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 September 30, 2000

          [ ] 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) 9,817,165 shares as of November 3, 2000


                               Page 1 of 14 pages

<PAGE>

PART I.- FINANCIAL INFORMATION
Item 1- Financial Statements

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                             September 30,   December 31,
                                                                                 2000            1999
                                                                             -------------   ------------
                                         Assets                                        (Unaudited)
<S>                                                                             <C>            <C>
Current assets:
     Cash and cash equivalents                                                  $  2,163       $  3,245
     Accounts receivable, net                                                      9,508         12,137
     Inventories                                                                   8,066          8,893
     Prepaid expenses                                                              1,960          1,373
                                                                                --------       --------
                  Total current assets                                            21,697         25,648
                                                                                --------       --------
      Property, plant and equipment, net                                           4,612          4,193
      Goodwill, net                                                               10,581         11,076
      Other assets                                                                 2,133          2,531
                                                                                --------       --------
                  Total assets                                                  $ 39,023       $ 43,448
                                                                                ========       ========

                           Liabilities and Stockholders' Deficit
Current liabilities:
      Current portion of senior debt                                            $ 21,146       $  2,000
      Subordinated notes                                                           6,131             --
      Accounts payable                                                             6,913          8,831
      Accrued expenses                                                             6,265          5,723
      Accrued interest payable                                                       537            588
      Accrued commissions                                                          1,456          1,864
      Income taxes payable                                                           240            267
      Accrued deferred compensation                                                  196            196
      Short-term loans                                                                 2             44
                                                                                --------       --------
                  Total current liabilities                                       42,886         19,513
                                                                                --------       --------

Senior debt net of current maturities                                                 --         15,518
Subordinated notes                                                                    --          6,013
6% convertible subordinated debentures                                               375            371
Deferred compensation                                                                970          1,004
Income taxes payable                                                                 205            352
Other long-term liabilities                                                          896            971
Minority interest                                                                    905          1,093
                                                                                --------       --------
                  Total long-term liabilities                                      3,351         25,322
                                                                                --------       --------

                  Total liabilities                                               46,237         44,835
                                                                                --------       --------
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
       9,797,648 shares at September 30, 2000 and 9,638,861 shares at
            December 31, 1999                                                         98             96
       Additional paid-in capital                                                 75,466         75,310
       Accumulated other comprehensive loss:
              Foreign currency translation adjustment                             (4,145)        (3,896)
       Accumulated deficit                                                       (76,695)       (70,959)
                                                                                --------       --------
                                                                                  (5,276)           551
        Treasury stock, at cost                                                   (1,938)        (1,938)
                                                                                --------       --------
                  Total stockholders' deficit                                     (7,214)        (1,387)
                                                                                --------       --------
                  Total liabilities and stockholders' deficit                   $ 39,023       $ 43,448
                                                                                ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                               Page 2 of 14 pages

<PAGE>

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

                                                         Nine Months Ended
                                                    September 30,  September 30,
                                                         2000          1999
                                                    -------------  -------------
Sales                                                   $ 40,951     $ 27,032
Cost of sales                                             28,813       19,704
                                                        --------     --------
     Gross profit                                         12,138        7,328
                                                        --------     --------
Selling, general and administrative expenses              10,277        9,226
Research and development expenses                          4,530        4,575
                                                        --------     --------
         Total expenses                                   14,807       13,801
                                                        --------     --------
     Operating loss                                       (2,669)      (6,473)

Interest expense                                          (3,087)      (2,608)
Interest income                                               88          138
Other income (expense)                                      (163)         158
                                                        --------     --------
     Loss before income taxes and minority interest       (5,831)      (8,785)

Income tax expense                                           (94)         (53)
Minority interest                                            188          155
                                                        --------     --------
Net loss                                                $ (5,737)    $ (8,683)
                                                        ========     ========
Other comprehensive loss, net of tax:

     Foreign currency translation adjustments               (249)        (178)
                                                        --------     --------
Comprehensive loss                                      $ (5,986)    $ (8,861)
                                                        ========     ========
Per share data:

Basic per share amounts:

         Net loss per share of common stock             $  (0.59)    $  (0.92)
                                                        ========     ========
     Weighted average shares outstanding                   9,747        9,487
                                                        ========     ========
Diluted per share amounts:

         Net loss per share of common stock             $  (0.59)    $  (0.92)
                                                        ========     ========
     Weighted average shares outstanding                   9,747        9,487
                                                        ========     ========

     See accompanying notes to unaudited consolidated financial statements.


