FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1995

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

For the transition period from...............to................

Commission file number 1-8191

                               PORTA SYSTEMS CORP.
             (Exact name of registrant as specified in its charter)

            Delaware                                            11-2203988
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)


                   575 Underhill Boulevard, Syosset, New York
                    (Address of principal executive offices)

                                      11791
                                   (Zip Code)

                                  516-364-9300
              (Registrant's telephone number, including area code)

Indicate by check mark whether (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the  preceding
12 months (or for such  shorter  period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

Yes [X]     No [ ]

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

                    7,307,106 shares as of November 13, 1995

                               Page 1 of 15 pages


<PAGE>

Part I
Financial Information
Porta Systems Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
                                                              September 30,    December 31,
                                                                  1995             1994
Assets                                                         (Unaudited)       
-------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>     
Current assets:                                                                
  Cash                                                          $  1,436         $  2,332
  Accounts receivable - trade, net                                15,944           13,964
  Inventories                                                     16,868           20,146
  Prepaid expenses                                                 1,694            1,020
                                                                -------------------------
     Total current assets                                         35,942           37,462
                                                                -------------------------
Property, plant and equipment, at cost                            32,889           32,187
  Less accumulated depreciation and amortization                 (22,812)         (21,048)
                                                                -------------------------
       Total                                                      10,077           11,139
                                                                -------------------------
Other assets:                                                                  
  Amounts receivable from sale of discontinued operations          1,000            4,500
  Deferred computer software                                       5,132            6,257
  Goodwill - net of accumulated amortization                      18,596           19,032
  Other assets                                                     6,734            6,573
                                                                -------------------------
                                                                  31,462           36,362
                                                                -------------------------
     Total assets                                               $ 77,481         $ 84,963
                                                                =========================
Liabilities and Stockholders' Equity                                           
Current liabilities:                                                           
  Notes payable - banks                                         $  1,722         $  1,253
  Current maturities of long-term debt                            26,490              152
  6% Convertible subordinated debentures due July 1, 2002         32,029             --
  Accounts payable                                                10,254            9,690
  Accrued expenses                                                13,895           12,168
  Income taxes payable                                               430              478
                                                                -------------------------
     Total current liabilities                                    84,820           23,741
                                                                -------------------------
Long-term liabilities:                                                         
  6% Convertible subordinated debentures due July 1, 2002           --             35,073       
  Long-term debt, net of current maturities                         --             21,000       
  Other long-term liabilities                                      2,934            2,967
  Minority interest                                                  856              657
                                                                -------------------------
     Total long-term liabilities                                   3,790           59,697
                                                                -------------------------
Stockholders' equity:                                                          
  Preferred stock, no par value; authorized                                    
   1,000,000 shares of which 100,000 shares                                    
   are designated as Series A; none issued                          --               --                                     
  Common stock, par value $.01; authorized                                     
   20,000,000 shares, issued 7,461,806 shares                                  
   in 1995 and 7,461,806 in 1994                                      75               75
  Additional paid-in capital                                      33,248           32,888
  Foreign currency translation adjustment                         (3,898)          (4,031)
  Accumulated deficit                                            (38,180)         (25,033)
                                                                -------------------------
                                                                  (8,755)           3,899
  Less shares held in treasury, at cost, 154,700 shares                       
       in 1995 and 1994                                           (1,938)          (1,938)
  Receivable for employee stock purchases                           (436)            (436)
                                                                -------------------------
     Total stockholders' equity (deficit)                        (11,129)           1,525
                                                                -------------------------
Total liabilities and stockholders' equity                      $ 77,481         $ 84,963
                                                                =========================
</TABLE>
                                                                     
     See accompanying notes to condensed consolidated financial statements.

