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, 2004

          [ ] 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.)

               6851 Jericho Turnpike, Suite 170, Syosset, New York
               ---------------------------------------------------
                    (Address of principal executive offices)

                                      11791
                                   ----------
                                   (Zip Code)

                                  516-364-9300
                -------------------------------------------------
                (Company's telephone number, including area code)

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

Yes [X] No [ ]

Indicate by a check mark  whether the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

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

      Common stock (par value $0.01) 9,972,284 shares as of April 29, 2004

                                  Page 1 of 16

<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,
                                                                                        2004                 2003
                                                                                    -----------       -----------------
Assets                                                                              (Unaudited)
------
<S>                                                                                 <C>               <C>
Current assets:
     Cash and cash equivalents                                                      $        167      $        469
     Accounts receivable - trade, less allowance for doubtful accounts                     6,061             3,898
     Inventories                                                                           2,533             3,004
     Prepaid expenses and other current assets                                               430               472
                                                                                    ------------      ------------
                  Total current assets                                                     9,191             7,843

      Property, plant and equipment, net                                                   1,394             1,466
      Goodwill                                                                             2,961             2,961
      Other assets                                                                            75                85
                                                                                    ------------      ------------
                  Total assets                                                      $     13,621      $     12,355
                                                                                    ============      ============

                                    Liabilities and Stockholders' Deficit
                                    -------------------------------------
Current liabilities:
      Senior debt                                                                   $     25,472      $     25,387
      Subordinated notes                                                                   6,144             6,144
      6% convertible subordinated debentures                                                 385               385
      Accounts payable                                                                     6,014             5,635
      Accrued expenses                                                                     3,027             3,117
      Accrued interest payable                                                             3,823             3,563
      Accrued commissions                                                                    243               284
      Deferred compensation                                                                   58                58
      Income taxes payable                                                                    70                95
                                                                                    ------------      ------------
                  Total current liabilities                                               45,236            44,668
                                                                                    ------------      ------------

Deferred compensation                                                                        909               925
                                                                                    ------------      ------------
                  Total long-term liabilities                                                909               925
                                                                                    ------------      ------------

                  Total liabilities                                                       46,145            45,593
                                                                                    ------------      ------------

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
      10,003,224 at March 31, 2004 and December 31, 2003                                     100               100
       Additional paid-in capital                                                         76,059            76,059
       Accumulated deficit                                                              (102,552)         (103,380)
       Accumulated other comprehensive loss:
               Foreign currency translation adjustment                                    (4,193)           (4,079)
                                                                                    ------------      ------------
                                                                                         (30,586)          (31,300)
        Treasury stock, at cost                                                           (1,938)           (1,938)
                                                                                    ------------      ------------
                  Total stockholders' deficit                                            (32,524)          (33,238)
                                                                                    ------------      ------------
                  Total liabilities and stockholders' deficit                       $     13,621      $     12,355
                                                                                    ============      ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                  Page 2 of 16

<PAGE>

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

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                         March 31,         March 31,
                                                                           2004              2003
                                                                       ------------      ------------


<S>                                                                    <C>               <C>
Sales                                                                  $      8,100      $      4,374
Cost of sales                                                                 4,970             3,381
                                                                       ------------      ------------
     Gross profit                                                             3,130               993

Selling, general and administrative expenses                                  1,466             1,556
Research and development expenses                                               513               572
                                                                       ------------      ------------
         Total expenses                                                       1,979             2,128
                                                                       ------------      ------------

         Operating income (loss)                                              1,151            (1,135)

Interest expense                                                               (323)             (307)
Interest income                                                                  --                 1
                                                                       ------------      ------------

         Income (loss) before income taxes                                      828            (1,441)

Income tax benefit                                                               --                15
                                                                       ------------      ------------

Net income (loss)                                                      $        828      $     (1,426)
                                                                       ============      ============

Other comprehensive income (loss):

         Foreign currency translation adjustments                              (114)              (80)
                                                                       ------------      ------------

Comprehensive income (loss)                                            $        714      $     (1,506)
                                                                       ============      ============

