The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109 "ACCOUNTING FOR INCOME TAXES". Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Because of the uncertainty as to their future realizability, net deferred tax assets, consisting primarily of net operating loss carry-forwards, have been fully reserved for. Accordingly, no income tax benefit for the net operating loss has been recorded in the accompanying consolidated financial statements.

Utilization of net operating losses generated through March 31, 2004 may be limited due to changes in ownership that have occurred.

Accrued expenses representing accrued general and administrative expenditures were $694,627 at March 31, 2004. At March 31, 2004 unpaid invoices for expenses for research and development expenses incurred with Lucent Technologies, Inc. totalling $170,000, included in accrued expenses and $480,603 were included in accounts payable.

In March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net pursuant to a Joint Venture Agreement (the "Agreement") for $20,000. The agreement stipulates for mPhase's joint venture partner, AlphaStar International, Inc., ("Alphastar"), to provide mPhaseTelevision.Net right of first transmission for its transmissions including MPEG-2 digital satellite television. In addition, in March 2000, mPhase loaned the joint venture $1,000,000 at 8% interest per annum. The loan is repayable to the Company from equity infusions to the subsidiary, no later than such time that mPhaseTelevision.Net qualifies for a NASDAQ Small Cap Market Listing. During April 2000, the Company acquired an additional 6.5% interest in mPhaseTelevision.Net for $1,500,000 and presently the Company owns 56.5% of this venture.

10.         DEFERRED REVENUE

Deferred revenue as of March 31, 2004 consists of customer billing in excess of costs totaling $156,180 on the POTS product line whereby completion of customer acceptance will be attained when original splitters are upgraded to the next generation splitters and deposits of $58,000 from Beta customers on the Traverser™ product line orders to be delivered when it reaches commercial production.

ITEM 2.     MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant factors, which have affected mPhase's financial position and should be read in conjunction with the accompanying financial statements, financial data, and the related notes.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995:

Some of the statements contained in or incorporated by reference in this Form 10-Q discuss the Company's plans and strategies for its business or state other forward-looking statements, as this term is defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "plan," "intend," "should," "seek," "will," and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. These forward-looking statements include, among others, statements concerning the Company's expectations regarding its working capital requirements, gross margin, results of operations, business, growth prospects, competition and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. Any forward-looking statements contained in this Quarterly Report on Form 10-Q are subject to risks and uncertainties that could cause actual results to differ materially from those results expressed in or implied by the statements contained herein.

RESULTS OF OPERATIONS

OVERVIEW

mPhase, a New Jersey corporation, founded in 1996 is a publicly-held company with over 11,000 shareholders and approximately 85 million shares of common stock outstanding. The Company's common stock is traded on the Over the Counter Bulletin Board under the ticker symbol XDSL. We are headquartered in Norwalk, Connecticut with offices in Little Falls, NJ and New York, N.Y. mPhase shares common office space

mPhase develops, markets and sells a line of innovative DSL ("digital subscriber line")-based broadband telecommunications equipment. Our flagship product line includes two systems enabling the delivery of television over DSL by telephone service providers. Both of these products facilitate telephone companies becoming full service communications providers by enabling the simultaneous delivery of digital broadcast television, high speed data and voice services over the existing telephone line infrastructure. mPhase has developed its flagship line of products with a specific target in mind-telephone companies in parts of the world where access to multichannel television is limited. To that end, mPhase's primary goal is to develop cost-effective TV over DSL solutions that support proven, revenue-generating services (i.e., broadcast television) rather than developing robust, feature-intensive and expensive platforms intended to compete with cable companies such as those that exist in the US.

mPhase has established a worldwide distribution agreement with Corning Cable Systems for the sale of this product.