                               Page 2 of 15 pages





<PAGE>

Porta Systems Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
                                                      Nine Months Ended                 Three Months Ended
                                                  September 30,    September 30,    September 30, September 30,
                                                        1995            1994            1995           1994
-------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>     
Sales                                                $ 47,922        $ 56,459        $ 14,744        $ 19,383
Cost of sales                                          37,269          40,429          11,422          16,799
                                                     --------------------------------------------------------
  Gross profit                                         10,653          16,030           3,322           2,584
Selling, general and administrative expenses           11,573          13,770           2,839           4,457
Research and development expenses                       3,853           2,981           1,419             965
                                                     --------------------------------------------------------
       Total expenses                                  15,426          16,751           4,258           5,422
                                                     --------------------------------------------------------
       Operating  loss                                 (4,773)           (721)           (936)         (2,838)
Interest expense                                       (5,882)         (3,719)         (2,072)         (1,255)
Interest income                                            48             198              15              74
Other                                                    (642)           (385)            (93)           (243)
                                                     --------------------------------------------------------
loss from continuing operations                                                                      
  before income taxes and minority interest           (11,249)         (4,627)         (3,086)         (4,262)
Income tax                                                (70)        (14,030)            (53)        (13,997)
Minority interest                                        (199)           (282)            (42)           (200)
                                                     --------------------------------------------------------
Loss from continuing operations                       (11,518)        (18,939          (3,181)        (18,459)
Loss on sale of discontinued operations                (3,500)           --              --              --
Extraordinary Item:                                                                                  
  Gain on early extinguishment of debt                  1,871            --              --              --
                                                     --------------------------------------------------------
Net loss                                             ($13,147)       ($18,939)        ($3,181)       ($18,459)
                                                     ======================================================== 
Per share amounts:                                                                                   
  Loss from continuing operations                      ($1.58)         ($2.66)         ($0.44)         ($2.57)
  Loss from discontinued operations and                                                              
       extraordinary Item                              ($0.22)           --              --              --
                                                     --------------------------------------------------------
Net loss per share                                     ($1.80)         ($2.66)         ($0.44)         ($2.57)
                                                     ======================================================== 
Weighted average shares outstanding (in thousands)      7,307           7,120           7,307           7,195
                                                     ======================================================== 
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                               Page 3 of 15 pages

<PAGE>

Porta Systems Corp. and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)                                               Nine Months Ended
                                                    September 30,  September 30,
                                                        1995           1994
--------------------------------------------------------------------------------
Cash flows from operating activities:
 Net loss                                             ($13,147)        ($18,939)
 Adjustments to reconcile net loss                                 
     to net cash used in operating activities:                     
   Adjustment of receivable from sale of                           
     discontinued operations                             3,500             --
   Gain on early extinguishment of debt                 (1,871)            --
   Deferred income taxes                                                 13,955
  Depreciation and amortization                          3,735            3,508
  Accretion of convertible subordinated                            
     debentures                                            544              332
  Minority interest                                        199              299
                                                      -------------------------
        Total                                           (7,040)            (845)

Changes in assets and liabilities                                  
  Accounts receivable                                   (1,980)          (4,415)
  Inventories                                            3,278            2,834
  Prepaid expenses                                        (314)             (71)
  Deferred computer software                              (510)          (1,362)
  Intangible and other assets                              622             (617)
  Accounts payable                                         564            5,330
  Accrued expenses                                       1,827              801
  Other liabilities                                        (81)            (893)
                                                      -------------------------
        Net cash (used in) provided by operating                         
           activities                                   (3,634)             762
                                                      -------------------------
Cash flows from investing activities:                              
  Capital additions, net of minor disposals               (702)            (904)
                                                      -------------------------
        Net cash used in investing activities             (702)            (904)
                                                      -------------------------
Cash flows from financing activities:                              
  Proceeds from additional long-term debt                5,338             --
  Repayments of long-term debt                          (2,500)          (1,394)
  Proceeds from issuance of common stock                    --            2,137
  Issuance of notespayable/short term loans                469              281
                                                      -------------------------
        Net cash provided by financing activities        3,307            1,024
                                                      -------------------------
Effect of exchange rates on cash                           133             (277)
Increase(decrease) in cash and cash equivalents           (896)             605
Cash and equivalents - beginning of year                 2,332            1,727
                                                      -------------------------
Cash and equivalents - end of period                  $  1,436         $  2,332
                                                      =========================
Supplemental cash flow disclosure:                                 
  Cash paid for interest expense                      $  2,365         $  3,701
                                                      =========================
  Cash paid for income taxes                          $     41         $     42
                                                      =========================
                                                                
     See accompanying notes to condensed consolidated financial statements.

                               Page 4 of 15 pages
<PAGE>

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1:  MANAGEMENT'S RESPONSIBILITY FOR INTERIM
         FINANCIAL STATEMENTS INCLUDING ALL
         ADJUSTMENTS NECESSARY FOR FAIR PRESENTATION

     Management  acknowledges  its  responsibility  for the  preparation  of the
accompanying  interim  consolidated   financial  statements  which  reflect  all
adjustments, consisting of normal recurring adjustments, considered necessary in
its  opinion  for a fair  statement  of  the  results  for  the  interim  period
presented.  Results  for the  first  nine  months  of 1995  are not  necessarily
indicative of results for the year.