Per share data:

Basic per share amounts:

         Income (loss) per share of common stock                       $       0.08      $      (0.14)
                                                                       ============      ============

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

Diluted per share amounts:

         Income (loss) per share of common stock                       $       0.08      $      (0.14)
                                                                       ============      ============

         Weighted average shares outstanding                                  9,972             9,972
                                                                       ============      ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                  Page 3 of 16

<PAGE>

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                 Unaudited Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                          March 31,         March 31,
                                                                            2004              2003
                                                                        ------------      ------------
<S>                                                                     <C>               <C>
Cash flows from operating activities:
     Net income (loss)                                                  $        828      $     (1,426)
     Adjustments to reconcile net income (loss) to net cash
          used in operating activities:
         Depreciation and amortization                                            95               139

Changes in operating assets and liabilities:
         Accounts receivable                                                  (2,163)              267
         Inventories                                                             471                88
         Prepaid expenses  and other current assets                               42               (95)
         Other assets                                                             10               118
         Accounts payable, accrued expenses and other liabilities                467               450
                                                                        ------------      ------------
              Net cash used in operating activities                             (250)             (459)
                                                                        ------------      ------------

Cash flows from investing activities:
         Capital expenditures, net                                               (18)              (62)
                                                                        ------------      ------------
              Net cash used in investing activities                              (18)              (62)
                                                                        ------------      ------------

Cash flows from financing activities:
         Proceeds from senior debt                                                85                75

         Repayments of short term loans                                           --                (1)
                                                                        ------------      ------------
              Net cash provided by financing activities                           85                74
                                                                        ------------      ------------

     Effect of exchange rate changes on cash                                    (119)              (73)
                                                                        ------------      ------------

     Decrease in cash and cash equivalents                                      (302)             (520)

     Cash and cash equivalents - beginning of the year                           469               779
                                                                        ------------      ------------

     Cash and cash equivalents - end of the period                      $        167      $        259
                                                                        ============      ============

     Supplemental cash flow disclosure:

         Cash paid for interest expense                                 $          1      $          1
                                                                        ============      ============

         Cash paid for income taxes                                     $         16      $          4
                                                                        ============      ============
</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                  Page 4 of 16

<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, 2003.  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, 2003 Form 10-K annual
report  contained an explanatory  paragraph  regarding the Company's  ability to
continue as a going  concern.  The  factors  which  resulted in the  explanatory
paragraph  are  continuing.  Results for the first three  months of 2004 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, 2004        December 31, 2003
                                        --------------        -----------------
                                                    (in thousands)
         Parts and components          $        1,344         $           1,673
         Work-in-process                          616                       427
         Finished goods                           573                       904
                                       --------------         -----------------
                                       $        2,533         $           3,004
                                       ==============         =================

Note 3: Senior and Subordinated Debt

      On  March  31,  2004,   the  Company's  debt  to  its  senior  lender  was
$25,472,000.  Under recent amendments,  the loan becomes due and payable on June
30, 2004.  If the  agreement is not  extended  beyond June 30, 2004,  and if the
senior lender demands  payment of all or a significant  portion of the loan when
due,  the  Company  will  not be able  to  continue  in  business  and may  seek
protection under the Bankruptcy Code.

      As of  March  31,  2004,  the  Company's  short-term  debt  also  included
$6,144,000 of subordinated  debt that became due on July 3, 2001 and $385,000 of
6%  debentures  which  became  due on  July 2,  2002.  Accrued  interest  on the
subordinated notes was approximately $3,436,000,  which represents interest from
July 2000 through March 31, 2004, and accrued  interest on the 6% debentures was
$87,000.  We are  precluded  by our senior  lender from paying any  principal or
interest on the subordinated debt.