NANOTECHNOLOGY: During the quarter ended March 31, 2004, the Company entered into the new field of Nanotechnology for the development of micro power source arrays for battery applications.  Such technology is currently the subject of $1.2 million development agreement with Lucent Technolgies Inc.  The first product line to be developed is targeted for military applications and is not expected to be available for sale for a period of approximately 18 months.

mPhase was organized on October 2, 1996. On February 17, 1997, the Company acquired Tecma Laboratories, Inc., a public corporation in a reverse merger transaction. This resulted in the Company's stock becoming publicly traded on the NASDAQ Over-the-Counter Bulletin Board. On June 25, 1998, the Company acquired Microphase Telecommunications, Inc. in a stock for stock exchange, whose principal assets included patents and patent applications utilized in the Company's Traverser™ product. On March 2, 2000, mPhase acquired an interest in mPhaseTelevision.Net, Inc., a joint venture organized to provide digital television programming content to service providers deploying television over DSL.

From mPhase's inception, the operating activities related primarily to research and development, establishing third-party manufacturing and distribution relationships and developing product brand recognition among telecommunications service providers. These activities included establishing trials and field tests of the

Revenues. To date, all material revenues have been generated from sales of the POTS Splitter Shelves and other DSL component products to a small number of telecommunications companies. mPhase believes that future revenues are difficult to predict because of the length and variability of the commercial roll-out of  its broadcast television platform to various telecommunications service providers. Since the Company believes that there may be a significant international market for its broadcast television platforms  involving many different countries, with different regulations, certifications and commercial practices than the United States, future revenues are highly subject to the changing variables and uncertainties. Additionally, the recent instability of the telecommunications market evidenced by reduction in capital spending across the whole telecom sector contributes to our difficulty in accurately predicting future revenues.

Cost of revenues. The costs necessary to generate revenues from the sale of POTS Splitter Shelves and other related DSL component products include direct material, labor and manufacturing. mPhase paid these costs to Janifast Ltd., which has facilities in the People's Republic of China and is owned by and managed by certain senior executives of the Company. The cost of revenues also includes certain royalties paid to Microphase Corporation, a privately held corporation organized in 1955, which shares certain common management with the Company. Costs for future production of the Traverser™ product will consist primarily of payments to manufacturers to acquire the necessary components and assemble the products and future patent royalties payable to Georgia Tech Research Corporation, ("GTRC").

General and administrative. Selling, general and administrative expenses consist primarily of salaries and related expenses for personnel engaged in direct marketing of the Traverser™, the POTS Splitter Shelves and other DSL component products, as well as support functions including executive, legal and accounting personnel. Certain administrative activities are outsourced on a monthly fee basis to Microphase Corporation. Finally, mPhase leases the principal office from Microphase Corporation.

Non-Cash Compensation Charge

The Company makes extensive use of stock options and warrants as a form of compensation to employees, directors and outside consultants. From inception (October 2, 1996) through March 31, 2004 the Company has incurred cumulative (a) development stage losses and has an accumulated deficit of $112,916,268 and (b) negative cash flow from operations of $46,280,631. The auditors report for the fiscal year ended June 30, 2003 includes the statement that "there is substantial doubt of the Company's ability to continue as a going concern".  The Company raised approximately  $3.8 million during the nine month period ended March 31, 2004 and management estimates that the Company needs to raise an additional $4 million during the next 12 months to continue operations. As of March 31, 2004, the Company had a negative net worth of $2,047,240 down from a negative net worth of $3,228,826 as a result of the raising of proceeds from private placements plus conversions of debt to equity offset by continuing net losses incurred after June 30, 2003.

In fiscal 2001, the Company had anticipated that the sales of its component products would be able to supplement the underwriting of the completion of our flagship product, the Traverser™. In fiscal 2002 and 2003 these sales declined with the overall decline of DSL deployments and spending in the telephone industry. During the first half of the fiscal year 2004, POTS Splitter revenues increased but have declined during the third quarter ended March 30, 2004. The Company believes its new IPOTS product will capture some of the existing DSL deployments, providing increases in revenue in the second half of fiscal 2005. Until such time such revenues are realized, the Company intends on maintaining its reduced cost structure to minimize its losses, which management believes will permit the Company to sustain its development process and ultimately achieve profitability.