Note 2:  Discontinued Operations

     At December 31, 1994, the Company's  balance sheet reflected a $4.5 million
receivable from sale of  discontinued  operations.  This amount  represented the
Company's expected recovery at such date from the sale by the Company in 1993 of
its  Israeli  subsidiaries  which  were  engaged  in  the  manufacture  of  data
communications   connecting  equipment.   As  a  result  of  a  liquidation  and
receivership proceedings involving the buyer of the subsidiaries,  the estimated
recovery  from the sale of such  operations  has been  reduced to $1.0  million,
which resulted in an additional loss on sale of discontinued  operations of $3.5
million during the first nine months ended September 30, 1995.

Note 3:  Inventories

     Inventories  at September 30, 1995 have been computed using a standard cost
system.  Inventories  at December 31, 1994  resulted  from a physical  inventory
conducted  on  that  date.  The  composition  of  inventories  at the end of the
respective periods is as follows:

                                       September 30, 1995      December 31, 1994
                                       ------------------      -----------------
                                                     (in thousands)
     Parts and Components                   $11,670                 $11,838
     Work in Process                          1,315                   1,854
     Finished Goods                           3,883                   6,454
                                            -------                 -------
                                            $16,868                 $20,146
                                            =======                 =======
                                                     
Note 4:  Long Term Contracts

     Accounts  receivable  include  approximately  $3.1 million at September 30,
1995 in excess  costs and  related  profits  over  amounts  billed  relating  to
long-term  contracts under which the Company  provides  specialized  products to
major  international  customers  Substantially  all such  amounts will be billed
during the remainder of 1995.

                               Page 5 of 15 pages
<PAGE>

Note 5:  Long-Term Debt

     At December 31, 1994, the Company's long-term debt consisted principally of
$35  million of 6%  convertible  subordinated  debentures  due July 1, 2002 (the
"Debentures"),  and $21 million due to Foothill Capital Corporation ("Foothill")
pursuant to the  Company's  Amended and Restated  Loan and  Security  Agreement,
dated as of November 28, 1994, as amended, between Foothill and the Company (the
"Foothill  Agreement").  At September  30, 1995,  the  Company's  debt under the
Debentures  and the  Foothill  Agreement  was $32.0  million  and $26.5  million
respectively.  The change in outstanding debt reflects  primarily the repurchase
by the Company from  Foothill of certain  Debentures  which had been acquired by
Foothill and an increase in borrowings pursuant to the Foothill  Agreement.  The
purchase of the  Debentures  from  Foothill was paid in part  through  increased
borrowings  from  Foothill.  The amount of Debentures  outstanding  reflects the
amount paid by the initial  purchasers of the  Debentures  plus the  unamortized
original issue discount.  Borrowings under the Foothill Agreement are secured by
substantially all the assets of the Company and its subsidiaries. The Debentures
are unsecured  obligations of the Company,  and the Company's  obligations under
the Foothill  Agreement are senior to its obligations on the  Debentures.  Loans
pursuant to the Foothill Agreement bear interest at 12% per annum which rate may
increase as a result of the event of default.

     The Foothill Agreement contains various  restrictive  covenants,  including
the maintenance of various financial ratios and tests,  including a consolidated
net worth test, maintenance of ratios of cash and accounts receivable to current
liabilities and a minimum  operating  income test. As of September 30, 1995, the
Company was in default with respect to  financial  covenants  under the Foothill
Agreement. In addition, the Foothill Agreement prohibits payment of dividends.

     The borrowings under the Foothill Agreement are limited by a borrowing base
formula. During the quarter, the borrowings,  including obligations with respect
to  letter  of  credit,  under  the  Foothill  Agreement  exceeded  the  maximum
availability.  As of September 30, 1995, the Company's  borrowings and letter of
credit  obligations  exceeded the maximum  availability  by  approximately  $4.1
million.

