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



|FORM 10-QSB
|-----------



||X| | QUARTERLY
REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------



| | For
the quarterly period ended March 31, 2004
| | ---------------------------------------------



||_| | TRANSITION
REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
|--- | -----------------------------------------------------------------------------------



|Commission File Number 0-25844
|------------------------------



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



|California 
      (State or Other Jurisdiction of 
      Incorporation or Organization) |  | 95-4249240 
      (I.R.S. Employer 
      Identification No.)
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------



|28040 West Harrison Parkway 
Valencia, California 91355-4162 
(Address Of Principal Executive Offices)
|------------------------------------------------------------------------------------------------------



|(661) 257-6060 
(Issuers
Telephone Number)
|-------------------------------------------



|NONE 
(Former Name, Address and
Fiscal Year, if Changed Since Last Report)
|--------------------------------------------------------------------------



|Indicate by check mark  whether  the
registrant:  (1) has filed all reports  required to be filed by Section 13 or  15(d) of
the 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
|_|
|-------------------------



|State the  number of  shares  outstanding  of
each of the  issuers  classes  of  common  stock,  as of the  latest  practicable
date:
|--------------------------------------------------------------------------------------------------------------------------------------

|                                            | 
|------------------------------------------- | 
|Class                                       | 
|Class A Common Stock, $.001 par
      value | 
|Class B Common Stock, $.001 par
      value | 



|Transitional Small Business Disclosure Format
(check one):  Yes |_|    No  |X|
|------------------------------------------------------------------------------



| |  | 
| |  | 



---





|PART I. FINANCIAL INFORMATION
|-----------------------------



|Item  1. Financial
Statements
|-----------------------------



|TAITRON COMPONENTS INCORPORATEDCondensed Consolidated Balance Sheet 
(Dollars in Thousands)
|-------------------------------------------------------------------------------------------

|                                                                                                                  | 
|----------------------------------------------------------------------------------------------------------------- | 
|Assets                                                                                                            | 
|Current assets:                                                                                                   | 
|Cash and cash equivalents                                                                                         | 
|Trade accounts receivable,
      net                                                                              | 
|Inventory, net                                                                                                    | 
|Prepaid expenses and
      other current assets                                                                   | 
|                                                                                                                  | 
|Total
      current assets                                                                                        | 
|Property and equipment, net                                                                                       | 
|Other assets                                                                                                      | 
|                                                                                                                  | 
|Total
      assets                                                                                                | 
|                                                                                                                  | 
|Liabilities and Shareholders Equity                                                                              | 
|Current liabilities:                                                                                              | 
|Trade accounts payable                                                                                            | 
|Accrued liabilities
      and other                                                                               | 
|Current portion of
      long term debt                                                                           | 
|                                                                                                                  | 
|Total
      current liabilities                                                                                   | 
|Long-term debt, less current portion                                                                              | 
|                                                                                                                  | 
|Total
      liabilities                                                                                           | 
|                                                                                                                  | 
|Commitments and contingencies (Note 3)                                                                            | 
|Shareholders equity:                                                                                             | 
|Preferred stock, $.001
      par value. Authorized 5,000,000 shares                                               | 
|None issued
      or outstanding                                                                                  | 
|Class
      A common stock, $.001 par value. Authorized 20,000,000 shares; issued andoutstanding 4,695,979 shares | 
|                                                                                                                 
|Class
      B common stock, $.001 par value. Authorized, issued and outstanding762,612 shares                     | 
|                                                                                                                 
|Additional paid-in
      capital                                                                                  | 
|Accumulated other
      comprehensive loss, net of tax                                                            | 
|Retained earnings                                                                                                 | 
|                                                                                                                  | 
|Total
      shareholders equity                                                                                  | 
|                                                                                                                  | 
|Total
      liabilities and shareholders equity                                                                  | 
|                                                                                                                  | 



|See accompanying notes to
condensed consolidated financial statements.
|----------------------------------------------------------------------



