<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 June 30, 1998
 
[ ] 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.)

                             4800 BROADWAY, SUITE A
                              DALLAS, TEXAS 75248
                    (Address of principal executive offices)

                                 (972) 386-0101
             (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  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, $.01 par value                            14,882,464
                                              -----------------------------
                                              Outstanding at August 10, 1998
<PAGE>
 
                             POLYPHASE CORPORATION
                                   FORM 10-Q
                          QUARTER ENDED JUNE 30, 1998

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

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

PART I. FINANCIAL INFORMATION                                       Page No.
-----------------------------                                       --------
 
Item 1. Financial Statements
 
Consolidated Condensed Balance Sheets as of
   June 30, 1998 and September 30, 1997                                2
 
Consolidated Condensed Statements of
  Operations for the Three Months Ended
  June 30, 1998 and 1997                                               4
 
Consolidated Condensed Statements of
  Operations for the Nine Months Ended
  June 30, 1998 and 1997                                               5
 
Consolidated Condensed Statements of
  Cash Flows for the Nine Months Ended
  June 30, 1998 and 1997                                               7
 
Notes to Consolidated Condensed Financial Statements                  10
 
Item 2. Management's Discussion and Analysis of
  Financial Condition and Results of Operations                       15
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk    16
 
PART II - OTHER INFORMATION
---------------------------
 
Item 1.  Legal Proceedings                                            17
 
Item 4.  Submission of Matters to a Vote of Security Holders          17
 
Item 6.  Exhibits and Reports on Form 8-K                             18
 
Signature Page                                                        19

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

                                     ASSETS
<TABLE> 
<CAPTION> 
                                                                June 30,    September 30,
                                                               -----------   -----------
                                                                  1998          1997
                                                               -----------   -----------
 
<S>                                                            <C>           <C>
Current assets:
 Cash                                                          $   727,973   $ 1,064,259
 Receivables, net of allowance for doubtful accounts
  of $595,477 and $576,192
   Trade accounts                                               12,155,929    11,576,650
   Current portion of sales contracts                            5,292,706     5,770,626
   Notes receivable                                              1,961,364       939,621
 Inventories                                                    33,142,140    23,002,020
 Prepaid expenses and other                                        742,650     1,607,644
                                                               -----------   -----------
    Total current assets                                        54,022,762    43,960,820
                                                               -----------   -----------
 
Property and equipment:
 Land                                                              432,000       765,000
 Buildings and improvements                                      3,552,210     4,660,582
 Machinery, equipment and other                                  9,749,756     8,953,076
                                                               -----------   -----------
                                                                13,733,966    14,378,658
 Less-accumulated depreciation                                  (7,053,416)   (5,954,554)
                                                               -----------   -----------
                                                                 6,680,550     8,424,104
                                                               -----------   -----------
 
Other assets:
 Noncurrent receivables
   Sales contracts                                               1,859,600     2,027,518
   Related parties, net of allowance of
   $164,563 and $0, respectively                                   349,071       522,597
 Excess of cost over fair value of net assets of businesses
   acquired, net of accumulated amortization of $2,980,421
   and $2,370,455                                               13,618,318    14,228,284
 Other intangible assets                                         2,844,339     1,197,139
 Restricted cash                                                   700,942       717,358
 Other                                                           1,062,485     1,071,629
                                                               -----------   -----------
                                                                20,434,755    19,764,525
                                                               -----------   -----------

                                                               $81,138,067   $72,149,449
                                                               ===========   ===========
</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>
                                                           June 30,     September 30,
                                                             1998          1997
                                                         -----------    -----------
<S>                                                      <C>            <C>
Current liabilities:                                
 Notes payable                                          $  9,690,876    $  9,013,099
 Note payable and accrued interest to related party       15,697,378      13,998,916
 Accounts payable                                          6,569,035       7,775,022
 Accrued expenses and other                                2,914,801       2,251,035
 Current maturities of long-term debt                      8,550,000       5,720,000
                                                         -----------    -----------
    Total current liabilities                             43,422,090      38,758,072
                                                       
