<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-Q

 
(Mark One)
[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES    
       EXCHANGE ACT OF 1934
          For the quarterly period ended March 31, 1997
 
[ ]    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: 1-9083
                                        
                             POLYPHASE CORPORATION
            (Exact name of registrant as specified in its charter)

             NEVADA                                       23-2708876
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)


                        16885 DALLAS PARKWAY, SUITE 400
                              DALLAS, TEXAS 75248
                   (Address of principal executive offices)

                                (214) 732-0010
             (Registrants'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 or 15 (d) of the Exchange Act during
the past 12 months ( or for such shorter period the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes               No      X
    ------------     -----------

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

Common Stock, $.01 par value                            13,644,109
                                                ---------------------------
                                                Outstanding at June 5, 1997
<PAGE>
 
                             POLYPHASE CORPORATION
                                   FORM 10-Q
                         QUARTER ENDED MARCH 31, 1997

--------------------------------------------------------------------------------

                               TABLE OF CONTENTS
                               -----------------

PART I. FINANCIAL INFORMATION                        Page No.
-----------------------------                        --------
 
Item 1. Financial Statements
 
Consolidated Condensed Balance Sheets as of
   March 31, 1997 and September 30, 1996                2
 
Consolidated Condensed Statements of
  Operations for the Three Months Ended
  March 31, 1997 and 1996                               4
 
Consolidated Condensed Statements of
  Operations for the Six Months Ended
  March 31, 1997 and 1996                               5
 
Consolidated Condensed Statements of
  Cash Flows for the Six Months Ended
  March 31, 1997 and 1996                               6
 
Notes to Consolidated Condensed Financial Statements    8
 


Item 2. Management's Discussion and Analysis of
  Financial Condition and Results of Operations        11


 
PART II - OTHER INFORMATION
---------------------------
 
Item 1. Legal Proceedings                              13
 
Item 4. Submission of Matters to a Vote of 
  Security Holders                                     13
 
Item 6. Exhibits and Reports on Form 8-K               13
 
Signature Page                                         14


                                      -1-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                  (UNAUDITED)


                                     ASSETS
<TABLE>
<CAPTION>

                                                                March 31,   September 30,
                                                               -----------  ------------                    
                                                                   1997         1996
                                                               -----------  -----------   
Current assets:
<S>                                                            <C>          <C>
 Cash                                                          $ 1,563,874  $   280,969
 Receivables, net of allowance for doubtful accounts
  of $510,808 and $519,104
   Trade accounts                                               10,287,324   12,098,852
   Current portion of sales contracts                            6,467,619    6,625,727
   Notes receivable                                                821,739      972,422
 Receivables from related parties                                  427,081      367,634
 Inventories                                                    26,721,117   28,027,779
 Prepaid expenses and other                                      2,494,958    2,676,336
                                                               -----------  -----------  
    Total current assets                                        48,783,712   51,049,719
                                                               -----------  -----------   
 
 
Property and equipment:
 Land                                                              765,000      765,000
 Buildings and improvements                                      4,701,041    4,279,917
 Machinery, equipment and other                                  8,595,559    8,575,687
                                                               -----------  -----------   
                                                                14,061,600   13,620,604
 Less-Accumulated depreciation                                   5,047,639    4,212,872
                                                               -----------  -----------   
                                                                 9,013,961    9,407,732
                                                               -----------  -----------   
 
Other assets:
 Noncurrent receivables
   Sales contracts                                               1,324,692    1,333,150
   Notes receivable                                                951,433    1,037,890
   Related parties, net allowance of $3,340,000                 14,698,032    9,931,054
 Excess of cost over fair value of net assets of businesses
   acquired, net of accumulated amortization of $1,940,199
   and $1,557,165                                               14,634,929   15,041,574
 Other intangible assets                                         2,081,727    1,402,239
 Restricted cash                                                   796,121      882,383
 Other                                                           4,144,309    4,092,780
                                                               -----------  -----------   
                                                                38,631,243   33,721,070
                                                               -----------  -----------   

                                                               $96,428,916  $94,178,521
                                                               ===========  ===========  
</TABLE> 

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -2-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
               CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
                                  (UNAUDITED)


                     LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
 
                                                           March 31,     September 30,
                                                         -----------     ------------    
                                                             1997            1996
                                                         -----------     -----------     
Current liabilities:
<S>                                                      <C>             <C>
 Notes payable                                           $10,805,495     $ 9,516,219
 Accounts payable                                          7,324,254       8,581,071
 Accrued expenses and other                                2,928,802       4,415,011
 Current maturities of long-term debt                     33,285,652      31,573,716
                                                         -----------     -----------    
    Total current liabilities                             54,344,203      54,086,017
 
