**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-Q**





[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      quarterly period ended September 30, 2006





[
      ]
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      transition period from.................to...................


Commission
      file number 1-8191





**PORTA
      SYSTEMS CORP.**


(Exact
      name of registrant as specified in its charter)





Delaware
            11-2203988(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)





6851
      Jericho Turnpike, Suite 170, Syosset, New York


(Address
      of principal executive offices)





11791


(Zip
      Code)





516-364-9300


(Company’s
      telephone number, including area code)





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes X  No____





Indicate
      by a check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer; see definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of Exchange Act. Check
      one:


Large
      accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X ]





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





Indicate
      the number of shares outstanding of each of the issuer’s classes of common stock
      as of the latest practicable date:





Common  stock
      (par value $0.01) 10,075,561 shares as of October 24, 2006





**PART
      I** .- **FINANCIAL
      INFORMATION**


**Item
      1-** **Financial
      Statements**





PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Consolidated
      Balance Sheets


(In
      thousands, except shares and par value)




September
                30,
            
            
            December
                31,2006
            
            
            2005Assets
            
            
            (Unaudited)Current
                assets:Cash
                and cash equivalents
            
            $
            1,355
            
            $
            1,254Accounts
                receivable - trade, less allowance for doubtful accountsof
                $256 in 2006 and $256 in 2005
            
            
            6,355
            
            
            3,471Inventories
            
            
            3,916
            
            
            4,541Prepaid
                expenses and other current assets
            
            
            796
            
            
            446Assets
                of discontinued operations
            
            
            415
            
            
            588Total
                current assets
            
            
            12,837
            
            
            10,300Property,
                plant and equipment, net
            
            
            1,447
            
            
            1,351Goodwill,
                net
            
            
            2,961
            
            
            2,961Other
                assets
            
            
            44
            
            
            49Total
                assets
            
            $
            17,289
            
            $
            14,661Liabilities
                and Stockholders’ DeficitCurrent
                liabilities:Senior
                debt
            
            $
            23,816
            
            $
            24,675Subordinated
                notes
            
            
            6,144
            
            
            6,1446%
                convertible subordinated debentures
            
            
            385
            
            
            385Accounts
                payable
            
            
            5,767
            
            
            4,035Accrued
                expenses and other
            
            
            2,050
            
            
            1,567Other
                accrued interest payable
            
            
            5,891
            
            
            5,180Liabilities
                of discontinued operations
            
            
            514
            
            
            2,033Total
                current liabilities
            
            
            44,567
            
            
            44,019Deferred
                compensation
            
            
            781
            
            
            827Total
                long-term liabilities
            
            
            781
            
            
            827Total
                liabilities
            
            
            45,348
            
            
            44,846Stockholders’
                deficit:Preferred
                stock, no par value; authorized 1,000,000 shares, none
                issued
            
            
            ---
            
            
            ---Common
                stock, par value $.01; authorized 20,000,000 shares,
                issued10,075,561
                shares in 2006 and 10,084,577 shares in 2005
            
            
            101
            
            
            101Additional
                paid-in capital
            
            
            76,124
            
            
            76,124Accumulated
                deficit
            
            
            (97,596
            )
            
            (99,895
            )Accumulated
                other comprehensive loss:Foreign
                currency translation adjustment
            
            
            (4,750
            )
            
            (4,577
            )(26,121
            )
            
            (28,247
            )Treasury
                stock, at cost, 30,940 shares
            
            
            (1,938
            )
            
            (
                1,938
            )Total
                stockholders’ deficit
            
            
            (28,059
            )
            
            (30,185
            )Total
                liabilities and stockholders’ deficit
            
            $
            17,289
            
            $
            14,661




See
      accompanying notes to unaudited consolidated financial statements.




Page
          2 of 22





PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Unaudited
      Consolidated Statements of Operations and Comprehensive Income


(In
      thousands, except per share amounts)




Nine
                Months EndedSeptember
                30,
            
            September
                30,2006
            
            
            2005Sales
            
            $
            25,039
            
            $
            22,504Cost
                of sales
            
            
            16,593
            
            
            13,626Gross
                profit
            
            
            8,446
            
            
            8,878Selling,
                general and administrative expenses
            
            
            4,090
            
            
            3,939Research
                and development expenses
            
            
            1,164
            
            
            981Total
                expenses
            
            
            5,254
            
            
            4,920Operating
                income
            
            
            3,192
            
            
            3,958Interest
                expense, net
            
            
            (848
            )
            
            (957
            )Other
                income, net
            
            
            2
            
            
            4Income
                from continuing operations before income taxes
            
            
            2,346
            
            
            3,005Income
                tax expense
            
            
            (92
            )
            
            (106
            )Income
                from continuing operations before discontinued operations
            
            
            2,254
            
            
            2,899Discontinued
                operations:Loss
                from discontinued operations (net of zero taxes)
            
            
            (245
            )
            
            (702
            )Net
                income
            
            $
            2,009
            
            $
            2,197Other
                comprehensive loss:Foreign
                currency translation adjustments
            
            
            (173
            )
            
            (263
            )Comprehensive
                income
            
            $
            1,836
            
            $
            1,934Basic
                income (loss) per common share:Continuing
                operations
            
            $
            0.22
            
            $
            0.29Discontinuing
                operations
            
            
            (0.02
            )
            
            (0.07
            )$
            0.20
            
            $
            0.22Weighted
                average shares outstanding
            
            
            10,076
            
            
            10,021Diluted
                income (loss) per common share:Continuing
                operations
            
            $
            0.22
            
            $
            0.29Discontinuing
                operations
            
            
            (0.02
            )
            $
            (0.07
            )$
            0.20
            
            $
            0.22Weighted
                average shares outstanding
            
            
            10,104
            
            
            10,054




See
      accompanying notes to unaudited consolidated financial statements.