     As a  result  of the  Company's  default  with  respect  to  the  financial
covenants,  Foothill  has the  right  to  accelerate  payment  of the  Company's
obligations under the Foothill Agreement. In July 1995, Foothill issued a notice
of  event of  default  under  the  Foothill  Agreement.  Although  the  Foothill
Agreement  provides  various remedies to Foothill if an event of default occurs,
Foothill,  while  expressly  reserving  the right to enforce any right or remedy
permitted by the Foothill  Agreement,  in its notice it elected only to exercise
its right to require the Company to refrain  from making  payments on account of
the  Debentures  for up to 225 days.  As a result,  the Company did not make the
interest payment of approximately $2.2 million due on July 31, 1995 with respect

                               Page 6 of 15 pages
<PAGE>

to the  Debentures.  While  the  terms of the  indenture  pursuant  to which the
Debentures were issued  precluded the Company from making the interest  payment,
the failure of the Company to make the interest  payment  constitutes  a default
with respect to the Debentures,  and gives the holders of the Debentures certain
rights with respect to the Debentures, including certain acceleration rights. As
a result  of the  occurrence  of  events  of  default  under  both the  Foothill
Agreement and the  Debentures,  the Company's  liabilities  with respect to such
indebtedness  have been  classified as current  liabilities  as of September 30,
1995.

Note 6:  Legal Matters

     Eight  alleged  class  action  complaints  have been  consolidated  and are
pending in the U.S.  District Court for the Eastern District of New York against
the  Company  and  certain of its  present  and former  directors  and  alleging
violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and
Rule 10b-5  thereunder.  The plaintiffs  seek,  among other things,  unspecified
money damages.  The Company  intends to vigorously  defend these suits,  however
management cannot presently  determine what, if any, damages may be sustained as
a result of these actions. No reserves for any such losses have been recorded.

                               Page 7 of 15 pages
<PAGE>


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

     The  company's  consolidated  statements  of  operations  for  the  periods
indicated below, shown as a percentage of Sales, are as follows:



                                         Nine Months Ended    Three Months Ended
                                           September 30,         September 30,
                                          --------------        --------------
                                          1995      1994        1995      1994
                                          ----      ----        ----      ----
Sales                                      100%      100%        100%      100%
 Cost of sales                              78%       72%         77%       87%
                                          ----      ----        ----      ----
Gross profit                                22%       28%         23%       13%
Selling, general and                                        
  administrative expenses                   24%       24%         19%       23%
Research and development expenses            8%        5%         10%        5%
    Operating income (loss)                (10)%      (1)%        (6)%     (15)%
Interest expense - net                     (12)%      (6)%       (14)%      (6)%
Other                                       (1)%      (1)%        (1)%      (1)%
Income tax                                  --       (25)%        --       (72)%
Minority interest                           --        --          --        (1)%
Loss on sale of discontinued                                
      Operations                            (7)%      --          --        --
Gain on extinguishment of debt               4%       --          --        --
Net loss                                   (27)%     (34)%       (22)%     (95)%
                                                          

     The  Company's  sales from  continuing  operations  by product line for the
periods ended September 30, 1995 and 1994 are as follows:


                                                Nine Months Ended
                                                  September 30,
                                           ---------------------------
                                              (Dollars in thousands)
                                           1995                   1994
                                           ----                   ----
Line connection/protection
   equipment                        $23,051       48%       $30,418       54%
OSS equipment                        20,995       44%        20,824       37%
Other                                 3,876        8%         5,217        9%
                                    -------      ---        -------      --- 
                                    $47,922      100%       $56,459      100%

                               Page 8 of 15 pages
<PAGE>

                                               Three  Months Ended
                                                  September 30,
                                           ---------------------------
                                              (Dollars in thousands)
                                           1995                   1994
                                           ----                   ----
Line connection/protection
   equipment                        $ 6,946       47%       $ 8,647       45%
OSS equipment                         6,599       45%         9,114       47%
Other                                 1,199        8%         1,622        8%
                                    -------      ---        -------      --- 
                                    $14,744      100%       $19,383      100%
                                                       