                                                       
Long term debt, less current maturities                   28,383,015      23,272,280
Reserve for credit guarantees                                700,942         717,358
                                                         -----------    -----------
    Total liabilities                                     72,506,047      62,747,710
                                                         -----------    -----------
                                                       
Warrants to purchase common stock                      
 in subsidiary                                             1,200,000       2,000,000
                                                       
Stockholders' equity:                                  
 Preferred stock, $.01 par value, authorized           
    50,000,000 shares, issued and outstanding          
    125,000  and  132,500 shares, respectively                 1,250           1,325
 Common stock, $.01 par value, authorized              
   100,000,000 shares, issued and outstanding          
   14,882,464 and 13,664,109 shares, respectively            148,825         136,641
 Paid-in capital                                          29,103,186      28,955,695
 Accumulated deficit                                     (20,845,922)    (20,716,603)
 Notes receivable                                           (975,319)       (975,319)
                                                         -----------     -----------
   Total stockholders' equity                              7,432,020       7,401,739
                                                         -----------     -----------
                                                   
                                                         $81,138,067     $72,149,449
                                                         ===========     ===========
</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
                                                                   June 30,
                                                         --------------------------
                                                             1998          1997
                                                         -----------    -----------
<S>                                                      <C>            <C> 
Net revenues                                             $37,272,305    $38,478,729

Cost of sales                                             30,806,581     31,514,664
                                                         -----------    -----------

Gross profit                                               6,465,724      6,964,065

Selling, general and administrative expenses               4,793,848      4,739,554
                                                         -----------    -----------

Operating income                                           1,671,876      2,224,511
                                                         -----------    -----------

Other income (expenses):
 Interest expense                                         (2,338,925)    (1,666,379)
 Interest income and other                                    (7,985)        36,474
                                                         -----------    -----------

  Total other income (expenses)                           (2,346,910)    (1,629,905)
                                                         -----------    -----------

Income (loss) before income taxes and warrant accretion     (675,034)       594,606

Income taxes                                                     -          186,889
                                                         -----------    -----------

                                                            (675,034)       407,717
Accretion of common stock purchase warrants
 of subsidiary                                                   -          130,606
                                                         -----------    -----------

Net income (loss)                                           (675,034)       277,111

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

Net income (loss) attributable to common stockholders    $  (712,534)       239,611
                                                         ===========    ===========


Basic income (loss) per share                            $      (.05)   $       .02
                                                         ===========    ===========

Diluted income (loss) per share                          $      (.05)   $       .02
                                                         ===========    ===========
</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)

                                                  For the Nine Months Ended
                                                            June 30,
                                                  --------------------------
                                                      1998          1997
                                                  ------------  ------------


Net revenues                                      $107,993,318  $113,053,741

Cost of sales                                       88,049,856    94,194,763
                                                  ------------  ------------

Gross profit                                        19,943,462    18,858,978

Selling, general and administrative expenses        13,990,441    13,174,410
                                                  ------------  ------------

Operating income                                     5,953,021     5,684,568
                                                  ------------  ------------
 
Other income (expenses):
 Interest expense                                   (6,451,552)   (5,080,729)
 Interest income and other                             115,344       131,577
 Gain on sale of assets                                987,857          -
                                                  ------------  ------------
 
  Total other income (expenses)                     (5,348,351)   (4,949,152)
                                                  ------------  ------------

Income before income taxes,
 warrant accretion and extraordinary item              604,670       735,416

Income taxes                                              -          307,417
                                                  ------------  ------------

                                                       604,670       427,999
Accretion of common stock purchase
  warrants of subsidiary                                  -          350,126
                                                  ------------  ------------

Net income before extraordinary item                   604,670        77,873

Extraordinary item:
 Early extinguishment of debt                         (616,239)         -
                                                  ------------  ------------