Page
          3 of 22




PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Unaudited
      Consolidated Statements of Operations and Comprehensive Income


(In
      thousands, except per share amounts)




Three
                Months EndedSeptember
                30,
            
            September
                30,2006
            
            2005Sales
            
            $
            9,018
            
            $
            6,875Cost
                of sales
            
            
            6,036
            
            
            4,429Gross
                profit
            
            
            2,982
            
            
            2,446Selling,
                general and administrative expenses
            
            
            1,386
            
            
            1,450Research
                and development expenses
            
            
            408
            
            
            331Total
                expenses
            
            
            1,794
            
            
            1,781Operating
                income
            
            
            1,188
            
            
            665Interest
                expense, net
            
            
            (261
            )
            
            (312
            )Other
                income, net
            
            
            --
            
            
            3Income
                from continuing operations before income taxes
            
            
            927
            
            
            356Income
                tax expense
            
            
            (22
            )
            
            (83
            )Income
                from continuing operations before discontinued operations
            
            
            905
            
            
            273Discontinued
                operations:Loss
                from discontinued operations (net of zero taxes)
            
            
            (87
            )
            
            (166
            )Net
                income
            
            $
            818
            
            $
            107Other
                comprehensive loss:Foreign
                currency translation adjustments
            
            
            (47
            )
            
            (155
            )Comprehensive
                income (loss)
            
            $
            771
            
            $
            (48
            )Per
                share data:Basic
                income (loss) per common share:Continuing
                operations
            
            $
            0.09
            
            $
            0.03Discontinued
                operations
            
            
            (0.01
            )
            
            (0.02
            )$
            0.08
            
            $
            (0.01
            )Weighted
                average shares outstanding
            
            
            10,076
            
            
            10,054Diluted
                income (loss) per common shareContinuing
                operations
            
            $
            0.09
            
            $
            0.03Discontinued
                operations
            
            
            (0.01
            )
            
            (0.02
            )$
            0.08
            
            $
            (0.01
            )Weighted
                average shares outstanding
            
            
            10,103
            
            
            10,089




See
      accompanying notes to unaudited consolidated financial statements.


Page
          4 of 22





PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Unaudited
      Consolidated Statements of Cash Flows


(In
      thousands)




Nine
                Months EndedSeptember
                30,
            
            
            September
                30,2006
            
            
            2005Cash
                flows from operating activities of continuing operations:Net
                income
            
            $
            2,009
            
            $
            2,197Loss
                from discontinued operations
            
            
            245
            
            
            702Adjustments
                to reconcile net income to net cashprovided
                by operating activities of continuing operations:Depreciation
                and amortization
            
            
            193
            
            
            991Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (2,883
            )
            
            (1,425
            )Inventories
            
            
            625
            
            
            90Prepaid
                expenses and other current assets
            
            
            (349
            )
            
            (704
            )Other
                assets
            
            
            4
            
            
            5Accounts
                payable, accrued expenses and other liabilities
            
            
            2,879
            
            
            753Net
                cash provided by continuing operations
            
            
            2,723
            
            
            2,609Net
                cash used in operations of discontinued operations
            
            
            (1,406
            )
            
            (1,520
            )Net
                cash from operations
            
            
            1,317
            
            
            1,089Cash
                flows from investing activities:Capital
                expenditures, net
            
            
            (149
            )
            
            (1,223
            )Net
                cash used in investing of discontinued operation
            
            
            (184
            )
            
            770Net
                cash used in investing activities
            
            
            (333
            )
            
            (453
            )Cash
                flows from financing activities:Increase
                in senior debt
            
            
            154
            
            
            261Repayments
                of senior debt
            
            
            (1,013
            )
            
            (675
            )Net
                cash used in financing activities
            
            
            (859
            )
            
            (414
            )Effect
                of exchange rate changes on cash
            
            
            (24
            )
            
            (196
            )Increase
                in cash and cash equivalents
            
            
            101
            
            
            26Cash
                and cash equivalents - beginning of the year
            
            
            1,254
            
            
            2,040Cash
                and cash equivalents - end of the period
            
            $
            1,355
            
            $
            2,066Supplemental
                cash flow disclosure:Cash
                paid for interest expense
            
            $
            159
            
            $
            680Cash
                paid for income taxes
            
            $
            74
            
            $
            98Common
                stock issued for accrued director fees
            
            $
            ---
            
            $
            66




See
      accompanying notes to unaudited consolidated financial statements.





Page
          5 of 22


PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


NOTES
      TO
      UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





**Note
      1: Management’s Responsibility For Interim Financial Statements Including All** **Adjustments
      Necessary For Fair Presentation**





Management
      acknowledges its responsibility for the preparation of the accompanying interim
      consolidated financial statements which reflect all adjustments, consisting
      of
      normal recurring adjustments, considered necessary in its opinion for a fair
      statement of its consolidated financial position and the results of its
      operations for the interim period presented. These consolidated financial
      statements should be read in conjunction with the summary of significant
      accounting policies and notes to consolidated financial statements included
      in
      the Company’s Form 10-K annual report for the year ended December 31, 2005.
      These financial statements have been prepared assuming that the Company will
      continue as a going concern and, accordingly, do not include any adjustments
      that might result from the outcome of the uncertainties described within. The
      audit opinion included in the December 31, 2005 Form 10-K annual report
      contained an explanatory paragraph regarding the Company’s ability to continue
      as a going concern. The factors which resulted in the explanatory paragraph
      are
      continuing. Results for the third quarter or the first nine months of 2006
      are
      not necessarily indicative of results for the year.





**Note
      2: Inventories**





Inventories,
      from continuing operations, are stated at the lower of cost (on the average
      or
      first-in, first-out method) or market. The composition of inventories at the
      end
      of the respective periods is as follows (net of reserve of $2,630,000 for 2006
      and $2,583,000 for 2005):




September
                30, 2006
            
            December
                31, 2005(in
                thousands)Parts
                and components
            
            $
            $2,690
            
            $
            3,192Work-in-process
            
            
            790
            
            
            459Finished
                goods
            
            
            436
            
            
            890$
            3,916
            
            $
            4,541





**Note
      3: Senior and Subordinated Debt**





On
      September 30, 2006, the Company’s liability to the holder of its senior debt was
      $23,816,000. During the fourth quarter of 2004, SHF IX LLC, an affiliate of
      Minnesota-based Stonehill Financial, LLC, purchased the Company’s senior debt of
      approximately $25,000,000 from Wells Fargo Foothill, Inc. The Company has made
      payments through September 30, 2006 totaling $2,137,500 as required by
      amendments and extensions of the loan agreement, of which $490,259 was applied
      to interest and $1,647,241 was applied to principal. On October 3, 2006, the
      Company entered into an agreement with SHF IX, LLC, which amended its Amended
      and Restated Loan and Security Agreement, dated as of November 28, 1994, as
      amended, to extend the maturity of the Company’s senior debt to November 30,
      2006, subject to the Company’s reaching an agreement with the senior debt holder
      and attaining certain milestones discussed in the following paragraph. The
      agreement provides for monthly payments of $112,500 to the senior debt and
      provides for the Company to pay the legal expenses and certain other expenses
      of
      the senior debt holder. As part of the extension, the senior debt holder agreed
      to continue the current deferral of interest on most of the senior
      debt.





