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, 2002

          [ ] 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. Employer
   incorporation or organization)                       Identification No.)

                   575 Underhill Boulevard, 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 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) 9,976,964 shares as of May 7, 2002

                               [table of contents]

                                  Page 1 of 14

<PAGE>

PART I.- FINANCIAL INFORMATION
Item 1- Financial Statements
                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                               March 31,    December 31,
                                                                                  2002         2001
                                                                              ----------    -----------
                                 Assets                                       (Unaudited)

<S>                                                                             <C>         <C>
Current assets:
     Cash and cash equivalents                                                  $    469    $  1,204
     Accounts receivable - trade, less allowance for doubtful accounts             4,850       4,284
     Inventories                                                                   4,396       5,206
     Prepaid expenses and other current assets                                     1,194         852
                                                                                --------    --------
                  Total current assets                                            10,909      11,546

      Property, plant and equipment, net                                           2,154       2,328
      Goodwill, net                                                                3,761       3,761
      Other assets                                                                    73         198
                                                                                --------    --------
                  Total assets                                                  $ 16,897    $ 17,833
                                                                                --------    --------

                  Liabilities and Stockholders' Deficit

Current liabilities:
      Senior debt                                                               $ 23,776    $ 22,095
      Subordinated notes                                                           6,144       6,144
      6% convertible subordinated debentures                                         384         382
      Accounts payable                                                             6,708       7,023
      Accrued expenses                                                             3,795       3,417
      Accrued interest payable                                                     1,929       1,593
      Accrued commissions                                                          1,193       1,607
      Accrued deferred compensation                                                  196         196
      Income taxes payable                                                           301         314
      Short-term loans                                                                10          11
                                                                                --------    --------
                  Total current liabilities                                       44,436      42,782
                                                                                --------    --------

Deferred compensation                                                                924         900
                                                                                --------    --------
                  Total long-term liabilities                                        924         900
                                                                                --------    --------

                  Total liabilities                                               45,360      43,682
                                                                                --------    --------

Stockholders' deficit:
      Preferred stock, no par value; authorized 1,000,000 shares, none issued         --          --
      Common stock, par value $.01; authorized 20,000,000 shares, issued
      9,976,964 and 9,947,421 shares at March 31, 2002 and December 31, 2001         100          99
       Additional paid-in capital                                                 76,057      76,056
       Accumulated deficit                                                       (98,546)    (95,909)
       Accumulated other comprehensive loss:
               Foreign currency translation adjustment                            (4,136)     (4,157)
                                                                                --------    --------
                                                                                 (26,525)    (23,911)
        Treasury stock, at cost                                                   (1,938)     (1,938)
                                                                                --------    --------
                  Total stockholders' deficit                                    (28,463)    (25,849)
                                                                                --------    --------
                  Total liabilities and stockholders' deficit                   $ 16,897    $ 17,833
                                                                                ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                  Page 2 of 14

<PAGE>

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
    Unaudited Consolidated Statements of Operations and Comprehensive (Loss)
                      (In thousands, except per share data)

                                                            Three Months Ended
                                                            March 31,  March 31,
                                                              2002       2001
                                                            -------    --------

Sales                                                       $ 4,744    $ 7,042
Cost of sales                                                 3,866      5,628
                                                            -------    -------
     Gross profit                                               878      1,414

Selling, general and administrative expenses                  1,868      2,578
Research and development expenses                               759      1,187
                                                            -------    -------
         Total expenses                                       2,627      3,765
                                                            -------    -------

         Operating loss                                      (1,749)    (2,351)

Interest expense                                               (874)    (1,003)
Interest income                                                   2         16
Other income (expense), net                                      (3)        28
                                                            -------    -------

         Loss before income taxes and minority interest      (2,624)    (3,310)

Income tax expense                                              (13)       (15)
Minority interest                                                --         92
                                                            -------    -------

Net loss                                                    $(2,637)   $(3,233)
                                                            =======    =======

Other comprehensive income, net of tax:

         Foreign currency translation adjustments                21          3

Comprehensive loss                                          $(2,616)   $(3,230)
                                                            =======    =======

Per share data:

Basic per share amounts:

         Net loss per share of common stock                 $ (0.26)   $ (0.33)
                                                            =======    =======

         Weighted average shares outstanding                  9,972      9,836
                                                            =======    =======
Diluted per share amounts:

         Net loss per share of common stock                 $ (0.26)   $ (0.33)
                                                            =======    =======

         Weighted average shares outstanding                  9,972      9,836
                                                            =======    =======

     See accompanying notes to unaudited consolidated financial statements.