| | Page
2 | 
| | ------ | 



---





|TAITRON COMPONENTS INCORPORATEDCondensed Consolidated Statements of Operations 
(Dollars in thousands, except per share amounts)
|--------------------------------------------------------------------------------------------------------------------------------

|                                                   |  |                                   
|-------------------------------------------------- |  | ----------------------------------
|                                                   |  | Three months ended March
      31,
|                                                   |  | 2004                              
|                                                   |  | (Unaudited)                       
|                                                   |  |                                   
|Net sales                                          |  | $        2,491                    
|                                                   |  |                                   
|Cost of goods sold                                 |  | 1,842                             
|                                                   |  |                                   
|                                                   |  |                                   
|Gross
      profit                                 |  | 649                               
|                                                   |  |                                   
|Selling, general and administrative
      expenses |  | 609                               
|                                                   |  |                                   
|                                                   |  |                                   
|Operating
      income                             |  | 40                                
|                                                   |  |                                   
|Interest expense, net                              |  | (62                               
|Other income (expense), net                        |  | 32                                
|                                                   |  |                                   
|                                                   |  |                                   
|Income
      before income taxes                   |  | 10                                
|                                                   |  |                                   
|Income tax provision (benefit)                     |  |                                  
|                                                   |  |                                   
|Net
      income                                   |  | $             10                  
|                                                   |  |                                   
|Net income per share                               |  |                                   
|Basic                                              |  | $                                
|                                                   |  |                                   
|Diluted                                            |  | $                                
|                                                   |  |                                   
|Weighted average common shares
      outstanding   |  |                                   
|Basic                                              |  | 5,479,708                         
|                                                   |  |                                   
|Diluted                                            |  | 6,014,708                         
|                                                   |  |                                   



|See accompanying notes to
condensed consolidated financial statements.
|----------------------------------------------------------------------



| | Page
3 | 
| | ------ | 



---





|TAITRON COMPONENTS INCORPORATEDCondensed Consolidated Statements
      of Cash Flows 
      (Dollars in thousands)
|------------------------------------------------------------------------------------------------------------------

|                                                                                                       |  |                                   
|------------------------------------------------------------------------------------------------------ |  | ----------------------------------
|                                                                                                       |  | Three months ended March
      31,
|                                                                                                       |  | 2004
      (Unaudited)            
|Cash flows from operating activities:                                                                  |  |                                   
|Net income                                                                                             |  | $      10                         
|                                                                                                       |  |                                   
|Adjustments to reconcile
      net income to net cash provided by 
              operating activities: |  |                                   
|Depreciation and amortization                                                                          |  | 66                                
|Amortization of debt
      discount related to options issued 
              with notes payable        |  | 4                                 
|Provision for sales
      returns and doubtful accounts                                                |  | 21                                
|Changes in assets
      and liabilities:                                                               |  |                                   
|Trade
      accounts receivable                                                                        |  | (181                              
|Inventory                                                                                              |  | 512                               
|Prepaid
      expenses and other current assets                                                        |  | (25                               
|Other
      assets                                                                                     |  |                                  
|Trade
      accounts payable                                                                           |  | 195                               
|Accrued
      liabilities and other                                                                    |  | (102                              
|                                                                                                       |  |                                   
|Total
      adjustments                                                                                |  | 490                               
|                                                                                                       |  |                                   
|Net
      cash provided by operating activities                                                        |  | 500                               
|                                                                                                       |  |                                   
|Cash flows from investing activities:                                                                  |  |                                   
|Acquisitions
      of property and equipment                                                           |  | (24                               
|                                                                                                       |  |                                   
|Net
      cash used in investing activities                                                            |  | (24                               
|                                                                                                       |  |                                   
|Cash flows from financing activities:                                                                  |  |                                   
|Payments on revolving
      line of credit                                                             |  |                                  
|Borrowings on notes
      payable                                                                      |  |                                  
|Payments on notes
      payable                                                                        |  | (139                              
|Proceeds from exercise
      of stock options                                                          |  | 25                                
|Repurchase of Class
      A Common Stock                                                               |  | (323                              
|                                                                                                       |  |                                   
|Net
      cash used in financing activities                                                            |  | (437                              
|                                                                                                       |  |                                   
|Impact of exchange rate changes on cash                                                                |  | 11                                
|                                                                                                       |  |                                   
|Net
      increase in cash and cash equivalents                                                        |  | 50                                
|Cash and cash equivalents, beginning of period                                                         |  | 2,953                             
|                                                                                                       |  |                                   
|Cash and cash equivalents, end of period                                                               |  | $ 3,003                           
|                                                                                                       |  |                                   
|Supplemental disclosure of cash flow information:                                                      |  |                                   
|Cash paid for interest                                                                                 |  | $      61                         
|                                                                                                       |  |                                   
|Cash paid for income
      taxes                                                                       |  | $      23                         
|                                                                                                       |  |                                   