THREE MONTHS ENDED MARCH 31, 2004 VS. MARCH 31, 2003

REVENUE

Total revenues were $555,339 for the three months ended March 31, 2004 compared to $209,754 for the three months ended March 31, 2003. The increase was primarily attributable to continued slow sales of the Company's POTS Splitter product line, caused by the continuing downturn in the telecommunications market, including among customers that order component products from the Company. The Company continues to believe that its line of POTS Splitter products is positioned to be competitively priced with high reliability and connectivity, and as such has the potential to be a significant part of DSL deployment worldwide. The Company still cannot say when the demand for telecommunication equipment will resume.

COST OF REVENUES

Cost of sales were $483,964 for the three months ended March 31, 2004 as compared to $205,231 in the prior period, representing 87.2% of gross revenues for the quarter ended March 31, 2004 and 98% for the quarter ended March 31, 2003, respectively. Our margins have contracted dramatically over the past two years as spending among the telecommunications providers has contracted, coupled with downward pressures related to the supply and demand of telecommunications products, and the current quarters improvement represents a slight improvement of our purchase price for materials used in our products.

RESEARCH AND DEVELOPMENT

Research and development expenses were $1,403,817 for the three months ended March 31, 2004 as compared to $905,554 during the comparable period in 2003 or an increase of $498,263 from the comparable period in 2003. Such expenditures include $0 incurred with GTRC for the three months ended March 31, 2004 as compared to $0 during the comparable quarter in 2003, which was more than offset by $596,675 incurred in the current quarter ended March 31, 2004, with Lucent Technologies, Inc., which consisted of $396,675 incurred on the development of the Broadcast Television Plus product for use with Lucent's Stinger® DSL product, $200,000 incurred on the cost with respect to the development of micro power source array batteries using Nanotechnology. In addition, the balance of $807,142 of additional expenses was incurred with Microphase and other strategic vendors for the three months ended March 31, 2004 when compared to $405,554 during the comparable quarter in 2003, and thus resulted in a decrease of $401,588 of such research costs to other than GTRC and Lucent. The elimination in research expenditures incurred with GTRC is due to the Company's transition from its legacy Traverser™ product to its TV+ platform in 2004.

Research expenditures incurred with Microphase were related to the continuing development of the Company's DSL component products, including the Company's line of POTS Splitters and Microfilters and the Company's newest products, the iPOTS™ and the mPhase Stretch. We believe the mPhase iPOTS™ offers a much needed solution for the DSL industry; the iPOTS™ enables telcos to remotely and cost-effectively perform loop management and maintenance including line testing, qualification and troubleshooting. Prior to the introduction of the iPOTS™, loop management could not be remotely performed through a conventional POTS Splitter without the deployment of personnel to the field. The unique (patent pending) iPOTS™ circuit allows most test heads to perform both narrow and wideband testing of the local loop through the central office POTS Splitter without having to physically disconnect the POTS Splitter, thereby

GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $803,411 for the three months ending March 31, 2004 up from $543,627 or an increase of $259,784 for the comparable period in 2003. The increase in the selling, general and administrative costs included a decrease of non-cash charges relating to the issuance of common stock and options to consultants, which totaled $36,900 for the three months ended March 31, 2004 as compared to $88,282 for the three months ended March 31, 2003 or an increase of $51,382 of such charges. The increase of $311,166 in selling, general and administrative costs were the aggregate of additions of several new employees in connection with development of the Company's mPhase TV+ solution and entry into the area of Nanotechnology.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $26,801 for the three months ending March 31, 2004, down from $128,725, or a decrease of $101,924 from the comparable period in 2003. The decrease is a result of the Company's reduced outlay for capital expenditures in its two most recent fiscal years. We do not expect such downward trends to continue but such depreciation and amortization expense should remain at the current levels until the Company commences deployment of its Television over DSL platforms. We expect to increase capital expenditures in connecting with the deployment of equipment at test sites with various telecommunications service providers globally as development of our TV+ product progresses.

NET LOSS

The Company recorded a net loss of $2,334,396 for the three months ended March 31, 2004 as compared to a loss of $1,586,813 for the three months ended March 31, 2003. This represents a loss per common share of $.03 for the three month period ended March 31, 2004 as compared to a loss per common share of $.02 for the three months ending March 31, 2003; based upon weighted average common shares outstanding of 81,564,405 and 65,596,810 during the periods end March 31, 2004 and 2003, respectively.

