading "Cautionary
Statements and Risk Factors."

      References to "Taitron," "the Company," "we," "our" and "us" refer to
Taitron Components Incorporated and its majority-owned subsidiary, unless the
context otherwise requires.

Critical Accounting Policies and Estimates

      Use Of Estimates - Management has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare its condensed
consolidated financial statements in conformity with accounting principles
generally accepted in the United States. These estimates have a significant
impact on the Company's valuation and reserve accounts relating to the allowance
for sales returns, doubtful accounts, inventory reserves and deferred income
taxes. Actual results could differ from these estimates.

      Revenue Recognition - Revenue is recognized upon shipment of the
merchandise, which is when legal transfer of title occurs. Reserves for sales
allowances and customer returns are established based upon historical experience
and our estimates of future returns. Sales returns for the quarters ended
September 30, 2006 and 2005 were $15,000 and $31,000, respectively, and for the
nine months ended September 30, 2006 and 2005 aggregated $111,000 and $92,000,
respectively. The allowance for sales returns and doubtful accounts at September
30, 2006 aggregated $73,000.

      Inventory - Inventory, consisting principally of products held for resale,
is recorded at the lower of cost (determined using the first in-first out
method) or estimated market value. We had inventory balances in the amount of
$15,597,000 at September 30, 2006, which is presented net of valuation
allowances of $1,033,000. We evaluate inventories to identify excess, high-cost,
slow-moving or other factors rendering inventories as unmarketable at normal
profit margins. Due to the large number of transactions and the complexity of
managing and maintaining a large inventory of product offerings, estimates are
made regarding adjustments to the cost of inventories. Based on our assumptions
about future demand and market conditions, inventories are carried at the lower
of cost or estimated market value. If our assumptions about future demand
change, or market conditions are less favorable than those projected, additional
write-downs of inventories may be required. In any case, actual amounts could be
different from those estimated.


                                     Page 8
<PAGE>

      Impact of Governmental Regulation - Our worldwide operations are subject
to local laws and regulations. As such, of particular interest is the European
Union ("EU") directive relating to the Restriction of Certain Hazardous
Substance ("RoHS"). Effective July 1, 2006, the European Union ("EU") began
restricting the distribution of products within the EU containing certain
substances, including lead. At the present time, much of the Company's inventory
contains substances prohibited by the RoHS directive and management believes it
is likely that the Company will not be able to distribute non-RoHS compliant
products to most customers who intend to sell their finished goods in the EU
after the effective date. Therefore, the non-RoHS compliant products may become
obsolete and unsaleable and, as a result, have to be written off. However, we
believe the demand from our customers requiring only the RoHS compliant products
has already been experienced during the periods leading up to the directive's
restriction date.

      Deferred Taxes - We review the nature of each component of our deferred
income taxes for reasonableness. If determined that it is more likely than not
that we will not realize all or part of our net deferred tax assets in the
future, we record a valuation allowance against the deferred tax assets, which
allowance will be charged to income tax expense in the period of such
determination. We also consider the scheduled reversal of deferred tax
liabilities, tax planning strategies and future taxable income in assessing the
realizability of deferred tax assets. We also consider the weight of both
positive and negative evidence in determining whether a valuation allowance is
needed. Based upon recent operating results and the difficulty of estimating
future market conditions, we have fully reserved against our net deferred tax
assets.

Selected Recent Accounting Policies

      In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Current Year Misstatements. SAB No. 108 requires
analysis of misstatements using both an income statement (rollover) approach and
a balance sheet (iron curtain) approach in assessing materiality and provides
for a one-time cumulative effect transition adjustment. SAB No. 108 is effective
for our fiscal year 2006 annual consolidated financial statements. We are
currently assessing the potential impact that the adoption of SAB No. 108 will
have on our consolidated financial statements.


      In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. This
statement is effective for us beginning January 1, 2008. We are currently
assessing the potential impact that the adoption of SFAS No. 157 will have on
our consolidated financial statements.


      In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in
Income Taxes - an interpretation of FASB Statement No. 109, which clarifies the
accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. The interpretation prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN No. 48
requires recognition of tax benefits that satisfy a greater than 50% probability
threshold. FIN No. 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN No. 48 is effective for us beginning January 1, 2007. We are
currently assessing the potential impact that the adoption of FIN No. 48 will
have on our financial statements.