|See accompanying notes to
condensed consolidated financial statements.
|----------------------------------------------------------------------



| | Page
4 | 
| | ------ | 



---





|TAITRON COMPONENTS INCORPORATED
|-------------------------------



|Notes to Condensed Consolidated
Financial Statements 
March 31, 2004 
(All amounts are unaudited)
|-------------------------------------------------------------------------------------------------



|Note 1 - Basis of Presentation
|------------------------------



| | The
accompanying unaudited condensed consolidated financial statements of Taitron Components
Incorporated  (the Company) were prepared in accordance with accounting
principles generally accepted in the United  States of America and reflect all
adjustments, consisting of normal recurring accruals and adjustments,  which are, in the
opinion of management, necessary for a fair presentation of the consolidated financial
position and results of operations at and for the periods presented.  Such financial
statements do not  include all the information or footnotes necessary for a complete
presentation and, accordingly, should be  read in conjunction with the Companys
Annual Report on Form 10-KSB for the fiscal year ended December 31,  2003, and the notes
thereto, which include significant accounting policies and estimates.  The results of
operations for the interim periods are not necessarily indicative of results for the full
year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 2 - Summary of Significant Accounting
Policies and Estimates
|-----------------------------------------------------------------



| | Principles
of Consolidation
| | ---------------------------



| | The
unaudited condensed consolidated financial statements include the accounts of the Company
and its  majority-owned subsidiary.  All significant intercompany transactions have been
eliminated in  consolidation.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Revenue
Recognition
| | -------------------



| | Revenue
is typically recognized upon shipment of merchandise and sales are recorded net of
discounts,  rebates, and returns.  Reserves for sales allowances and customer returns are
established based upon  historical experience and managements estimates as
shipments are made.  Sales returns for the quarters  ended March 31, 2004 and 2003 were
$47,000 and $46,000, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Allowance
for Sales Returns and Doubtful Accounts
| | -------------------------------------------------



| | On
a case-by-case basis, the Company accepts returns of products from its customers, without
restocking  charges, when they can demonstrate an acceptable cause for the return.
Requests by a distributor to  return products purchased for its own inventory generally
are not included under this policy.  The Company  will, on a case-by-case basis, accept
returns of products upon payment of a restocking fee, which is  generally 15% to 30% of
the net sales price.  The Company will not accept returns of any products that  were
special-ordered by a customer or that otherwise are not generally included in our
inventory.  The  allowance for sales returns and doubtful accounts at March 31, 2004
aggregated $160,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Inventory
| | ---------



| | Inventory,
consisting principally of products held for resale, is recorded at the lower of cost
(determined using the first in-first out method) or estimated market value.  Inventory is
presented net of  valuation allowances of $861,000 at March 31, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Income
Taxes
| | ------------



| | The
Company accounts for income taxes under the asset and liability method.  Deferred tax
assets and  liabilities are recognized for future tax consequences attributable to
differences between the financial  statement carrying amounts of existing assets and
liabilities and their respective tax bases.  Deferred  tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the  years in
which the temporary differences are expected to be recovered or settled.  The effect on
deferred  tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes  the enactment date.  Valuation allowances are recorded, when
necessary, to reduce deferred tax assets to  the amount expected to be realized.  The
Company has fully reserved against its deferred income tax  assets, as management could
not determine that it was more likely than not such assets would be realized.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Page
5 | 
| | ------ | 