The Company believes the initial major deployments and the resultant revenues of its Flagship product, the TV+ platform, are not expected until the second quarter of fiscal year 2005, which along with any upturn of spending in the telephone industry will also increase sales and improve the Company's margins and provide the Company with the opportunities to attain profitability.

NINE MONTHS ENDED MARCH 31, 2004 VS. MARCH 31, 2003

REVENUE

Total revenues were $4,335,476 for the nine months ended March 31, 2004 compared to $981,591 for the nine months ended March 31, 2003. The increase was attributable primarily to significantly increasing sales of the Company's POTS Splitter product line in the first quarter of fiscal year 2004, followed by more modest increases in sales during the second and third quarter of fiscal year 2004, as compared to such quarters in fiscal year 2003.  There remains continued volatility in capital spending in the telecommunications market, including customers that order component products from the Company. The Company continues to believe that its line of POTS Splitter products is positioned to be competitively priced with high reliability and connectivity, and as such has the potential to be a significant part of DSL deployment worldwide. The Company cannot predict future demand for such product line.

COST OF REVENUES

Cost of sales was $3,878,239 for the nine months ended March 31, 2004 as compared to $949,261 in the prior period, represented as a result of a substantial increase in POTS Splitter sales and constituted 89.5% of gross revenues, for the nine months ended March 31, 2004 and 2003, respectively. The margins have increased slightly during the current period but not dramatically as spending among the telecommunications providers contracted during the fiscal years ended June 30, 2003 and

RESEARCH AND DEVELOPMENT

Research and development expenses were $2,858,715 for the nine months ended March 31, 2004 as compared to $2,461,696 during the comparable period in 2003; or an increase of $397,019 from the comparable period in 2003. Such expenditures include $0 incurred with GTRC for the nine months ended March 31, 2004 as compared to $100,000 during the comparable period in 2003. The Company incurred all of its research and development expenses with vendors including Lucent, Microphase and other strategic vendors for the nine months ended March 31, 2004 which totaled $2,858,715 as compared to $2,361,696 incurred with vendors other than GTRC during the comparable period in 2003.

Such decreases are the result primarily of elimination of further development of the TRAVERSER DVDDS product by GTRC as the Company focuses its efforts on research and development and expenditures associated therewith on the TV+ product with Lucent, which has been comparatively, to date, less expense to develop.

The Company does, however, expect an increase in research and development costs beginning in March, 2004. In order to broaden and diversify its current line of business into additional high growth technology areas, the Company has entered into a Development Agreement, effective February 3, 2004, with the Bell labs division of Lucent Technologies, Inc. to commercialize the use of nano power cell technology. Under the terms of the $1.2 million contract, Lucent/ Bell Labs will develop for mPhase micro-power source arrays fabricated using nanotextured, superhydrophobic materials. This new business arrangement with Lucent Bell Labs will give mPhase the opportunity to develop and offer breakthrough battery technology applications, initially to government market segments including defense and homeland security, and ultimately to the commercial market. The initial applications for the nano power cell technology will address the need to supply emergency and reserved power to a wide range of electronic devices for the defense department.

Research expenditures incurred with Microphase were related to the continuing development of the company's DSL component products, including the company's line of pots splitters and microfilters and the company's newest products, the ipots(tm) and the mphase stretch. We believe the mphase ipots(tm) offers a much-needed solution for the DSL industry; the ipots(tm) enables telcos to remotely and cost-effectively perform loop management and maintenance including line testing, qualification and troubleshooting. Prior to the introduction of the ipots(tm), loop management could not be remotely performed through a conventional pots splitter without dispatching personnel to the field. The unique (patent pending) ipots(tm) circuit allows most test heads to perform both narrow and wideband testing of the local loop through the central office pots splitter without having to physically disconnect the pots splitter, thereby eliminating the need to dispatch personnel and a truckroll. The Company anticipates future demand for this product, as it significantly reduces the cost of deploying and maintaining DSL services.