                               Page 3 of 14 pages

<PAGE>

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


                                                        Three Months Ended
                                                    September 30,  September 30,
                                                         2000          1999
                                                    -------------  -------------
Sales                                                  $ 11,195     $  8,397
Cost of sales                                             8,343        6,519
                                                       --------     --------
     Gross profit                                         2,852        1,878
                                                       --------     --------
Selling, general and administrative expenses              3,279        3,203
Research and development expenses                         1,463        1,828
                                                       --------     --------
         Total expenses                                   4,742        5,031
                                                       --------     --------
     Operating loss                                      (1,890)      (3,153)

Interest expense                                         (1,122)        (888)
Interest income                                              32           34
Other income (expense)                                     (175)           1
                                                       --------     --------
     Loss before income taxes and minority interest      (3,155)      (4,006)

Income tax expense                                          (33)         (38)
Minority interest                                            32           45
                                                       --------     --------
Net loss                                               $ (3,156)    $ (3,999)
                                                       ========     ========
Other comprehensive loss, net of tax:

     Foreign currency translation adjustments              (151)        (110)
                                                       --------     --------
Comprehensive loss                                     $ (3,307)    $ (4,109)
                                                       ========     ========
Per share data:

Basic per share amounts:

         Net loss per share of common stock            $  (0.32)    $  (0.42)
                                                       ========     ========
     Weighted average shares outstanding                  9,796        9,489
                                                       ========     ========
Diluted per share amounts:

         Net loss per share of common stock            $  (0.32)    $  (0.42)
                                                       ========     ========
     Weighted average shares outstanding                  9,796        9,489
                                                       ========     ========

     See accompanying notes to unaudited consolidated financial statements.


                               Page 4 of 14 pages

<PAGE>

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

                                                        Nine Months Ended
                                                    September 30,  September 30,
                                                         2000          1999
                                                    -------------  -------------
Cash flows from operating activities:
     Net loss                                          $(5,737)      $(8,683)
     Adjustments to reconcile net loss to
       net cash used in operating activities:
         Non-cash financing expenses                        --            18
         Non-cash employee stock bonuses                    --             8
         Depreciation and amortization                   1,156         1,144
         Amortization of debt discounts                     42           240
         Minority interest                                (188)         (155)
     Changes in assets and liabilities:
         Accounts receivable                             2,629         7,530
         Inventories                                       827         1,796
         Prepaid expenses                                 (587)         (266)
         Other assets                                      371            99
         Accounts payable, accrued expenses
           and other liabilities                        (2,118)       (3,588)
                                                       -------       -------
              Net cash used in operating activities     (3,605)       (1,857)
                                                       -------       -------
     Cash flows from investing activities:
         Proceeds from disposal of assets                   --           243
         Capital expenditures                           (1,091)         (588)
         Proceeds from exercised options and warrants      158            --
         Repayments of employee loans                       --           245
                                                       -------       -------
              Net cash used in investing activities       (933)         (100)
                                                       -------       -------
     Cash flows from financing activities:
         Proceeds from senior debt                       5,010         3,350
         Repayments of senior debt                      (1,382)       (1,420)
         Proceeds from subordinated notes                   80            --
         Repayments of short term loans                    (42)          (99)
                                                       -------       -------
              Net cash provided by financing
                activities                               3,666         1,831
                                                       -------       -------
     Effect of exchange rates on cash                     (210)         (175)
                                                       -------       -------
     Decrease in cash and cash equivalents              (1,082)         (301)

     Cash and equivalents - beginning of the year        3,245         3,044
                                                       -------       -------
     Cash and equivalents - end of the period          $ 2,163       $ 2,743
                                                       =======       =======
     Supplemental cash flow disclosures:
         Cash paid for interest expense                $ 3,096       $ 2,007
                                                       =======       =======
         Cash paid for income taxes                    $   147       $   364
                                                       =======       =======

     See accompanying notes to unaudited consolidated financial statements.


                               Page 5 of 14 pages

<PAGE>

              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 periods 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  annual  report to  stockholders  for the year ended
December 31, 1999. Results for the first nine months of 2000 are not necessarily
indicative of results for the year.