---





| | Net
Income Per Share
| | --------------------



| | Basic
income per share is computed by dividing net income available to common shareholders by
the  weighted-average number of common shares outstanding during the period.  Diluted
income per share reflects  the potential dilution that could occur if securities or other
contracts to issue common stock were  exercised or converted into common stock or
resulted in the issuance of common stock that then shared in  the earnings of the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Stock
Option Plan
| | -----------------



| | The
Company has adopted the disclosure requirements of SFAS No. 148, Accounting for
Stock-Based  Compensation--Transition and Disclosure and SFAS No. 123.  SFAS No.
123 allows companies to choose whether  to account for employee stock-based compensation
on a fair value method, or to continue to account for  stock-based compensation under the
current intrinsic value method as prescribed by APB Opinion No. 25,  Accounting for
Stock Issued to Employees. The Company has elected to continue to follow the
provisions  of APB Opinion No. 25.  SFAS No. 123, as amended by SFAS No. 148, requires
interim disclosures regarding  the pro forma effects of compensation expense had the
Companys 1995 Stock Incentive Plan been determined  based on the fair value at the
grant date consistent with SFAS No. 123.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Accordingly,
under SFAS No. 123, the Companys net income and diluted income per share for the
three  months ended March 31, 2004 and March 31, 2003, would have been changed to the pro
forma amounts indicated  below:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                 |  |             |  |                                   
| | --------------- |  | ----------- |  | ----------------------------------
| |                 |  |             |  | Three Months Ended March
      31,
| |                 |  |             |  | 2004                              
| | Net income      |  | As reported |  | $                                 
| |                 |  | Pro forma   |  | $                                 
| |                 |  |             |  |                                   
| | Diluted income  |  | As reported |  | $                                 
| | per
      share |  | Pro forma   |  | $                                 



| | The
total fair value of options granted would have been $0 for both the three months ended
March 31, 2004  and 2003, as there were no options granted during either period.  At
March 31, 2004, the number of options  exercisable was 515,465 and weighted average
exercise prices of those options were $1.88.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Reclassification
| | ----------------





| | Certain
amounts in the 2003 condensed consolidated financial statements have been reclassified to
conform  with the 2004 presentation.
| | --------------------------------------------------------------------------------------------------------------------------------------



| | Use
of Estimates
| | ----------------



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



| | Page
6 | 
| | ------ | 



---





|Note 3 - Long-Term Debt
|-----------------------

| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | Long-term debt is summarized as
      follows:                                                              
| | Note payable collateralized
      by real property, dueDecember 31, 2009, bearing an interest rate of 6.875%
|
| |                                                                                                             
| | Subordinated note,
      due September 30, 2005, bearing an interestrate of 4.75% per annum *               
|
| |                                                                                                             
| | Subordinated note,
      due February 20, 2006, bearing an interestrate of 4.75% per annum **               
|
| |                                                                                                             
| |                                                                                                             
| | Less current maturities                                                                                     
| |                                                                                                             
| |                                                                                                             
| | Less unamortized debt discount                                                                              
| |                                                                                                             
| |                                                                                                             
| |                                                                                                             



| | *
The subordinated note of $1,000,000, due September 30, 2005, is from K.S. Best
International Co. Ltd.,  a company controlled by the brother of the Companys Chief
Executive Officer.  In connection with the  subordinated note, the Company issued 100,000
stock options with a relative estimated fair value of  $29,000. The amount has been
presented as debt discounts and accreted through periodic interest charges  through the
maturity date of these notes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | **
The subordinated note of $500,000, due February 20, 2006, is from an un-related third
party.  In  connection with the subordinated note, the Company issued 50,000 stock
options with a relative estimated  fair value of $15,000. The amount has been presented
as debt discounts and accreted through periodic  interest charges through the maturity
date of these notes.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item  2.  MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|-----------------------------------------------------------------------------------------------