                                  Page 3 of 14

<PAGE>

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                 Unaudited Consolidated Statements of Cash Flows
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                         March 31,    March 31,
                                                                           2002         2001
                                                                         -------     ---------
<S>                                                                      <C>         <C>
Cash flows from operating activities:
     Net (loss)                                                          $(2,637)    $(3,233)
     Adjustments to reconcile net (loss) to net cash
       used in operating activities:
         Non-cash financing expenses                                          --          61
         Depreciation and amortization                                       167         439
         Amortization of debt discounts                                        2           2
         Minority interest                                                    --         (92)
          Changes in operating assets and liabilities:
         Accounts receivable                                                (566)       (297)
         Inventories                                                         810         387
         Prepaid expenses  and other current assets                         (342)       (696)
         Other assets                                                        125         365
         Accounts payable, accrued expenses and other liabilities             14       1,507
                                                                         -------     -------
              Net cash used in operating activities                       (2,427)     (1,557)
                                                                         -------     -------
Cash flows from investing activities:
         Capital expenditures, net                                            (5)        (36)
                                                                         -------     -------
              Net cash used in investing activities                           (5)        (36)
                                                                         -------     -------

Cash flows from financing activities:
         Proceeds from senior debt                                         1,681          --
         Repayments of senior debt                                            --        (400)
         Proceeds from exercised options and warrants                          2          16
         Repayments of short term loans                                       (1)         (1)
                                                                         -------     -------
              Net cash provided by (used in) financing activities          1,682        (385)
                                                                         -------     -------

     Effect of exchange rate changes on cash                                  15           9
                                                                         -------     -------

     Decrease in cash and cash equivalents                                  (735)     (1,969)

     Cash and equivalents - beginning of the year                          1,204       2,366
                                                                         -------     -------

     Cash and equivalents - end of the period                            $   469     $   397
                                                                         -------     -------
     Supplemental cash flow disclosure:

         Cash paid for interest expense                                  $     6     $   726
                                                                         =======     =======

         Cash paid for income taxes                                      $    27     $    77
                                                                         =======     =======
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                  Page 4 of 14

<PAGE>

                      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, 2001.  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, 2001 Form 10-K annual
report  contained an explanatory  paragraph  regarding the Company's  ability to
continue as a going concern.  Results for the first three months of 2002 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:

                                   March 31, 2002            December 31, 2001
                                   --------------            -----------------
                                                 (in thousands)
         Parts and components          $2,402                      $3,217
         Work-in-process                  389                         192
         Finished goods                 1,605                       1,797
                                       ------                      ------
                                       $4,396                      $5,206
                                       ======                      ======

Note 3: Senior Debt

      On  March  31,  2002,   the  Company's  debt  to  its  senior  lender  was
$23,776,000.   During  the  three  months  then  ended,   the  Company  borrowed
$1,681,000.  The current  agreement with the senior lender,  as amended in March
2002 and described  below,  expires on December 31, 2002 and,  accordingly,  the
senior debt has been classified as a current liability at March 31, 2002.