 Net income (loss)                                     (11,569)       77,873

Dividends on preferred stock                          (117,750)     (112,500)
                                                  ------------  ------------

Net loss attributable to common stockholders      $   (129,319) $    (34,627)
                                                  ============  ============


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

                                      -5-
<PAGE>
 
                     POLYPHASE CORPORATION AND SUBSIDIARIES
          CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (CONTINUED)
                                  (UNAUDITED)
 
 
                                  For the Nine Months Ended
                                           June 30,
                                  --------------------------
                                     1998            1997
                                  ----------      ----------
Basic income (loss) per share:
 Income (loss) before
  extraordinary item              $      .03      $        -
 
 Extraordinary item                     (.04)              -
                                  ----------      ----------
 
 Net income (loss) per share:     $     (.01)     $        -
                                  ==========      ==========



Diluted income (loss) per share:
 Income (loss) before
  extraordinary item              $      .03      $        -

 Extraordinary item                     (.04)              -
                                  ----------      ----------


 Net income (loss) per share:     $     (.01)     $        -
                                  ==========      ==========



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

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

 
                                                      For the Nine Months Ended
                                                              June 30,
                                                      -------------------------
                                                         1998           1997
                                                      -----------   -----------


Cash flow provided by (used in) operating activities:
 Net income (loss)                                    $   (11,569)  $    77,873
                                                      -----------   -----------
Adjustments to reconcile net income (loss)          
 to net cash provided by (used in) operating        
 activities:                                        
  Depreciation and amortization                         3,210,649     2,453,680
  Provision for doubtful accounts                         183,848       123,914
  Gain on sale of assets                                 (987,857)         -
  Accretion of warrants to purchase common stock    
     of subsidiary                                           -          350,126
  Changes in:                                       
   Accounts and sales contracts receivable                 47,274     1,646,086
   Inventories                                        (10,140,120)    2,161,029
   Prepaid expenses and other                             828,094       488,469
   Accounts payable                                    (1,205,987)   (1,371,802)
   Accrued expenses and other                             715,766      (699,698)
                                                      -----------   -----------
                                                    
      Net cash provided by (used in)                
       operating activities                            (7,359,902)    5,229,677
                                                      -----------   -----------
                                                    
Cash flows provided by (used in) investing          
 activities:                                        
  Notes and other receivables                          (1,021,743)      310,251
  Receivables from related parties                          8,963    (5,014,730)
  Capital expenditures, net                            (1,010,543)     (686,703)
                                                      -----------   -----------
                                                    
     Net cash (used in)                             
      investing activities                             (2,023,323)   (5,391,182)
                                                      -----------   -----------



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

                                      -7-
<PAGE>
 
                     POLYPHASE CORPORATION AND SUBSIDIARIES
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
                                  (UNAUDITED)


<TABLE> 
<CAPTION> 
                                                         For the Nine Months Ended
                                                                  June 30,
                                                        ----------------------------
                                                            1998           1997
                                                        ------------    ------------
<S>                                                     <C>             <C>

Cash flows provided by (used in) financing activities:
Borrowings (principal payments) under line of
   credit arrangements, net                              $  2,174,882   $ (1,206,023)
  Borrowings (principal payments) on other          
   notes payable and long term debt, net                   31,041,039      1,380,837
  Principal payments on term notes                         (1,982,280)             -
  Principal payments on convertible bonds                  (4,300,000)             -
  Principal payments on subordinated debentures           (13,000,000)             -
  Redemption of Overhill warrants                          (2,000,000)             -
  Principal collections on Pyrenees note receivable                 -        303,770
  Exercise of common stock options and warrants                 2,100         56,600
  Dividends on preferred stock                               (117,750)      (112,500)
  Deferred financing costs                                 (2,753,552)             -
  Common stock issuance costs                                 (17,500)       (17,500)
                                                         ------------   ------------
                                                    
