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 June 30, 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) 9,979,442 shares as of August 5, 2002
<PAGE>

PART I. - FINANCIAL INFORMATION
Item 1 - Financial Statements

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (Dollars in thousands)
                                                        June 30,    December 31,
                                                          2002         2001
                                                        --------    -----------
                                    Assets            (Unaudited)
Current assets:
     Cash and cash equivalents                          $    388        1,204
     Accounts receivable - trade, less
       allowance for doubtful accounts                     7,243        4,284
     Inventories                                           3,292        5,206
     Prepaid expenses and other current assets               509          852
                                                        --------     --------
               Total current assets                       11,432       11,546

      Property, plant and equipment, net                   2,034        2,328
      Goodwill, net                                        2,961        3,761
      Other assets                                            65          198
                                                        --------     --------
               Total assets                             $ 16,492       17,833
                                                        ========     ========

                      Liabilities and Stockholders' Deficit
Current liabilities:
      Senior debt                                       $ 24,921       22,095
      Subordinated notes                                   6,144        6,144
      6% convertible subordinated debentures                 385          382
      Accounts payable                                     6,608        7,023
      Accrued expenses                                     3,546        3,417
      Accrued interest payable                             2,166        1,593
      Accrued commissions                                    643        1,607
      Accrued deferred compensation                          348          196
      Income taxes payable                                   293          314
      Short-term loans                                         9           11
                                                        --------     --------
               Total current liabilities                  45,063       42,782
                                                        --------     --------

Deferred compensation                                        803          900
                                                        --------     --------
               Total long-term liabilities                   803          900
                                                        --------     --------

               Total liabilities                          45,866       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
        June 30, 2002 and December 31, 2001                  100           99
       Additional paid-in capital                         76,059       76,056
       Accumulated deficit                               (99,433)     (95,909)
       Accumulated other comprehensive loss:
               Foreign currency translation
                 adjustment                               (4,162)      (4,157)
                                                        --------     --------
                                                         (27,436)     (23,911)
        Treasury stock, at cost                           (1,938)      (1,938)
                                                        --------     --------
               Total stockholders' deficit               (29,374)     (25,849)
                                                        --------     --------
               Total liabilities and stockholders'
                 deficit                                $ 16,492       17,833
                                                        ========     ========

          See accompanying notes to consolidated financial statements.


                                  Page 2 of 16
<PAGE>

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

                                                            Six Months Ended
                                                         June 30,      June 30,
                                                           2002          2001
                                                         --------      --------

Sales                                                    $ 11,236        15,957
Cost of sales                                               8,241        11,618
                                                         --------      --------
     Gross profit                                           2,995         4,339
                                                         --------      --------

Selling, general and administrative expenses                3,628         5,362
Research and development expenses                           1,387         2,621
Impairment loss                                               800            --
                                                         --------      --------
        Total expenses                                      5,815         7,983
                                                         --------      --------

        Operating loss                                     (2,820)       (3,644)

Interest expense                                           (1,178)       (2,295)
Interest income                                                 3            25
Gain on sale of investment in joint venture                   450            --
Other income (expense), net                                    30            43
                                                         --------      --------

        Loss before income taxes and
          minority interest                                (3,515)       (5,871)

Income tax expense                                             (9)          (17)
Minority interest                                              --           144
                                                         --------      --------

Net loss                                                 $ (3,524)       (5,744)
                                                         ========      ========
Other comprehensive loss, net of tax:
        Foreign currency translation
          adjustments                                          (5)          (20)
                                                         --------      --------

Comprehensive loss                                       $ (3,529)       (5,764)
                                                         ========      ========

Per share data:

Basic per share amounts:

        Net loss per share of common stock               $  (0.35)        (0.58)
                                                         ========      ========

        Weighted average shares outstanding                 9,986         9,872
                                                         ========      ========

Diluted per share amounts:

        Net loss per share of common stock               $  (0.35)        (0.58)
                                                         ========      ========

        Weighted average shares outstanding                 9,986         9,872
                                                         ========      ========

     See accompanying notes to unaudited consolidated financial statements.