The changes in Research and Development expenses for the nine month period ended March 31, 2004 as compared to the nine month period ended March 31, 2003 included the following significant items:

1. A reduction of expenses with GTRC of $100,000.

2. An increase of charges from Lucent Technologies of $839,852

3. A decrease of depreciation related to research and development of $187,091 from $659,767 to $472,676.

4. A decrease of expenses with Microphase and other strategic vendors of $255,742

Charges from Lucent Technologies Inc. totaled $1,508,602 for the nine months ended March 31, 2004 as compared to $688,750 for the same period ended March 31, 2003.  Such charges consisted of $1,308,602 for development of the TV+ product and $200,000 incurred with respect to the Company's new Nanotechnology product line.

The elements attributing to the decrease in other research and development expenses included a decrease in the operations of the Company's joint venture, mPhase Television.net. The major costs incurred by the joint venture were payroll expenses attributable to research and development of the Company's transmission capabilities and acquisition of television content. Costs incurred by the joint venture during the nine months ending March 31, 2003 were $31,000 as compared to $0 for the nine months ending March 31, 2004.

Research expenditures incurred with Microphase were related to the continuing development of the Company's DSL component products, including the Company's line of POTS Splitters and Microfilters and the Company's newest products, the iPOTS™ and the mPhase Stretch. We believe the mPhase iPOTS™ offers a much needed solution for the DSL industry; the iPOTS™ enables telcos to remotely and cost-effectively perform loop management and maintenance including line testing, qualification and troubleshooting. Prior to the introduction of the iPOTS™, loop management could not be remotely performed through a conventional POTS Splitter cost effectively. The unique (patent pending) iPOTS™ circuit allows both narrow and wideband testing of the local loop through the central office POTS Splitter by a telephone service provider without having to deploy personnel to the field. The Company anticipates future demand for this product, as it significantly

GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $2,196,052 for the nine months ending March 31, 2004, up from $2,167,805 or an increase of $28,247 from the comparable period in 2003. The increase in the selling, general and administrative costs included an increase of non-cash charges relating to the issuance of common stock and options to consultants, which totalled $344,940 for the nine months ended March 31, 2004 as compared to $572,640 during the comparable period in 2003, or decrease of $227,700 of such charges.  After adjusting for the change in non-cash charges, all other selling, general and administrative expenses rose $255,947, which primarily consist of an increase of $275,000 in administrative and technical sales payroll and payroll charges to approximately $605,000 for the nine months ended March 31, 2004 as compared to the nine months ended March 31, 2003.  We expect sales and travel expenses to continue to grow as the company approaches deployment of its TV + Product.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense was $100,883 for the nine months ending March 31, 2004, down from $388,106, or a decrease of $287,223 from the comparable period in 2003.  The decrease is a result of the Company's reduced outlays for capital expenditures in its two most recent fiscal years.  We do not expect such downward trend to continue but such depreciation and amortization expense should remain at the current reduced levels until the Company commences deployment of its Television over DSL platforms.  We expect to increase capital expenditures in connecting with the deployment of equipment at test sites with various telecommunications  service providers globally as development of our TV+ product progresses.

NET LOSS

The Company recorded a net loss of $4,899,771 for the nine months ended March 31, 2004 as compared to a loss of $5,008,209 for the nine months ended March 31, 2003. This represents a loss per common share of $.07 for the nine month period ended March 31, 2004 as compared to a loss per common share of $.08 for the nine months ending March 31, 2003 based upon weighted average common shares outstanding of 75,312,485 and 64,238,350 during the periods ending March 31, 2004 and 2003, respectively.

Although it is difficult to predict the exact timing of our fist sales, the company believes the initial major deployments and the resultant revenues of its flagship products, the TV+ platform respectively, are not expected until the second quarter of fiscal year 2005, which along with any upturn of spending in the telephone industry, will also increase sales and improve the Company's operating margins and provide the company with the opportunities to attain profitability.

CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION

All revenue included in the accompanying consolidated statements of operations for all periods presented relates to sales of mPhase's POTS Splitter Shelves and DSL component products.