      In March 2002,  the senior  lender  agreed to an amended and restated loan
and security  agreement  whereby a new term loan was established  with a maximum
principal amount of $1,500,000.  The agreement allows the Company to draw monies
subject to the senior  lender's  receipt and  approval of a weekly  disbursement
budget.  Advances  under this  agreement  are  subject to the sole and  absolute
discretion  of the senior  lender.  As of April 22, 2002,  the Company had drawn
down the full amount of the new term loan.  On May 10, 2002,  the senior  lender
agreed to a further  amendment to the loan and security  agreement to permit the
Company to borrow up to an additional  $750,000.  Obligations under the new term
loan bear  interest at 12%,  and  principal  and interest on the note are due on
December 31, 2002,  which  interest  shall accrue  monthly and be applied to the
principal  until  September  1, 2002 when  interest for the month of August 2002
shall be paid and interest shall continue to be paid each subsequent  month. The
agreement  provides that all indebtedness prior to March 1, 2002 is reflected as
an old term loan in the amount of  $22,610,000,  which  includes  the  principal
balance due at December 31, 2001 plus accrued interest though March 1, 2002. The
old term loan bears no interest from March 1, 2002 until such time as the senior
lender

                                  Page 5 of 14

<PAGE>

in its sole  discretion  notifies  the  Company  that the old  term  loan  shall
thereafter  accrue  interest  which shall be payable.  Both the new and old term
loans are due on December 31, 2002.

      Additionally, the senior lender has prohibited the Company from making any
payments on indebtedness to any subordinated  creditors,  but the Company is not
prohibited  from paying  accounts  payable in the  ordinary  course of business.
Finally,  the  agreement  allows for  standby  letters of credit not to exceed a
maximum of $573,000.

Note 4: Subordinated Notes

      As  of  March  31,  2002,  the  Company  has  outstanding   $6,144,000  of
subordinated  notes and  $1,588,000  of  accrued  interest,  which  were due and
payable.  These notes matured in January and July 2001; however, the Company did
not have  the  resources  to pay the  $6,144,000  principal  and  $1,588,000  of
interest  due on the  subordinated  debt.  In  addition,  the senior  lender had
precluded the Company from making payments on the subordinated debt (Note 3).

Note 5: Sale of Ownership in Joint Venture

      As of  December  31,  2001,  we had a 50%  ownership  interest in Woo Shin
Electro  Systems Co, a Korean  company ("Woo Shin").  In April 2002, we sold our
interest in Woo Shin for $450,000 to Mr. J.C. Jun, the owner of the other 50% of
Woo Shin. Payment was made by the forgiveness of commissions, totaling $450,000,
which the Company owed to a company  owned by Mr. Jun with respect to sales made
by Woo Shin.

Note 6: Recent Accounting Pronouncements

      The Company adopted SFAS No. 142, "Goodwill and Other Intangible  Assets,"
in the first  quarter of 2002.  Effective  January 1, 2002,  the Company  ceased
amortization of goodwill resulting in a decrease of $198,000 in amortization for
the three  months  ended  March 31,  2002  compared  to the same period in 2001.
Instead of  amortizing  goodwill  over a fixed period of time,  the Company will
measure the fair value of the acquired  business at least  annually to determine
if goodwill has been impaired. In addition,  the Company will complete the first
step of the  goodwill  transitional  impairment  test by June  30,  2002,  which
requires  determining  the fair value of the reporting  unit, as defined by SFAS
142, and comparing it to the carrying  value of the net assets  allocated to the
reporting unit. The Company will not be able to determine the impact of SFAS 142
on its  consolidated  financial  statements until such time as it applies all of
its provisions.  Any impairment loss resulting from the transitional  impairment
test will be recorded as a cumulative effect of a change in accounting principle
for the quarter ending June 30, 2002. Any subsequent  impairment  losses will be
reflected in operating income (loss) in the statement of operations.

                                  Page 6 of 14

<PAGE>

      The  following  schedule  presents net loss,  basic net loss per share and
diluted net loss per share,  exclusive of goodwill amortization expense, for the
three months ended March 31, 2001, for which the standard had not been adopted.