Note payable and accrued interest to related party        13,163,916      12,546,600
Reserve for credit guarantees                                796,121         882,383
Deferred income taxes                                      1,475,897       1,475,897
                                                         -----------     -----------     
    Total liabilities                                     69,780,137      68,990,897
                                                         -----------     -----------     
 
 
Warrants to purchase common stock
 in subsidiary                                             1,408,744       1,189,224
 
Stockholders' equity:
 Preferred stock, $.01 par value, authorized
    50,000,000 shares, issued and outstanding 125,000
    and  250,000 shares, respectively                          1,250           2,500
 Common stock, $.01 par value, authorized
   100,000,000 shares, issued and outstanding
   13,664,109 and 13,196,966 shares, respectively            136,641         131,970
 Paid-in capital                                          27,839,392      26,630,714
 Accumulated deficit                                      (1,761,933)     (1,487,695)
 Notes receivable                                           (975,315)     (1,279,089)
                                                         -----------     -----------     
   Total stockholders' equity                             25,240,035      23,998,400
                                                         -----------     -----------     

                                                         $96,428,916     $94,178,521
                                                         ===========     ===========    
</TABLE> 

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -3-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)


<TABLE> 
<CAPTION> 
                                          For the Three Months Ended
                                                   March 31,
                                          --------------------------
                                             1997           1996
                                          -----------    -----------
<S>                                       <C>            <C> 

Net revenues                              $38,409,223    $37,749,771

Cost of sales                              32,623,184     29,044,520
                                          -----------    -----------

Gross profit                                5,786,039      8,705,251

Selling, general and administrative 
 expenses                                   3,811,186      5,759,733
                                          -----------    -----------

Operating income                            1,974,853      2,945,518
                                          -----------    -----------

Other income (expenses):
 Interest expense                          (1,839,932)    (1,570,285)
 Interest income and other                   (115,857)       385,844
                                          -----------    -----------
 
  Total other income (expenses)            (1,955,789)    (1,184,441)
                                          -----------    -----------

Income before income taxes and
  warrant accretion                            19,064      1,761,077

Income taxes                                   41,418        643,165
                                          -----------    -----------

                                              (22,354)     1,117,912
Accretion of common stock purchase warrants
 of subsidiary                                109,647         99,911
                                          -----------    -----------

Net income (loss)                            (132,001)     1,018,001

Dividends on preferred stock                  (37,500)       (37,500)
                                          -----------    -----------

Net income (loss) attributable to common 
 stockholders                             $  (169,501)   $   980,501
                                          ===========    ===========

Weighted average common and common
  equivalent shares                        13,664,109     13,974,294
                                          ===========    ===========

Net income (loss) per common share        $      (.01)   $       .07
                                          ===========    =========== 
</TABLE> 

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -4-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)


<TABLE> 
<CAPTION> 
                                           For the Six Months Ended
                                                   March 31,
                                          --------------------------
                                             1997           1996
                                          -----------    -----------
<S>                                       <C>            <C> 

Net revenues                              $74,575,012    $75,247,061

Cost of sales                              62,680,099     58,963,580
                                          -----------    -----------

Gross profit                               11,894,913     16,283,481

Selling, general and administrative 
 expenses                                   8,434,856     10,382,323
                                          -----------    -----------

Operating income                            3,460,057      5,901,158
                                          -----------    -----------

Other income (expenses):
 Interest expense                          (3,414,350)    (3,144,021)
 Interest income and other                     95,103        485,540
                                          -----------    -----------

  Total other income (expenses)            (3,319,247)    (2,658,481)
                                          -----------    -----------

Income before income taxes
 and warrant accretion                        140,810      3,242,677

Income taxes                                  120,528      1,169,805
                                          -----------    -----------

                                               20,282      2,072,872

Accretion of common stock purchase
  warrants of subsidiary                      219,520        257,575
                                          -----------    -----------

Net income (loss)                            (199,238)     1,815,297

Dividends on preferred stock                  (75,000)       (75,000)
                                          -----------    -----------

Net income (loss) attributable to 
 common stockholders                      $  (274,238)   $ 1,740,297
                                          ===========    ===========


Weighted average common and common
 equivalent shares                         13,600,432     13,779,389
                                          ===========    ===========