As required, mPhase has adopted the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements", which provides guidelines on applying generally accepted accounting principals to revenue recognition based upon the interpretations and practices of the SEC. The Company recognizes revenue for its POTS Splitter Shelf and Other DSL component products at the time of shipment, at which time, no other significant obligations of the Company exist, other than normal warranty support.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations as incurred in accordance with Statement of Financial Accounting Standards ("SFAS"), No.2, "Accounting for Research and Development Cost."

INCOME TAXES

mPhase accounts for income taxes using the asset and liability method in accordance with SFAS No.109 "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are measured using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized

Utilization of net operating losses generated through June 30, 2003 may be limited due to "changes in control" of our common stock that occurred.

STOCK-BASED COMPENSATION

The Company follows the disclosure-only provisions of SFAS No. 123 "Accounting for Stock-based Compensation". SFAS No 123 encourages, but does not require companies to record compensation expense for stock-based employee compensation at fair value. As permitted, the Company has elected to continue to account for stock-based compensation to employees using the intrinsic value method presented in Accounting Principles Board ("APB") Opinion No.25 "Accounting for Stock Issued to Employees" and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants as if the fair valued-based method, as defined, had been applied. Compensation expense is generally measured on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

The Company accounts for non-employee stock based awards in which goods or services are the consideration received for the equity instruments issued based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more readily determinable.

INVENTORY RESERVE AND VALUATION ALLOWANCE

The Company carries its inventory at the lower of cost, determined on a first-in, first-out basis, or market. Inventory consists mainly of the Company's POTS Splitter Shelf and Filters. In determining the lower of cost or market, the Company periodically reviews and estimates a valuation allowance to reserve for technical obsolescence and marketability. The allowance represents management's assessment and reserve for the technical obsolescence based upon the inter-operability of its component products, primarily filters and splitters, with presently deployed and next generation DSL infrastructures as well as a reserve for marketability based upon current prices and the overall demand for the individual inventory items. Material changes in either the technical standards of future DSL deployments or further erosion in the demand for deployments of DSL infrastructures could affect the estimates and assumptions resulting in the amounts reported. The allowance is estimated as the difference between inventory at historical costs, on a first in first out basis, and market based upon assumptions about future demand, current prices and product liability, and charged to the provision for inventory, which is a component of cost of sales. At the point the historical cost is adjusted, a lower cost-basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

During the fiscal years ended June 30, 2003, 2002 and 2001, the Company reserved approximately $302,000, approximately $928,000, and approximately $315,000, respectively, for technical obsolescence and marketability based upon current prices and overall demand and charged a like amount to expense, representing 8.4% of average inventory, at cost, of approximately $3,588,000 on hand during the period in fiscal 2003; 20.2% of average inventory, at cost, of approximately $4,602,000 on hand during the period in fiscal 2002; and 13.6% of average inventory, at cost, of approximately $2,309,000 on hand during fiscal 2001. The reserve and corresponding charges in fiscal 2002 were increased as the Company experienced a dramatic decrease, along with the entire telephonic industry, in demand for our component products in addition to the decision to table the production of certain product line items built on certain European standards and which the Company does not expect to pursue in the near future. As of June 30, 2003, the Company recorded a cost adjustment of approximately $1,059,000, recognizing permanent cost reductions due to price adjustments approximating

MATERIAL RELATED PARTY TRANSACTIONS

The Company records material related party transactions. The Company incurs costs for engineering, design and production of prototypes and certain administrative functions from Microphase Corporation and the purchase of finished goods, primarily consisting of DSL splitter shelves and filters, from Janifast Limited. The Company has incurred costs for obtaining transmission rights. This enabled the Company to obtain retransmission accreditation to proprietary television content that the Company plans to provide with its flagship product, the Traverser™ within its incorporated joint venture mPhase Television.net, in which the Company owns a 56.5% interest.

The Company has also incurred charges for beta testing and on-site marketing, including the display of a live working model at Hart Telephone. In addition, the Company has entered into a supply agreement with Hart Telephone, which is scheduled to commence upon the commercial production of the Traverser™. A member of mPhase's board of directors is employed by Lintel, Inc., the parent corporation of Hart Telephone.

