SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-Q/A

 
                                Amendment No. 1

                  For the quarterly period ended June 30, 1996

                          Commission file number 1-8191


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

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


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

                                      11791
                                   (Zip Code)

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


Purpose of Amendment:  To amend and restate items 1 and 2 in Part I.



                               Page 1 of 15 pages


<PAGE>

PART I.- FINANCIAL INFORMATION
Item 1- Financial Statements

                      PORTA SYSTEMS CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (Dollars in thousands)

                                                       June 30,     December 31,
                                                         1996           1995
                                                       --------     ------------
                                     Assets           (Unaudited)
Current assets:
     Cash and cash equivalents                         $  1,049       $  1,109
     Accounts receivable, net                            13,292         12,626
     Inventories                                          8,177          8,979
     Prepaid expenses                                       728            659
     Receivable from sale 
       of discontinued operations                            --          1,000
     Other receivable                                       920             --
                                                       --------       --------
                  Total current assets                   24,166         24,373
                                                       --------       --------
      Assets held for sale, net                              --          7,893
      Property, plant and equipment, net                  6,074          6,911
      Deferred computer software, net                     2,463          3,188
      Goodwill, net                                     11,5771          1,793
      Other assets                                        4,888          6,433
                                                       --------       --------
                  Total assets                         $ 49,168       $ 60,591
                                                       ========       ========

                      Liabilities and Stockholders' Deficit
Current liabilities:
      Convertible subordinated debentures              $  4,522       $  6,564
      Accounts payable                                    7,028          8,302
      Accrued expenses                                    8,678         10,502
      Accrued interest payable                              784          3,534
      Accrued commissions                                 2,040          2,016
      Income taxes payable                                  780            780
      Customer advances                                     500            504
      Short-term loans                                      250            368
                                                       --------       --------
                  Total current liabilities              24,582         32,570
                                                       --------       --------

Long-term debt                                           18,016         26,645
Convertible subordinated debentures                          --         25,660
Zero coupon senior subordinated convertible notes        23,830             --
Notes payable net of current maturities                   3,084          3,084 
Income taxes payable                                        811            811
Other long-term liabilities                                 501            385
Minority interest                                           526            759
                                                       --------       --------
                  Total long-term liabilities            46,768         57,344
Stockholders' deficit:
      Preferred stock, no par value; authorized 
          1,000,000 shares, none issued                      --             --
      Common stock, par value $.01;  authorized 
          40,000,000 and 20,000,000 shares,
          issued 2,095,052 and 1,492,361 
          shares at June 30, 1996 and 
          December 31, 1995, respectively                    21             15
      Additional paid-in capital                         36,206         33,308
      Foreign currency translation adjustment            (3,805)        (4,199)
      Accumulated deficit                               (52,231)       (56,074)
                                                       --------       --------
                                                        (19,809)       (26,950)
      Treasury stock, at cost                            (2,066)        (2,066)
      Receivable for employee stock purchases              (307)          (307)
                                                       --------       --------
                  Total stockholders' deficit           (22,182)       (29,323)
                                                       --------       --------
                  Total liabilities and 
                    stockholders' deficit              $ 49,168       $ 60,591
                                                       ========       ========

          See accompanying notes to consolidated financial statements.
                               Page 2 of 15 pages


<PAGE>

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


                                                            Six Months Ended
                                                        June 30,       June 30,
                                                          1996           1995
                                                        --------       --------

Sales                                                  $ 26,863       $ 33,178
Cost of sales                                            17,744         25,847
                                                       --------       --------
     Gross profit                                         9,119          7,331

Selling, general and administrative expenses              6,187          8,734
Research and development expenses                         1,804          2,434
                                                       --------       --------
         Total expenses                                   7,991         11,168
                                                       --------       --------

         Operating income (loss)                          1,128         (3,837)

Interest expense                                         (3,226)        (3,810)
Interest income                                              42             33
Gain on sale of assets                                    2,264             --
Other income (expense)                                       18           (549)
                                                       --------       --------

       Income (loss) before income taxes, 
          minority interest and extraordinary item          226         (8,163)