Page
          6 of 22


As
      a
      condition to the extension, the Company agreed to continue to take steps to
      effect a restructuring of the senior debt in a manner which results in a
      reduction of a significant portion of the senior debt and the issuance of equity
      to the senior debt holder. Additionally, the Company would attempt to achieve
      a
      restructuring of debt which is junior to the senior debt. The agreement required
      that the Company reaches an agreement with the senior debt holder for such
      restructuring by October 31, 2006 and meets certain other milestones directed
      at
      effecting such restructuring. The Company is currently negotiating the terms
      of
      such agreement with the senior debt holder. As a result of the Company’s failure
      to reach an agreement by October 31, 2006, the senior debt holder has the right
      to immediately accelerate the maturity date.





As
      previously announced, the Company has retained an investment banker and is
      actively seeking an investor. The Company cannot give any assurance that it
      will
      be able to obtain an investor on terms that are acceptable to the senior debt
      holder or otherwise reach an agreement with the senior debt holder regarding
      a
      restructuring of the senior debt. In the event that the Company is successful
      in
      negotiating an agreement with an investor and the senior debt holder, it is
      likely that the Company will be required to issue a significant number of shares
      of common stock or convertible securities which would result in very significant
      dilution to the Company’s present stockholders. However, the Company cannot give
      any assurance that any such restructuring will be consummated, if at all,
      outside of bankruptcy reorganization.





As
      of
      September 30, 2006, the Company’s short-term debt also included $6,144,000 of
      subordinated debt, which became due on July 3, 2001, and $385,000 of 6%
      debentures, which became due on July 2, 2002. Accrued interest on the
      subordinated notes was approximately $5,746,000, which represents interest
      from
      July 2000 through September 30, 2006, and accrued interest on the 6% debentures
      was $144,000 and is reflected in “ *Other
      Accrued Interest Payable* ”
in
      the
      accompanying Consolidated Balance Sheet. The Company is precluded by the holder
      of its senior debt from paying any principal or interest on the subordinated
      debt.





**Note
      4: Accounting for Stock Based Compensation**





Incentive
      awards are provided to employees under the terms of our 1998 Non-Qualified
      Stock
      Option Plan and our 1999 Incentive and Non-Qualified Stock Option Plan (the
      "1998 Plan" and “1999 Plan”, respectively). Options under the 1998 Plan may be
      granted to key employees, including officers and directors of the Company and
      its subsidiaries. The exercise prices for all options granted under the 1998
      Plan are equal to the fair market value at the date of grant and vest as
      determined by the board of directors. Options under the 1999 Plan may be granted
      to key employees, including officers and directors of the Company and its
      subsidiaries, except that members
      and alternate members of the stock option committee are not eligible for options
      under the 1999 Plan. The exercise prices for all options granted are equal
      to
      the fair market value at the date of grant and vest as determined by the board
      of directors, which is historically determined as six months. In addition,
      the
      1999 Plan provides for the automatic grant to non-management directors of
      non-qualified options to purchase 5,000 shares on May 1st of each year
      commencing May 1, 1999, based upon the average closing price of the last ten
      trading days of April of each year. Options under both the 1998 and 1999 Plans
      have expiration terms between 5 and 10 years.





Effective
      January 1, 2006, the Company adopted the provisions of FAS No. 123(R),
      "Share-Based Payment" ("FAS123(R)"). Under FAS123(R), share-based compensation
      cost is measured at the grant date, based on the estimated fair value of the
      award, and is recognized as expense over the requisite service period. The
      Company adopted the provisions of FAS123(R) using a modified prospective
      application. Under this method, compensation cost is recognized for all
      share-based payments granted, modified or settled after the date of adoption,
      as
      well as for any unvested awards that were granted prior to the date of adoption.
      Prior periods are not revised for comparative purposes. There was no stock-based
      compensation expense for the three and nine months ended September 30, 2006
      as
      all options are either fully vested or will vest in future periods.





Page
          7 of 22


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





**Options**
            
            
            **Weighted
                Average**
              **Exercise**
              **Price
                Per**
              **Share**
            
            
            **Weighted**
              **Average**
              **Remaining**
              **Term**
            
            
            **Aggregate**
              **Intrinsic
                Value****Outstanding
                at January 1, 2006**
            
            
            337,780
            
            $
            1.39
            
            
            2.73
            
            $
            --Granted
            
            
            --
            
            
            --
            
            
            --
            
            
            --Forfeited
            
            
            (28,500
            )
            
            3.31
            
            
            --
            
            
            --Exercised
            
            
            --
            
            
            --
            
            
            --
            
            
            --**Outstanding
                at March 31, 2006**
            
            
            309,280
            
            $
            1.22
            
            
            2.71
            
            $
            3,240Granted
            
            
            20,000
            
            
            0.11
            
            
            9.84
            
            
            --Forfeited
            
            
            (2,000
            )
            
            3.69
            
            
            --
            
            
            --Exercised
            
            
            --
            
            
            --
            
            
            --
            
            
            --**Outstanding
                at June 30, 2006**
            
            
            327,280
            
            $
            1.13
            
            
            2.91
            
            $
            5,690****Granted
            
            
            --
            
            
            --
            
            
            --
            
            
            --****Forfeited
            
            
            (5,000
            )
            