Mr. Durando, the President and CEO of mPhase, owns a controlling interest and is a director of Janifast Limited. Mr. Durando and Mr. Dotoli are officers of Microphase Corporation. Mr. Ergul, the chairman of the board of mPhase, owns a controlling interest and is a director of Microphase Corporation. Microphase, Janifast, Hart Telephone and Lintel Corporation are significant shareholders of mPhase. Microphase, Janifast and Hart Telephone have converted significant liabilities to equity in fiscal years June 30, 2001, 2002 and 2003. Management believes the amounts charged to the Company by Microphase, Janifast, mPhase Television.net and Hart Telephone are commensurate to amounts that would be incurred if outside parties were used. The Company believes Microphase, Janifast and Hart Telephone have the ability to fulfill their obligations to the Company without further support from the Company.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2004 mPhase had working capital deficit of $1,951,928 as compared to a working capital deficit of $1,405,331 at June 30, 2003. Through March 31, 2004, the Company had incurred development stage losses totaling approximately $112,916,268. At March 31, 2004, the Company had  $1,375,063 of cash, cash equivalents and  $122,291 of trade receivables to fund short-term working capital requirements. The Company's ability to continue as a going concern and its future success is dependent upon its ability to raise capital in the near term to: (1) satisfy its current obligations, (2) continue its research and development efforts, and (3) the successful wide scale development, deployment and marketing of its products.

Historically, mPhase has funded its operations and capital expenditures primarily through private placements of common stock. Management expects that its ongoing financial needs will be provided by financing activities and believes that the sales of its line of POTS Splitter products and other related DSL component products will provide some offset to cashflow used in operations, although there can be no assurance as to the level and growth rate of such sales in future periods as seen with quarter to quarter fluctuations in component sales. At March 31, 2004, the Company had cash and cash equivalents of $1,375,063 compared to $396,860 at June 30,

Cash used in operating activities was $2,665,390 during the nine months ending March 31, 2004. The cash used by operating activities principally consists of the net loss, the net decrease in inventory, the net decrease in accounts receivable offset by the increase in depreciation and amortization, and by non-cash charges for common stock options and warrants issued for services and increased accrued expenses.

The Company has entered into various agreements with GTARC, pursuant to which the Company receives technical assistance in developing the Digital Video and Data Delivery System. The Company has incurred expenses in connection with technical assistance from GTARC totaling approximately $0, $100,000, for the nine month periods ended March 31, 2004 and 2003, respectively, and $13,524,300 from the period from inception through March 31, 2004. On February 18, 2004 GTARC converted payables owed by the Company of approximately $1.8 million into a cashless warrant to purchase 5,069,200 shares of common stock based upon a stock valuation of $.35 per share and one promissory note for $100,000 payable in quarterly equal installments of $16,667 commencing March 31, 2004. mPhase is the sole, worldwide licensee of the technology developed by GTARC in conjunction with the Traverser™ product line. Upon completion of the commercial product, GTRC may receive a royalty of up to 5% of product sales.

During the nine months ending March 31, 2004, strategic vendors (including GTARC) and related parties converted approximately $1,875,640 of accounts payable and accrued expenses into 110,467 shares of the Company's common stock and 5,069,242 warrants.

As of March 31, 2004, mPhase is obligated to pay Lucent Technologies, Inc., the sum of $140,000 per month through May of 2004 for further development of the mPhase TV+ product plus $100,000 per month through December 31, 2004 for development of its new line of Nanotechnology products. MPhase has no other material commitments for capital expenditures.

LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS

From inception (October 2, 1996) through March 31, 2004 the Company had incurred development stage losses and has an accumulated deficit of approximately $112,916,268 million and a stockholder's deficit of  $2,047,240. Cumulatively and for the nine months ended March 31, 2004, the Company had negative cash flow from operations of $46,280,631 million and $2,665,390, respectively. The report of the Company's outside auditor's, Rosenberg, Rich, Baker,Berman and Company with respect to its latest audited 10K for the fiscal year ended June 30, 2003 stated that "there is substantial doubt of the Company's ability to continue as a going concern". Management estimates that the Company will need to raise approximately $4,000,000 during the next 12 months to fund further research and development and continue operations.