Income tax expense                                           (6)           (17)
Minority interest                                           233           (157)
                                                       --------       --------
       Income (loss) from continuing operations             453         (8,337)

Loss on disposal of discontinued operations                  --         (3,500)
                                                       --------       --------

       Income (loss) before extraordinary item              453        (11,837)

Extraordinary gain                                        3,390          1,871
                                                       --------       --------

Net income (loss)                                      $  3,843       $ (9,966)
                                                       ========       ========
Per share data:

        Income (loss) from continuing operations       $   0.10       $  (5.83)
                                                       ========       ========
        Income (loss) before extraordinary item        $   0.10       $  (8.28)
        Extraordinary item                                 0.80           1.31
                                                       --------       --------
           Net income (loss)                           $   0.90       $  (6.97)
                                                       ========       ========

         Weighted average shares outstanding              4,249          1,430
                                                       ========       ========


     See accompanying notes to unaudited consolidated financial statements.
                               Page 3 of 15 pages


<PAGE>

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


                                                           Three Months Ended
                                                         June 30,       June 30,
                                                          1996            1995
                                                        --------       --------

Sales                                                  $ 13,642       $ 17,235
Cost of sales                                             8,861         14,705
                                                       --------       --------
     Gross profit                                         4,781          2,530

Selling, general and administrative expenses              2,775          3,719
Research and development expenses                           933          1,161
                                                       --------       --------
         Total expenses                                   3,708          4,880
                                                       --------       --------

         Operating income (loss)                          1,073         (2,350)

Interest expense                                         (1,048)        (1,884)
Interest income                                              33             11
Gain on sale of assets                                    2,264             --
Other income (expense)                                      169           (164)
                                                       --------       --------

       Income (loss) before income taxes, 
       minority interest and extraordinary item           2,491         (4,387)

Income tax benefit (expense)                                  7             (7)
Minority interest                                           123           (212)
                                                       --------       --------
       Income (loss) from continuing operations           2,621         (4,606)

Loss on disposal of discontinued operations                  --         (3,500)
                                                       --------       --------

       Income (loss) before extraordinary item            2,621         (8,106)

Extraordinary gain                                          357             --
                                                       --------       --------

Net income (loss)                                      $  2,978       $ (8,106)
                                                       ========       ========

Per share data:

        Income (loss) from continuing operations       $   0.54       $  (3.22)
                                                       ========       ========

        Income (loss) before extraordinary item        $   0.54       $  (5.67)
        Extraordinary item                                 0.07             --
                                                       --------       --------
           Net income (loss)                           $   0.61       $  (5.67)
                                                       ========       ========

         Weighted average shares outstanding              4,854          1,430
                                                       ========       ========

     See accompanying notes to unaudited consolidated financial statements.
                               Page 4 of 15 pages


<PAGE>

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

                                                           Six  Months Ended
                                                        June 30,       June 30,
                                                          1996           1995
                                                        --------       --------
Cash flows from operating activities:
     Net income (loss)                                 $   3,843      $ (9,966)
     Adjustments to reconcile net income 
      (loss) to net cash
       used in operating activities:
         Loss on disposal of discontinued 
           operations                                         --         3,500
         Gain on sale of assets                           (2,264)           --
         Extraordinary gain                               (3,390)       (1,871)
         Non-cash financing expenses                       1,799           360
         Depreciation and amortization                     2,237         2,752
         Amortization of discount on convertible 
           subordinated debentures                            63           395
         Minority interest                                  (233)          157
       Changes in assets and liabilities:
         Accounts receivable                                (666)       (3,300)
         Inventories                                         802         2,699
         Prepaid expenses                                    (69)         (628)
         Deferred computer software                          (38)         (647)
         Other assets                                       (359)         (125)
         Accounts payable                                 (1,274)          415
         Accrued expenses                                 (1,824)        2,467
         Other liabilities                                   247          (164)
                                                        --------      --------
              Net cash used in operating activities       (1,126)       (3,956)

     Cash flows from investing activities:
         Proceeds from disposal of assets 
           held for sale, net                              6,793            --
         Proceeds from sale of assets                      3,456            --
         Capital expenditures                               (292)         (604)
                                                        --------      --------
              Net cash provided by (used in) 
                investing activities                       9,957          (604)