            0.30
            
            
            --
            
            
            --****Exercised
            
            
            --
            
            
            --
            
            
            --
            
            
            --**Outstanding
                at September 30, 2006**
            
            
            322,280
            
            $
            1.15
            
            
            2.71
            
            $
            4,290**Exercisable
                at September 30, 2006**
            
            
            302,280
            
            $
            1.21
            
            
            2.25
            
            $
            3,690





Prior
      to
      the beginning of fiscal 2006, the Company did not record compensation expense
      for its stock based compensation plans, as such treatment was permitted under
      the provisions of Accounting Principles Board (“APB”) Opinion No. 25 “Accounting
      for Stock Issued to Employees,” related interpretations, and SFAS 123,
“Accounting for Stock-Based Compensation.” The Company provided the requisite
      pro forma disclosures and complied with provisions of SFAS 148, “Accounting for
      Stock-Based Compensation—Transition and Disclosures.” For the three and nine
      months ended September 30, 2006, there was no pro-forma disclosure as there
      were
      no unvested options.





Presented
      in the table below are the options granted, weighted average fair value using
      a
      Black Sholes pricing model and total compensation charges, net of estimated
      forfeitures:





Page
          8 of 22








****
            ****
            **Weighted****Average****Options**
            
            
            **Black
                    Scholes**
            
            
            **Compensation****Granted**
            
            
            **Value**
            
            
            **Charge**Options
                granted subsequent to SFAS 123R
            
            
            20,000
            
            $
            .0432
            
            $
            0Non-vested
                options granted prior to adoptionof
                SFAS 123R
            
            
            ---
            
            
            ---
            
            
            ---Total
            
            
            20,000
            
            $
            .0432
            
            $
            0




The
      fair
      value of each option award is estimated based on the date of the grant using
      a
      Black Sholes option valuation model. Expected volatility is based on the
      historical volatility of the price of the Company’s stock. The risk-free
      interest rate is based on the U.S. Treasury issues with a term equal to the
      expected life of the options. The Company uses historical data to estimate
      expected dividend yield, expected life and forfeiture rates. The value of the
      options granted during the nine months ended September 30, 2006 was based on
      the
      following weighted average assumptions:




Expected
                volatility
            5%Risk-free
                interest rate
            4.99%Expected
                dividend yield
            0%Expected
                life
            10
                years





As
      of
      September 30, 2006, there were approximately $874 of unrecognized stock
      compensation charges related to options granted under our plans that will be
      recognized in the fourth quarter of 2006 when the 2006 grant vests.





A
      summary
      of our non-vested shares as of September 30, 2006 and changes during the nine
      months ended September 30, 2006 is presented below:





**Weighted****Average****Grant
                Date****Shares**
            
            
            **Fair
                Value**Non-vested
                as of January 1, 2006
            
            
            ---
            
            
            ---Granted
            
            
            20,000
            
            $
            0.11Vested
            
            
            ---
            
            
            ---Forfeited
            
            
            ---
            
            
            ---Non-vested
                as of September 30, 2006
            
            
            20,000
            
            $
            0.11





**Note
      5: Segment Data**





The
      Company has two reportable segments: Line Connection and Protection Equipment
      (“Line”) whose products interconnect copper telephone lines to switching
      equipment and provide fuse elements that protect telephone equipment and
      personnel from electrical surges, and Signal Processing (“Signal”) whose
      products are used in data communication devices that employ high frequency
      transformer technology.





Due
      to
      continuing losses in the Operating Support Systems (“OSS”) division, combined
      with difficulties in marketing OSS products in view of our financial condition, the
      Company decided to exit this operating segment in December, 2003. We
      currently limit our OSS activities to the performance of contractual maintenance
      and warranty services which are anticipated to expire in June, 2007 (see Note
      8). It is currently anticipated that these services will cease by June 2007.
      Effective as of June 30, 2006 t he
      assets
      and liabilities, and results of operations, of the OSS division have been
      segregated and reported separately as discontinued operations, on the
      Consolidated Financial Statements present
      in this Form 10-Q. OSS was
      engaged in the business whose products automate the testing, provisioning,
      maintenance and administration of communication networks and the management
      of
      support personnel and equipment. Currently we limit OSS activities to the
      performance of
      contractual maintenance and warranty services.





Page
          9 of 22


The
      factors used to determine the above segments focused primarily on the types
      of
      products and services provided, and the type of customer served. Each of these
      segments is managed separately from the others, and management evaluates segment
      performance based on operating income.





There
      has
      been no significant change, from December 31, 2005, in the basis of measurement
      of segment revenues and profit or loss, and no significant change in the
      Company’s assets for the Line and Signal reporting segments.


Nine
                  Months Ended
              
              
              Three
                  Months EndedSeptember
                  30, 2006
              
              
              September
                  30, 2005
              
              
              September
                  30, 2006
              
              
              September
                  30, 2005Sales:Line
              
              $
              21,027,000
              
              $
              17,868,000
              
              $
              7,532,000
              
              $
              5,588,000Signal
              
              
              3,731,000
              
              
              4,517,000
              
              
              1,324,000
              
              
              1,263,000Total
                  of ContinuingOperations
              
              $
              24,758,000
              
              $
              22,385,000
              
              $
              8,856,000
              
              $
              6,851,000Segment
                  profit:Line
              
              $
              3,956,000
              
              $
              4,054,000
              
              $
              1,341,000
              
              $
              945,000Signal
              
              
              1,067,000
              
              
              1,875,000
              
              
              462,000
              
              
              488,000Total
                  of ContinuingOperations
              
              $
              5,023,000
              
              $
              5,929,000
              
              $
              1,803,000
              
              $
              1,433,000




The
      following table reconciles segment totals to consolidated totals:


Nine
                  Months Ended
              
              
              Three
                  Months EndedSeptember
                  30, 2006
              
              
              September
                  30, 2005
              
              
              September
                  30, 2006
              
              
              September
                  30, 2005Sales:Total
                  revenue for reportablesegments
              