                                  Page 5 of 16

<PAGE>

Note 4: Accounting for Stock Based Compensation

      The Company  applies the intrinsic value method as outlined in APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related  interpretations
in  accounting  for  stock  options.   Under  the  intrinsic  value  method,  no
compensation  expense  is  recognized  if the  exercise  price of the  Company's
employee stock options  equals the market price of the  underlying  stock on the
date of the grant. Accordingly,  no compensation cost has been recognized.  SFAS
No. 123,  "Accounting  for  Stock-Based  Compensation,"  requires the Company to
provide pro forma  information  regarding net loss and net loss per common share
as if  compensation  cost  for the  Company's  stock  option  programs  had been
determined in accordance with the fair value method  prescribed  therein.  Since
there was no stock-based  compensation  in the quarters ended March 31, 2004 and
2003, pro forma income/(loss) is the same as the reported net income/(loss).

Note 5: Segment Data

      The Company has three reportable segments:  Line Connection and Protection
Equipment  ("Line")  whose  products  interconnect  copper  telephone  lines  to
switching  equipment and provide fuse elements that protect telephone  equipment
and  personnel  from  electrical  surges;  Signal  Processing  ("Signal")  whose
products  are used in data  communication  devices  that employ  high  frequency
transformer  technology,  and Operating  Support  Systems ("OSS") whose products
automate  the  testing,   provisioning,   maintenance  and   administration   of
communication networks and the management of support personnel and equipment.

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

      There has been no  significant  change from December 31, 2003 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, 2004        March 31, 2003
                                           --------------        --------------
            Sales:
                  Line                      $  5,972,000        $     2,161,000
                  Signal                       1,303,000              1,065,000
                  OSS                            811,000                913,000
                                            ------------        ----------------

                                            $  8,086,000        $     4,139,000
                                            ============        ===============

            Segment profit (loss):
                  Line                      $  1,636,000        $         3,000
                  Signal                         455,000                349,000
                  OSS                           (298,000)              (853,000)
                                            ------------        ---------------

                                            $  1,793,000        $      (501,000)
                                            ============        ===============

                                  Page 6 of 16

<PAGE>

The following table reconciles segment totals to consolidated totals:

<TABLE>
<CAPTION>
                                                                           Three Months Ended
                                                                  March 31, 2004          March 31, 2003
                                                                  --------------          ---------------
<S>                                                                <C>                    <C>
            Sales:
               Total revenue for reportable segments               $  8,086,000           $     4,139,000
               Other revenue                                             14,000                   235,000
                                                                   ------------           ---------------
               Consolidated total revenue                          $  8,100,000           $     4,374,000
                                                                   ============           ===============

            Operating Profit (loss):
               Total segment profit (loss) for
                  reportable segments                              $  1,793,000           $      (501,000)
               Corporate and unallocated                               (642,000)                 (634,000)
                                                                   ------------           ---------------
               Consolidated total operating profit (loss)          $  1,151,000           $    (1,135,000)
                                                                   ============           ===============
</TABLE>

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,
                                                            2004         2003
                                                            ----         -----
Sales                                                       100%         100%
Cost of Sales                                                61%          77%
Gross Profit                                                 39%          23%
Selling, general and administrative expenses                 18%          36%
Research and development expenses                             6%          13%
     Operating income(loss)                                  14%         (26%)
Interest expense - net                                       (4%)         (7%)
Net  income (loss)                                           10%         (33%)

      The  Company's  sales by product line for the periods ended March 31, 2004
and 2003 are as follows:

                                                  Three Months Ended March 31,
                                                             $(000)
                                                       2004              2003
                                                       ----              ----

Line connection/protection equipment           $  5,972    74%   $  2,161    49%
Signal Processing                                 1,303    16%      1,065    24%
OSS equipment                                       811    10%        913    21%
Other                                                14     0%        235     6%
                                               ---------------   ---------------
                                               $  8,100   100%   $  4,374   100%
                                               ===============   ===============

                                  Page 7 of 16

<PAGE>

Overview

      We operate  in the  telecommunications  industry,  and our  customer  base
consists  largely of  government-owned  and  privately-owned  telecommunications
companies.  During the recent  past,  the  telecommunications  industry has been
affected  by a worldwide  slowdown,  and many,  if not most,  telecommunications
companies  have  scaled  back  plans  for  expansion,  which has  resulted  in a
significant  drop in the requirements  for products  including  products such as
those sold by the Company.  The  improvement  shown in the results of operations
for the quarter  ended March 31, 2004  results  from an increase in sales of our
Line products to British Telecommunications.  This improvement in the quarter is
not  necessarily  indicative of future  results,  and our ability to continue to
operate profitably is dependent upon continued purchases by this customer or our
developing  new  customers.  We  anticipate  a lower  level of sales to  British
Telecommunications,  for the second  quarter,  based upon current and  projected
order rates.

