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 June 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 July 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)

<TABLE>
<CAPTION>
                                                                                                  June 30,
                                                                                                    2006
                                                                                                 -----------
                                     Assets                                                      (Unaudited)
<S>                                                                                                <C>
Current assets:
    Cash and cash equivalents                                                                      $ 2,158
    Trade accounts receivable, net                                                                   2,350
    Inventory, net                                                                                  16,099
    Prepaid expenses and other current assets                                                          120
                                                                                                   -------
           Total current assets                                                                     20,727

Property and equipment, net                                                                          4,353
Other assets                                                                                           119
                                                                                                   -------

           Total assets                                                                            $25,199
                                                                                                   =======

                      Liabilities and Shareholders' Equity

Current liabilities:
    Trade accounts payable                                                                         $ 1,331
    Accrued liabilities and other                                                                      564
                                                                                                   -------
           Total current liabilities                                                                 1,895

           Total liabilities                                                                         1,895
                                                                                                   -------

Commitments and contingencies (Note 3)

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                                                                      10,450
    Accumulated other comprehensive loss, net of tax                                                     6
    Retained earnings                                                                               12,842
                                                                                                   -------

           Total shareholders' equity                                                               23,304
                                                                                                   -------

           Total liabilities and shareholders' equity                                              $25,199
                                                                                                   =======
</TABLE>

     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 June 30,            Six months ended June 30,

                                                           2006               2005              2006                2005
                                                       -----------        -----------        -----------        -----------
                                                       (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)
<S>                                                    <C>                <C>                <C>                <C>
Net sales                                              $     2,996        $     2,202        $     4,985        $     4,044

Cost of goods sold                                           2,133              1,616              3,642              2,957
                                                       -----------        -----------        -----------        -----------

         Gross profit                                          863                586              1,343              1,087

Selling, general and administrative
    expenses                                                   704                628              1,340              1,246
                                                       -----------        -----------        -----------        -----------

     Income (loss) from operations                             159                (42)                 3               (159)

Interest income (expense), net                                  22                 (5)                37                (17)
Other (expense) income, net                                    (19)                39                (36)                39
                                                       -----------        -----------        -----------        -----------

     Income (loss) before income taxes                         162                 (8)                 4               (137)

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

         Net income (loss)                             $       162        $        (8)$                -        $      (137)
                                                       ===========        ===========        ===========        ===========

Other comprehensive income (loss):
     Foreign currency translation adjustment                    11                 (1)                23                 (7)
                                                       -----------        -----------        -----------        -----------
Comprehensive income (loss)                            $       173        $        (9)       $        23        $      (144)
                                                       ===========        ===========        ===========        ===========

Income (loss) per share
         Basic                                         $       .03        $      (.00)       $       .00        $      (.03)
                                                       ===========        ===========        ===========        ===========
         Diluted                                       $       .03        $      (.00)       $       .00        $      (.03)
                                                       ===========        ===========        ===========        ===========
Weighted average common shares outstanding
         Basic                                           5,479,423          5,462,479          5,475,812          5,461,549
                                                       ===========        ===========        ===========        ===========
         Diluted                                         5,918,423          5,462,479          5,948,812          5,461,549
                                                       ===========        ===========        ===========        ===========
</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>
                                                                                    Six months ended June 30,

                                                                                      2006               2005
                                                                                   -----------        -----------
                                                                                   (Unaudited)        (Unaudited)
<S>                                                                                  <C>                <C>
Cash flows from operating activities:
    Net loss                                                                         $    --            $  (137)
                                                                                     -------            -------
    Adjustments to reconcile net loss to net cash provided by operating
         activities:
    Depreciation and amortization                                                        106                120
    Provision for sales returns and doubtful accounts                                     15                  9
    Stock-based compensation                                                              10                 --
    Changes in assets and liabilities:
      Trade accounts receivable                                                         (813)              (282)
      Inventory, net                                                                     582                775
      Prepaid expenses and other current assets                                           31                 88
      Other assets                                                                       (41)               (14)
      Trade accounts payable                                                             311                (73)
      Accrued liabilities and other                                                      (21)               176
                                                                                     -------            -------
              Total adjustments                                                          180                799
                                                                                     -------            -------
              Net cash provided by operating activities                                  180                662
                                                                                     -------            -------

Cash flows from investing activities:
      Acquisitions of property and equipment                                             (31)               (23)
                                                                                     -------            -------
              Net cash used in investing activities                                      (31)               (23)
                                                                                     -------            -------