   Net cash provided by                             
     financing activities                                   9,046,939        405,184
                                                         ------------   ------------
                                                    
Net increase (decrease) in cash                              (336,286)       243,679
Cash - beginning of period                                  1,064,259        280,969
                                                         ------------   ------------
                                                    
Cash - end of period                                     $    727,973   $    524,648
                                                         ============   ============
</TABLE> 

                                      -8-
<PAGE>
 
                     POLYPHASE CORPORATION AND SUBSIDIARIES
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
                                  (UNAUDITED)

                                                   For the Nine Months Ended
                                                           June 30,
                                                   -------------------------
                                                      1998           1997
                                                   ----------     ----------


Supplemental schedule of cash flow information:
 Cash paid during the period for :
  Interest                                         $3,069,653     $4,045,806
  Income taxes                                     $        -     $1,311,055

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 was tendered
125,000 shares of Series A-3 Preferred Stock having a redemption value of
$1,250,000.

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.

In January 1997, an unrelated third party was granted an option on 200,000
shares of common stock, exercisable at $.01 per share, in exchange for a two
year consulting agreement and were valued at $973,000.

In December 1997, in connection with the new Overhill Farms credit agreement,
warrants were issued having a fair market value of $1,200,000.

In connection with the repayment of certain indebtedness to Merrill Lynch, the
Company issued warrants covering 210,000 shares exercisable at $.01 per share
and 210,000 shares exercisable at $1.125 per share.  Such warrants were assigned
a value of $175,000.



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

                                      -9-
<PAGE>
 
                     POLYPHASE CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 JUNE 30, 1998


1.  NATURE OF BUSINESS

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

    In December 1997, the Company's subsidiary, Overhill Farms, Inc., refinanced
    a certain portion of existing debt. The new financing amounted to a total
    facility of $24.1 million which is structured as a three-year term loan
    maturing in December 2000. The note requires interest-only payments at prime
    plus 4% ( 12.5% as of June 30, 1998) through April 1999 and thereafter
    provides for principal amortization of $250,000 per month, plus interest,
    until a final payment of approximately $19,850,000 is due on December 5,
    2000. The agreement also requires Overhill to pay on a quarterly basis,
    service fees totalling $140,000, $300,000 and $440,000 for the first, second
    and third years of the loan, respectively. Under the terms of the new
    financing agreement, the lender was granted warrants to purchase 30% of
    Overhill's common stock, exercisable immediately at a nominal value, 20% of
    which can be repurchased by the Company over the next two years for
    $2,000,000. Such warrants were assigned a value of $1,200,000, which has
    been recorded as debt discount and is being amortized over the term of the
    loan. Additionally, the lender received fees totalling approximately $1.7
    million in connection with

                                      -10-
<PAGE>
 
    this financing, which are partially refundable upon early repayment of the
    loan through a refinancing, sale or initial public offering of Overhill. As
    a result of this transaction Overhill repaid in full the $13.0 million
    subordinated debentures and repurchased for approximately $2.0 million the
    warrants previously held by Rice to purchase up to 22.5% of Overhill's
    common stock. These payments to Rice resulted in the Company and Rice
    reaching a settlement of their litigation. The Company also used a portion
    of the proceeds to repay Term Loans A and B due Finova, the $1,500,000
    senior convertible debenture and $2,800,000 of principal of the $4,000,000
    senior convertible debentures due Merrill Lynch. The refinancing also
    enabled the Company and Overhill to cure all previous defaults under various
    loan agreements and provided the Company with approximately $900,000 in
    working capital. The early extinguishment of this indebtedness resulted in
    an extraordinary charge to operations of approximately $616,000 (before
    income taxes). Overhill's credit facilities generally restrict loans,
    advances, dividends or transfers from Overhill to the Company to $350,000
    per year.