                                                              Three Months Ended
                                                                March 31, 2001
                                                              ------------------
                                                                (In thousands)

Reported net loss .........................................        $(3,233)
Add back:  Goodwill amortization ..........................            198
                                                                   -------
Adjusted net loss .........................................        $(3,035)
                                                                   =======

Basic net loss per share:
         Reported net loss ................................        $ (0.33)
         Goodwill amortization ............................           0.02
                                                                   -------
Adjusted net loss per share ...............................        $ (0.31)
                                                                   =======

Diluted net loss per share:
         Reported net loss ................................        $ (0.33)
         Goodwill amortization ............................           0.02
                                                                   -------
Adjusted diluted net loss per share .......................        $ (0.31)
                                                                   =======

      In October 2001, the Financial Accounting Standards Board issued Statement
No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets,"
effective  for fiscal years  beginning  after  December 15, 2001.  The Statement
provides a single  accounting model for long-lived  assets to be disposed of and
significantly   changes   the   criteria   required  to  classify  an  asset  as
held-for-sale.   Under  the  Statement,   more  dispositions  will  qualify  for
discontinued operations treatment in the statement of operations, which requires
expected future operating losses from discontinued operations to be displayed in
discontinued  operations  in the period in which the losses  are  incurred.  The
Statement is effective for fiscal years  beginning  after December 15, 2001. The
Company  does not expect at this time that the  adoption of SFAS 144 will have a
material impact on its consolidated financial statements.

Note 7: 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;  Operating  Support Systems ("OSS") whose
products automate the testing,  provisioning,  maintenance and administration of
communication  networks and the  management of support  personnel and equipment;
and Signal Processing  ("Signal") whose products are used in data  communication
devices that employ high frequency transformer technology.

      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.

                                  Page 7 of 14

<PAGE>

      There has been no  significant  change from December 31, 2001 in the basis
of measurement of segment revenues and profit or loss, and no significant change
in the Company's assets.

                                                    Three Months Ended
                                        March 31, 2002         March 31, 2001
                                        --------------         --------------
      Sales:
            Line                         $  1,470,000            $ 3,848,000
            OSS                             2,045,000              1,365,000
            Signal                          1,076,000              1,652,000
                                         ------------            -----------
                                         $  4,591,000            $ 6,865,000
                                         ============            ===========

      Segment profit (loss):
            Line                         $   (661,000)           $   536,000
            OSS                              (279,000)            (2,314,000)
            Signal                            107,000                345,000
                                         ------------            -----------
                                         $   (833,000)           $(1,433,000)
                                         ============            ===========

The following table reconciles segment totals to consolidated totals:

                                                  Three Months Ended
                                        March 31, 2002          March 31, 2001
                                        --------------          --------------
      Sales:
         Total revenue for reportable
           segments                      $  4,591,000            $ 6,865,000
         Other revenue                        153,000                177,000
                                         ------------            -----------
         Consolidated total revenue      $  4,744,000            $ 7,042,000
                                         ============            ===========

      Operating loss:
         Total segment loss for
           reportable segments           $   (833,000)           $(1,433,000)
         Corporate and unallocated           (916,000)              (918,000)
                                         ------------            -----------
         Consolidated total
           operating loss                $ (1,749,000)           $(2,351,000)
                                         ============            ===========

                                  Page 8 of 14

<PAGE>

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 Ended
                                                                  March 31,
                                                              2002         2001
                                                              ----         ----
Sales                                                         100%         100%
Cost of Sales                                                  82%          80%
Gross Profit                                                   18%          20%
Selling, general and administrative expenses                   39%          36%
Research and development expenses                              16%          17%
     Operating loss                                           (37%)        (33%)
Interest expense - net                                        (18%)        (14%)
Other                                                           0%           0%
Minority interest                                              --            1%
Net (loss)                                                    (55%)        (46%)

      The  Company's  sales by product line for the periods ended March 31, 2002
and 2001 are as follows:

                                           Three Months Ended March 31,
                                                      $(000)
                                                2002            2001
                                                ----            ----

Line connection/protection equipment       $1,470   31%     $3,848   55%
OSS equipment                               2,045   43%      1,365   19%
Signal Processing                           1,076   23%      1,652   23%
Other                                         153    3%        177    3%
                                           -----------      -----------
                                           $4,744  100%     $7,042  100%
                                           ===========      ===========

Results of Operations

      Our  sales  for  the  quarter   ended  March  31,  2002  were   $4,744,000
representing a decrease of $2,298,000  (33%) compared to the quarter ended March
31, 2001 of $7,042,000.  The overall decrease in sales reflects reduced sales of
Line and Signal equipment partially offset by increased sales from OSS.