Cash flows from financing activities:
    Payments on notes payable                                                             --                (73)
    Proceeds from exercise of stock options and issuance of stock                         24                  2
                                                                                     -------            -------
              Net cash provided by (used in) financing activities                         24                (71)
                                                                                     -------            -------

Impact of exchange rate changes on cash                                                   23                 (7)
                                                                                     -------            -------

              Net increase in cash and cash equivalents                                  196                561

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

Cash and cash equivalents, end of period                                             $ 2,158            $ 1,100
                                                                                     =======            =======

Supplemental disclosure of cash flow information:
    Cash paid for interest                                                           $    --            $    45
                                                                                     =======            =======
    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
                                  June 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
      footnotes necessary for a complete presentation and, accordingly, 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 June 30, 2006 and 2005 were $81,000 and $44,000,
      respectively, and for the six months ended June 30, 2006 and 2005
      aggregated $96,000 and $61,000, 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 June 30, 2006 aggregated $70,000.

      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 $1,024,000 at June 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 six month periods ended June
      30, 2006 and 2005 is set forth in the following table:

<TABLE>
<CAPTION>
                                                            Three months ended                  Six months ended

                                                                 June 30                             June 30
                                                        ---------------------------        ---------------------------
                                                           2006             2005              2006             2005
                                                        ----------       ----------        ----------       ----------
<S>                                                      <C>              <C>               <C>              <C>
   Basic weighted average shares outstanding             5,479,423        5,462,479         5,475,812        5,461,549
   Potentially dilutive stock options                      439,000          603,000           473,000          603,000
   Anti-dilutive stock options due to net
        loss in period                                          --         (603,000)               --         (603,000)
                                                        ----------       ----------        ----------       ----------
   Diluted weighted average shares outstanding           5,918,423        5,462,479         5,948,812        5,461,549
                                                        ==========       ==========        ==========       ==========
</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 June 2006, the Company's shareholders approved the 2005 Stock Incentive
      Plan (the "2005 Plan"), 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, while it's pending approval by
      state regulators.

      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    Six months ended
                                             June 30, 2005        June 30, 2005
                                             -------------        -------------

         Net loss, as reported                 $(8,000)            $  (137,000)
         Net loss, pro forma                   $(2,000)            $  (125,000)

         Diluted loss, as reported                  --             $     (0.03)
         Diluted loss,  pro forma                   --             $     (0.02)

      Stock option activity during the periods indicated is as follows:

                                                   Number      Weighted Average
                                                 of Shares      Exercise Price


         Balance at December 31, 2005              526,166        $   1.78
            Exercised                              (16,666)       $   1.41
                                                   -------
         Balance at June 30, 2006  (Unaudited)     509,500        $   1.80
                                                   =======

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

      At June 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 June 30, 2006, the approximate number of options exercisable was
      466,000 and the weighted average exercise prices of those exercisable
      options were $1.80.

Note 3 - 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. Upon effectiveness of
      the RoHS legislation, some of the Company's inventory 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.

      On July 10 2006, we entered into commitments for purchasing approximately
      4,500 square feet of office space in Shanghai, China for $1,230,000. The
      investment will be used as rental property for lease to others and for our
      project design and engineering center.


                                     Page 7
<PAGE>

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 June
30, 2006 and 2005 were $81,000 and $44,000, respectively, and for the six months
ended June 30, 2006 and 2005 aggregated $96,000 and $61,000, respectively. The
allowance for sales returns and doubtful accounts at June 30, 2006 aggregated
$70,000.

      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
$16,099,000 at June 30, 2006, which is presented net of valuation allowances of
$1,024,000. 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.

      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, this directive restricts the
distribution of products within the EU containing certain substances, including
lead. While the enabling legislation of a number of EU member countries has not
yet been adopted, we believe it is likely that we 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. At the present time, much of our
inventory contains substances prohibited by the RoHS directive. Further, many of
our suppliers are not yet supplying RoHS compliant products. Upon effectiveness
of the RoHS legislation, some of our inventory may become obsolete and
unsaleable and, as a result, have to be written off. While we are working
closely with our customers and suppliers to minimize this impact, at this time,
it is difficult to quantify the financial impact, if any, of


                                     Page 8
<PAGE>

such obsolete inventory. 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 March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets - an amendment of FASB Statement No. 140 ("SFAS 156") which
amends FASB Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, with respect to the
accounting for separately recognized servicing assets and servicing liabilities.
This statement clarifies when servicing rights should be separately accounted
for, requires companies to account for separately recognized servicing rights
initially at fair value, and gives companies the option of subsequently
accounting for those servicing rights at either fair value or under the
amortization method. SFAS 156 is effective for fiscal years beginning after
September 15, 2006. We do not believe that adoption of SFAS 156 will have a
material impact 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 manufacturing work offshore. We formed some strategic business
partnerships with a few customers and are providing them with original design
and manufacturing (ODM) solutions for their multi-year turn-key projects. We are
beginning to see the results from these additional products during 2006.