4.  SALE OF SUBSIDIARY

    In December 1997, the Company sold Dallas Parkway Properties, Incorporated,
    a subsidiary whose principal asset was the corporate office building, in
    exchange for nominal consideration plus the assumption of a note payable for
    $2.8 million. The Company realized a gain of approximately $988,000 on this
    transaction.

5.  TAXES

    For the nine months ended June 30, 1998, the actual Federal income tax
    expense attributable to income from continuing operations differed from the
    net amounts recorded by the Company. The Company recorded a provision for
    Federal income taxes of $4,000 using the statutory tax rate of 34% and then
    applied a like amount of the existing valuation allowance, resulting in a
    net provision for the period of zero. As of June 30, 1998, the Company had a
    remaining valuation allowance of approximately $5.0 million and net
    operating loss carryforwards of approximately $7.3 million.

                                      -11-
<PAGE>
 
6.  EARNINGS PER SHARE

    The following table sets forth the computations of basic and diluted
    earnings per share:

<TABLE> 
<CAPTION> 
 
                                                        For the Three Months Ended
                                                                  June 30,
                                                        --------------------------
                                                           1998           1997
                                                        -----------    -----------
<S>                                                     <C>            <C>
Numerator:
  Net income (loss)                                     $  (675,034)       277,111
  Preferred dividends                                       (37,500)       (37,500)
                                                        -----------    -----------
 
 Net income (loss) attributable to common shareholders  $  (712,534)   $   239,611
                                                        ===========    ===========

Denominator:
  Denominator for basic earnings
    per share- weighted average shares                   14,785,541     13,664,109
                                                        -----------    -----------
 
  Effect of dilutive securities:
    Convertible preferred stock                                -           250,000
    Stock options                                              -           382,125
                                                        -----------    -----------
 
    Dilutive potential common shares                          - (a)        632,125
                                                        -----------    -----------
 
                                                         14,785,541     14,296,234
                                                        ===========    ===========
</TABLE> 
 
<TABLE> 
<CAPTION>  
                                                        For the Nine Months Ended
                                                                 June 30,
                                                        -------------------------
                                                           1998          1997
                                                        -----------   -----------
<S>                                                     <C>           <C>
                                                                    
  Numerator:                                                        
    Net income (loss) before extraordinary item         $   604,670   $    77,873
    Preferred dividends                                    (117,750)     (112,500)
                                                        -----------   -----------
                                                            486,920       (34,627)
    Extraordinary item                                     (616,239)         -
                                                        -----------   -----------
    Income (loss) attributable to common shareholders   $  (129,319)  $   (34,627)
                                                        ===========   ===========
  Denominator:                                                      
    Denominator for basic earnings per share-                       
      weighted average shares  (a)                       14,419,541    13,621,658
                                                        ===========   ===========
</TABLE> 

   (a) Dilutive potential common shares were excluded from the computation in
       loss periods since their effect would have been antidilutive.

                                      -12-
<PAGE>
 
7. STOCKHOLDERS' EQUITY

   During the period ended June 30, 1998, the holders of the Company's Series F
   6% Preferred Stock converted 7,500 shares into a total of 1,008,355 shares of
   common stock.

   During the quarter ended December 31, 1997, the conversion price of the
   Company's Series A-3 Preferred Stock was adjusted, pursuant to the
   Certificate of Designation for such preferred stock, to market value as of
   the date of conversion.  Accordingly, at June 30, 1998, the Series A-3
   Preferred Stock is convertible into a total of approximately 2.0 million
   shares.

   In connection with the repayment of certain indebtedness to Merrill Lynch as
   described in Note 3, the Company issued warrants covering 210,000 shares
   exercisable at $.01 per share, which were exercised during the period ended
   June 30, 1998, and 210,000 shares exercisable at $1.125 per share.  Such
   warrants were assigned a value of $175,000, which is being amortized over the
   remaining term of the loan.