                                  Page 3 of 16
<PAGE>

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

                                                            Three Months Ended
                                                          June 30,      June 30,
                                                            2002          2001
                                                          --------      -------

Sales                                                     $ 6,492         8,915
Cost of sales                                               4,375         5,990
                                                          -------       -------
     Gross profit                                           2,117         2,925
                                                          -------       -------

Selling, general and administrative
  expenses                                                  1,761         2,784
Research and development expenses                             627         1,434
Impairment loss                                               800            --
                                                          -------       -------
        Total expenses                                      3,188         4,218
                                                          -------       -------

        Operating loss                                     (1,071)       (1,293)

Interest expense                                             (304)       (1,292)
Interest income                                                 1             9
Gain on sale of investment in joint venture                   450            --
Other income (expense), net                                    33            15
                                                          -------       -------

        Loss before income taxes and
          minority interest                                  (891)       (2,561)

Income tax benefit (expense)                                    4            (2)
Minority interest                                              --            52
                                                          -------       -------

        Net loss                                          $  (887)       (2,511)
                                                          =======       =======
Other comprehensive loss, net of tax:
        Foreign currency translation
          adjustments                                         (26)          (23)
                                                          -------       -------

Comprehensive loss                                        $  (913)      $(2,534)
                                                          =======       =======

Per share data:

Basic per share amounts:

        Net loss per share of common stock                $ (0.09)      $ (0.25)
                                                          =======       =======

        Weighted average shares outstanding                 9,999         9,900
                                                          =======       =======

Diluted per share amounts:

        Net loss per share of common stock                $ (0.09)      $ (0.25)
                                                          =======       =======

        Weighted average shares outstanding                 9,999         9,900
                                                          =======       =======

     See accompanying notes to unaudited consolidated financial statements.


                                  Page 4 of 16
<PAGE>

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

                                                              Six Months Ended
                                                             June 30,   June 30,
                                                               2002       2001
                                                             --------   -------
Cash flows from operating activities:
     Net loss                                                $(3,524)   $(5,744)
     Adjustments to reconcile net loss to net cash
      used in operating activities:
        Non-cash financing expenses                               --        123
        Depreciation and amortization                            342      1,067
        Amortization of debt discounts                             3          3
        Impairment loss                                          800         --
        Minority interest                                         --       (144)
        Gain on sale of investment in joint venture             (450)        --
      Changes in operating assets and liabilities:
        Accounts receivable                                   (2,959)     1,327
        Inventories                                            1,914      1,071
        Prepaid expenses                                         343         (8)
        Other assets                                             133        405
        Accounts payable, accrued expenses and
          other liabilities                                     (193)      (131)
                                                             -------    -------
          Net cash used in operating activities               (3,591)    (2,031)
                                                             -------    -------

Cash flows from investing activities:
        Capital expenditures, net                                (19)      (150)
                                                             -------    -------
          Net cash used in investing activities                  (19)      (150)
                                                             -------    -------

Cash flows from financing activities:
        Proceeds from senior debt                              2,826        824
        Repayments of senior debt                                 --       (400)
        Proceeds from exercised options and warrants               4         30
        Repayments of short term loans                            (2)        12
                                                             -------    -------
          Net cash provided by financing activities            2,828        466
                                                             -------    -------

     Effect of exchange rate changes on cash                     (34)         3
                                                             -------    -------

     Decrease in cash and cash equivalents                      (816)    (1,712)

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

     Cash and equivalents - end of the period                $   388    $   654
                                                             =======    =======

     Supplemental cash flow disclosure:

        Cash paid for interest expense                       $     6    $   899
                                                             =======    =======

        Cash paid for income taxes                           $    27    $    99
                                                             =======    =======

     See accompanying notes to unaudited consolidated financial statements.


                                  Page 5 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, 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 second  quarter or the first six
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  method) or market.  The  composition of inventories at the end of the
respective periods is as follows:

                                              June 30, 2002   December 31, 2001
                                              -------------   -----------------
                                                      (in thousands)
      Parts and components                        $2,142           $3,217
      Work-in-process                                383              192
      Finished goods                                 767            1,797
                                                  ------           ------
                                                  $3,292           $5,206
                                                  ======           ======

Note 3: Sale of Investment in Joint Venture

      In April 2002,  the  Company  sold its 50%  interest  in Woo Shin  Electro
Systems  Co., a Korean  company,  for  $450,000  to its joint  venture  partner.
Payment was made by the forgiveness of  commissions,  totaling  $450,000,  which
were  owed to its  sales  representation  company  owned  by our  joint  venture
partner,  with respect to sales made by Woo Shin  Electro  Systems Co. in Korea.
The investment in the joint venture had previously  been written down to zero as
the Company's share of the losses of the joint venture  exceeded its investment.
Therefore,  the  transaction  was  reflected as a $450,000  reduction in accrued
commissions and a non-cash gain on sale of investment in joint venture.