      Line equipment sales decreased by $2,378,000 (62%) from $3,848,000 for the
March 2001 quarter to $1,470,000  for the March 2002 quarter.  The reduced sales
level  reflected  a  decrease  in volume of sales to United  States  and  United
Kingdom customers. The ability to sell line equipment products reflects both the
Company's  weak  financial  position  as well  as the  general  slowdown  in the
telecommunications industry.

      OSS sales  increased  by $680,000  (50%) from  $1,365,000  for the quarter
ended March 31, 2001 to  $2,045,000  for the quarter  ended March 31, 2002.  The
increased  sales resulted from higher levels of contract  completion  during the
current quarter as compared to the same quarter last year.

                                  Page 9 of 14

<PAGE>

      Signal processing revenue for the quarter ended March 31, 2002 compared to
2001 decreased by $576,000 (35%) from $1,652,000 to $1,076,000.  The decrease in
sales primarily reflects delays in the receipt of certain anticipated  contracts
and the  continued  slowdown in the order rate from  customers  during the first
quarter of 2002.

      Gross  margin for the March 2002  quarter was 18%  compared to 20% for the
March  2001  quarter.  This  decline  in gross  margin  is  attributable  to the
decreased  level of sales.  Because of the low volume of sales,  the Company was
unable to absorb  certain  fixed  expenses  associated  with the Line and Signal
units.

      Selling,  general and administrative  expenses decreased by $710,000 (28%)
from  $2,578,000  in the March  2001  quarter  to  $1,868,000  in the March 2002
quarter.  This  decrease  relates  primarily to reduced  salaries and  benefits,
consulting  services and  commissions  reflecting our current level of business.
However,  because of our  significantly  reduced  level of sales,  our  selling,
general and administrative  expenses  represented a larger percentage of sales -
39% in the March 2002 quarter as compared with 36% in the March 2001 quarter.

      Research  and  development  expenses  decreased  by  $428,000  (36%)  from
$1,187,000 in the March 2001 quarter to $759,000 in the March 2002 quarter. This
decrease in research and development expenses results from our efforts to reduce
expenses  primarily related to the OSS business.  Our inability to fund research
and development  could  adversely  affect our ability to offer products based on
developing  technologies,  which  could  affect our  ability to sell  product in
future years.

      As a result of the  foregoing,  we had an operating loss of $1,749,000 for
the March 2002 quarter,  as compared to an operating  loss of $2,351,000 for the
March 2001 quarter.

      Interest  expense  decreased by $129,000 (13%) from  $1,003,000 in 2001 to
$874,000 in 2002. This change is attributable primarily to our amended agreement
with our senior  lender  whereby the old term loan bears no interest  commencing
March 1, 2002 until such time as the  lender,  in its sole  discretion,  resumes
interest charges.

      As the  result of the  foregoing,  our net loss was  $2,637,000,  $.26 per
share  (basic  and  diluted),  for the March 2002  quarter  versus a net loss of
$3,233,000, $.33 per share (basic and diluted), for the March 2001 quarter.

      Our losses are  continuing,  and we cannot give any assurance that we will
be able to operate profitably in the future. As a result of the deterioration of
our operating  revenue  resulting from both market  conditions and our financial
condition,  we are evaluating various options,  including the sale of one or all
of our divisions as well as a reorganization under the Bankruptcy Code.

Liquidity and Capital Resources

      At March 31, 2002, we had cash and cash  equivalents of $469,000  compared
with  $1,204,000 at December 31, 2001. Our working  capital deficit at March 31,
2002 was  $33,527,000,  compared to a working  capital deficit of $31,236,000 at
December  31,  2001.  The  reduced  level  of cash on hand  and  inventory,  and
increased level of senior debt,  resulted in the increase in the working capital
deficiency. During the March 2002 quarter, the net cash used by us in operations
was  $2,427,000,  which was partially  offset by additional  borrowings from our
senior lender of  $1,681,000.  Our senior lender has no obligation to advance us
any funds,  and, if our operations do not generate a positive cash flow or we do
not obtain funds from other sources, we may be unable to continue in business.