|The following
discussion should be read in conjunction with the condensed consolidated financial
statements, including the related notes, appearing in Item 1 of this report as well as
our most recent annual report on Form 10-KSB. Also, several of the matters discussed in
this document contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements usually are denoted by words or phrases such as believes, expects, projects, estimates, anticipates, will
likely result or similar expressions. We wish to caution readers that all
forward-looking statements are necessarily speculative and not to place undue reliance
on forward-looking statements, which speak only as of the date made, and to advise
readers that actual results could vary due to a variety of risks and uncertainties.
Factors associated with the forward looking statements that could cause the forward
looking statements to be inaccurate and could otherwise impact our future results are
set forth in detail in our most recent annual report on Form 10-KSB. In addition to the
other information contained in this document, readers should carefully consider the
information contained in our Form 10-KSB for the year ended December 31, 2003 under the
heading Cautionary Statements and Risk Factors.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Overview
|--------



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



|The demand for
electronic components drastically decreased beginning in 2001 and continued through most
of  2003.  This downturn was marked by oversupply of components, excess manufacturing
capacity, accelerated
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Page
7 | 
| | ------ | 



---





|migration  of the manufacturing capacity of
OEM/CEM customers abroad and the consolidation of CEM customers domestically.  In
response, we are refocusing our business strategy beyond the traditional role of
electronic components  fulfillment to the additional role of engineering and turn-key
services for the existing OEM and CEM customers.  We intend to form strategic business
partnerships with a few selected existing customers and provide them with  original
design and manufacturing (ODM) services for their multi-year turn-key projects.  We
expect to see some  new opportunities and results from these additional services during
2004.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We believe that
the overall market demand for our products has increased during the first quarter of
2004,  as we have experienced some business improvement in shipments and bookings and our
suppliers lead times have  been stretching out with prices steadily increasing.
Under these recent market condition changes and the results  of our cost-cutting efforts
accomplished during the past few years, we believe these factors may help us return  to
consistent profitability in 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Critical Accounting Policies and Estimates
|------------------------------------------



|Use of Estimates
 We have made a number of estimates and assumptions relating to the reporting of
assets  and liabilities and the disclosure of contingent assets and liabilities to
prepare our financial statements in  conformity with accounting principles generally
accepted in the U.S.  These estimates have a significant impact  on our valuation and
reserve accounts relating to the allowance for sales returns, doubtful accounts,
inventory  reserves and deferred income taxes.  Actual results could differ from these
estimates.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Revenue
Recognition  Revenue is recognized upon shipment of the merchandise, which is when
legal transfer  of title occurs.  Reserves for sales allowances and customer returns are
established based upon historical  experience and our estimates of future returns.  Sales
returns for the period ended March 31, 2004 and 2003 were  $46,000.  The allowance for
sales returns and doubtful accounts at March 31, 2004 was $160,000.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Inventory  Inventory,
consisting principally of products held for resale, is recorded at the lower of  cost
(determined using the first in-first out method) or estimated market value.  We had
inventory balances in  the amount of $19,204,000 at March 31, 2004, which is presented
net of valuation allowances of $861,000.  We  evaluate inventories to identify excess,
high-cost, slow-moving or other factors rendering inventories as  unmarketable at normal
profit margins.  For inventories supplied under franchise agreements, we rely upon our
contractual rights to receive compensation for price differences caused by market
fluctuations.  Due to the large  number of transactions and the complexity of managing
and maintaining a large inventory of product offerings,  estimates are made regarding
adjustments to the cost of inventories.  Based on our assumptions about future  demand
and market conditions, inventories are carried at the lower of cost or estimated market
value.  If our  assumptions about future demand change, or market conditions are less
favorable than those projected, additional  write-downs of inventories may be required.
In any case, actual amounts could be different from those estimated.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Deferred Taxes
 We review the nature of each component of our deferred income taxes for
reasonableness.  If determined that it is more likely than not that we will not realize
all or part of our net deferred tax assets  in the future, we record a valuation
allowance against the deferred tax assets, which allowance will be charged  to income tax
expense in the period of such determination.  We also consider the scheduled reversal of
deferred  tax liabilities, tax planning strategies and future taxable income in assessing
the realizability of deferred tax  assets.  We also consider the weight of both positive
and negative evidence in determining whether a valuation  allowance is needed.  However,
due to the previously reported continuous net losses, we have fully reserved a  $652,000
allowance against our net deferred tax assets.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Page
8 | 
| | ------ | 