      Our  business  is  divided  into three  segments  -- line  connection  and
protection  equipment  ("Line") which  interconnects  copper  telephone lines to
switching  equipment and provides fuse elements that protect telephone equipment
and personnel from electrical  surges;  signal processing  ("Signal")  equipment
which  is  used  in  data  communication  devices  that  employ  high  frequency
transformer technology: and Operating Support Systems ("OSS") which automate the
testing, provisioning,  maintenance and administration of communication networks
and the management of support personnel and equipment.

      Because our OSS  contracts  are  long-term  contracts,  our  customers and
potential  customers have raised concerns about our financial  condition and our
ability to perform our  obligations  under our contracts,  as well as to provide
ongoing   services.   We   recognize   revenue   from   OSS   contracts   on   a
percentage-of-completion   basis   primarily   measured  by  the  attainment  of
milestones. We recognize anticipated losses, if any, in the period in which they
are  identified.  We are  continuing  to sustain  operating  losses from the OSS
division.  As a result,  during 2003 we further scaled back our OSS  operations,
and we now perform maintenance services for existing customers and we market our
products in selected markets. Even with the reduced scale of OSS operations,  we
are continuing to incur an operating  loss in this division.  If we are not able
to  generate  profits  from  these  operations,   we  may  discontinue  our  OSS
operations.

      Our Line equipment is designed to connect copper-wired  telecommunications
networks and to protect  telecommunications  equipment from voltage  surges.  We
market this equipment to telephone  operating companies in the United States and
foreign  countries.  Our Line division operated at a profit for the three months
ended   March   31,   2004  as  a  result   of   increased   sales  to   British
Telecommunications.  We market Signal  equipment  principally for use in defense
and aerospace  applications.  The Signal division  generated a modest  operating
profit for the three  months ended March 31, 2004 and the  comparable  period of
2003.  We recognize  revenue from Line and Signal  products  when the product is
shipped.

      Our  obligations  to our senior lender mature on June 30, 2004. The senior
lender has  expressed  concern as to whether  our  business  is or can be either
viable or  saleable  in the  context of its  ability to realize  any  meaningful
percentage  of our debt to it.  Although  the senior  lender has during the past
years,  extended  the  maturity  date  from  time to time  as we  approached  an
expiration date, we cannot give any assurance that the senior lender will extend
the loan  beyond  June 30, 2004 or that if an  extension  is  granted,  that the
extension will not be the final  extension which the senior lender grants to us.
If the senior  lender does not extend the maturity date of our  obligations  and
demands  payment of all or a significant  portion of our  obligations due to the
senior  lender,  we will not be able to  continue  in  business  and we may seek
protection  under the  Bankruptcy  Code.  We cannot  assure  you that our senior
lender  will

                                  Page 8 of 16

<PAGE>

not demand payment of all or a significant portion of our obligations or that we
will not seek protection under the Bankruptcy Code in anticipation of a decision
by the senior lender to demand payment.

Results of Operations

      Our  sales  for  the  quarter  ended  March  31,  2004  were   $8,100,000,
representing an increase of $3,726,000 (85%) compared to the quarter ended March
31, 2003 of $4,374,000.  As discussed  above, the increased sales level resulted
primarily  from increased  sales of Line products to British  Telecommunications
that  commenced  in the  third  quarter  of 2003 as a result of an  increase  by
British  Telecommunications  in the  availability  of DSL  lines  in the  United
Kingdom, and to a significantly lesser extent from a modest increase in sales of
our Signal products.