Financial Condition and Liquidity

     The Company's working capital changed from working capital of $13.7 million
at  December  31,  1994 to a working  capital  deficiency  of $48.9  million  at
September 30, 1995. This change results principally from the reclassification of
the Company's  obligations to Foothill Capital Corporation  ("Foothill") and its
6% convertible  subordinated debentures due July 1, 2002 (the "Debentures") from
long-term  at December 31, 1994 to current at  September  30, 1995.  Such change
resulted from the occurrence of an event of default under the agreement relating
to the Company's debt to Foothill. As a result of the event of default, Foothill
took action to prohibit the Company from making a $2.2 million  interest payment
on the Debentures,  which was due by July 31, 1995, thereby triggering a default
under the Debentures.  As a result of the defaults under both the agreement with
Foothill and the  Debentures,  Foothill and the holders of the  Debentures  have
certain  rights,  including  certain  acceleration  rights.  Accordingly,   such
indebtedness  was treated as current at September 30, 1995.  See Note 5 of Notes
to Consolidated Financial Statements.  Furthermore,  although Foothill is, as of
the date of this Report, continuing to fund the Company's operations and has not
taken any action other than to prohibit the Company from paying the $2.2 million
interest payment due to the holders of the Debentures,  as a result of events of
default,  Foothill has no  obligation to provide  financing to the Company,  and
Foothill has reserved its rights and remedies.

     The Company's  obligations to Foothill are secured by substantially  all of
the assets of the Company and its  subsidiaries.  Other than cash generated from
accounts  receivable,  the Company does not have any significant source of funds
to fund its ongoing operations. Under the Company's agreement with Foothill, all
receipts  generated  from its  accounts  receivable  are  deposited in a lockbox
account under Foothill's control. Although Foothill is continuing to finance the
Company's business and has not demanded repayment of the Company's borrowings in
excess of its  borrowing  base,  there is no assurance  that it will continue to
advance money to the Company or refrain from  demanding  repayment of the excess
borrowings.  In the event that  Foothill  forecloses  on the  Company's  assets,

                               Page 9 of 15 pages
<PAGE>

particularly  its  accounts  receivable,  or does  not  permit  the  Company  to
re-borrow, the Company will not have sufficient funds to continue operations.

     The Company has a preliminary  understanding,  subject to approval of final
documents,  with  certain  holders of the  Debentures  to  exchange  each $1,000
debenture  for 97 shares of common stock and $767.22  principle  amount of a new
note. Upon approval of the final documents the company intends to make the offer
to all the holders of the Debentures.

     The Company's  liquidity problems have resulted in increased cost of sales,
resulting in lower gross profits.  As discussed under  "Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results of  Operation - Results of
Operation,"  the gross  profit for the nine months ended  September  30, 1995 is
less than the  selling,  general  and  administrative  expenses  for the period.
Accordingly,  without  a  significant  improvement  in  gross  profit  and/or  a
significant reduction in selling, general and administrative and other expenses,
any  restructuring  of the  Company's  debt will not be sufficient to enable the
Company to operate profitably.

     The Company may seek to raise funds  through the sale of one or more of its
lines of  business.  Currently,  the Company is engaged in informal  exploratory
discussions  with a number of parties.  However , no assurance can be given that
such discussion will result in any agreement.

Results of Operations

     The  Company's  continued  shortage  of working  capital has had a material
adverse  effect  upon its  operations  during  the three and nine  months  ended
September  30,  1995.  Moreover,  the  Company  has  embarked  on,  among  other
activities, an inventory reduction program, and a reduction of its workforce.

     The Company's  sales for the three and nine months ended September 30, 1995
decreased  from  the  same  periods  of the  prior  year  by  23.9%  and  15.1%,
respectively,  as the Company  experienced  continuing  cash  constraints  which
adversely  affected  the  Company's  operations.  Sales of fiber  products  fell
substantially, primarily due to the effects of the Company's liquidity problems.
Sales of  copper  based  connection/protection  products  in the  three and nine
months ended September 30, 1995 were significantly  lower sales of such products
for the comparable  periods of 1994, as a result of both the absence of sales to
Telefonos de Mexico due, in part, to the continuing  Mexican  financial  crisis,
and a reduced  level of sales to  British  Telecommunications  plc  ("BT").  The
company  believes that a portion of the decline in sales to BT will be reflected
in increased sales to BT in subsequent  periods.  Domestic sales of copper based
connection/protection  products  remained  generally  the  same.  Sales  of  OSS
equipment during the nine months ended September 30, 1995 increased  compared to
the same period of 1994, due to the increased  shipments by the Company's Korean
joint venture subsidiary,  but decreased during the three months ended September
30, 1995 due to the  Company's  high level of  performance  under OSS  contracts
during  the  third  quarter  of  1994.  Sales of other  products  decreased  due

                               Page 10 of 15 pages
<PAGE>

primarily to decreased  third party sales of plastic molded product in the three
and nine months ended  September  30, 1995,  partially  offset by certain  price
increases.