---





|Results of Operations
|---------------------



|Three month Period Ended March 31, 2004
Compared To The Three month Period Ended March 31, 2003.
|------------------------------------------------------------------------------------------------



|Net sales for the
three months ended March 31, 2004 were $2,491,000, compared with $3,155,000 for the same
period last year, a decrease of $664,000 or 21.1%.  The decrease is primarily due to an
industry-wide decrease in  demand for discrete and passive and semiconductor components.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Cost of goods sold
for the quarter ended March 31, 2004 decreased to $1,842,000 from $2,188,000 for the
same period last year, a decrease of $346,000 or 15.8%.  Consistent with the decrease in
net sales, cost of goods  sold decreased, however at a slower rate, resulting in gross
profit decreasing as a percentage of net sales to  26.1% for the quarter ended March 31,
2004 from 30.7% for the same period last year.  Gross profit decreased by  $318,000 to
$649,000 for the quarter ended March 31, 2004 from $967,000 for the same period in 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Selling, general
and administrative (SGA) expenses decreased by $240,000 or 28.3% for the
quarter  ended March 31, 2004 compared to the same period of 2003.  The decrease is
primarily attributable to  personnel-related expenses decreasing by $104,000, bad debt
expenses decreasing by $47,000, depreciation and  amortization decreasing by $43,000 and
trade commissions decreasing by $29,000.  As a percentage of net sales,  SG&A
decreased to 24.5% for the three months ended March 31, 2004 from 26.9% for the same
period last year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating earnings
were $40,000 for the quarter ended March 31, 2004 as compared to $118,000 for the  same
period last year.  The decrease in operating earnings results from the decrease in gross
profit margin, as  discussed above.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest expense,
net of interest income, for the quarter ended March 31, 2004 decreased by $46,000
compared to the same period last year.  The decrease is primarily due to lower
outstanding borrowing levels  incurred during the current quarter, when compared to the
same period last year.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|No income tax
provision or benefit was recorded during the quarter ended March 31, 2004, or the same
period last year because of taxable losses generated by the Company in each of these
periods.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net income was
$10,000 for the quarter ended March 31, 2004 as compared to $6,000 for the same period
last year.
|----------------------------------------------------------------------------------------------------------------



|Liquidity and Capital Resources
|-------------------------------



|We have satisfied
our liquidity requirements principally through cash generated from operations and
subordinated promissory notes.  A summary of our cash flows resulting from our operating,
investing and financing  activities for the three months ended March 31, 2004 and 2003
are as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                        |                                   
| | ---------------------- | ----------------------------------
| |                        | Three months ended March
      31,
| | (Dollars in thousands) | 2004
      (Unaudited)            
| | Operating activities   | $ 500                             
| | Investing activities   | (24                               
| | Financing activities   | (437                              



|Cash flows
provided by operating activities decreased to $500,000 during the three months ended
March 31,  2004, as compared to $933,000 during the same period last year.  The change is
primarily due to a decrease in  inventory of $512,000 during the first three months of
2004, as compared to a decrease of $1,290,000 during the  same period last year.  Our
ability to continue generating cash from operations is dependent upon using its  current
inventory (as opposed to new purchases of inventory) for generating sales, collection of
its receivables  and extended payments of accounts payables.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Page
9 | 
| | ------ | 