Net income (loss) per common share        $      (.02)   $       .13
                                          ===========    ===========
</TABLE> 

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -5-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

 
<TABLE> 
<CAPTION> 
                                                   For the Six Months Ended
                                                          March 31,
                                                   --------------------------
                                                       1997           1996
                                                   -----------    -----------
<S>                                                 <C>           <C> 
Cash flow provided by (used in) 
 operating activities:
 Net income (loss)                                  $  (199,238)  $ 1,815,297
Adjustments to reconcile net income (loss)
 to net cash provided by (used in) 
 operating  activities:
  Depreciation and amortization                       1,534,924     1,514,505
  Provision for doubtful accounts                        (8,296)       (5,770)
  Accretion of warrants to purchase 
     common stock of subsidiary                         219,520       257,575
  (Increase) decrease in, net of effects of
   acquisitions:
   Accounts and sales contracts receivable            1,986,390     2,535,939
   Inventories                                        1,306,662    (4,847,849)
   Prepaid expenses and other                           129,849       661,209
  Increase (decrease) in, net of effects of
   acquisitions:
   Accounts payable                                  (1,256,817)      125,309
   Accrued expenses and other                        (1,486,209)      887,822
                                                    -----------   -----------  

      Net cash provided by (used in)
       operating activities                           2,226,785     2,944,037
                                                    -----------   -----------  

 
 
Cash flows provided by (used in) investing
 activities:
  Notes and other receivables                           237,140      (168,149)
  Receivables from related parties                   (4,826,425)   (4,766,022)
  Capital expenditures                                 (440,996)     (372,048)
  Other intangibles                                    (973,000)            -
                                                    -----------   -----------   

     Net cash used in
      investing activities                           (6,003,281)   (5,306,219)
                                                    -----------   -----------  

</TABLE> 

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -6-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
                                  (UNAUDITED)


<TABLE> 
<CAPTION> 
                                                      For the Six Months Ended
                                                             March 31,
                                                      --------------------------
                                                          1997           1996
                                                      -----------    -----------

Cash flows provided by (used in) financing activities:
<S>                                                    <C>          <C> 
  Borrowings (principal payments) under line of
   credit arrangements, notes payable and
   long-term debt, net                                 $3,618,528   $(2,917,542)
  Proceeds from the issuance of 12%
   subordinated debentures                                      -     1,500,000
  Advances from (payments to) related parties                   -    (1,153,000)
  Principal collections on Pyrenees note receivable       303,774       379,231
  Exercise of common stock options                      1,229,599        12,500
  Dividends on preferred stock                            (75,000)      (75,000)
  Common stock issuance costs                             (17,500)      (17,642)
  Proceeds from private placement of
   preferred stock                                              -     2,500,000
                                                       ----------   ----------- 

   Net cash provided by
     financing activities                               5,059,401       228,547
                                                       ----------   -----------
                                                                   
Net increase (decrease) in cash                         1,282,905    (2,133,635)
Cash - beginning of period                                280,969     3,275,068
                                                       ----------   ----------- 
                                                                   
Cash - end of period                                   $1,563,874   $ 1,141,433
                                                       ==========   ===========

Supplemental schedule of cash flow information:
 Cash paid during the period for :
  Interest                                             $2,643,554   $ 2,220,593
  Income taxes                                         $1,311,055   $   189,536

</TABLE> 

Supplemental schedule of noncash investing and financing activities:

In October 1996, an unrelated third party exercised an option to purchase
357,143 shares of common stock.  As consideration, the Company received 125,000
shares of Series A-3 Preferred Stock having a redemption value of $1,250,000.



                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      -7-
<PAGE>
 
                    POLYPHASE CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                MARCH 31, 1997


1.  NATURE OF BUSINESS

  The Company is a diversified holding company that, through its subsidiaries,
  operates in three industry  segments: the forestry segment, which distributes,
  leases and provides financing for commercial and industrial timber and logging
  equipment; the transformer segment, which manufactures and markets electronic
  transformers, inductors and filters; and the food processing segment, which
  produces high quality entrees, plated meals, soups, sauces and poultry, meat
  and fish specialties.
 
2.  BASIS OF PRESENTATION

  The consolidated financial statements include the accounts of the Company and
  its wholly owned subsidiaries.  All material intercompany accounts and
  transactions are eliminated.