Note 2: Inventories

      Inventories  are valued 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:

                                        September 30, 2000      December 31,1999
                                        ------------------      ----------------
                                                     (in thousands)
         Parts and components               $  5,415                $  5,558
         Work-in-process                       1,329                     584
         Finished goods                        1,322                   2,751
                                            --------                --------
                                            $  8,066                $  8,893
                                            ========                ========

Note 3: Senior Debt

      On  September  30,  2000,  the  Company's  debt to its  senior  lender was
$21,146,000.  During the nine and three months  ended  September  30, 2000,  the
Company repaid principal of $1,382,000 and $400,000,  respectively.  The Company
borrowed  $5,010,000 and $520,000 during the nine and three-month  periods ended
September 30, 2000, respectively.  Subsequent to September 30, 2000, the Company
repaid $400,000, resulting in a balance owed of approximately $20,746,000. As of
September 30, 2000, the total outstanding principal balance, of which $2,000,000
is due on  January  1, 2001 and  $19,146,000  is due on July 3,  2001,  has been
classified as a current liability. See Item II Liquidity and Capital Resources

      Financial  debt  covenants  include an interest  coverage  ratio  measured
quarterly, limitations on the incurrence of indebtedness, limitations on capital
expenditures, and prohibitions on declarations of any cash or stock dividends or
the repurchase of the Company's stock. As of September 30, 2000, the Company was
not in  compliance  with the interest  coverage  covenant.  In  addition,  as of
September 30, 2000, the outstanding advances from the senior lender exceeded the
maximum allowable under the borrowing base formula since the Company's  eligible
assets were not sufficient to support the outstanding balance under the combined
revolving  advance and standby  letters of credit  guarantee.  As a result,  the
outstanding advances from the senior lender exceeded the maximum allowable under
the borrowing base formula by $1,400,000 as of November 3, 2000. The Company has
obtained a waiver of such  non-compliance  from its senior lender related to the
interest  coverage ratio and the over advance under the line. In connection with
the waiver given with respect to the overadvance, (i) the lender agreed that the
Company  may have an  overadvance  of not more than  $1,800,000  or such  higher
amount  that the lender may allow in its sole and  absolute  discretion  through
December 31, 2000 and (ii) the Company reduced from $2.00 per share to $1.00 per
share, the exercise price of warrants to purchase 571,000 shares of common stock
which are held by the lender.


                               Page 6 of 14 pages

<PAGE>

Note 4: 12% Subordinated Notes

      As of  September  30,  2000,  the Company has  outstanding  $6,144,000  of
subordinated  notes. During the quarter ended June 30, 2000, the Company and the
holders of 85% of the  subordinated  notes agreed to eliminate  the  requirement
that Porta meet specific  financial  goals for Porta to extend the maturity date
of their subordinated notes to July 3, 2001. As a result, notes in the principal
amount of $900,000 are due January 3, 2001 and notes in the principal  amount of
$5,244,000   are  due  July  3,  2001.  The  carrying  value  of  such  combined
subordinated  notes as of September  30, 2000 is  $6,131,000,  which is net of a
related issuance discount of $13,000.

      In connection with the extension agreement, the Company agreed to issue to
the noteholders warrants to purchase 127,500 shares of common stock at $3.00 per
share.  The Company may issue warrants to purchase up to 22,500 shares of common
stock at  $3.00  per  share  to any  noteholders  who  agree to this  amendment.
Warrants to  purchase  150,000  shares of common  stock,  which were  previously
authorized, will be issued if the notes are extended.

Note 5: Segment Data

      The Company has three reportable segments:  Line Connection and Protection
Equipment  ("Line")  whose  products  interconnect  copper  telephone  lines  to
switching  equipment and provides 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, 1999 in the basis
of measurement of segment revenues and profit or loss, and no significant change
in the Company's assets.

<TABLE>
<CAPTION>

                                Nine Months Ended                       Three Months Ended
                      September 30, 2000  September 30, 1999    September 30, 2000  September 30, 1999
                      ------------------  ------------------    ------------------  ------------------
<S>                      <C>                 <C>                   <C>                 <C>
Revenue:
    Line                 $ 14,801,000        $ 14,633,000          $  4,289,000        $  5,472,000
    OSS                    19,977,000           7,690,000             4,672,000           1,424,000
    Signal                  5,668,000           4,544,000             2,080,000           1,435,000
                         ------------        ------------          ------------        ------------
                         $ 40,446,000        $ 26,867,000          $ 11,041,000        $  8,331,000
                         ============        ============          ============        ============