              $
              24,758,000
              
              $
              22,385,000
              
              $
              8,856,000
              
              $
              6,851,000Other
                  revenue
              
              
              281,000
              
              
              119,000
              
              
              162,000
              
              
              24,000Consolidated
                  total revenue
              
              $
              25,039,000
              
              $
              22,504,000
              
              $
              9,018,000
              
              $
              6,875,000Operating
                  income (loss):Total
                  segment incomefor
                  reportable segments
              
              $
              5,023,000
              
              $
              5,929,000
              
              $
              1,803,000
              
              $
              1,433,000Corporate
                  and unallocated
              
              
              (1,831,000
              )
              
              (1,971,000
              )
              
              (615,000
              )
              
              (768,000
              )Consolidated
                  totaloperating
                  income
              
              $
              3,192,000
              
              $
              3,958,000
              
              $
              1,188,000
              
              $
              665,000





Page
          10 of 22




**Note 6:** **Legal
      Proceedings**




In
      April
      2006, the Company commenced a legal action against a former officer of one
      of
      its operating divisions and against his current employer. The Company asserts
      that the former officer breached his duties to the Company and engaged in unfair
      competition by using the Company's confidential and proprietary information
      and
      trade secrets to manufacture and sell products which are identical in all
      material respects to those sold by the division which he managed on behalf
      of
      the Company. At this time, the Company cannot predict the outcome of this
      litigation.





**Note
      7:** **New
      accounting pronouncements**





In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      155 (FASB No. 155), Accounting for Certain Hybrid Financial Instruments an
      amendment of FASB Statements No. 133 and No. 140. The objectives of this
      statement is to a) simplify accounting for certain hybrid financial instruments
      by permitting fair value remeasurement for any hybrid financial instruments
      that
      contains an embedded derivative that otherwise would require bifurcation and
      b)
      eliminate the interim guidance in Statement No. 133 Implementation Issue No.
      D1,
      Application of Statement 133 to Beneficial Interests in Securitized Financial
      Assets, which provides that beneficial interests in securitized assets are
      not
      subject to the provisions of Statement No. 133. Statement No. 155 is effective
      for fiscal years beginning after September 15, 2006. The adoption of this
      statement is not expected to have a material effect on our financial position
      or
      results of operations.





In
      March
      2006, the FASB issued Statement of Financial Accounting Standards No. 156 (FASB
      No. 156), Accounting for Servicing Financial Assets an amendment of FASB
      Statement No. 140. The objective of this statement amends Statement No. 140
      to
      require that all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value. Statement No. 156 is effective
      for fiscal years beginning after September 15, 2006. The adoption of this
      statement is not expected to have a material effect on our financial position
      or
      results of operations.





In
      June
      2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for
      Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. The
      objective of this 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 48 is
      effective for the fiscal years beginning after December 15, 2006. The adoption
      of this statement is not expected to have a material effect on our financial
      position or results of operations.





In
      September 2006, FASB issued SFAS No. 157, “Fair Value Measurements,”
which provides enhanced guidance for using fair value to measure assets and
      liabilities. SFAS No. 157 establishes a common definition of fair value,
      provides a framework for measuring fair value under U.S. GAAP and expands
      disclosures requirements about fair value measurements. SFAS No. 157 is
      effective for financial statements issued in fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. . The
      adoption of this statement is not expected to have a material effect on our
      financial position or results of operations.





In
      September 2006, the Financial Accounting Standards Board (FASB) issued
      SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and
      132(R),” which requires recognition of a net liability or asset to report the
      funded status of defined benefit pension and other postretirement plans on
      the
      balance sheet and recognition (as a component of other comprehensive income)
      of
      changes in the funded status in the year in which the changes occur.
      Additionally, SFAS No. 158 requires measurement of a plan’s assets and
      obligations as of the balance sheet date and additional annual disclosures
      in
      the notes to the financial statements. The recognition and disclosure provisions
      of SFAS No. 158 are effective for fiscal years ending after
      December 15, 2006, while the requirement to measure a plan’s assets and
      obligations as of the balance sheet date is effective for fiscal years ending
      after December 15, 2008. The Company is currently evaluating the effect
      this statement may have on our future results of operations.





Page
          11 of 22





**Note
      8:** **Discontinued
      operations**




**Operating
      Support Systems (“OSS”)**








In
      December, 2003, the Company decided to wind down its OSS business. This decision
      was made because of continuing losses combined
      with difficulties in marketing OSS products in view of our financial condition.
      The Company anticipates the discontinuation of this business by June 30, 2007.
      Effective as of June 30, 2006, the OSS operating segment is reported in the
      Consolidated Financial Statements as a discontinued operation. Currently,
      its operating activities are limited to the performance of
      contractual maintenance and warranty services.





The
      following amounts related to OSS have been segregated from the Company’s
      continuing operations and are reported as assets and liabilities of discontinued
      operations in the consolidated balance sheet:





September
                30, 2006
            
            December
                31, 2005Assets
                of discontinued operations:Prepaid
                expenses
            
            $
            28,000
            
            $
            35,000Accounts
                receivable
            
            
            15,000
            
            
            184,000Inventories
            
            
            342,000
            
            
            311,000Property,
                plant and equipment
            
            
            29,000
            
            
            57,000Other
                assets
            
            
            1,000
            
            
            1,000**Total
                assets of discontinued operations**
            
            $
            415,000
            
            $
            588,000Liabilities
                of discontinued operations:Accounts
                payable and accrued expenses
            
            $
            514,000
            
            $
            2,033,000**Total
                liabilities of discontinued operations**
            
            $
            514,000
            
            $
            2,033,000





Results
      of operations for OSS have been segregated from continuing operations and are
      reflected as discontinued operations approximately as follows:





Nine
                Months Ended
              September
                30,2006
            
            
            2005Revenues
            
            $
            276,000
            
            $
            557,000Loss
                from discontinued operations
            
            $
            (245,000
            )
            $
            (702,000
            )




Page
          12 of 22






Three
                Months Ended
              September
                30,2006
            
            
            2005Revenues
            
            $
            80,000
            
            $
            146,000Loss
                from discontinued operations
            
            $
            (87,000
            )
            $
            (166,000
            )




**Item
      2.** **Management’s
      Discussion and Analysis of Financial Condition and Results
      of** **Operations**