---





|Cash flows used in
investing activities was $24,000 during the three months ended March 31, 2004 compared
to $1,000 during the same period last year.
|-----------------------------------------------------------------------------------------------------------------------------------------------------



|Cash flows used in
financing activities decreased to $437,000 from $819,000 during the three months ended
March 31, 2004 and 2003, respectively, as we repaid more borrowings during the 2003
period.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Inventory is
included in current assets, however, it may take over one year for the inventory to turn
and  therefore may not be saleable within a one-year time frame.  Hence, inventory would
not be as readily marketable  or liquid as other items included in current assets, such
as cash.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We believe that
funds generated from operations, in addition to existing cash balances, is likely to be
sufficient to finance our working capital and capital expenditure requirements for the
foreseeable future or  until principal payments are due under our outstanding
obligations.  If these funds are not sufficient, we may  secure new sources of
asset-based lending on accounts receivables or issue debt or equity securities.
Otherwise,  we may need to liquidate assets to generate the necessary working capital.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of the date of
this Report,  we had no  commitments  for other equity or debt  financing or other
capital  expenditures.
|---------------------------------------------------------------------------------------------------------------------------



|Item  3.  Controls and Procedures
|---------------------------------



|As of the last day
covered by this report,  the Company  carried out an evaluation,  under the  supervision
and with the participation of the Companys  management,  including the Companys
Chief Executive  Officer,  of the  effectiveness  of the design and  operation  of the
Companys  disclosure  controls  and  procedures  pursuant  to  Rule 13a-14 of the
Securities  Exchange Act of 1934 (the Exchange  Act).  Based upon that
evaluation,  the Chief  Executive  Officer  concluded  that the  Companys
disclosure  controls  and  procedures  are  effective in timely  alerting them to
material information  relating to the Company (including its consolidated  subsidiary)
required to  be included in the Companys Exchange Act filings.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|There have been no
significant  changes in the Companys  internal controls or in other factors which
could  significantly affect internal controls subsequent to the date the Company carried
out its evaluation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|PART II.  OTHER INFORMATION
|---------------------------



|Item 1. Legal Proceedings.
|--------------------------



|Not Applicable
|--------------



|Item 2.  Changes In Securities and Small
Business Issuer Purchases of Equity Securities.
|----------------------------------------------------------------------------------------



|There were no
issuances or sales of our securities by us during the first quarter of 2004 that were not
registered under the Securities Act.
|--------------------------------------------------------------------------------------------------------------------------------------------



|During the first
quarter 2004, we repurchased 148,520 shares of our Class A common stock in open market
transactions for an aggregate amount of $323,000.  .
|------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 3.  Defaults Upon Senior Securities.
|-----------------------------------------



|None.
|-----



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



|None.
|-----



|Item 5.  Other Information.
|---------------------------



|None.
|-----



|Item 6.  Exhibits and Reports on Form 8-K.
|------------------------------------------



|(a)  Exhibits:
|--------------



| | Page
10 | 
| | ------- | 



---





| | 31 | Certification Pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002.
| | -- | ------------------------------------------------------------------------------



| | 32 | Certification Pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.
| | -- | ------------------------------------------------------------------------------



|(b)  Reports on
Form 8-K:
|-------------------------



| | On
March 18,  2004,  the  Company  filed a Form 8-K  reporting  financial  results for the
fourth  quarter and year-ended December 31, 2003.
| | --------------------------------------------------------------------------------------------------------------------------------------------



| | No
other reports on Form 8-K were filed during the quarter ended March 31, 2004.
| | --------------------------------------------------------------------------------



|SIGNATURES
|----------



|In accordance with
the  requirements of the Securities  Exchange Act of 1934, the registrant  caused  this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TAITRON COMPONENTS INCORPORATED
| |  |  | -------------------------------



|Date: May 17, 2004 |  | By:  | /s/ Stewart Wang
      Stewart Wang                                 
|------------------ |  | ---- | --------------------------------------------------------------------
|                   |  | Its: | Chief Executive Officer, President and
      Chief Financial Officer



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