Overview

      We are a national distributor of electronic components, primarily focused
on transistors, diodes and other discrete semiconductors, optoelectronic devices
and passive components with a reputation of in-depth inventories and knowledge
of the products we sell. Our customers consist of other electronic distributors,
contract electronic manufacturers (CEMs) and original equipment manufacturers
(OEMs).

      We believe that demand for discrete semiconductors in the U.S. market
drastically declined since 2000. This declining demand has resulted from the
accelerated trend of moving the production capacity of OEM/CEM customers abroad
and the consolidation of CEM customers domestically. In response, we have been
refocusing our business strategy beyond the traditional role of electronic
components fulfillment to the additional role of engineering and turn-key
services for our existing OEM and CEM customers by outsourcing their product
design and


                                     Page 9
<PAGE>

manufacturing work offshore. We formed some strategic business partnerships with
a few customers and are providing them with original design and manufacturing
(ODM) services for their multi-year turn-key projects.

      Our core strategy of electronic components fulfillment, however, consists
of carrying a substantial quantity and variety of products in inventory to meet
the rapid delivery requirements of our customers. This strategy allows us to
fill customer orders immediately from stock on hand. Although we believe better
market conditions may return, we are focused on lowering our inventory balances
and increasing our cash holdings. Our long-term strategy is to rely not only on
our core strategy of component fulfillment service, but also the value-added
engineering and turn-key services. In accordance with Generally Accepted
Accounting Principles, we classify inventory as a current asset. However, if all
or a substantial portion of the inventory was required to be immediately
liquidated, the inventory would not be as readily marketable or liquid as other
items included or classified as a current asset, such as cash. We cannot assure
you that demand in the discrete semiconductor market will increase and that
market conditions will improve. Therefore, it is possible that further declines
in our carrying values of inventory may result.

Results of Operations

Third quarter of 2006 versus Third quarter of 2005.

      Net sales in the third quarter of 2006 totaled $2,892,000 versus
$2,288,000 in the comparable period for 2005, an increase of 26.4% over the same
period last year. The sales increase was attributed to growth in our ODM
products by $465,000 comparing the third quarter of 2006 over the same period
last year.

      Gross profit for the third quarter of 2006 was $865,000 versus $663,000 in
the comparable period for 2005, and gross margin percentage of net sales was 29%
in both periods. The increase was primarily attributed to the impact from our
ODM products.

      Selling, general and administrative ("SG&A") expenses in the third quarter
of 2006 totaled $729,000 versus $706,000 in the comparable period for 2005. As a
percentage of net sales, SG&A expenses were 25.2% in the third quarter of 2006
compared to 30.9% in the third quarter for 2005. The increase of $23,000 was
primarily attributable to personnel related expenses from our engineering center
in China and higher trade commissions to our sales representatives for ODM
products.

      Interest income, net of interest expense, was $16,000 for the third
quarter of 2006 versus $6,000 in the comparable period for 2005. The change is
due to earning interest on cash investments in 2006 after repaying all debt
obligations in 2005.

      Income tax provision was $0 for the third quarter of 2006 and $8,000 in
the comparable period for 2005, as we do not expect significant taxable income
for fiscal year 2006.

      Net income was $173,000 for the third quarter of 2006 versus a loss of
$23,000 in the comparable period for 2005, an increase of $196,000.

      Effective January 1, 2006, we adopted SFAS 123(R) and such had a $3,000
financial impact to our SG&A for the third quarter of 2006.

Nine Months Ended September 30, 2006 versus Nine Months Ended September 30,
2005.

      Net sales in the nine months ended September 30, 2006 was $7,877,000
versus $6,332,000 in the comparable period for 2005, an increase of 24.4% over
the same period last year. The sales increase was attributed to growth in our
ODM products by $1,452,000 comparing the nine months ended September 30, 2006
over the same period last year.

      Gross profit for the nine months ended September 30, 2006 was $2,208,000
versus $1,750,000 in the comparable period for 2005, and gross margin percentage
of net sales was 28% for both periods. The dollar increase was primarily
attributed to the impact from our ODM products.


                                    Page 10
<PAGE>

      Selling, general and administrative ("SG&A") expenses in the nine months
ended September 30, 2006 totaled $2,069,000 versus $1,952,000 in the comparable
period for 2005. As a percentage of net sales, SG&A expenses were 26.3% in the
nine months ended September 30, 2006 compared to 30.8% in the comparable period
for 2005. The increase of $117,000 was primarily attributable to personnel
related expenses from our engineering center in China and higher trade
commissions to our sales representatives for ODM products.