The
      Company’s consolidated statements of operations for the periods indicated below,
      shown as a percentage of sales, are as follows:





Nine
                Months Ended
            
            
            Three
                Months EndedSeptember
                30,
            
            
            September
                30,2006
            
            
            2005
            
            
            2006
            
            
            2005Sales
            
            
            100
            %
            
            100
            %
            
            100
            %
            
            100
            %Cost
                of sales
            
            
            66
            %
            
            61
            %
            
            67
            %
            
            64
            %Gross
                profit
            
            
            34
            %
            
            39
            %
            
            33
            %
            
            36
            %Selling,
                general and administrative expenses
            
            
            16
            %
            
            18
            %
            
            15
            %
            
            21
            %Research
                and development expenses
            
            
            5
            %
            
            4
            %
            
            4
            %
            
            5
            %Operating
                income
            
            
            13
            %
            
            18
            %
            
            13
            %
            
            10
            %Interest
                expense - net
            
            
            (3
            %)
            
            (4
            %)
            
            (3
            %)
            
            (5
            %)Other
            
            
            0
            %
            
            0
            %
            
            0
            %
            
            0
            %Discontinued
                operations
            
            
            (1
            %)
            
            (3
            %)
            
            (1
            %)
            
            (2
            %)Net
                income
            
            
            8
            %
            
            10
            %
            
            9
            %
            
            2
            %





The
      Company’s sales by product line for the periods ended September 30, 2006 and
      2005 are as


follows:


Nine
                  Months Ended September 30,$(000)2006
              
              
              2005Line
                  connection/protection equipment
              
              $
              21,027
              
              
              84
              %
              $
              17,868
              
              
              79
              %Signal
                  Processing
              
              
              3,731
              
              
              15
              %
              
              4,517
              
              
              20
              %Other
              
              
              281
              
              
              1
              %
              
              119
              
              
              1
              %$
              25,039
              
              
              100
              %
              $
              22,504
              
              
              100
              %
 
 
 Three
                  Months Ended September 30,$(000)2006
              
              
              2005Line
                  connection/protection equipment
              
              $
              7,532
              
              
              84
              %
              $
              5,588
              
              
              81
              %Signal
                  Processing
              
              
              1,324
              
              
              15
              %
              
              1,263
              
              
              18
              %Other
              
              
              162
              
              
              1
              %
              
              24
              
              
              1
              %$
              9,018
              
              
              100
              %
              $
              6,875
              
              
              100
              %
 
 Page
            13 of 22




**Overview**





We
      operate in the telecommunications industry, and our customer base consists
      largely of government-owned and privately-owned telecommunications companies.
      Our line connection and protection equipment (“Line”) interconnects copper
      telephone lines to switching equipment and provides fuse elements that protect
      telephone equipment and personnel from electrical surges. Our signal processing
      (“Signal”) equipment is used in data communication devices that employ high
      frequency transformer technology.




Our
      Line
      equipment is designed to connect copper-wired telecommunications networks and
      to
      protect telecommunications equipment from voltage surges. We market this
      equipment primarily to telephone operating companies outside the United States
      and through distribution to designers, engineers and installers in the United
      States. Our Line division operated at a profit for the three and nine months
      ended September 30, 2006 and September 30, 2005. We market Signal equipment principally
      for use in defense and aerospace applications. The Signal division generated
      operating profit for the three and nine months ended September 30, 2006 and
      the
      comparable periods of 2005. We recognize revenue from Line and Signal products
      when the product is shipped.





We
      currently limit our OSS activities to the performance of contractual maintenance
      and warranty services which are anticipated to expire in June, 2007 (see Note
      8). Effective as of June 30, 2006, the
      Company’s Consolidated Results of Operations present the OSS division as
      discontinued operations.





On
      September 30, 2006, our liability to the holder of our senior debt was
      $23,816,000. The most recent extension, which extended the maturity date,
      subject to our attaining certain milestones, from September 30, 2006 to November
      30, 2006, requires us to continue to make monthly payments of $112,500. The
      most
      recent extension also includes a number of milestones to the continuation of efforts towards a restructure in a manner which would enable
      the
      holder of the senior debt to receive significant payments on account of the
      senior debt including reaching an agreement with the sub-debt holder regarding
      restructuring of the senior and junior debts by October 31, 2006. Although
      the
      Company continues to negotiate with the senior debt holder, this milestone
      was
      not achieved by October 31, 2006. Therefore, the senior debt holder may demand
      immediate payment of the debt and declare a default. If the holder of the senior
      debt demands payment of all or a significant portion of the loan, we will not
      be
      able to continue in business and it is likely that we will seek protection
      under
      the Bankruptcy Code.





**Results
      of Continuing Operations**





The
      below
      narratives discuss the activities of our continuing operations.





Line
      equipment sales for the nine months ended September 30, 2006, compared to the
      nine months ended September 30, 2005 increased by $3,159,000 (18%) from
      $17,868,000 to $21,027,000. Sales for the three months ended September 30,
      2006
      increased by $1,944,000 (35%) from $5,588,000 for the same period in 2005 to
      $7,532,000 for the same period in 2006. The increase in sales for the nine
      and
      the three months in 2006 is primarily the result of increased sales volume
      to
      British Telecommunications as a result of British Telecommunications’ continuing
      rollout of DSL lines, and its implementation of the local loop unbundling
      program, demanded by regulators in the United Kingdom to enable third party
      providers of the telephone service to gain access to British Telecommunications’
systems.





Page
          14 of 22




Signal
      sales for the nine months ended September 30, 2006 were $3,731,000, compared
      to
      $4,517,000 in the same period of 2005, a decrease of $786,000 (17%). Sales
      for
      the three months ended September 30, 2006 compared to the same period in 2005,
      increased by $61,000 (5%) from $1,263,000 to $1,324,000. The decline in Signal
      revenue from the first nine months of 2006 resulted primarily from sluggish
      order rates from the military sector in the first six months of 2006. In
      addition, the revenue for the nine months ended September 30, 2005 was
      positively impacted by product shipments to customers whose 2004 backloged
      orders were not shipped in 2004 due to the Company’s cash constraints at that
      time.  Sales
      for
      the third quarter and nine months of 2006 represent shipments of current orders
      and backlog.