     Cash flows from financing activities:
         Proceeds from long-term debt                      1,330         5,338
         Repayments of long-term debt                     (9,959)       (2,500)
         (Repayments of) proceeds from notes 
            payable and short term loans                    (118)          533
                                                        --------      --------
              Net cash (used in) provided 
                by financing activities                   (8,747)        3,371
                                                        --------      --------

     Effect of exchange rates on cash                       (144)          193

     Decrease in cash and cash equivalents                   (60)         (996)

     Cash and equivalents - beginning of the year          1,109         2,332
                                                        --------      --------

     Cash and equivalents - end of the period          $   1,049      $  1,336
                                                       =========      ========

     Supplemental cash flow disclosures:
         Cash paid for interest expense                $   1,391      $  1,534
                                                       =========      ========

         Cash paid for income taxes                    $      29      $     27
                                                       =========      ========


     See accompanying notes to unaudited consolidated financial statements.
                               Page 5 of 15 pages


<PAGE>

              NOTES TO UNAUDITIED CONSOLIDATED FINANCIAL STATEMENTS


Note 1: Management's  Responsibility For Interim Financial  Statements Including
        All Adjustments Necessary For Fair Presentation

        Management  acknowledges its  responsibility  for the preparation of the
accompanying  interim  consolidated   financial  statements  which  reflect  all
adjustments, consisting of normal recurring adjustments, considered necessary in
its opinion for a fair statement of its consolidated  financial position and the
results of its operations for the interim periods presented.  These consolidated
financial  statements  should  be  read  in  conjunction  with  the  summary  of
significant  accounting policies and notes to consolidated  financial statements
included  in the  Company's  annual  report to  stockholders  for the year ended
December 31, 1995.  Results for the first six months of 1996 are not necessarily
indicative of results for the year.

Note 2: Computation of Per Share Earnings

        All  share  and per  share  information  presented  in the  Consolidated
Financial  Statements  and the Form 10-Q for the six months  ended June 30, 1996
gives retroactive effect to the Reverse Split described in Note 10.

                                       Six months ended       Three months ended
                                        June 30, 1996            June 30, 1996
                                       ----------------       ------------------
                                        (In thousands, except per share amounts)

Net income                                 $3,843                   $2,978
                                           ======                   ======

Weighted average shares outstanding         1,924                    2,024

Shares of common stock contingently 
   issuable in connection with the 
   potential conversion of the zero 
   coupon senior subordinated 
   convertible notes                        2,325                    2,830
                                           ------                   ------

Weighted average shares 
  outstanding-Primary                       4,249                    4,854
                                           ======                   ======

Earnings per share                         $ 0.90                   $ 0.61
                                           ======                   ======

Note 3: Discontinued Operations

        The Company's  receivable from the sale of  discontinued  operations was
collateralized  by  shares  of  common  stock of the  entity  which now owns the
discontinued  operations.  During the quarter  ended June 30, 1996,  the Company
sold the  shares of this  common  stock for  $3,456,000  and  recorded a gain of
$2,264,000.  The gain  represented  an adjustment in the estimated  value of the
shares  previously  received  and  accordingly  was  reflected  as  an  item  in
continuing  operations.  The  receivable  had  previously  been  written down to
$1,000,000  as a result of the Israeli  receivership  proceedings  involving the
purchaser  of the  discontinued  operations.  As part of an  agreement  with the
Company's  primary  lender,  the net proceeds from the sale of the  discontinued
operations  were  applied to reduce  the  outstanding  principal  balance of the
Company's term loan. 

                               Page 6 of 15 pages


<PAGE>

Note 4: Assets Held For Sale

        On March 13, 1996, the Company sold certain assets and the buyer assumed
certain  liabilities and severance  obligations related to the operations of the
Company's fiber optics management and component business for $7,893,000, subject
to certain  adjustments.  As of December  31,  1995,  in  conjunction  with this
transaction,  the Company accrued approximately $700,000 for certain obligations
in connection  with the closing of its fiber optics  facility in Ireland.  These
obligations  were  settled in the second  quarter of 1996,  and along with other
adjustments related to the sale of the fiber business, for a positive adjustment
of  approximately  $358,000.  The  difference  was  recorded as a  reduction  of
selling,  general and administrative  expenses in the accompanying  statement of
operations.