Segment profit (loss):
    Line                 $  2,382,000        $  3,218,000          $    477,000        $  1,011,000
    OSS                    (2,697,000)         (7,176,000)           (1,970,000)         (3,186,000)
    Signal                  1,146,000           1,071,000               504,000             262,000
                         ------------        ------------          ------------        ------------
                         $    831,000        $ (2,887,000)         $   (989,000)       $ (1.913,000)
                         ============        ============          ============        ============
</TABLE>

                               Page 7 of 14 pages

<PAGE>

The following table reconciles segment totals to consolidated totals:

<TABLE>
<CAPTION>

                                    Nine Months Ended                           Three Months Ended
                        September 30, 2000   September 30, 1999      September 30, 2000   September 30, 1999
                        ------------------   ------------------      ------------------   ------------------
<S>                        <C>                  <C>                     <C>                  <C>
Revenue:
    Total revenue
    for reportable
    segments               $ 40,446,000         $ 26,867,000            $ 11,041,000         $  8,331,000
    Other
    Revenue                     505,000              165,000                 154,000               66,000
                           ------------         ------------            ------------         ------------
    Consolidated
    total revenue          $ 40,951,000         $ 27,032,000            $ 11,195,000         $  8,397,000
                           ============         ============            ============         ============

Operating loss:
    Total segment
    profit (loss) for
    reportable
    segments               $    831,000         $ (2,887,000)           $   (989,000)        $ (1,913,000)
    Corporate and
    unallocated              (3,500,000)          (3,586,000)               (901,000)          (1,240,000)
                           ------------         ------------            ------------         ------------
    Consolidated
    total operating
    loss                   $ (2,669,000)        $ (6,473,000)           $ (1,890,000)        $ (3,153,000)
                           ============         ============            ============         ============
</TABLE>

Note 6: Equity

      On August 8, 2000,  the board of directors  approved,  with the consent of
the  directors,  the  issuance to the  non-management  directors an aggregate of
125,335  shares of  common  stock in lieu of  payment  of  director's  fees from
January 1, 2000  through  January 1, 2001.  The common stock was valued at $1.31
per share, which was the market price of the common stock on such approval date.
At September 30, 2000, no shares had been issued.

Note 7: Legal Proceedings

      On or about July 7, 2000, Porta entered into two related agreements with a
vendor concerning  updating and maintaining certain Porta software and resolving
certain prior disputes with that vendor.  Thereafter, new disputes arose between
Porta and that vendor  concerning  that vendor's and Porta's  performance  under
those agreements. In August 2000, Porta suspended making payments to that vendor
pending  resolution of those disputes.  The vendor then commenced  mediation and
arbitration proceedings against Porta seeking damages alleged to be in excess of
$6,750,000.  Porta  strongly  disputes the  allegations of the vendor and if the
matter cannot be resolved through mediation,  Porta intends to defend vigorously
the claims  asserted by the vendor and to assert its own  counterclaims  against
the  vendor  concerning  the  vendor's  failure to  perform  under the  parties'
agreements.

      In September 2000, the Company settled the previously  reported action for
commissions allegedly owed to a former sales representative.  The settlement did
not have a material effect on the Company's financial statements.


                               Page 8 of 14 pages

<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:

<TABLE>
<CAPTION>
                                                     Nine Months Ended             Three Months Ended
                                                       September 30,                 September 30,
                                                   2000           1999             2000         1999
                                                ----------     ----------       ----------    ---------
<S>                                                <C>            <C>              <C>          <C>
Sales                                              100%           100%             100%         100%
Cost of sales                                       70%            73%              75%          78%
Gross profit                                        30%            27%              25%          22%
Selling, general and administrative expenses        25%            34%              29%          38%
Research and development expenses                   11%            17%              13%          22%
     Operating loss                                 (6%)          (24%)            (17%)        (38%)
Interest expense - net                              (7%)           (9%)            (10%)        (10%)
Other income                                        (1%)            1%              (1%)          0%
Minority interest                                    0%             0%               0%           0%
Income taxes                                         0%             0%               0%           0%
Net loss                                           (14%)          (32%)            (28%)        (48%)
</TABLE>

      The Company's  sales by product line for the periods  ended  September 30,
2000 and 1999 are as follows:

                                                 Nine Months Ended
                                                    September 30,
                                             2000                   1999
                                             ----                   ----
                                               (Dollars in thousands)
Line connection/protection
         equipment ("Line")            $14,801     36%       $14,633      54%
Operations Support Systems ("OSS")      19,977     49%         7,690      28%
Signal Processing ("Signal")             5,668     14%         4,544      17%
Other                                      505      1%           165       1%
                                       ---------------       ----------------
                                       $40,951    100%       $27,032     100%
                                       ===============       ================

                                                 Three Months Ended
                                                    September 30,
                                             2000                   1999
                                             ----                   ----
                                               (Dollars in thousands)
Line                                   $ 4,289     38%       $ 5,472      65%
OSS                                      4,672     42%         1,424      17%
Signal                                   2,080     19%         1,435      17%
Other                                      154      1%            66       1%
                                       ---------------       ----------------
                                       $11,195    100%       $ 8,397     100%
                                       ===============       ================


                               Page 9 of 14 pages

<PAGE>

Results of Operations

      The Company's  sales for the nine months ended September 30, 2000 compared
to the nine months ended  September 30, 1999  increased  $13,919,000  (51%) from
$27,032,000  in 1999 to  $40,951,000  in  2000.  Sales  for  the  quarter  ended
September  30, 2000 of  $11,195,000  increased by $2,798,000  (33%)  compared to
$8,397,000 for the quarter ended September 30, 1999. The increased sales for the
three and nine months are due primarily  from higher sales by the OSS and Signal
divisions.

      The line sales for the nine months ended  September  30, 2000  compared to
September 30, 1999 increased  from  $14,633,000 to $14,801,000 or $168,000 (1%).
Line sales for the three  months ended  September  30,  decreased by  $1,183,000
(22%) from  $5,472,000 in 1999 to $4,289,000 in 2000.  The increase in sales for
the nine  month  period  is  primarily  attributable  to sales of  approximately
$3,100,000  pursuant to a purchase  order from  Telefonos de Mexico S.A. de C.V.
(Telmex)  which was  completed  during  the  first  quarter  of 2000,  which was
partially offset by reduced sales to other customers,  primarily to customers in
the United  Kingdom.  The decrease for the three months ended September 30, 2000
reflects reduced sales primarily to customers in the United Kingdom.

      OSS sales for the nine months ended  September  30, 2000 were  $19,977,000
compared to the nine months ended September 30, 1999 of $7,690,000,  an increase
of $12,287,000 (160%).  Sales for the three months ended September 30, 2000 were
$4,672,000  compared to sales for the three months ended  September  30, 1999 of
$1,424,000,  an increase of $3,248,000  (228%). The increase in sales during the
nine months  ended  September  30,  2000  resulted  from sales of  approximately
$11,000,000  to Fujitsu  Telecommunications  Europe  Limited under a $12,000,000
supply  contract  which  was  completed  during  the  first  half of  2000,  and
approximately   $2,800,000  to  Philippines  Long  Distance  Telephone  Co.  The
approximate   $2,800,000  to  Philippines  Long  Distance   Telephone  Co.  also
positively impacted the three months ended September 30, 2000.

      Signal sales for the nine months ended  September 30, 2000 were $5,668,000
compared to the nine months ended September 30, 1999 of $4,544,000,  an increase
of  $1,124,000  (25%).  Signal  processing  sales  for the  three  months  ended
September 30, 2000 were $2,080,000, compared to the three months ended September
30, 1999 of $1,435,000, an increase of $645,000 (45%). The increase in sales for
the nine and  three-month  periods  primarily  reflects an improvement in timely
deliveries to meet customers' orders.

      Gross margin for the nine months ended September 30, 2000 was 30% compared
to 27% for the nine months ended September 30, 1999.  This  improvement in gross
margin is  attributable  to the  increased  level of sales by the OSS  division,
which  enabled the Company to absorb more  efficiently  certain  fixed  expenses
associated with the OSS contracts.  Gross margin for the quarter ended September
30, 2000 was 25% compared to 22% for the quarter ended  September 30, 1999. This
improvement in gross margin is attributable  to the Company's  ability to absorb
more efficiently  certain fixed expenses associated with the OSS contracts which
was slightly  offset by both changes in the line product mix and increased costs
to support OSS customer maintenance contracts.