Gross
      margin for the nine months ended September 30, 2006 was 34% compared to 39%
      for
      the nine months ended September 30, 2005. Gross margin for the quarter ended
      September 30, 2006 was 33% compared to 36% for the quarter ended September
      30,
      2005. This
      decrease for the nine months was attributable to a change in products sold
      to
      British Telecommunications (from the higher gross margin DSL products to the
      lower margin local loop unbundling products), short-term manufacturing
      inefficiencies at our assembly facility in Mexico during the second quarter,
      and
      additional freight costs associated with on-time deliveries to customers. The
      quarter ended September 30, 2006 was negatively impacted primarily by additional
      freight costs and, to a lesser extent, the continuation of sales to British
      Telecommunications of lower margin products.





Selling,
      general and administrative expenses increased by $151,000 (4%) from $3,939,000
      to $4,090,000 for the nine months ended September 30, 2006 compared to the
      same
      period in 2005. For the quarter ended September 30, 2006 selling, general and
      administrative expenses decreased by $64,000 (4%) from $1,450,000 in 2005 to
      $1,386,000 in 2006. The increase for the nine months ended September 30, 2006
      relates primarily to increased expenses in our Line segment for salaries and
      advertising as our marketing activities for Line were increased during the
      first
      quarter of 2006. These increases in Line expenses were partially offset by
      a
      decrease in general and administrative expenses relating to a 2005 lease
      agreement in the United Kingdom which was settled in the fourth quarter
      2005.





For
      the
      nine months ended September 30, 2006 compared to the same period in 2005,
      research and development expenses increased by $183,000 (19%) to $1,164,000
      from
      $981,000. For the quarter ended September 30, 2006 compared to the same period
      in 2005, research and development expenses increased by $77,000 (23%) to
      $408,000 from $331,000. The increase for the quarter and nine months resulted
      primarily from increased spending by our Line connection/protection division
      of
      approximately $55,000 for the quarter and $160,000 for the nine months to
      enhance our existing Line products and develop new products.




As
      a
      result of the above, for the nine months ended September 30, 2006, we had an
      operating income from continuing operations of $3,192,000 compared with
      $3,958,000 in the same period of 2005. We had an operating income of $1,188,000
      for the quarter ended September 30, 2006 as compared with $665,000 in the same
      period of 2005.





We
      continue to accrue interest on obligations to the holder of
      $1,206,000  of
      our
      senior debt, which represents interest on senior debt that we incurred
      subsequent to March 2002. In
      addition, there is outstanding an old term loan, in the principal amount of
      $22,610,000, that accrues no interest until such time as the holder of the
      debt,
      in its sole discretion, notifies us that interest, at a rate of 12%, or a
      default rate of 14%, shall be payable. The holder of the senior debt has not
      required us to pay interest on this amount.





Page
          15 of 22


Income
      tax expense for the nine months ended September 30, 2006 relates to state and
      foreign taxes.





As
      a
      result of the foregoing, we generated net income, from continuing operations,
      of
      $2,254,000, $0.22 per share (basic and diluted), for the nine months ended
      September 30, 2006, compared with $2,899,000 , $0.29
      per
      share (basic and diluted), in 2005. The net income for the three months ended
      September 30, 2006, from continuing operations, was $905,000, $0.09 per share
      (basic and diluted), compared with $273,000, $0.03 per share (basic and diluted)
      in 2005.





**DISCONTINUED
      OPERATIONS**


**Operating
      Support Systems (“OSS”)**





In
      December, 2003, the Company decided to wind down its OSS business. This decision
      was made because of continuing losses combined
      with difficulties in marketing OSS products in view of our financial condition.
      The Company anticipates the discontinuation of this business by June 30, 2007.
      Effective as of June 30, 2006, the OSS operating segment is reported in the
      Consolidated Financial Statements as a discontinued operation. Currently,
      its operating activities are limited to the performance of
      contractual maintenance and warranty services.  (See
      Note
      8 to the unaudited consolidated financial statements.)





**Liquidity
      and Capital Resources**





At
      September 30, 2006, we had cash and cash equivalents of $1,355,000 compared
      with
      $1,254,000 at December 31, 2005. Our working capital deficit at September 30,
      2006 was $31,730,000 compared to a working capital deficit of $33,719,000 at
      December 31, 2005, a reduction of $1,989,000 in our working capital deficit
      since December 31, 2005. This decrease in the working capital deficiency
      reflects our improved accounts receivable balance for the nine months ended
      September 30, 2006. During the nine months of 2006, we made payments to the
      holder of our senior debt of $1,012,500 of **** which
      approximately $154,000 was applied to interest and the remaining $859,000 was
      applied to principal.





As
      of
      September 30, 2006, our debt includes $23,816,000 of senior debt, which may
      become immediately due if the holder of the senior debt calls a default,
      $6,144,000 of subordinated debt that became due on July 3, 2001, and $385,000
      of
      6% debentures that became due on July 2, 2002. We were unable to pay the
      interest due on the subordinated notes of approximately $5,746,000 that
      represents interest from July 2000 through September 2006, or the interest
      on
      the subordinated debentures of approximately $144,000. We have been notified
      by
      the trustee of 6% debentures that the non-payment of the principal and interest
      caused an event of default. At September 30, 2006, we did not have sufficient
      resources to pay either the senior lender or the subordinated lenders; it is
      unlikely that we can generate such cash from our operations, and our senior
      lender has precluded us from making any payments on the subordinated
      debt.





On
      October 3, 2006, the Company entered into an agreement with SHF IX, LLC, which
      amended its Amended and Restated Loan and Security Agreement, dated as of
      November 28, 1994, as amended, to extend the maturity of the Company’s
      senior debt to November 30, 2006, subject to the Company’s reaching an agreement
      with the senior debt holder and attaining certain milestones discussed in the
      following paragraph. The agreement provides for monthly payments of $112,500
      to
      the senior debt and provides for the Company to pay the legal expenses and
      certain other expenses of the senior debt holder. As part of the extension,
      the
      senior debt holder agreed to continue the current deferral of interest on most
      of the senior debt.