8. LIQUIDITY

   As described in Note 1, the Company operates primarily in three industry
   segments.  The majority of the Company's net sales, operating profit and
   identifiable assets are in the Food and Forestry Groups.  The Company's
   corporate entity has no significant operations and has historically been
   partially dependent upon cash flows from its Food and Forestry Groups to meet
   its ongoing liquidity requirements.  As a result of various restrictions in
   debt agreements that exist at the Food and Forestry Group levels, the Company
   is generally restricted as to the amount of  management fees, dividends,
   loans or certain other advances that may be upstreamed from those
   subsidiaries.

   In December 1997, in connection with the Long Horizons refinancing, Overhill
   was allowed per the terms of the new note agreement to effect a one-time cash
   advance to Polyphase of $5.5 million.  These proceeds were subsequently used
   by Polyphase to reduce corporate borrowings plus accrued interest by $4.6
   million and provide cash flow for working capital and other needs of
   $900,000.  The remaining proceeds of the $24.1 million Long Horizons note
   were used by Overhill to refinance existing principal plus accrued interest,
   repurchase existing warrants to purchase 22.5% of Overhill's common stock for
   $2 million and pay certain costs related to the financing.  In addition, the
   refinancing enabled the Company and Overhill to cure all defaults under all
   of their previous loan agreements.

   Upon maturity of its note payable to Mr. Harold Estes, former owner of Texas
   Timberjack, Inc. (TTI), the Company, in April 1998, entered into a verbal
   agreement with Mr. Estes to extend the maturity of the note for an additional
   six months on essentially the same terms and conditions as previously in
   effect.  The new principal amount of $15,127,000 bears interest at 16% and
   will become due in October 1998.  Mr. Estes has no recourse to any of the
   assets or capital stock of the Company or any of its other subsidiaries other
   than its ownership interest on TTI, except that Mr. Estes holds as secondary
   collateral 2,000,000 shares of the Company's common stock owned by the
   Pyrenees Group, a private investment firm.

                                      -13-
<PAGE>
 
   In the event of default on the above note, the Company may be required to
   transfer at least some portion its ownership interest in TTI to Mr. Estes,
   and the Company would likely incur a noncash loss represented by the
   difference between its net asset position in TTI and the note balance due Mr.
   Estes.  Further, as of June 30, 1998, Polyphase is indebted to TTI for
   approximately $6.4 million on a non-interest bearing intercompany advance
   from TTI offset by an intercompany receivable due to Polyphase from TTI of
   approximately $4.7 million. These amounts may be required to be settled in
   the event of default on the Estes note.  Also, in the event of default on
   this note, if the primary collateral, the Company's ownership interest in
   TTI, is not sufficient to satisfy the balance owed to Mr. Estes, it is
   possible that some or all of the Polyphase shares owned and pledged by
   Pyrenees could be retained by Mr. Estes.

   Furthermore, Polyphase may be required to retain legal representation on
   various matters affecting the Company.  The fees to be incurred could be
   substantial in relation to the Company's cash position.

9. CONTINGENCIES

   On February 23, 1998, Mr. Paul A. Tanner resigned as Chief Executive Officer
   and Chairman of the Company's Board of Directors.  Mr. James Rudis, the
   Company's President was elected by the Board to assume the positions of Chief
   Executive Officer and Chairman.  Following the resignation, a reserve of
   approximately $165,000 was established against outstanding advances due from
   Mr. Tanner.

   The Company has guaranteed the repayment of a loan on behalf of  PLY Stadium
   Partners, Inc. ("Stadium Partners"), a private investment firm headed by the
   former Chairman of the Company, Mr. Paul A. Tanner.  The loan was made by a
   financial institution in connection with the purchase of land by a
   partnership affiliated with Stadium Partners to build a multi purpose stadium
   in Las Vegas.  The guarantee is only effective, in certain circumstances or
   upon the occurrence of certain events.  A foreclosure sale was conducted on
   or about July 15, 1998.  Notwithstanding such foreclosure action the Company,
   based on the advice of legal counsel, does not believe that it will incur any
   significant liability as a result of this guarantee. As a result, the Company
   believes the existence of such guarantee will not have a material adverse
   effect on the Company's financial condition or results of operations.