                               Page 10 of 14 pages

<PAGE>

Results of Operations (continued)

      Selling, general and administrative expenses increased by $1,051,000 (11%)
from  $9,226,000  to  $10,277,000  for the nine months ended  September 30, 2000
compared to the nine months  ended  September  30,  1999.  Selling,  general and
administrative expenses increased by $76,000 (2%) from $3,203,000 in the quarter
ended  September 30, 1999 to $3,279,000 in the  comparable  quarter of 2000. The
increase  from 1999 to 2000 for the nine and  three  months  primarily  reflects
higher than anticipated  professional legal expenses due primarily to litigation
involving  the Company,  particularly  litigation  and  settlement  of a dispute
involving a vendor.

      Research and development  expenses  decreased by $45,000 (1%) for the nine
months ended September 30, 2000 and by $365,000 (20%) for the three months ended
September  30,  2000 from the  comparable  periods  in 1999,  respectively.  The
decrease for the three  months  reflects the  completion  of certain  efforts to
develop new products primarily related to the OSS business.

      As a result of the above,  the Company had an operating loss of $2,669,000
for the nine months ended September 30, in 2000 compared to an operating loss of
$6,473,000 in the  comparable  period of 1999. The Company had an operating loss
of  $1,890,000  for the  quarter  ended  September  30,  2000 as  compared to an
operating loss of $3,153,000 for the quarter ended September 30, 1999.

      Interest  expense for the nine months ended September 30, 2000 compared to
September  30, 1999  increased  by  $479,000  (18%) from  $2,608,000  in 1999 to
$3,087,000 in 2000. Interest expense for the three-month period ending September
30, 2000 compared to the same three months of 1999,  increased by $234,000 (26%)
from  $888,000  in 1999 to  $1,122,000  in 2000.  This  change  is  attributable
primarily to increased levels of borrowing from the Company's senior lender.

      As the  result  of the  foregoing,  the  Company  incurred  a net  loss of
$5,737,000,  $0.59 per share  (basic  and  diluted)  for the nine  months  ended
September  30, 2000,  compared  with a net loss of  $8,683,000,  $0.92 per share
(basic and diluted),  for the nine months ended September 30, 1999. The net loss
for the three months ended  September 30, 2000 was  $3,156,000,  $0.32 per share
(basic  and  diluted),  compared  with a net loss  for the  three  months  ended
September 30, 1999 of $3,999,000, $0.42 per share (basic and diluted).

Liquidity and Capital Resources

      At  September  30,  2000 the  Company  had cash  and cash  equivalents  of
$2,163,000  compared  with  $3,245,000  at December 31, 1999.  The Company had a
working  capital  deficit at  September  30,  2000 of  $21,189,000,  compared to
working  capital of  $6,135,000  at December  31,  1999.  The decline in working
capital  was  primarily a result of (i) the  classification  of senior debt to a
current  liability  and (ii)  the  classification  of  Subordinated  Notes  from
long-term to current liabilities.

      During the first nine months of 2000,  the net cash used by the Company in
operations was $3,605,000.  The principal  source of cash during the nine months
was a net increase of $3,628,000 in loans from the senior lender.


                               Page 11 of 14 pages

<PAGE>

Liquidity and Capital Resources (continued)

      As of September 30, 2000, the Company's  loan and security  agreement with
its senior  secured  lender  provides the Company,  under its revolving  line of
credit and its letter of credit facility,  with combined  availability  totaling
$11,000,000 (See Note 3). Of the  $11,000,000,  $2,000,000 is payable on January
1, 2001 and the remainder  expires July 3, 2001.  The combined  availability  is
subject  to the  Company's  borrowing  base and  amounts  outstanding  under the
revolver and committed letters of credit. The Company's  outstanding  borrowings
from the senior lender at September 30, 2000, were $21,146,000 of which $310,000
was a  non-interest  bearing  note,  $10,160,000  was  outstanding  against  the
revolving line of credit,  and  $10,676,000 was a term loan. As of September 30,
2000, the Company's  eligible assets were not sufficient to support the combined
revolving  advance and standby  letters of credit  guarantee.  As a result,  the
outstanding advances from the senior lender exceeded the maximum allowable under
the borrowing base formula by $1,400,000 as of November 3, 2000. The Company has
obtained a waiver of such  non-compliance from its senior lender pursuant to the
interest  coverage ratio and the overadvance  under the line. In connection with
the waiver given with  respect to the  overadvance,  the lender  agreed that the
Company  may have an  overadvance  of not more than  $1,800,000  or such  higher
amount  that the lender may allow in its sole and  absolute  discretion  through
December  31,  2000.  The  Company  cannot give any  assurance  that it will not
require an overadvance in excess of $1,800,000 or that the overadvance  will not
be required  subsequent  to December  31,  2000.  The Company  does not have any
commitments for  alternative  financing  sources,  and its inability to have the
required financing could severely impair its business and operations.