     Cost of sales for the nine months ended  September 30, 1995  increased as a
percent of sales by 6% but decreased by 10% during the third  quarter,  from the
comparable periods of 1994. The increase in the cost of sales percentage,  which
resulted  from the  Company's  cash  problems,  reflected  (i) a lower volume of
sales,  (ii) the inability of the Company to purchase  efficiently and to obtain
materials from certain suppliers,  (iii) the under-absorption of overhead costs,
and (iv) the need to rework inventory in order to fulfill  customer orders.  The
steps taken to reduce manufacturing labor costs by staffing reductions,  was not
implemented  until late in the second  quarter  but are  reflected  in the third
quarter.

     Selling,  general and administrative expenses decreased 32% and 29% for the
three and nine months ended September 30, 1995,  from the comparable  periods of
1994, the result of the company's original effort to reduce operating expenses.

     Although  the Company is taking  steps to reduce both the cost of goods and
the selling, general and administrative expenses, no assurance can be given that
such reductions will be sufficient to enable the Company to operate profitably.

     Research and development  increased  during the three and nine months ended
September 30, 1995 from the comparable periods of 1994. Research and development
expenses and  capitalized  software  development  costs during the 1995 and 1994
periods were comparable.

     Interest  expense  was  significantly  higher for the three and nine months
ended  September  30, 1995 compared  with the  comparable  periods in 1994, as a
result of substantially  higher average interest rates and increased  borrowings
under the Foothill  agreement as compared with the interest rate and  borrowings
payable during the 1994 periods on the Company's borrowings from Chemical Bank.

     Other  expense  includes  costs  associated  with the  modification  of the
Company's  agreement  with  Foothill  during the first nine months of 1995 which
were not present in the comparable period of 1994.

     In the three and nine months ended  September  30, 1995,  the Company's tax
expense was considerably  reduced from the similar periods of 1994 due primarily
to the  write  off of the  deferred  taxes in  1994.  Tax  expense  for the 1995
periods, is comprised primarily of offshore taxes.

     During the three and nine months  ended  September  30,  1995,  the Company
recorded   charges  of   approximately   $42,000  and  $199,000,   respectively,
representing the 50% interest in the income of its Korean subsidiary. During the

                               Page 11 of 15 pages
<PAGE>

comparable  periods of 1994 the Company recorded income of $200,000 and $282,000
in the 50% interest in the income of its Korean subsidiary, during the three and
nine months ended September 30, 1994, respectively.

     The  $3.5  million   extraordinary  loss  from  the  sale  of  discontinued
operations  reflects a reduction in the amount of the expected recovery from the
sale by the Company in 1993 of its Israeli  subsidiaries  which were  engaged in
the manufacture of data communications  connecting  equipment.  As a result of a
receivership  and  liquidation   proceedings  involving  the  purchaser  of  the
subsidiaries,  the estimated  recovery from the sale of such operations has been
reduced from $4.5 million which was the estimated recovery at December 31, 1994,
to $1.0 million which is the estimated recovery at September 30, 1995.

     In  connection  with  the  modification  of the  Company's  agreement  with
Foothill,  the  Company  repurchased  from  Foothill  and retired  $3.9  million
principal amount of its 6% Convertible Subordinated Debentures for approximately
$2.5 million through an increase in the term-loan under the New Credit Agreement
and the repricing of certain warrants granted to the senior lender.  The company
included as an extraordinary item a gain of $1.9 million on early extinguishment
of this debt,  representing  the difference  between the principal amount of the
debt retired less the related amount of the unamortized  original issue discount
and the approximate market value of the debt on the date of the transaction.


                               Page 12 of 15 pages
<PAGE>

PART II

Item 1.  Legal Proceedings.

     As previously disclosed, seven complaints alleging class actions pending in
the U.S. District Court for the Eastern District of New York were  consolidated,
and styled "In re Porta Systems Securities Litigation." On or about September 9,
1993,  plaintiffs in those cases filed a consolidated  amended and  supplemental
complaint  naming as defendants the Company and certain of its present or former
officers and directors.  On or about November 11, 1994 plaintiffs in those cases
filed a  revised  third  consolidated  amended  and  supplemental  class  action
complaint ( the "amended complaint").