   During 1997, five substantially identical complaints were filed in the United
   States District Court for the District of Nevada against the Company and
   certain of its officers and directors. The plaintiffs' complaints each sought
   certification as  class action and asserted liability based on alleged
   misrepresentations that resulted in the market price of the stock being
   artificially inflated.  The defendants filed motions to dismiss in each of
   the lawsuits.  Without certifying the cases as class actions, the District
   Court consolidated the cases into a single action.

   During the period ended June 30, 1998, the District Court dismissed the
   complaint in the consolidated action and ordered that the plaintiffs replead
   such complaints.  The plaintiffs then filed a motion for reconsideration of
   the Court's ruling.  The defendants opposed the motion for reconsideration.
   The Court has not ruled upon plaintiffs' motion; however, the plaintiffs have
   not filed an amended complaint.  Consequently, it cannot be determined at
   this time whether the dismissal of the complaint will lead to a dismissal of
   the consolidated action.

                                      -14-
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Statements contained in this Form 10-Q that are not historical facts, including,
but not limited to, any 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 nine  months ended June  30, 1998 decreased $5,061,000 (4%) to
$107,993,000 from $113,054,000 during the nine months ended June 30, 1997.  The
decrease in revenue is primarily attributable to the elimination of low margined
business at Overhill Farms and slower than anticipated growth in the food
services sector.  On a consolidated basis, gross margins increased over the
comparable period in the prior year from 16.7% to 18.5%, resulting in a slight
increase in operating income despite higher selling, general and administrative
expenses.  For the nine months ended June 30 1998, operating income increased
$268,000  to $5,953,000 from $5,685,000 during the comparable period in 1997.

Interest expense increased $1,371,000 over the comparable period in 1997,
primarily due to additional borrowings and the refinancing of the Company's
indebtedness to Harold Estes.

Net income before extraordinary item for the nine months ended June 30, 1998
increased  $527,000 to  net income of $605,000 from  $78,000 during the nine
months ended June 30, 1997.  Net income for the period included a one time gain
of $988,000 from the sale of the Company's corporate headquarters in December
1997.  Net income was negatively affected by an  extraordinary expense of
$616,000, the early extinguishment of debt, associated with the refinancing of
certain indebtedness by Overhill Farms.

The Food Group's revenues decreased $5,000,000 to $68,550,000 for the nine
months ended June 30, 1998 as compared to $73,550,000 for the nine months ended
June 30, 1997.  Operating income decreased to $3,647,000 for the period,
compared to $4,022,000 in the prior year.  Revenues have decreased primarily due
to Overhill's emphasis on  higher margined business and the slow growth of its
food services sector.

Revenues for the Forestry Group for the nine months ended June 30, 1998
decreased  $617,000  to $36,243,000 from $36,860,000 for the nine months ended
June 30, 1997.  Operating income for the comparable period increased $342,000
to $3,463,000 for the nine  months ended June 30, 1998 from $3,121,000 for the
nine months ended June 30, 1997.    Sales of new equipment decreased  during the
period as sales of used equipment remained strong, generating a product mix with
higher gross margins than the comparable period in 1997.

                                      -15-
<PAGE>
 
Revenues in the Transformer Group for the nine months ended June 30, 1998
increased $556,000 to $3,201,000 from $2,645,000 for the comparable period in
fiscal 1997.  Operating income increased slightly to $36,000 for the nine months
ended June 30, 1998 from $27,000 for the comparable period in fiscal 1997.   The
increase  is primarily attributable to higher sales of filters and transformers
on government contracts.


LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended June 30, 1998, the Company used cash of
approximately $7,360,000 in its operating activities compared to cash provided
of $5,230,000 during the comparable period in fiscal 1997. The increased use of
cash over the comparable period resulted  from  increases in inventories,
primarily at Timberjack.