      As of  September  30,  2000,  the Company had  outstanding  $6,144,000  of
subordinated notes. As a result of an agreement with the holders of 85% of these
notes, the maturity date of the notes was extended to July 3, 2001. As a result,
notes in the  principal  amount of $900,000 are due January 3, 2001 and notes in
the principal  amount of $5,244,000  are due July 3, 2001. The carrying value of
such combined subordinated notes as of June30, 2000 is $6,131,000,  which is net
of a related issuance discount.

      The  Company's  cash  availability   during  the  remainder  of  2000  and
thereafter  may be affected by a number of factors.  At September 30, 2000,  the
Company had no cash  available  under its credit  facility and had borrowed more
than the amount available to the Company under its borrowing base. To the extent
that credit is not  available,  the Company may have  difficulty  performing its
obligations  under its  contracts,  which could  result in the  cancellation  of
contracts or the loss of future business. In addition, $2,000,000 of senior debt
and  $900,000  of  subordinated  debt  will  become  due  in  January  2001  and
$24,390,000 of senior and subordinated  debt will become due in July 2001. Under
the default  provisions of the loan agreement with the senior lender,  a default
on the subordinated notes can trigger a default in the Company's  obligations to
the senior lender.  The Company does not presently have the ability to pay these
debts and, if the Company  cannot  obtain either an extension on the maturity of
the debts or an alternative financing source or raise funds from the sale of one
of its divisions, the Company may be unable to meet these financial obligations.
Although the Company has been  exploring  alternatives,  including  the possible
sale of one of its divisions, the Company has no formal or informal agreement or
understanding  as to an  extension  of its  existing  loans  or any  alternative
financing  source,  and it  cannot  give any  assurance  that it will be able to
obtain either an extension of its existing debt or funds to enable it to pay its
loans. The Company has been engaged in negotiations with respect to the possible
sale of one of its divisions.  However, the Company has not signed any agreement
with  respect  to such a  sale,  and it  cannot  give  any  assurance  that  its
negotiations will result in the sale of such division.


                               Page 12 of 14 pages

<PAGE>

Forward Looking Statements

      Statements contained in this Form 10-Q include forward-looking  statements
that are  subject  to risks  and  uncertainties.  Actual  results  could  differ
materially  from  those  currently  anticipated  due  to a  number  of  factors,
including  those  identified in this Form 10-Q,  the Company's  Annual Report on
From 10-K for the year ended December 31, 1999 and in other  documents  filed by
the Company with the Securities and Exchange Commission.

PART II- OTHER INFORMATION

Item 1. Legal Proceedings

      The Company is the  respondent  in mediation and  arbitration  proceedings
commenced  by a vendor,  BMS  Corporation,  in New York  City with the  American
Arbitration Association. The claims asserted in those proceedings arose from two
related  agreements  which the Company entered into with BMS on or about July 7,
2000, requiring BMS to update and maintain certain of the Company's software and
resolving certain prior disputes with BMS. After entering into those agreements,
new disputes arose between the Company and BMS concerning BMS' and the Company's
performance under those agreements. In August 2000, the Company suspended making
payments  to BMS  pending  resolution  of those  disputes.  BMS  then  commenced
mediation  and  arbitration  proceedings  against  the Company  seeking  damages
alleged  to be in  excess of  $6,750,000.  The  Company  strongly  disputes  the
allegations of BMS and if the matter cannot be resolved through  mediation,  the
Company  intends to defend  vigorously the claims  asserted by BMS and to assert
its own  counterclaims  against BMS concerning BMS' failure to perform under the
parties' agreements.

      In September 2000, the Company settled the previously  reported action for
commissions allegedly owed to a former sales representative.  The settlement did
not have a material effect on the Company's financial statements.

Item 6. Exhibits and Reports on Form 8-K

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


                               Page 13 of 14 pages

<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 November 9, 2000          By /s/William V. Carney
                                     --------------------
                                     William V. Carney
                                     Chairman of the Board

  Dated November 9, 2000          By /s/Edward B. Kornfeld
                                     ---------------------
                                     Edward B. Kornfeld
                                     Vice President and Chief Financial Officer


                               Page 14 of 14 pages