                                 Page 10 of 14

<PAGE>

      As of March 31, 2002,  our debt includes  $23,776,000  of senior debt that
matures on December 31, 2002,  and $6,144,000 of  subordinated  debt that became
due in January and July 2001. We were unable to pay the principal or interest on
the  subordinated  notes.   Interest  on  the  subordinated  notes  amounted  to
approximately $1,588,000, which represents interest from July 2000 through March
31, 2002. At March 31, 2002, we did not have sufficient  resources to pay either
the  senior  lender or the  subordinated  lenders,  it is  unlikely  that we can
generate such cash from our  operations,  and our senior lender has precluded us
from making any payments on the subordinated debt.

      On March 1,  2002,  our  senior  lender  and we agreed to an  amended  and
restated  loan and security  agreement  whereby a new term loan was  established
with a maximum  principal amount of $1,500,000.  The agreement allows us to draw
monies  subject  to  our  senior  lender's  receipt  and  approval  of a  weekly
disbursement budget.  Obligations under the new term loan shall bear interest at
12%.  As of April  22,  2002,  we had  drawn  down the full  amount  of this new
facility.  On May 10, 2002,  the senior lender agreed to a further  amendment to
the loan and security agreement to increase the maximum additional borrowings by
$750,000,  and any additional  advances are to be made in the sole and exclusive
discretion  of  the  senior  lender.   The  agreement  with  our  senior  lender
establishes all  indebtedness  prior to March 1, 2002 as an old term loan in the
amount of $22,610,000,  which includes the balance due at December 31, 2001 plus
accrued interest though March 1, 2002. The old term loan bears no interest until
such time as the senior lender in its sole  discretion  notifies us that the old
loan shall thereafter accrue interest,  which shall be payable. Both the new and
old term loans  expire on December  31,  2002.  As part of this  agreement,  the
senior lender  continues to preclude us from making any payments on indebtedness
to any  subordinated  creditors  except to pay accounts  payable in the ordinary
course of business.  The additional $750,000 being advanced by our senior lender
is being advanced at the sole and exclusive  discretion of the senior lender and
such advances are dependent on, among other things, the perception of the senior
lender that we are either stemming our losses or effecting a sale of one or more
of our divisions. If the senior lender ceases funding our operations,  unless we
have obtained alternative financing,  we will be unable to continue in business.
Furthermore, unless we obtain funding from another source, including the sale of
one or more of our  divisions,  we will not be able to pay our senior  lender on
December 31, 2002, and we may not be able to continue in business.

      As of  March  31,  2002,  we  had  remaining  outstanding  $384,000  of 6%
Debentures, net of original issue discount of $1,000, which mature July 2, 2002.
The face amount of the  outstanding  6% Debentures  was  $385,000.  The interest
accrued on the 6%  Debentures  is  payable  on July 1 of each  year.  Due to the
restriction  imposed by our senior lender precluding us from making any payments
on  indebtedness  to any  subordinated  debt  holder,  we were unable to pay the
interest due on July 1, 2001. Thus,  interest due at March 31, 2002 was $41,000.
Additionally,  we have been notified by the trustee that the  non-payment of the
interest caused an event of default.

      As of March 31, 2002, we had outstanding $6,144,000 of subordinated notes,
all of which became due during 2001.  We did not have the  resources to pay, and
we did not pay, either the principal or interest on the  subordinated  notes and
are restricted by our senior lender from making such  payments.  The holder of a
subordinated  note in the  principal  amount of $500,000 has commenced an action
seeking  payment of the principal and interest on his note.  However,  the court
recently denied the holder's  motion for a summary  judgment on the grounds that
the terms of the note did not give him  permission to obtain a judgment while we
remained in default to the senior debt holder.