  The financial statements included herein have been prepared by the Company,
  without an audit, pursuant to the rules and regulations of the Securities and
  Exchange Commission. Certain information and footnote disclosures normally
  included in financial statements prepared in accordance with generally
  accepted accounting principles have been  condensed or omitted pursuant to
  such rules and regulations.  The Company  believes that the disclosures are
  adequate to make the information presented not misleading.  The information
  presented reflects all adjustments (consisting solely of normal recurring
  adjustments) which are, in the opinion of management, necessary for a fair
  statement of results for the interim periods when read in conjunction with the
  financial statements and the notes thereto included in the Company's latest
  financial statements filed as part of Form 10-K.
 
3.  LIQUIDITY

  The Company has not complied with certain covenants involving most of its loan
  agreements, including covenants that restrict transactions with affiliates and
  which require the filing of audited financial statements for the Company and
  its subsidiaries on a timely basis. (See Note 5)  As a result, the Company's
  debt has been classified as current as of March 31, 1997.

  The Company is in the process of negotiating a transaction involving Overhill
  that the Company expects will resolve the Rice lawsuit and improve the
  Company's overall debt structure, but there can be no assurances that such
  transaction will be consummated.  Upon completion of the transaction, the
  Company believes it will be able to negotiate with the remaining debt holders
  and obtain waivers to the covenant violations that exist.  As such, the
  Company expects that it will be able to meet its liquidity requirements.

                                      -8-
<PAGE>
 
4.  RELATED PARTY TRANSACTIONS

  During January 1996, the Company reached an agreement in principle to manage a
  project to develop and build a multi-purpose sports facility in Las Vegas,
  Nevada.  The project is being developed by PLY Stadium Partners, Inc.
  ("Stadium Partners"), a private investment firm headed by Mr. Paul A. Tanner,
  Chairman and Chief Executive Officer of the Company.  As part of the
  transaction, the Company is also to participate in the facility's management,
  sales of suites and seat options, concessions and events and is to be
  compensated for such services.  The Company has provided $4 million of debt,
  bearing interest at 12%, to Stadium Partners.  The debt is  (1) convertible
  into a 14% economic interest in the project and (2) is  guaranteed by Mr.
  Tanner and Pyrenees,  a private investment firm headed by Mr. Tanner.

  On November 15, 1996, Stadium Partners, through a newly-formed partnership,
  purchased  62 acres in Las Vegas for the development of the stadium and
  adjacent convention facility. Financing was provided by Lehman Brothers
  Holdings, Inc. ("Lehman") through a partnership, Nevada Stadium Partners
  Limited Partnership ("Nevada Partnership") with Lehman as the lender receiving
  an equity interest in the project.

  The Company has guaranteed the repayment of the loan from Lehman to the
  partnership in the above mentioned transaction, upon the occurrence of certain
  events.  Such guarantee is effective upon the occurrence of certain
  conditions,  including without limitation if the Partnership files for
  bankruptcy or insolvency,  if representation by the Partnership proves to be
  fraudulent regarding the financial condition of the Borrower, the land
  securing the loan is further encumbered or ownership transferred without the
  consent of Lehman.

  In January 1997, the Company further advanced Stadium Partners $4.9 million.
  The funds advanced consisted of $2.5 million, drawn from an existing line of
  credit, and $2.4 million from a six month term note.  The term note bears
  interest at 16%, is payable monthly and is secured by a second lien on the
  Company's headquarters.  As additional collateral, the  Company agreed to
  issue an option on 500,000 shares of Series A-2 preferred stock (convertible
  into 1,000,000 shares of common stock) which is exercisable upon default of
  certain covenants of the agreement.

  In connection with the aforementioned transaction, the Company entered into a
  two year consulting agreement with a principal of the lender.  In
  consideration of the agreement, the Company issued an option to purchase
  200,000 shares of common stock at $.01 per share.

  During the twelve months ended September 30, 1996, the Company accrued
  management and service revenues of $2,550,000 and interest income of $790,000
  related to the Company's activities with Stadium Partners, the collectibility
  of which is dependent upon the success of the project and/or the guarantees
  referred to above. As a result of the financing described above Stadium
  Partners is precluded from making any distributions until permanent project
  financing is secured.  As a consequence of Stadium Partners inability to make
  its payment to the Company due March 15,1997, the Company established a
  reserve of $3.34 million as of September 30, 1996, which represents the income
  accrued. The reserve will be reduced as collections and distributions are made
  pursuant to the Stadium Partners loan agreements. The Company no longer
  accrues management fees or interest income on the existing advances.

