**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 March 31, 2006





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


SECURITIES
      EXCHANGE ACT OF 1934








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


Commission
      file number 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 May 02 **,** 2006










**PART
      I.  FINANCIAL INFORMATION**


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




PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Consolidated
      Balance Sheets


(In
      thousands, except shares and par value)




March
                31,
            
            
            December
                31,Assets
            
            
            2006
            
            
            2005Current
                assets:
            
            
            (Unaudited)Cash
                and cash equivalents
            
            $
            1,033
            
            $
            1,254Accounts
                receivable - trade, less allowance for doubtfulaccounts
                of $256 in 2006 and $256 in 2005
            
            
            4,602
            
            
            3,655Inventories
            
            
            4,464
            
            
            4,851Prepaid
                expenses and other current assets
            
            
            496
            
            
            481Total
                current assets
            
            
            10,595
            
            
            10,241Property,
                plant and equipment, net
            
            
            1,413
            
            
            1,409Goodwill
            
            
            2,961
            
            
            2,961Other
                assets
            
            
            52
            
            
            50Total
                assets
            
            $
            15,021
            
            $
            14,661Liabilities
                and Stockholders’ DeficitCurrent
                liabilities:Senior
                debt, including accrued interest
            
            $
            24,404
            
            $
            24,675Subordinated
                notes
            
            
            6,144
            
            
            6,1446%
                Convertible subordinated debentures
            
            
            385
            
            
            385Accounts
                payable
            
            
            4,984
            
            
            4,614Accrued
                expenses and other
            
            
            2,460
            
            
            3,021Other
                accrued interest payable
            
            
            5,417
            
            
            5,180Total
                current liabilities
            
            
            43,794
            
            
            44,019Deferred
                compensation
            
            
            810
            
            
            827Total
                long-term liabilities
            
            
            810
            
            
            827Total
                liabilities
            
            
            44,604
            
            
            44,846Commitments
                and contingenciesStockholders’
                deficit:Preferred
                stock, no par value; authorized 1,000,000 shares, none
                issued
            
            
            -
            
            
            -Common
                stock, par value $.01; authorized 20,000,000 shares,issued
                10,084,577 shares in 2006 and 10,084,577 in 2005
            
            
            101
            
            
            101Additional
                paid-in capital
            
            
            76,124
            
            
            76,124Accumulated
                deficit
            
            
            (99,000
            )
            
            (99,895
            )Accumulated
                other comprehensive loss:Foreign
                currency translation adjustment
            
            
            (4,869
            )
            
            (4,577
            )(27,645
            )
            
            (28,247
            )Treasury
                stock, at cost, 30,940 shares
            
            
            (1,938
            )
            
            (1,938
            )Total
                stockholders’ deficit
            
            
            (29,583
            )
            
            (30,185
            )Total
                liabilities and stockholders’ deficit
            
            $
            15,021
            
            $
            14,661





See
      accompanying notes to consolidated financial statements




Page 2
of 
            14





PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Unaudited
      Consolidated Statements of Operations and Comprehensive Income


(In
      thousands, except per share amounts)








Three
                Months EndedMarch
                31,
            
            
            March
                31,2006
            
            
            2005Sales
            
            $
            8,043
            
            $
            7,615Cost
                of sales
            
            
            5,308
            
            
            4,472Gross
                profit
            
            
            2,735
            
            
            3,143Selling,
                general and administrative expenses
            
            
            1,364
            
            
            1,177Research
                and development expenses
            
            
            447
            
            
            421Total
                expenses
            
            
            1,811
            
            
            1,598Operating
                income
            
            
            924
            
            
            1,545Interest
                expense, net of interest income
            
            
            (296
            )
            
            (325
            )Income
                before income taxes
            
            
            628
            
            
            1,220Income
                tax expense
            
            
            (23
            )
            
            (17
            )Net
                income
            
            $
            605
            
            $
            1,203Other
                comprehensive income:Foreign
                currency translation adjustments
            
            
            (293
            )
            
            (62
            )Comprehensive
                income
            
            $
            312
            
            $
            1,141Per
                share data:Basic
                per share amounts:Net
                income per share of common stock
            
            $
            0.06
            
            $
            0.12Weighted
                average shares outstanding
            
            
            10,076
            
            
            9,972Diluted
                per share amounts:Net
                income per share of common stock
            
            $
            0.06
            
            $
            0.12Weighted
                average shares outstanding
            
            
            10,106
            
            
            10,005





See
      accompanying notes to unaudited consolidated financial statements.