During the nine months ended June 30, 1998, the Company's investing activities
used cash of approximately $2,023,000 compared to a use of cash in the amount of
$5,391,000 in fiscal 1997. The Company's use of cash consisted primarily of new
notes receivable and fixed asset additions.

During the nine months ended June 30, 1998 , the Company's financing activities
provided cash of approximately $9,047,000 as compared to cash provided of
$405,000 in the comparable period in fiscal 1997.  The source of cash during the
period consisted primarily from the loan facility of approximately $24 million
at Overhill Farms and additional borrowings to finance inventory at Timberjack.

Subsequent to June 30, 1998 , Texas Timberjack  refinanced its existing line of
credit with a  new loan agreement with NationsBank, N.A. The new facility
includes a $4.0 million term note, at 8.3% maturing August 2001, amortizing
monthly, and  an $8.0 million revolving  line of credit at prime less 1/4%, due
March 31, 1999.

The Company plans to continue its program of expansion and diversification
through the acquisition of additional operating companies.  Funding for these
acquisitions is anticipated to come primarily from a combination of internally
generated funds and from additional borrowings.  The Company's management
believes that cash generated from operations, together with available lines of
credit and contemplated debt and/or equity placements, will be sufficient to
meet the Company's liquidity requirements for the next twelve months.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not own, nor does it have an interest in any market risk
sensitive investments.

                                      -16-
<PAGE>
 
                          PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

During 1997, five substantially identical complaints were filed in the United
States District Court for the District of Nevada against the Company and certain
of its officers and directors. The plaintiffs' complaints each sought
certification as  class action and asserted liability based on alleged
misrepresentations that resulted in the market price of the stock being
artificially inflated.  The defendants filed motions to dismiss in each of the
lawsuits.  Without certifying the cases as class actions, the District Court
consolidated the cases into a single action.

During the period ended June 30, 1998, the District Court dismissed the
complaint in the consolidated action and ordered that the plaintiffs replead
such complaints.  The plaintiffs then filed a motion for reconsideration of the
Court's ruling.  The defendants opposed the motion for reconsideration.  The
Court has not ruled upon plaintiffs' motion; however, the plaintiffs have not
filed an amended complaint.  Consequently, it cannot be determined at this time
whether the dismissal of the complaint will lead to a dismissal of the
consolidated action.

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

On April 24, 1998, the Company held its 1998 Annual Meeting of Stockholders (the
"Annual Meeting").  At the Annual Meeting, the only matter considered and voted
upon by stockholders was the election of four (4) directors.

The following table sets forth certain information relating to the voting by
stockholders on the matter referred to above:
 
                      Votes Cast   Votes Against                Broker
Nominee                  For        Or Withheld   Abstentions  Non-Votes
 
James Rudis           11,573,994        480,799        -           -
 
Michael F. Buck       11,578,594        476,199        -           -
 
George R. Schrader    11,578,594        476,199        -           -
 
William E. Shatley    11,579,094        475,699        -           -

Reference is made to the Company's definitive proxy statement, mailed on March
27, 1998 to stockholders of record on March 16, 1998, for more complete
information relating to the Annual Meeting.

                                      -17-
<PAGE>
 
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

       (a)  Exhibits
 
            None

       27   Financial Data Schedule

       (b)  Reports on Form 8-K - The following reports were filed on Form 8-K
            during the quarter ended June 30, 1998.
 
            None

                                      -18-
<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: August 10, 1998                    By: /s/ James Rudis            
                                             ------------------------------
                                             James Rudis
                                             Chairman, President and
                                             Chief Executive Officer



Date: August 10, 1998                    By: /s/ William E. Shatley
                                             ------------------------------
                                             William E. Shatley
                                             Senior Vice President, Treasurer
                                             and Chief Financial Officer

                                      -19-
<PAGE>
 
                               INDEX TO EXHIBITS



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

             27                                     Financial Data Schedule