      Line equipment  sales  increased by $3,811,000  (176%) from $2,161,000 for
the March 2003 quarter to $5,972,000 for the March 2004 quarter,  reflecting the
increased sales to British Telecommunications.

      Signal processing revenue for the quarter ended March 31, 2004 compared to
2003  increased by $238,000 (22%) from  $1,065,000 to $1,303,000.  This increase
resulted  from our ability to ship orders  from  backlog on a more timely  basis
than in the comparable period of 2003.

      OSS sales  decreased by $102,000 (11%) from $913,000 for the quarter ended
March 31, 2003 to $811,000 for the quarter  ended March 31, 2004.  The decreased
sales  resulted from a lower level of new contracts  resulting from the slowdown
in the  telecommunications  market  and the  reduction  in the  scope of our OSS
operations.

      Gross  margin for the March 2004  quarter was 39%  compared to 23% for the
March  2003  quarter.  This  increase  is the  result  of better  absorption  of
manufacturing  overhead created by the increase in our Line business and reduced
OSS costs.

      Selling,  general and  administrative  expenses  decreased by $90,000 (6%)
from  $1,556,000  in the March  2003  quarter  to  $1,466,000  in the March 2004
quarter.  This decrease  relates  primarily to reduced  consulting  services and
commissions reflecting our current level of business.

      Research and development expenses decreased by $59,000 (10%) from $572,000
in the March 2003 quarter to $513,000 in the March 2004  quarter.  This decrease
results  primarily  from  our  reduction  in  product  development  for  our OSS
business,  consistent  with the reduction in 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 income of $1,151,000 for
the March 2004 quarter,  as compared to an operating  loss of $1,135,000 for the
March 2003 quarter.

      Pursuant  to our  agreement  with our senior  lender,  we have not paid or
accrued  interest on  $22,600,000  of senior debt since March 2002. As a result,
our statements of operations do not reflect any interest charges on this portion
of our senior debt for 2003 or 2004. The senior lender has the right at any time
to require us to pay interest;  however, our obligation to pay interest will not
require us to pay interest on such senior debt for periods prior to the date the
senior lender requires us to commence interest  payments.  We continue to accrue
interest on obligations  to our senior lender which were incurred  subsequent to
March 2002.  Interest expense increased by $16,000 (5%) from $307,000 in 2003 to

                                  Page 9 of 16

<PAGE>

$323,000 in 2004. The increase  represents accrued interest on loan principal of
$2,225,000 to our senior lender which was incurred subsequent to March 2002.

      As the result of the foregoing,  we generated net income of $828,000, $.08
per share (basic and diluted),  for the March 2004 quarter  versus a net loss of
$1,426,000, $0.14 per share (basic and diluted), for the March 2003 quarter.

Liquidity and Capital Resources

      At March 31, 2004, we had cash and cash  equivalents of $167,000  compared
with  $469,000 at December 31, 2003.  Our working  capital  deficit at March 31,
2004 was  $36,045,000,  compared to a working  capital deficit of $36,825,000 at
December 31, 2003, a reduction of $780,000 in our working capital deficit.  This
improvement  is the result of our  improved  operating  results  for the quarter
ended March 31,  2004.  We used  $250,000 of cash in our  operations  during the
March 2004 quarter.

      As of March 31, 2004,  our debt includes  $25,472,000 of senior debt which
matures on June 30, 2004,  $6,144,000  of  subordinated  debt that became due on
July 3, 2001, and $385,000 of 6% debentures which became due on July 2, 2002. We
were  unable  to  pay  the  interest  payment  on  the  subordinated   notes  of
approximately  $3,436,000 that represents  interest from July 2000 through March
2004, or the interest on the subordinated  debentures of approximately  $87,000.
We have been notified by the trustee of 6% debentures  that the  non-payment  of
the principal and interest caused an event of default. At March 31, 2004, 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.

      Our  financial  condition  and stock  price  effectively  preclude us from
raising  funds  through the  issuance of debt or equity  securities,  we have no
other source of funds other than operations, and our operations are generating a
negative  cash flow.  We have in the past sought to raise funds through the sale
of one or more of our divisions, but our efforts to date have been unsuccessful.
We also do not have any  prospects of obtaining  an alternate  senior  lender to
replace our present lender.