                                      -9-
<PAGE>
 
   As of March 31, 1997, the Company had net additional advances to Stadium
   Partners of $4,826,425, which is subject to the above guarantees, and are
   currently due and payable.

   During the six months ended March 31, 1997, the Company made advances to
   Mr. Tanner totalling $70,300 resulting in a balance due of $85,160 as of
   that date.

   In connection with the TTI acquisition, the Company also issued a non-
   interest bearing note to Harold Estes for $10,000,000 due October 31, 1994,
   on which the Company imputed interest at 8.0% per annum. The Company has
   since modified, extended and renewed the note whereby the note currently
   having a balance including accrued interest of $13,163,916 has been extended
   to December 1, 1997 bearing interest at 10% through June 30, 1997 and 16%
   thereafter. The Company anticipates that it will be required to refinance
   this note payable on a long-term basis and is presently in negotiations with
   potential lenders to accomplish their goal. There is no certainty that
   Company will be able to refinance this note on acceptable terms or at all, by
   December 1, 1997. The note holder has no recourse to any of the assets or
   capital stock of Polyphase Corporation or any of its other subsidiaries and
   no cross-default provisions exist between this note and any other Polyphase
   debt.


5.  CONTINGENCIES

   In January 1997, a suit was filed in District Court of Dallas County against
   the Company by Rice Partners II, L.P., subordinated debt holders of the
   Overhill Farms subsidiary. The suit claims, among other things, that the
   Company breached covenants of the subordinated debt agreement and refused to
   cure the defaults within a reasonable period of time. The Company has filed a
   counter suit claiming Rice Partners II, L.P. (i) refused to comply with
   verbal agreements to the indenture (ii) conspired with the former general
   partner of Overhill to force the Company to sell Overhill Farms at a
   distressed price in order to benefit Rice Partners II, L.P. and (iii) caused
   the halting of trading of the Company's stock.


6.  STOCKHOLDERS' EQUITY

   In October 1996 a director of the Company exercised options on 75,000 of
   common stock at $.75 per share.

   In October 1996 an associate of the holders of the Company's Series A-3
   Preferred Stock tendered 125,000 shares of preferred stock as consideration
   for the exercise of options on 357,143 shares of common stock at $3.50 per
   share.

   In November 1996 a former executive of the Company exercised options on
   35,000 of common stock at $.01 per share. Such options were granted in
   consideration for a consulting contract and were valued at $200,000.

                                     -10-
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS


Statements contained in this Form 10-Q that are not historical facts,
including, but not limited to, the projections contained herein, are forward-
looking statements and involve a number of risks and uncertainties.  The actual
results of the future events described in such forward-looking statements in
this Form 10-Q could differ materially from those stated in such forward-looking
statements.  Among the factors that could cause actual results to differ
materially are: adverse economic conditions, industry competition and other
competitive factors, government regulation and possible future litigation.

RESULTS OF OPERATIONS

Revenues for the six months ended March 31, 1997 decreased $672,000 (1%) to
$74,575,000 from $75,247,000 during the six months ended March 31, 1996.  The
decrease in revenue is primarily attributable to the exclusion of the Computer
Group in fiscal 1997 offset by higher revenues in the Timber Group.  Operating
income also decreased $2,441,000 (41%) from the comparable period due to
significantly lower gross margins at the Food and Timber Groups.

Net income for the six months ended March 31, 1997 decreased $2,014,000 (111%)
to a loss of $199,000 from net income of  $1,815,000 during the six months ended
March 31, 1996.  Net income was adversely affected by lower gross margins and
higher operating and interest expense.

The Food Group's revenues increased slightly  to $48,732,000 for the six months
ended March 31, 1997 as compared to $47,738,000 for the six months ended March
31, 1996.  Operating income decreased $861,000 (25%) to $2,561,000, from
$3,428,000 in the comparable period.   Revenues have remained flat primarily due
to slower than anticipated growth in the new business segments of food service
products and Overhill branded items due to the competitive environment.  The
slower growth in new segments coupled with mature market of the weight loss and
airline segments have forced gross margins to decrease approximately 2% from the
past year.

Revenues for the Timber Group for the six months ended March 31, 1997 increased
$6,601,000 (38%) to $24,080,000 from $17,479,000 for the six months ended March
31, 1996. Operating income for the comparable period decreased $497,000 (26%) to
$1,412,000 for the six months ended March 31, 1997 from $1,909,000 for the six
months ended March 31, 1996.  Increased revenues were primarily due to increased
demand for new equipment in East Texas as the lumber prices stabilized in fiscal
1997 and large operators made capital expenditures.  Profit margins decreased
significantly in fiscal 1997 due to a higher percentage of sales in new units
which carries lower profit margins.  In the comparable period of 1996 a slowdown
in the timber market resulted in decreased sales of new units and increased
sales of  higher margined used units or refurbishment of existing units.
Management expects sales to continue to grow with the lower profit margins in
fiscal 1997.