Page 3
of 
            14


PORTA
      SYSTEMS CORP. AND SUBSIDIARIES


Unaudited
      Consolidated Statements of Cash Flows


(In
      thousands)





Three
                Months EndedMarch
                31,
            
            March
                31,2006
            
            2005Cash
                flows from operating activities:Net
                income
            
            $
            605
            
            $
            1,203Adjustments
                to reconcile net income to net cashProvided
                by (used in) operating activities:Depreciation
                and amortization
            
            
            99
            
            
            101Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (947
            )
            
            (495
            )Inventories
            
            
            387
            
            
            (338
            )Prepaid
                expenses and other current assets
            
            
            (15
            )
            
            (359
            )Other
                assets
            
            
            (2
            )
            
            (1
            )Accounts
                payable, accrued expenses and other liabilities
            
            
            (37
            )
            
            (305
            )Net
                cash provided by (used in) operating activities
            
            
            90
            
            
            (194
            )Cash
                flows from investing activities:Capital
                expenditures, net
            
            
            (102
            )
            
            (169
            )Net
                cash used in investing activities
            
            
            (102
            )
            
            (169
            )Cash
                flows from financing activities:Increase
                in senior debt
            
            
            67
            
            
            91Repayments
                of senior debt
            
            
            (338
            )
            
            (150
            )Net
                cash used in financing activities
            
            
            (271
            )
            
            (59
            )Effect
                of exchange rate changes on cash
            
            
            62
            
            
            (58
            )Decrease
                in cash and cash equivalents
            
            
            (221
            )
            
            (480
            )Cash
                and cash equivalents - beginning of the year
            
            
            1,254
            
            
            2,040Cash
                and cash equivalents - end of the period
            
            $
            1,033
            
            $
            1,560Supplemental
                cash flow disclosure:Cash
                paid for interest expense
            
            $
            66
            
            $
            151Cash
                paid for income taxes
            
            $
            23
            
            $
            30





See
      accompanying notes to unaudited consolidated financial statements.








Page 4
of 
            14




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 first three months of 2006 are not necessarily
      indicative of results for the year.





**Note
      2:   Inventories**





Inventories
      are stated at the lower of cost (on the average or first-in, first-out methods)
      or market . The
      composition of inventories at the end of the respective periods is as follows
      (net of reserves of $2,576,000 for 2006 and $2,583,000 for 2005):





March
                31, 2006
            
            
            December
                31, 2005(in
                thousands)Parts
                and components
            
            $
            3,046
            
            $
            3,196Work-in-process
            
            
            325
            
            
            460Finished
                goods
            
            
            1,093
            
            
            1,195$
            4,464
            
            $
            4,851





**Note
      3:   Senior and Subordinated Debt**





On
      March
      31, 2006, the Company’s liability to the holder of its senior debt was
      $24,404,000 . During
      the fourth quarter of 2004, SHF IX LLC, an affiliate of Stonehill Financial,
      LLC, purchased the Company’s senior debt of approximately $25,000,000 from Wells
      Fargo Foothill, Inc. The Company has made payments totaling $2,260,000 as
      required by amendments and extensions of the loan agreement, of which $864,000
      was applied to interest and $1,396,000 was applied to principal. The most recent
      extension, which extended the maturity date, subject to the Company attaining
      certain milestones, from May 1, 2006 to September 30, 2006, requires the Company
      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 of the Company in a manner which would enable the holder of the
      senior debt to receive significant payments on account of the senior debt.
      The
      loan becomes due and payable on September 30, 2006 or earlier if the Company
      fails to achieve any of the milestones and the holder of the senior debt
      declares a default. If the holder of the senior debt demands payment of all
      or a
      significant portion of the loan when due, the Company will not be able to
      continue in business and it is likely that the Company will seek protection
      under the Bankruptcy Code.