Note 4: Senior Debt

      On June 30, 2002, the Company's debt to its senior lender was $24,921,000.
During  the six and three  months  ended June 30,  2002,  the  Company  borrowed
$2,826,000 and $1,145,000,  respectively.  The current agreement with the senior
lender,  as  amended  in March  and May 2002 and  described  below,  expires  on
December  31,  2002,  at  which  time  all  of  the  senior  debt  becomes  due.
Accordingly,  all senior debt is classified  as a current  liability at June 30,
2002.


                                  Page 6 of 16
<PAGE>

      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  and  subsequently  increased  in May  2002 to
$2,250,000.  The  agreement  allows the  Company to draw  monies  subject to the
senior  lender's  receipt and  approval  of a weekly  disbursement  budget.  Any
advances  under  this  agreement  are  subject to the  discretion  of the senior
lender. Obligations under the new term loan bear interest at 12%, which interest
shall accrue monthly and be added 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 until
such time as the senior lender in its sole discretion  notifies the Company that
interest  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.  As of June 30, 2002, the Company has borrowed  $2,250,000,
the maximum principal amount.

Note 5: Subordinated Notes

      As  of  June  30,  2002,  the  Company  has   outstanding   $6,144,000  of
subordinated  notes and  $1,820,000  of  accrued  interest,  which  were due and
payable,  but which the Company did not have the  resources to pay. In addition,
the senior  lender  had  precluded  the  Company  from  making  payments  on the
subordinated debt (note 4).

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 $397,000 in amortization for
the six months ended June 30, 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  completed  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  determined  that there was no impairment  loss resulting from
the transitional impairment test.

      At December 31, 2001, the Company's goodwill was $3,761,000,  all of which
related to its Signal  division.  The Company has been attempting to sell one or
more of its  divisions  and,  during  the second  quarter  of 2002,  has been in
discussions  in  respect  to the  sale of the  Signal  division.  Based on those
discussions  the Company has  determined  that goodwill has been impaired and it
estimated  that the amount of the  impairment is $800,000.  This amount has been
charged to  operations  in the quarter  ended June 30,  2002.  Furthermore,  the
Company cannot give assurance that the negotiations  relating to the sale of the
Signal  division  will  result  in a sale  of  this  division  or  that  further
writedowns will not be necessary.

      The  following  schedule  presents  proforma net loss,  basic net loss per
share  and  diluted  net loss per  share,  exclusive  of  goodwill  amortization
expense,  for the six months ended June 30, 2001 and the three months ended June
30, 2001, had the standard been adopted for those periods.


                                  Page 7 of 16
<PAGE>

                                           Six Months Ended   Three Months Ended
                                            June 30, 2001       June 30, 2001
                                           ----------------   ------------------

Reported net loss ........................     $  (5,744)        $  (2,511)
   Add back: Goodwill amortization .......           397               198
                                               ---------         ---------

Adjusted net loss ........................     $  (5,347)        $  (2,313)
                                               =========         =========

Basic net loss per share:
   Reported net loss .....................     $   (0.58)        $   (0.25)
   Goodwill amortization .................          0.04              0.02
                                               ---------         ---------

Adjusted net loss per share ..............     $   (0.54)        $   (0.23)
                                               =========         =========

Diluted net loss per share:
   Reported net loss .....................     $   (0.58)        $   (0.25)
   Goodwill amortization .................          0.04              0.02
                                               ---------         ---------

Adjusted diluted net loss per share ......     $   (0.54)        $   (0.23)
                                               =========         =========

      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.

      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.


                                  Page 8 of 16
<PAGE>

<TABLE>
<CAPTION>
                                    Six Months Ended                     Three Months Ended
                            June 30, 2002      June 30, 2001      June 30, 2002     June 30, 2001
                            -------------      -------------      -------------     -------------
<S>                         <C>                <C>                <C>                <C>
Sales:
   Line                     $  4,232,000       $  7,316,000       $  2,762,000       $  3,468,000
   OSS                         4,236,000          5,478,000          2,191,000          4,113,000
   Signal                      2,412,000          2,828,000          1,336,000          1,176,000
                            ------------       ------------       ------------       ------------
                            $ 10,880,000       $ 15,622,000       $  6,289,000       $  8,757,000
                            ============       ============       ============       ============