                                 Page 11 of 14

<PAGE>

      As a result of our continuing financial difficulties:

      o     we are having and we may continue to have difficulty  performing our
            obligations   under  our  contracts,   which  could  result  in  the
            cancellation  of  contracts  or the  loss  of  future  business  and
            penalties for non-performance; and

      o     A number of  creditors,  including  one  holder of our  subordinated
            notes,  as discussed  above,  have engaged  attorneys or  collection
            agencies or  commenced  legal  actions  against us, and some of them
            have obtained  judgments against us, including a former landlord who
            has obtained a $400,000 judgment against us.

      The  creditors  include five former  senior  executives  who have deferred
compensation  agreements with us. The total payments due under these  agreements
are  approximately  $1.9 million,  of which  $146,000 was due at March 31, 2002.
Other claimants who have already either commenced litigation or otherwise sought
collection  or who have  obtained  judgments  against  us are due  approximately
$600,000. If we are unable to reach a settlement with these creditors and others
who have not yet brought claims, and these claimants obtain judgments against us
or,  in the  case of  creditors  who have  already  obtained  judgments,  if the
creditors  seek to enforce  the  judgment,  it may be  necessary  for us, or our
senior lender may require us, to seek protection under the Bankruptcy Code.

      We  are  seeking  to  address  our  need  for   liquidity   by   exploring
alternatives,  including  the  possible  sale of one or  more of our  divisions.
Although we are engaged in preliminary  discussions  with respect to the sale of
one of our divisions,  we have not signed any agreements  with respect to such a
sale,  and we  cannot  give  any  assurance  that we  will  be able to sell  any
divisions on reasonable terms, if at all. Furthermore, if we sell a division, we
anticipate  that a  substantial  portion of the net proceeds will be made to our
senior lender and we will not receive any significant  amount of working capital
from such a sale.  During  2001 and early  2002,  we have taken  steps to reduce
overhead and  headcount.  We will continue to look to reduce costs while we seek
additional  business  from new and  existing  customers.  Our senior  lender has
precluded  us from  making any  payments  on  indebtedness  to any  subordinated
creditors.  Because of our present  stock price,  it is highly  unlikely that we
will be able to raise funds through the sales of our equity securities,  and our
financial condition prevents us from issuing debt securities.  In the event that
we are  unable  to  extend  our  debt  obligations  and  sell one or more of our
divisions,  we cannot assure you that we will be able to continue in operations.
Furthermore,  we believe that our losses and our  financial  position are having
and will  continue  to have an adverse  effect  upon our  ability to develop new
business as  competitors  and potential  customers  question our ability both to
perform our  obligations  under any  agreements  we may enter and to continue in
business. We have been informally advised by British  Telecommunications,  which
is one of our largest customers that, because of our financial position, it will
not place orders with us for OSS products until we can  demonstrate  that we are
financially  viable.  However,  British  Telecommunications  continues  to place
orders  for OSS  maintenance  and  modest  orders  for line test  products.  The
significantly  reduced level of business from this customer is having a material
adverse effect upon our operations.  In addition, our auditors included in their
report on our December  31, 2001 audited  financial  statements  an  explanatory
paragraph about our ability to continue as a going concern.

                                 Page 12 of 14

<PAGE>

Forward Looking Statements

      Statements contained in this Form 10-Q include forward-looking  statements
that are subject to risks and uncertainties.  In particular,  statements in this
Form  10-Q  that  state  the  Company's   intentions,   beliefs,   expectations,
strategies,   predictions  or  any  other  statements  relating  to  our  future
activities  or other  future  events  or  conditions  are  "forward-looking  ___
statements."  Forward-looking statements are subject to risks, uncertainties and
other  factors,  including,  but not limited to,  those  identified  under "Risk
Factors,"  in our Form  10-K for the year  ended  December  31,  2001 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.

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits
                  None
         (b)      Reports on Form 8-K
                  None

                                 Page 13 of 14

<PAGE>

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 14, 2002                  By /s/William V. Carney
                                                --------------------
                                                William V. Carney
                                                Chairman of the Board
                                                and Chief Executive Officer

         Dated May 14, 2002                  By /s/Edward B. Kornfeld
                                                ---------------------
                                                Edward B. Kornfeld
                                                Senior Vice President
                                                and Chief Financial Officer

                                 Page 14 of 14