Page 5
of 
            14


As
      of
      March 31, 2006, the Company’s short-term debt also included $6,144,000 of
      subordinated debt that 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 $5,284,000, which represents interest from July 2000 through
      March
      31, 2006, and accrued interest on the 6% debentures was $133,000. We are
      precluded by the holder of our 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. Because all of the
      Company’s outstanding options are fully vested, there is no stock-based
      compensation expense for the period ended March 31, 2006.





Stock
      option activity through the three months ended March 31, 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
                and Exercisable at March 31, 2006
            
            
            309,280
            
            $
            1.22
            
            
            2.71
            
            $
            3,240





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 months ended
      March 31, 2005, there was no pro-forma disclosure as there were no unvested
      options.





Page 6
of 
            14





**Note
      5:   Segment Data**





The
      Company has three 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; Signal Processing (“Signal”) whose products
      are used in data communication devices that employ high frequency transformer
      technology, and Operating Support Systems (“OSS”) whose products automate the
      testing, provisioning, maintenance and administration of communication networks
      and the management of support personnel and equipment.





Because
      of continuing losses in the OSS division, combined with difficulties in
      marketing OSS products in view of our financial condition, we limit our OSS
      activities to the performance of maintenance and warranty services. For the
      three months ended March 31, 2006, OSS sales were $105,000, which was
      approximately 1.3% of the Company’s revenue and the OSS operations generated a
      loss of approximately $82,000. For the three months ended March 31, 2005, OSS
      sales were $208,000, which was approximately 2.7% of the Company’s revenue and
      the OSS operations generated a loss of approximately $273,000. The Company
      anticipates that the OSS revenue will represent an increasingly smaller portion
      of our revenue.





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.





Three
                Months EndedMarch
                31, 2006
            
            March
                31, 2005Sales:Line
            
            $
            6,488,000
            
            $
            5,707,000Signal
            
            
            1,412,000
            
            
            1,656,000OSS
            
            
            105,000
            
            
            208,000$
            8,005,000
            
            $
            7,571,000Segment
                profit (loss):Line
            
            $
            1,204,000
            
            $
            1,573,000Signal
            
            
            384,000
            
            
            698,000OSS
            
            
            (82,000
            )
            
            (273,000
            )$
            1,506,000
            
            $
            1,998,000








Page 7
of 
            14








The
      following table reconciles segment totals to consolidated totals:





Three
                Months EndedMarch
                31, 2006
            
            
            March
                31, 2005Sales:Total
                revenue for reportable segments
            
            $
            8,005,000
            
            $
            7,571,000Other
                revenue
            
            
            38,000
            
            
            44,000Consolidated
                total revenue
            
            $
            8,043,000
            
            $
            7,615,000Operating
                Income:Total
                segment income forreportable
                segments
            
            $
            1,506,000
            
            $
            1,998,000Corporate
                and unallocated
            
            
            (582,000
            )
            
            (453,000
            )Consolidated
                total operating income
            
            $
            924,000
            
            $
            1,545,000





**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.





**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:





Three
                Months EndedMarch
                31,2006
            
            
            2005Sales
            
            
            100
            %
            
            100
            %Cost
                of Sales
            
            
            66
            %
            
            59
            %Gross
                Profit
            
            
            34
            %
            
            41
            %Selling,
                general and administrative expenses
            
            
            17
            %
            
            15
            %Research
                and development expenses
            
            
            6
            %
            
            6
            %Operating
                income
            
            
            11
            %
            
            20
            %Interest
                expense - net
            
            
            (4
            %)
            
            (4
            %)Net
                income
            
            
            8
            %
            
            16
            %





The
      Company’s sales by product line for the periods ended March 31, 2006 and 2005
      are as follows:




Page 8
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            14


Three
                  Months Ended March 31,$(000)2006
              
              
              2005Line
                  connection/protection equipment
              
              $
              6,488
              
              
              81
              %
              $
              5,707
              
              
              75
              %Signal
                  Processing
              
              
              1,412
              
              
              18
              %
              
              1,656
              
              
              22
              %OSS
                  equipment
              
              
              105
              
              
              1
              %
              
              208
              
              
              3
              %Other
              
              
              38
              
              
              0
              %
              
              44
              
              
              1
              %$
              8,043
              
              
              100
              %
              $
              7,615
              
              
              100
              %




**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 Operating Support Systems (“OSS”), which
      are becoming an increasingly less important part of our business, automate
      the
      testing, provisioning, maintenance and administration of communication networks
      and the management of support personnel and equipment.