Segment profit (loss):
   Line                     $   (706,000)      $    753,000       $    (46,000)      $    217,000
   OSS                           (48,000)        (2,684,000)           231,000           (370,000)
   Signal                        444,000            410,000            337,000             65,000
                            ------------       ------------       ------------       ------------
                            $   (310,000)      $ (1,521,000}      $    522,000       $    (88,000)
                            ============       ============       ============       ============
</TABLE>

The following table reconciles segment totals to consolidated totals:

<TABLE>
<CAPTION>
                                            Six Months Ended                      Three Months Ended
                                     June 30, 2002      June 30, 2001     June 30, 2002      June 30, 2001
                                     -------------      -------------     -------------      -------------
<S>                                  <C>                <C>                <C>                <C>
Sales:
   Total revenue for reportable
     segments                        $ 10,880,000       $ 15,622,000       $  6,289,000       $  8,757,000
Other revenue                             356,000            335,000            203,000            158,000
                                     ------------       ------------       ------------       ------------
Consolidated total revenue           $ 11,236,000       $ 15,957,000       $  6,492,000       $  8,915,000
                                     ============       ============       ============       ============
Operating loss:
   Total segment profit (loss)
     for reportable segments         $   (310,000)      $ (1,521,000)      $    522,000       $    (88,000)
   Impairment loss                       (800,000)                --           (800,000)                --
   Corporate and unallocated           (1,710,000)        (2,123,000)          (793,000)        (1,205,000)
                                     ------------       ------------       ------------       ------------
   Consolidated total
     operating loss                  $ (2,820,000)      $ (3,644,000)      $ (1,071,000)      $ (1,293,000)
                                     ============       ============       ============       ============
</TABLE>


                                  Page 9 of 16
<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:

                                            Six Months Ended  Three Months Ended
                                                June 30,          June 30,
                                            ----------------  ------------------
                                              2002     2001     2002     2001
                                              ----     ----     ----     ----
Sales                                         100%     100%     100%     100%
Cost of sales                                  73%      73%      67%      67%
Gross profit                                   27%      27%      33%      33%
Selling, general and administrative
  expenses                                     32%      34%      27%      31%
Research and development expenses              12%      16%      10%      16%
Impairment loss                                 7%      --       12%      --
     Operating loss                           (25%)    (23%)    (16%)    (14%)
Interest expense - net                        (10%)    (14%)     (5%)    (14%)
Gain on sale of joint venture                   4%      --        7%      --
Other                                           0%       0%       0%       0%
Minority interest                              --        1%      --        0%
Net loss                                      (31%)    (36%)    (14%)    (28%)

The Company's sales by product line for the periods ended June 30, 2002 and 2001
are as follows:

                                            Six Months Ended June 30,
                                    ---------------------------------------
                                                     $(000)
                                         2002                     2001
                                    --------------          ---------------
Line connection/protection
  equipment                         $ 4,232     38%         $ 7,316      46%
OSS equipment                         4,236     38%           5,478      34%
Signal Processing                     2,412     21%           2,828      18%
Other                                   356      3%             335       2%
                                    --------------          ---------------
                                    $11,236    100%         $15,957     100%
                                    ==============          ===============

                                          Three Months Ended June 30,
                                    ---------------------------------------
                                                     $(000)
                                         2002                     2001
                                    --------------          ---------------
Line connection/protection
  equipment                         $ 2,762     42%         $ 3,468      39%
OSS equipment                         2,191     34%           4,113      46%
Signal Processing                     1,336     21%           1,176      13%
Other                                   203      3%             158       2%
                                    --------------          ---------------
                                    $ 6,492    100%         $ 8,915     100%
                                    ==============          ===============


                                  Page 10 of 16
<PAGE>

Results of Operations

      Our sales for the six  months  ended  June 30,  2002  compared  to the six
months ended June 30, 2001  decreased by $4,721,000  (30%) from  $15,957,000  in
2001 to  $11,236,000  in 2002.  Sales for the  quarter  ended  June 30,  2002 of
$6,492,000  decreased by $2,423,000 (27%) compared to $8,915,000 for the quarter
ended June 30, 2001.  The decrease in sales for the six months is  attributed to
all three business units and for the three month period  reflects lower level of
sales from Line test/protection equipment and OSS equipment divisions.