      Interest income, net of interest expense, was $53,000 for the nine months
ended September 30, 2006 versus interest expense, net of interest income, of
$11,000 in the comparable period for 2005. The change is due to earning interest
on cash investments in 2006 after repaying all debt obligations in 2005.

      Income tax provision was $4,000 for the nine months ended September 30,
2006 versus $8,000 in the comparable period for 2005, as we do not expect
significant taxable income for fiscal year 2006.

      Net income was $173,000 for the nine months ended September 30, 2006
versus net losses of $160,000 in the comparable period for 2005, an increase of
$333,000 resulting from the reasons discussed above.

      Effective January 1, 2006, we adopted SFAS 123(R) and such had a $13,000
financial impact to our SG&A for the nine months ended September 30, 2006.

Liquidity and Capital Resources

      We have satisfied our liquidity requirements principally through cash
generated from operations and short-term commercial loans. A summary of our cash
flows resulting from our operating, investing and financing activities for the
nine months ended September 30, 2006 and 2005 are as follows:

                                               Nine months ended September 30,
                                               -------------------------------
              (Dollars in thousands)               2006              2005
                                               ------------     --------------
                                                (Unaudited)       (Unaudited)
      Operating activities ...............        $ 1,082          $ 1,275
      Investing activities ...............         (1,391)              (3)
      Financing activities ...............            644           (1,324)


      Cash provided by operating activities for the nine months ended September
30, 2006 was $1,082,000 versus $1,275,000 during the comparable period in 2005.
The decrease was primarily attributed to inventory decreasing by $1,084,000 for
the nine months ended September 30, 2006, versus inventory decreasing by
$1,250,000 during the comparable period in 2005.

      Cash used in investing activities for the nine months ended September 30,
2006 and 2005 was $1,391,000 and $3,000, respectively. The increase was
primarily attributed to the deposit of $1,230,000 for the real estate purchase
contract of office space in Shanghai, China in the third quarter of 2006 (see
Note 3) and $125,000 for upgrading our computer server equipment and Oracle ERP
software in the third quarter of 2006.

      Cash provided by financing activities for the nine months ended September
30, 2006 was $644,000 versus $1,324,000 used in, during the comparable period in
2005. The increase was primarily attributed to the borrowing of $620,000 for the
deposit on real estate purchase contract for office space in Shanghai, China
(see Note 3) and repayments on notes payable of $1,326,000 in the nine months
ended September 30, 2005.

      Inventory is included in current assets; however, it will take over one
year for the inventory to turn. Hence, inventory would not be as readily
marketable or liquid as other items included in current assets, such as cash.

      We believe that funds generated from operations, in addition to existing
cash balances are likely to be sufficient to finance our working capital and
capital expenditure requirements for the foreseeable future. If these funds are
not sufficient, we may secure new sources of short-term commercial loans,
asset-based lending on accounts receivables or issue debt or equity securities.


                                    Page 11
<PAGE>

Item 3. Controls and Procedures.

      The Company's management, including its Chief Executive Officer and Chief
Financial Officer, have evaluated the effectiveness of the Company's disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the
reporting period covered by this quarterly report. Based on such evaluation, the
Chief Executive Officer and Chief Financial Officer has concluded that, as of
the end of the period covered by this quarterly report, the Company's disclosure
controls and procedures are effective such that material information required to
be disclosed by the Company (including its consolidated subsidiary) in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified by the Securities and
Exchange Commission's rules and forms relating to the Company.

      During the quarterly period covered by this report, there have been no
changes to the Company's internal control over financial reporting that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

      None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

      There were no issuances or sales of our securities by us during the
quarter ended September 30, 2006 that were not registered under the Securities
Act.

Item 3. Defaults Upon Senior Securities.

      None.

Item 4. Submission of Matters to a Vote of Security Holders.

      None.

Item 5. Other Information.

      None.

Item 6. Exhibits.

            a.    Certification Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.

            b.    Certification Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.

                                   SIGNATURES

            In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                         TAITRON COMPONENTS INCORPORATED

Date: November 14, 2006                     By: /s/ Stewart Wang
                                                --------------------------------
                                            Stewart Wang
                                            Chief Executive Officer, President,
                                            Chief Financial Officer and Director
                                            (Principal Executive, Financial and
                                             Accounting Officer)


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