We have evaluated our cash requirements for fiscal year 2004 based upon certain assumptions, including our ability to raise additional financing and increased sales of our POTS splitter. The Company has approximately $1,375,000 of cash and cash equivalents as of the end of the third quarter of fiscal year 2004. Additional investment in technology design to reduce the cost of the TV+ and provide enhanced features will be necessary over the next 12 months. In the long-term, the Company may invest additional funds annually on research and development of the TV+, iPOTS3 and Nanotechnology product lines based upon sales levels, changes to technology and the overall success of the Company attaining sufficient financing until such time as it achieves profitable operations.

Should these cash flows not be available to us, we believe we would have the ability to revise our operating plan and make certain further reductions in expenses, so that our resources which were available at March 30, 2004, plus financing to be secured during fiscal year 2005, and expected POTS splitter revenues, will be sufficient to meet our obligations until the end of fiscal year 2005. We have continued to experience operating losses and negative cash flows. To date, we have funded our operations with a combination of component sales debt conversions with related parties and strategic vendors, and private equity offerings. Management believes that we will be able to secure the necessary financing in the short-term to fund our operations into our next fiscal year. However, failure to raise additional funds, or generate significant cash flows through revenues, could have a material adverse effect on our ability to achieve our intended business objectives.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is not exposed to changes in interest rates as the Company has no debt arrangements and no investments in certain held-to-maturity securities. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of any financial instruments at March 31, 2004.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14c and of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2003 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 1. LEGAL PROCEEDINGS

mPhase was advised in April 2002 that following an investigation by the staff of the Securities and Exchange Commission, the staff intended to recommend that the Commission file a civil injunctive action against Packetport.com, Inc. ("Packetport") and its Officer's and Directors. Such recommendation related to alleged civil violations by Packetport and such Officers and Directors of various sections of the Federal Securities Laws. The staff has alleged civil violations of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 13(d) of the Securities Exchanges Act of 1034. As noted in other public filings of mPhase, the CEO and COO of mPhase also serve as Directors and Officers of Packetport. At that time these persons advised mPhase that they deny any violation of law on their part and intend to vigorously contest such recommendation or action, if any. To date no action has been filed against Packetport, its Officers or Directors. mPhase is not named as a party in connection with this matter.

From time to time mPhase may be involved in various legal proceedings and other matters arising in the normal course of business.

ITEM 2. CHANGES IN SECURITIES

Effective for the nine-month period ended March 31, 2004 the Company issued the following unregistered securities:

During the nine months ending March 31, 2004, the Company granted 924,667 shares of its common stock to consultants for services performed and 228,826 shares were issued to finders as finders fees. Additionally, effective for the nine months ended March 31, 2004, the Company issued 110,467 shares of the Company's common stock and 5,069,242 warrants in connection with the extinguishments of debt.  In addition 10,955,480 shares of its common stock together with a like amount of warrants were issued in private placements generating $3,458,073 of net proceeds to the Company.  Finally, 1,053,334 shares were issued pursuant to the exercise of previous outstanding warrants, generating $316,000 of net proceeds to the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

Pursuant to the requirements of the Section 13 or 15(d) 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.

CERTIFICATIONS

I, Ronald A. Durando, certify that:

1. I have reviewed this quarterly report on Form 10-Q of mPhase Technologies, Inc.
    

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
    

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;
    
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant's and have:
    

   1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       

   2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       

   3. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
       

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions);
    

   1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants' ability to record, process, summarize and report financial information; and
       

   2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Exhibit 32.1

/s/	Ronald A. Durando
Name:	Ronald A. Durando
	Chief Executive Officer
Date: May 21, 2004

Exhibit 31.2

mPHASE TECHNOLOGIES, INC.

CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of mPhase Technologies, Inc., a New Jersey corporation (the "Company"), on Form 10Q for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission (the "Report"), I, Martin S. Smiley, Chief Financial Officer of the Company, certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
    
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.