Because
      of continuing losses in the OSS division, combined with difficulties in
      marketing OSS products in view of our financial condition, we limit our OSS
      activities to the performance of maintenance and warranty services. In addition,
      we are trying to sell our remaining OSS inventory although we did not generate
      any sales of OSS inventory in the first quarter of 2006 as well as for the
      year
      ended 2005. We expect our OSS business to continue to decline in future years,
      and we do not anticipate that we will enter into new maintenance contracts
      when
      our warranty obligations terminate or renew existing maintenance contracts
      when
      they expire.





Our
      Line
      equipment is designed to connect copper-wired telecommunications networks and
      to
      protect telecommunications equipment from voltage surges. We market this
      equipment to telephone operating companies in the United States and foreign
      countries. Our Line division operated at a profit for the three months ended
      March 31, 2006 and March 31, 2005. We market Signal equipment principally
      for use in defense and aerospace applications. The Signal division generated
      operating profit for the three months ended March 31, 2006 and the comparable
      period of 2005. We recognize revenue from Line and Signal products when the
      product is shipped.





On
      March
      31, 2006, our liability to the holder of our senior debt was $24,404,000. The
      most recent extension, which extended the maturity date, subject to our
      attaining certain milestones, from May 1, 2006 to September 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. The loan becomes due and payable on September 30, 2006 or earlier
      if we fail to achieve any of the milestones and the holder of the senior debt
      declares a default. If the holder of the senior debt demands payment of all
      or a
      significant portion of the loan when due, we will not be able to continue in
      business and it is likely that we will seek protection under the Bankruptcy
      Code.







Page 9
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            14





**Results
      of Operations**





Our
      sales
      for the quarter ended March 31, 2006 were $8,043,000, representing an increase
      of $428,000 (5%) compared to the quarter ended March 31, 2005 of $7,615,000.
      The
      increased sales level resulted
      from increased sales of Line products, with our increase in Line products being
      partially offset by decreased sales by Signal and OSS.





Line
      equipment sales increased by $781,000 (14%) from $5,707,000 for the March 2005
      quarter to $6,488,000 for the March 2006 quarter, primarily as a result of
      an
      increase in sales 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.





Signal
      processing revenue for the quarter ended March 31, 2006 compared to 2005
      decreased by $244,000 (15%) from $1,656,000 to $1,412,000. The decline in Signal
      Processing revenue from the first quarter of 2005 resulted from a level of
      sales
      in the 2005 quarter which included products for which shipments had been delayed
      from the fourth quarter of 2004 because of our cash difficulties which affected
      our ability to ship products in 2004.





OSS
      sales
      decreased by $103,000 (50%) from $208,000 for the quarter ended March 31, 2005
      to $105,000 for the quarter ended March 31, 2006. The decreased sales, all
      of
      which were generated from maintenance agreements, resulted from the reduction
      in
      the scope of our OSS operations.





Gross
      margin for the March 2006 quarter was 34% compared to 41% for the March 2005
      quarter. This
      decrease is primarily related to a change in products sold to British
      Telecommunications in the quarter ended March 31, 2006, from the higher gross
      margin DSL products to the lower margin local loop unbundling products from
      our
      Line segment, and additional freight costs associated with on time deliveries
      to
      customers. Also, our Signal segment gross margin slightly decreased during the
      quarter due to a minor shift to lower margin deliveries to
      customers.





Selling,
      general and administrative expenses increased by $187,000 (16%) from $1,177,000
      in the March 2005 quarter to $1,364,000 in the March 2006 quarter. This increase
      relates primarily to increased expenses in our Signal segment for salaries,
      commissions and advertising as our marketing activities for Signal were
      increased during the first quarter of 2006. Selling and marketing salaries
      increased in our Line segment as well as increased administrative salaries
      which
      were partially offset by a decrease in general and administrative expenses
      relating to the OSS division as we continue to wind down that
      operation.