      Line sales for the six months ended June 30,  decreased from $7,316,000 to
$4,232,000,  or $3,084,000  (42%) from 2001 to 2002.  Sales for the three months
ended June 30 decreased by $706,000 (20%) from  $3,468,000 in 2001 to $2,762,000
in 2002.  The  decrease  for both the six months and three months ended June 30,
2002 reflects  reduced sales  primarily due to reduced sales volume to customers
in the United  Kingdom  and by the general  slowdown  in the  telecommunications
industry.

      OSS sales for six months ended June 30, 2002 were  $4,236,000  compared to
the six months  ended June 30,  2001 of  $5,478,000,  a decrease  of  $1,242,000
(23%).  OSS sales for the  three  months  ended  June 30,  2002 were  $2,191,000
compared to the three  months ended June 30, 2001 of  $4,113,000,  a decrease of
$1,922,000 (47%). The decreased sales during the six and three months ended June
30, 2002  resulted from the inability to secure new orders and from lower levels
of  contract  completion  compared  to the  similar  period of the  prior  year.
Additionally, as a result of our change to the equity method and subsequent sale
of our interest in our Korean joint  venture,  we did not  recognize any revenue
from OSS sales in Korea during 2002,  whereas  during the second quarter and six
months of 2001,  our share of the revenue  generated  by the Korean  venture was
$469,000 and $684,000 respectively.

      Signal  sales for the six  months  ended  June 30,  2002  were  $2,412,000
compared  to the six months  ended June 30,  2001 of  2,828,000,  a decrease  of
$416,000  (15%).  Sales for the quarter  ended June 30,  2002  compared to 2001,
increased  $160,000 (14%) from  $1,176,000 to $1,336,000.  The decrease in sales
for the six months was primarily due to a lower level of contract  sales,  while
the increased level of sales in the second quarter  resulted from an increase in
the normal order rate.

      Gross  margin for the six months  ended June 30, 2002 was 27%  compared to
27% for the six months ended June 30, 2001.  Gross margin for the quarter  ended
June 30, 2002 was 33% compared to 33% for the quarter ended June 30, 2001.

      Selling, general and administrative expenses decreased by $1,734,000 (32%)
from $5,362,000 to $3,628,000 for the six months ended June 30, 2002 compared to
2001.  For the quarter  ended June 30, 2002 selling  general and  administrative
expenses  decreased  by  $1,023,000  (37%)  from  2001.  This  decrease  relates
primarily to reduced salaries and benefits,  consulting services and commissions
reflecting our current level of business.

      Research and  development  expenses  decreased by $1,234,000  (47%) and by
$807,000  (56%)  for the six and  three  months  ended  June 30,  2002  from the
comparable  periods in 2001. This decrease in research and development  expenses
for both six and three  months  resulted  from our  efforts  to reduce  expenses
primarily related to the OSS business.


                                  Page 11 of 16
<PAGE>

      At December 31, 2001, our goodwill was $3,761,000, all of which related to
our Signal division.  We have determined that this goodwill has been impaired as
of June 30, 2002.  We have been  attempting to sell one or more of our divisions
and during the second quarter of 2002 we have been in  discussions  with respect
to the sale of the Signal division.  Based on those discussions we estimate that
the impairment loss is approximately  $800,000.  This amount has been charged to
operations  in the  quarter  ended June 30,  2002.  Furthermore,  we cannot give
assurance that the negotiations relating to the sale of the Signal division will
result  in a sale of  this  division  or that  further  writedowns  will  not be
necessary.

      As a result of the above,  for the six months ended June 30, 2002 compared
to 2001, we had an operating loss of $2,820,000 in 2002 versus an operating loss
of $3,644,000 in 2001.  We had an operating  loss of $1,071,000  for the quarter
ended June 30, 2002 as  compared  to an  operating  loss of  $1,293,000  for the
quarter ended June 30, 2001.

      Interest  expense for the six months ended June 30, 2002  compared to June
30, 2001 decreased by $1,117,000  (49%) from $2,295,000 in 2001 to $1,178,000 in
2002.  Interest expense for the three-month period ending June 30, 2002 compared
to the same three months of 2001, decreased by $988,000 (76%) from $1,292,000 in
2001 to $304,000 in 2002. The reduced level of interest  expense is attributable
to our amended  agreement with our senior lender whereby the old term loan bears
no interest  during the three and six months ended June 30, 2002. (See Note 4 of
notes to unaudited financial statements).