Page
          16 of 22


As
      a
      condition to the extension, the Company agreed to continue to take steps to
      effect a restructuring of the senior debt in a manner which results in a
      reduction of a significant portion of the senior debt and the issuance of equity
      to the senior debt holder. Additionally, the Company would attempt to achieve
      a
      restructuring of debt which is junior to the senior debt. The agreement requires
      that the Company reaches an agreement with the senior debt holder for such
      restructuring by October 31, 2006 and meets certain other milestones directed
      at
      effecting such restructuring. As the Company failed to reach an agreement with
      the senior debt holder by October 31, 2006, the senior debt holder has the
      right
      to immediately accelerate the maturity date. The Company continues to negotiate
      with the holder of the senior debt to effect such an agreement.





As
      previously announced, the Company has retained an investment banker and is
      actively seeking an investor. The Company cannot give any assurance that it
      will
      be able to obtain an investor on terms that are acceptable to the senior debt
      holder or otherwise reach an agreement with the senior debt holder regarding
      a
      restructuring of the senior debt. In the event that the Company is successful
      in
      negotiating an agreement with an investor and the senior debt holder, it is
      likely that the Company will be required to issue a significant number of shares
      of common stock or convertible securities which would result in very significant
      dilution to the Company’s present stockholders. However, the Company cannot give
      any assurance that any such restructuring will be consummated, if at all,
      outside of bankruptcy reorganization.





We have
      sought to
      address our need for liquidity by exploring alternatives, including the possible
      sale of one or more of our divisions. During 2004 and 2005, we were engaged
      in
      discussions with respect to the possible sale of our divisions; however, those
      negotiations were terminated without an agreement having been reached, and
      we
      may not be able to sell those divisions on acceptable, if any, terms.
      Furthermore, if we sell a division, we anticipate that a substantial
      portion ,
      if not
      all, of the
      net proceeds will be paid to the holder of our senior debt, and we will not
      receive any significant amount of working capital from such a sale. We continue
      our efforts to reduce costs while we seek additional business from new and
      existing customers, or seek to sell one or more of our divisions. As a result
      of
      the significant reduction in the operations of our OSS division, we do not
      believe that we will be able to sell that division on terms which would generate
      any significant cash. Further, the dependence of our copper business on several
      significant customers, principally British Telecommunications, are major factors
      which may impair our ability to sell the copper division or our business as
      a
      whole or may affect the terms on which we would be able to sell the business.





**Forward
      Looking Statements**





Statements
      contained in this Form 10-Q include forward-looking statements that are subject
      to risks and uncertainties. In particular, statements in this Form 10-Q that
      state the Company’s intentions, beliefs, expectations, strategies, predictions
      or any other statements relating to our future activities or other future events
      or conditions are “forward-looking statements.” Forward-looking statements are
      subject to risks, uncertainties and other factors, including, but not limited
      to, those identified under “Risk Factors,” in our Form 10-K for the year ended
      December 31, 2005 and those described in “Management’s Discussion and Analysis
      of Financial Conditions and Results of Operations” in our Form 10-K and this
      Form 10-Q, and those described in any other filings by us with the Securities
      and Exchange Commission, as well as general economic conditions and economic
      conditions affecting the telecommunications industry, any one or more of which
      could cause actual results to differ materially from those stated in such
      statements.





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          17 of 22


**Item
      3.**  **Quantitative
      and Qualitative Disclosure About Market Risk.**





We
      conduct certain operations outside the United States. A substantial portion
      of
      our revenue and expenses from our United Kingdom operations are denominated
      in
      Sterling. Any Sterling-denominated receipts are promptly converted into United
      States dollars. We do not engage in any hedging or other currency
      transactions.





**Item
      4.**  **Controls
      and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





As
      of the
      end of the period covered by this report, our Chief Executive Officer and Chief
      Financial Officer evaluated the effectiveness of our disclosure controls and
      procedures. Based on his evaluation, the Chief Executive Officer and Chief
      Financial Officer has concluded that our disclosure controls and procedures
      are
      effective.





**Changes
      in Internal Control over Financial Reporting**





There
      has
      been no change in our internal control over financial reporting that occurred
      during the fiscal quarter covered by this quarterly report that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





**PART
      II - OTHER INFORMATION**





**Item
      1.** **Legal
      Proceedings**




In
      April
      2006, the Company commenced a legal action against a former officer of one
      of
      its operating divisions and against his current employer. The Company asserts
      that the former officer breached his duties to the Company and engaged in unfair
      competition by using the Company's confidential and proprietary information
      and
      trade secrets to manufacture and sell products which are identical in all
      material respects to those sold by the division which he managed on behalf
      of
      the Company. At this time, the Company cannot predict the outcome of this
      litigation.





**Item
      1 A.** **Risk
      Factors** ****





**** In
      addition to the other information set forth in this report, you should carefully
      consider the factors discussed in Part 1, “Item 1A. Risk Factors,” in our Annual
      Report on Form 10-K for the year ended December 31, 2005, which could materially
      affect our business, financial condition or future results. The risks described
      in our Annual Report on Form 10-K are not the only risks facing our Company.
      Additional risks and uncertainties not currently known to us or that we
      currently deem to be immaterial also may materially adversely affect our
      business, financial condition and/or operating results.





Page
          18 of 22





**Item
      3. Defaults Upon Senior Securities.**





See
      Note
      3 of Notes to Unaudited Consolidated Financial Statements and “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations - Liquidity and
      Capital Resources” for information concerning defaults on our subordinated debt
      and the status of our senior debt.





**Item
      6. Exhibits**





Exhibits




31.1
            Certificate
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002. 32.1
            Certificate
                of Chief Executive Officer and Chief Financial Officer pursuant to
Section
                906 of the Sarbanes-Oxley Act of
                2002.














Page
          19 of 22




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.








PORTA
                SYSTEMS CORP.Dated:
                November 14, 2006
            By
            /s/
                Edward B. KornfeldEdward
                B. KornfeldChief
                Executive Officerand
                Chief Financial Officer


















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