Revenues in the Transformer Group for the six months ended March 31, 1997
decreased $77,000 to $1,763,000 from $1,840,000 for the comparable period in
fiscal 1996.  Operating income also decreased to $43,000 for the six months
ended March 31, 1997 from $71,000 for the comparable period in fiscal 1997.
The decreases are primarily attributable to the competitive market and the lower
profit margins on government contracts.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended March 31, 1997, the Company's operating activities
provided cash of approximately $2,227,000 compared to $2,944,000 of cash
provided in the comparable period of fiscal 1996.  The decrease from the
comparable period of  cash provided by operating activities were primarily due
from the net loss, and large decreases in accounts payable and accruals.  These
were offset by decreases in accounts receivable and inventories in the Food
Group subsidiary.

                                     -11-
<PAGE>
 
During the six months ended March 31, 1997, the Company's investing activities
used cash of approximately $6,003,000 compared to a use of cash in the amount of
$5,306,000 during the comparable period in fiscal 1996.  The Company's use of
cash consisted primarily of advances to PLY Stadium Partners a company
affiliated with  Mr. Paul A. Tanner, the Company's Chairman of the Board,
President and Chief Executive Officer.

During the six months ended March 31, 1997, the Company's financing activities
provided cash of approximately $5,059,000 as compared to $229,000 of cash
provided in the comparable period in fiscal 1996.  During the period the Company
borrowed approximately $4.9 million consisting of $2.4 million from an existing
line of credit and $2.5 million from a six month term note.   The term note
bears interest at 16%, is payable monthly and is secured by a second lien on the
Company's headquarters.  As additional collateral, the  Company agreed to issue
an option on 500,000 shares of Series A-2 preferred stock (convertible into
1,000,000 shares of common stock) which is exercisable upon default of certain
covenants of the agreement.  The funds from these transactions were used in
advances to PLY Stadium Partners, Inc.

The Company has not complied with certain covenants involving substantially
all of the Company's loan agreements, including covenants that restrict
transactions with affiliates and which require the filing of audited financial
statements for the Company and its subsidiaries on a timely basis.  As a result,
the Company's debt has been classified as current as of September 30, 1996 and
March 31, 1997.

The Company is in the process of negotiating a transaction involving Overhill
that the Company expects will resolve the Rice lawsuit and improve the Company's
overall debt structure, but there can be no assurance that such transaction will
be consummated.

Accordingly,  the Company's management believes that cash generated from the
proposed Overhill transaction and from operations, together with existing lines
of credit, will be sufficient to enable the Company to meet its liquidity
requirements for the next 12 months.

                                     -12-
<PAGE>
 
                          PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

In January 1997, a suit was filed in District Court of Dallas County against the
Company by Rice Partners II, L.P., subordinated debt holders of Overhill.  The
suit claims, among other things, that the Company breached covenants of the
subordinated debt agreement and refused to cure the defaults within a reasonable
period of time.  The Company has filed a counter suit claiming Rice Partners II,
L.P. (i) refused to comply with verbal agreements to the indenture (ii)
conspired with the former general manager of Overhill to force the Company to
sell Overhill Farms at a distressed price in order to benefit Rice Partners, II,
L.P. and (iii) caused the halting of trading of the Company's stock.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

See "Management's Discussion and Analysis--Liquidity and Captial Resources" for 
a description of certain defaults.

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

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

  (a) Exhibits
 
  27  Financial Data Schedule

  (b) Reports on Form 8-K - The following reports were filed on Form 8-K during
the quarter ended March 31, 1997.

      NONE

                                     -13-
<PAGE>
 
                                  SIGNATURES


In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                            POLYPHASE CORPORATION
                                            (REGISTRANT)


Date:   June 9, 1997                        By:  /s/ Paul A. Tanner
                                               ---------------------------------
                                               Paul A. Tanner
                                               President and
                                               Chief Executive Officer



                                     -14-
<PAGE>
 
                               INDEX TO EXHIBITS



      Exhibit No.                                     Exhibit
    -----------------                         -----------------------

         27                                   Financial Data Schedule