      In April 2002, we sold our 50% interest in Woo Shin Electro  Systems Co, a
Korean company,  for $450,000 to our joint venture partner.  Payment was made by
the forgiveness of commissions,  totaling  $450,000,  which we owed to our sales
representation company owned by our joint venture partner, with respect to sales
made by Woo Shin Electro Systems Co. in Korea.

      As a result of the foregoing, we incurred a net loss of $3,524,000,  $0.35
per share (basic and diluted),  for the six months ended June 30, 2002, compared
with a net loss of $5,744,000,  $0.58 per share (basic and diluted), for the six
months  ended June 30,  2001.  The net loss for the three  months ended June 30,
2002 was $887,000, $0.09 per share (basic and diluted), compared with a net loss
for the three months ended June 30, 2001 of  $2,511,000,  $0.25 per share (basic
and diluted).

Liquidity and Capital Resources

      At June 30, 2002, we had cash and cash  equivalents  of $388,000  compared
with  $1,204,000 at December 31, 2001. Our working  capital  deficit at June 30,
2002 was  $33,631,000  compared to a working  capital  deficit of $31,236,000 at
December 31, 2001.  The increased  level of senior debt resulted in the increase
in the working capital  deficiency.  During the six months of 2002, the net cash
used by us in operations was $3,591,000.

      As of June 30, 2002,  our debt  includes  $24,921,000  of senior debt that
matures on December 31, 2002,  and $6,144,000 of  subordinated  debt that became
due on  July 3,  2001.  We  were  unable  to pay  the  interest  payment  on the
subordinated notes of approximately  $1,819,000,  which represents interest from
July 2000 through June 30, 2002.  At June 30, 2002,  we did not have  sufficient
resources to pay either the senior lender or the subordinated  lenders and it is
unlikely  that we can  generate  such cash from our  operations,  and our senior
lender has precluded us from making payments on the subordinated debt.


                                  Page 12 of 16
<PAGE>

      On March 1, 2002, and as amended on May 10, 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  $2,250,000.  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%. Secondly, the agreement 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 interest shall be payable.  Both
the  new and old  term  loans  are due 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 $2,250,000  advance from our senior lender
was made at the  discretion  of the senior  lender.  Since we have  borrowed the
maximum,  our senior lender has no obligation to fund future  operations.  If we
require  additional  funds and 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 of 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  June  30,  2002,  we  had  remaining  outstanding  $385,000  of 6%
Debentures  which  became due on July 2, 2002.  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 of $23,000
which was due on each of July 1, 2001 and  2002,  and we were  unable to pay the
principal of $385,000 which was due on July 2, 2002. Additionally,  we have been
notified by the trustee that the non-payment caused an event of default.

      As of June 30, 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
has denied the holder's motion for a summary judgment.

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;

      o     we are having and we may  continue to have  difficulty  in obtaining
            new business from either existing customers or new customers; and

      o     we may have difficulty selling one or more of our divisions on terms
            which we consider reasonable; 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.


                                  Page 13 of 16
<PAGE>

      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 $133,000 was due at June 30, 2002 and
an  additional  $78,000  will  become due during the  remainder  of 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  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 a significant  amount,  if any, of working  capital from
such a sale.

      During 2001 and 2002, we took 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 was 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,
this customer  continues to place orders for OSS  maintenance  and modest orders
for line test  products.  The  substantially  reduced level of purchases by this
customer  has had an  adverse  effect  upon our  operations.  In  addition,  our
auditors included in their report an explanatory  paragraph about our ability to
continue as a going concern.

      In July 2002,  we were  notified  by the  American  Stock  Exchange of its
intention to delist our common stock based on our failure to meet the Exchange's
minimum  requirements  for  continued  listing.  We have  requested  a  hearing;
however,  no assurance can be given that the hearing will change the view of the
Exchange.


                                  Page 14 of 16
<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 15 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 August 14, 2002               By /s/ William V. Carney
                                             -----------------------------------
                                             William V. Carney
                                             Chairman of the Board
                                             and Chief Executive Officer

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

             CERTIFICATION OF CHIEF EXECUTIVE AND FINANCIAL OFFICERS

      The undersigned chief executive officer and chief financial officer of the
Registrant  do hereby  certify  that this  Quarterly  Report on Form 10-Q  fully
complies with the  requirements  of Section 13(a) or 15(d) of the Securities Act
of 1934, as amended,  and that the  information  contained in this report fairly
presents,  in all material  respects,  the  financial  condition  and results of
operations  of the  Registrant  at the dates and for the  periods  shown in such
report.

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

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


                                 Page 16 of 16