      Although we have scaled back our OSS  operations,  we are having,  and may
continue to have, difficulty performing our obligations under our OSS contracts,
which  could  result  in the  cancellation  of  contracts  or the loss of future
business  and  penalties  for  non-performance.  Furthermore,  one  creditor has
engaged a collection agency, and a vendor has commenced arbitration  proceedings
against us alleging breach of contract.

      We  have  sought  to  address  our  need  for   liquidity   by   exploring
alternatives,  including  the  possible  sale of one or  more of our  divisions.
During 2002 and 2003 we were engaged in discussions with respect to the possible
sale of our divisions;  however,  those  negotiations  were  terminated  without
reaching  an  agreement,  and we may  not be able to  sell  those  divisions  on
acceptable,  if any, terms. We will continue to consider the sale of one or more
of  our  divisions;  however,  if we  sell  a  division,  we  anticipate  that a
substantial  portion, if not all, of the net proceeds will be paid to our senior
lender and we will not receive any  significant  amount of working  capital from
such a sale.  Furthermore,  if we only  sell one  division,  we may be unable to
reduce overhead sufficiently to enable us to operate profitably.

      During 2002 and 2003, we have taken steps to reduce overhead and headcount
by  relocating  the  executive,  sales/marketing,  accounting  and  research and
development  departments  to less expensive

                                 Page 10 of 16

<PAGE>

offices in Syosset,  NY and further  reduced  the OSS  personnel  as part of the
scaling-down  effort.  We will  continue  to look to reduce  costs while we seek
additional business from new and existing customers.

      Because of our present stock price, we cannot raise funds through the sale
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, even though we generated net income for
the quarter  ended March 31,  2004,  our  ability to operate  profitably  in the
future   is   dependent   upon  the   continuation   of  orders   from   British
Telecommunications or the development of new business,  and we cannot assure you
that we will be able to do so.

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,  2003 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.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

      Although we conduct operations  outside of the United States,  most of our
contracts  and sales are dollar  denominated.  A portion of the revenue from our
United Kingdom  operations  and the majority of our United Kingdom  expenses are
denominated  in  Sterling.  Any   Sterling-denominated   receipts  are  promptly
converted into United States  dollars.  We do not engage in any hedging or other
currency transactions.


Item 4. Controls and Procedures

Disclosure Controls and Procedures

      As of the end of the period  covered by this report,  our Chief  Executive
Officer  and  Chief  Financial   Officer  evaluated  the  effectiveness  of  our
disclosure  controls  and  procedures.  Based on  their  evaluation,  the  Chief
Executive  Officer  and the Chief  Financial  Officer  have  concluded  that our
disclosure  controls and  procedures  are effective in alerting them to material
information  that is required  to be  included  in the  reports  that we file or
submit under the Securities Exchange Act of 1934.

                                 Page 11 of 16

<PAGE>

Internal Control Over Financial Reporting

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

PART II - OTHER INFORMATION

Item 3. Defaults Upon Senior Securities.

      See Note 3 of Notes to Unaudited  Consolidated  Financial  Statements  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  --  Liquidity  and Capital  Resources"  for  information  concerning
defaults on our subordinated debt.

Item 6. Exhibits and Reports on Form 8-K

      (a)   Exhibits

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

            31.2  Certificate of Chief Financial Officer pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

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

      (b)   Reports on Form 8-K

            On April 1, 2004 the Company  reported its results of operations for
            the year ended December 31, 2003.

                                 Page 12 of 16


<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 12, 2004                   By /s/William V. Carney
                                              ---------------------------
                                              William V. Carney
                                              Chairman of the Board
                                              and Chief Executive Officer

      Dated May 12, 2004                   By /s/Edward B. Kornfeld
                                              ----------------------------------
                                              Edward B. Kornfeld
                                              President, Chief Operating Officer
                                              and Chief Financial Officer

                                 Page 13 of 16