     The amended  complaint alleges  violations of the anti-fraud  provisions of
Sections 10 (b) of the Securities  Exchange Act of 1934 (the "Exchange Act") and
Rule  10b-5  thereunder  and  Section  20(a) of the  Exchange  Act  based on the
Company's April 1, 1993 announcement that certain revenue attributable to a sale
of a line test system previously  recorded during 1992 was being reversed during
the fourth  quarter and that the Company  would suffer a loss for the year ended
December 31, 1992. The amended  complaint also alleges that certain other public
statements  made by the Company  during 1992 were  false,  including  statements
relating to  anticipated  sales and the  divestiture  of its North Hills Israel,
Ltd.  subsidiary and the NetCom  business of its North Hills  Electronics,  Inc.
subsidiary.  The amended  complaint  alleges that the Company and certain of the
other named  defendants knew or should have known that  statements  contained in
various  of the  Company's  public  filings  and press  releases  misrepresented
material facts concerning the Company and its financial prospects,  resulting in
the Company's reported revenues and profits for the second and third quarters of
1992 being  misstated,  and the market price of the Company's Common Stock being
artificially  inflated during the purported class period.  The plaintiffs  seek,
among other things, unspecified money damages.

     The Company  moved  under Rules 9(b) and 12(b) (6) of the Federal  Rules of
Civil  Procedure to dismiss the complaint.  Following the Court's denial of that
motion by order  entered  October  13,  1994,  on or about  November  11,  1994,
defendants  filed an answer  to the  amended  complaint,  denying  the  material
factual allegations of the amended complaint and asserting  affirmative defenses
to the alleged claims. Discovery is in progress. The Company intends to continue
to defend this action.

     As previously disclosed, on or about April 23, 1993, a complaint alleging a
class action  entitled  Klein vs. Porta Systems  Corporation et al. was filed in
Delaware  Chancery  Court  naming as  defendants  the Company and certain of its
current and former officers and directors,  and alleging  certain  violations of
Delaware law, including breach of fiduciary duty, fraudulent  misrepresentation,
concealment,  and  nondisclosure.  An  amended  complaint  was filed on or about
October 4, 1993.  The amended  complaint  substantially  the same facts as those
alleged  in the  New  York  action,  and  the  claims  were  likewise  based  on
allegations  concerning  the Company's  April 1, 1993  announcement  and certain

                               Page 13 of 15 pages
<PAGE>

other  allegedly  false and  misleading  public  statements  made by the Company
during 1992. The plaintiff sought, among other things, unspecified money damages
on behalf of the alleged class of shareholders.

     Prior to filing an answer in which the material factual  allegations of the
amended complaint would have been denied, the Company and other defendants moved
to  dismiss or stay the action in view of the prior  pending  litigation  in New
York. In a decision  dated April 21, 1994,  the Court granted the motion to stay
the  Delaware  action  pending  the  outcome  of  the  earlier  filed  New  York
litigation.  Subsequently,  by  stipulation-so-ordered by the Court on April 22,
1994, the Delaware action was dismissed  without  prejudice.  The plaintiff (and
his counsel) have since joined the action pending in New York.

Item 3.  Default Upon Senior Securities.

     See Note 5 of Notes to  Consolidated  Financial  Statements for information
concerning  the  Company's  default under its  agreement  with Foothill  Capital
Corporation.

Item 5.  Other Information

     As  previously  reported the company  does not satisfy the  American  Stock
Exchange's financial guidelines for the continued listing of its Common Stock on
such exchange.  The exchange is continuing to review the status of the Company's
listing, and no assurance can be given that the Common Stock will continue to be
listed on such exchange.

     In  November  1995,  Mr.  Edward R. Olson was elected  president  and chief
operating  officer of the Company.  Mr. Olson is also  president  and one of the
founders of KPMG Bay Mark Strategies  LLC, and  independent  firm in a strategic
alliance  with KMPG Peat Marwick LLP. Mr. Olson will  continue in this  position
while serving as president and chief operating officer of the Company.

     In October 1995,  Mr. Edward B. Kornfeld was elected as vice  president and
chief financial officer of the Company.  Prior to his election to this position,
Mr. Kornfeld held positions with several publicly traded companies.

                               Page 14 of 15 pages
<PAGE>

SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                           PORTA SYSTEMS CORP.

Date:   November 9,1995                    By  /s/Vincent F. Santulli
                                               ------------------------
                                            Vincent F. Santulli
                                            Chairman of the Board
                                            Chief Executive Officer


Date:   November 9, 1995                   By  /s/Edward  B. Kornfeld
                                               ------------------------
                                            Edward B. Kornfeld
                                            Vice President and Chief 
                                            Financial Officer



                               Page 15 of 15 pages