Research
      and development expenses increased by $26,000 (6%) from $421,000 in the March
      2005 quarter to $447,000 in the March 2006 quarter. This resulted from our
      increased spending by our line connection/protection division of approximately
      $100,000 to enhance our existing Line products and develop new products. This
      increased spending was partially offset by reduced spending of approximately
      $75,000 in our OSS division as we continue to wind down that operation. There
      is
      an insignificant amount spent for OSS related to warranty and maintenance
      contracts.





As
      a
      result of the foregoing, we had an operating income of $924,000 for the March
      2006 quarter, as compared to an operating income of $1,545,000 for the March
      2005 quarter.





We
      continue to accrue interest on obligations to the holder of $2,225,000 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
      approximately $23,000,000, that accrues no interest commencing March 1, 2002,
      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.





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Income
      tax expense for the quarter ended March 31, 2006 as well as March 31, 2005
      relates to state and foreign taxes. No federal income tax expense has been
      provided due to the availability of net operating loss carry
      forwards.





As
      the
      result of the foregoing, we generated net income of $605,000, **** $.06
      per
      share (basic and diluted), for the March 2006 quarter versus net income of
      $1,203,000, $0.12 per share (basic and diluted), for the March 2005
      quarter.







**Liquidity
      and Capital Resources**





At
      March
      31, 2006, we had cash and cash equivalents of $1,033,000 compared with
      $1,254,000 at December 31, 2005. Our working capital deficit at March 31, 2006
      was $33,199,000, compared to a working capital deficit of $33,778,000 at
      December 31, 2005, a reduction of $579,000 in our working capital deficit.
      This
      improvement is primarily the result of our increased accounts receivable. During
      the first quarter, we continued making payments to the holder of our senior
      debt, with payment of $338,000, of **** which
      approximately $66,000 was applied to interest and the remaining $272,000 was
      applied to principal.





As
      of
      March 31, 2006, our debt includes $24,404,000 of senior debt which matures
      on
      September 30, 2006 or earlier if we fail to meet required milestones and the
      holder of the senior debt calls a default, $6,144,000 of principal and
      $5,284,000 of accrued interest on our subordinated debt that became due on
      July
      3, 2001, and $385,000 of principal and $133,000 of accrued interest on our
      6%
      debentures that became due on July 2, 2002. We are prohibited by the holder
      of
      our senior debt from paying principal or interest on any of the subordinated
      debt. 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 March 31, 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.





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. The significant reduction in the operations of our OSS
      division will impair our ability to sell that division, and such reduction,
      and
      the dependence of our copper business on several significant customers, are
      major factors which may impair our ability to sell the copper division or our
      business as a whole. Further, if we sell one of our two divisions, we may be
      unable to operate the remaining division at a profit.








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**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 our 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. S uch
      statements could be affected by risks and uncertainties related to our financial
      conditions, our relationship with the holder of our senior and subordinated
      debt, including the willingness or unwillingness of the holder of the senior
      debt to extend the maturity date of the senior debt and the amount and timing
      of
      any payments which the holder of the senior debt may require, our ability to
      sell any or all of our divisions or effect a restructure of our business and
      our
      debt and equity structure on terms acceptable to the holder of the senior debt,
      our relationship with British Telecommunications including its continued
      requirements for our products, factors which affect the telecommunications
      industry, market and customer acceptance, our access to current technology,
      competition, domestic and foreign government regulations and requirements and
      pricing, as well as general industry and market conditions and growth rates,
      and
      general economic conditions. Any forward-looking statements speak only as of
      the
      date on which they are made, and we do not undertake any obligation to update
      any forward-looking statement to reflect events or circumstances after the
      date
      of this Form 10-Q.








**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**





**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.














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**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
      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.





**Item
      6.    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.








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**SIGNATURES**





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








PORTA
                SYSTEMS CORP.Dated:
                May 12, 2006
            By
                /s/ Edward B. KornfeldEdward
                B. KornfeldChief
                Executive Officerand
                Chief Financial Officer







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