      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

Second quarter of 2006 versus Second quarter of 2005.

      Net sales in the second quarter of 2006 totaled $2,996,000 versus
$2,202,000 in the comparable period for 2005, an increase of 36.1% over the same
period last year. The sales increase was attributed to growth in our ODM
products by $853,000 comparing the second quarter of 2006 over the same period
last year.


                                     Page 9
<PAGE>

      Gross profit for the second quarter of 2006 was $863,000 versus $586,000
in the comparable period for 2005, and gross margin percentage of net sales was
28.8% in 2006 versus 26.6% in 2005. The increase was primarily attributed to the
impact from our ODM products.

      Selling, general and administrative ("SG&A") expenses in the second
quarter of 2006 totaled $704,000 versus $628,000 in the comparable period for
2005. As a percentage of net sales, SG&A expenses were 23.5% in the second
quarter of 2006 compared to 28.5% in the second quarter for 2005. The increase
of $76,000 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 $22,000 for the second
quarter of 2006 versus interest expense, net of interest income, of $5,000 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 second quarter of 2006 and in the
comparable period for 2005, as we do not expect significant taxable income for
fiscal year 2006.

      Net income was $162,000 for the second quarter of 2006 versus a loss of
$8,000 in the comparable period for 2005, an increase of $170,000.

Six Months Ended June 30, 2006 versus Six Months Ended June 30, 2005.

      Net sales in the six months ended June 30, 2006 was $4,985,000 versus
$4,044,000 in the comparable period for 2005, an increase of 23.3% over the same
period last year. The sales increase was attributed to growth in our ODM
products by $976,000 comparing the six months ended June 30, 2006 over the same
period last year.

      Gross profit for the six months ended June 30, 2006 was $1,343,000 versus
$1,087,000 in the comparable period for 2005, and gross margin percentage of net
sales was 26.9% for both periods. The dollar increase was primarily attributed
to the impact from our ODM products.

      Selling, general and administrative ("SG&A") expenses in the six months
ended June 30, 2006 totaled $1,340,000 versus $1,246,000 in the comparable
period for 2005. As a percentage of net sales, SG&A expenses were 26.9% in the
six months ended June 30, 2006 compared to 30.8% in the comparable period for
2005. The increase of $94,000 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 $37,000 for the six months
ended June 30, 2006 versus interest expense, net of interest income, of $17,000
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 six months ended June 30, 2006
versus $0 in the comparable period for 2005, as we do not expect significant
taxable income for fiscal year 2006.

      Net income was $0 for the six months ended June 30, 2006 versus net losses
of $137,000 in the comparable period for 2005, an increase of $137,000 resulting
from the reasons discussed above.

      Effective January 1, 2006, we adopted SFAS 123(R) and such had a $10,000
financial impact to our SG&A for the six months ended June 30, 2006.

Liquidity and Capital Resources

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


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<PAGE>

                                                   Six months ended June 30,
                                                  ---------------------------
           (Dollars in thousands)                     2006           2005
                                                  -----------     -----------
                                                  (Unaudited)     (Unaudited)

      Operating activities .......................   $ 180          $ 662
      Investing activities .......................     (31)           (23)
      Financing activities .......................      24            (71)

      Cash provided by operating activities for the six months ended June 30,
2006 and 2005 was $180,000 and $662,000, respectively. The decrease was
primarily attributed to the increase of accounts receivable by $813,000 for the
six months ended June 30, 2006 versus the increase of $282,000 in the comparable
period for 2005.

      Cash used in investing activities for the six months ended June 30, 2006
and 2005 was $31,000 and $23,000, respectively, for capital expenditures.

      Cash provided by financing activities for the six months ended June 30,
2006 was $24,000 versus $71,000 used in, during the comparable period in 2005.
The increase was primarily attributed to repayments on notes payable of $73,000
in the six months ended June 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 is 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.

      As of the date of this Report, we have the commitment for purchasing
approximately 4,500 square feet of office space in Shanghai, China for
$1,230,000. The investment will be used as rental property for lease to others
and for our project design and engineering center. We had no commitments for
other equity or debt financing or other capital expenditures.

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 have 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 June 30, 2006 that were not registered under the Securities Act.


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<PAGE>

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.


                                    Page 12
<PAGE>

                                   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: August 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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