        The  Company  received  $6,793,000  at  closing of the sale of the fiber
business and the  remainder was placed into two escrow funds to be released over
the next year, subject to certain conditions, including a final valuation of the
net assets  transferred.  As of June 30,  1996,  the  remainder,  $920,000,  has
remained in escrow and is reported as an "Other  receivable" in the accompanying
consolidated  balance sheet. The proceeds were primarily used to repay long-term
debt.  As a  result  of the  transaction,  the  Company  recorded  a  charge  to
operations  in 1995 of  $862,000  to  write  down  the  net  assets  sold to net
realizable value. Net sales of the fiber optics business  approximated  $452,000
and $3,684,000 for the six months ended June 30, 1996 and 1995, respectively.

Note 5: Inventories

        Inventories  at June 30, 1996 have been  computed  using a standard cost
system.  The composition of inventories at the end of the respective  periods is
as follows:

                                       June 30, 1996          December 31,1995
                                       -------------          ----------------
                                                  (in thousands)
         Parts and components            $ 4,884                   $ 5,370
         Work-in-process                   1,519                       849
         Finished goods                    1,774                     2,760
                                         -------                   -------
                                         $ 8,177                   $ 8,979
                                         =======                   =======
                                                         
Note 6: Long-Term Contracts

        At June 30, 1996, accounts receivable included approximately $900,000 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  are  expected to be
billed during the remainder of 1996.

Note 7: 6% Convertible Subordinated Debentures

        On  November  30,  1995,  the  Company  offered  the  holders  of its 6%
Convertible  Subordinated  Debentures  due  July 1,  2002  (the  Debentures)  an
exchange  of each $1,000  face  amount of such debt and the  elimination  of the
associated  accrued  interest  payable for 19.4 shares of the  Company's  common
stock  and  $767.22   principal  amount  of  zero  coupon  senior   subordinated
convertible  notes (the Notes) due  January 2, 1998 (the  Exchange  Offer).  The
Notes are non-interest bearing, unsecured and have no sinking fund requirements.


                               Page 7 of 15 pages


<PAGE>

Note 7: 6% Convertible Subordinated Debentures (continued)

        Each Note is  convertible  into common  stock at a  conversion  price of
$7.90  per  share  until  November  1,  1996 and  $6.55  per  share  thereafter.
Accordingly,  in addition to a maximum of 699,855 of common shares issuable from
the  exchange of the  Debentures,  the maximum  number of shares of common stock
that could be issued  upon  conversion,  if all  Debentures  are  exchanged,  is
approximately  4,225,600.  The Notes are redeemable at the option of the Company
at 86.71%  through  November  1,  1996  increasing  periodically  to 100% of the
principal balance on November 1, 1997.

        Through June 30, 1996, the Company exchanged  approximately  $31,060,000
principal amount of the Debentures,  net of unamortized  discount of $3,295,000,
for 602,564  shares of the  Company's  common  stock and  $23,830,000  principal
amount of Notes pursuant to the Exchange Offer.

        The exchange of the  Debentures  for the Notes and common stock has been
accounted for as a troubled debt  restructuring  in accordance with Statement of
Financial  Accounting Standards No. 15 (SFAS No. 15). Since the future principal
and interest  payments  under the Notes is less than the  carrying  value of the
Debentures,  the Notes were recorded for the amount of the future cash payments,
and not discounted.  Accordingly,  the Company recorded an extraordinary gain on
restructuring  of $357,000 during the quarter ended June 30, 1996 and $3,033,000
during the quarter ended March 31, 1996.  Additionally,  in accordance with SFAS
No. 15, no future interest expense will be recorded on the Notes.

        As of June 30, 1996,  $4,522,000 of the Debentures remained outstanding,
net of original issue discounts amortized to principal over the term of the debt
using the effective  interest rate method,  of $493,000.  The face amount of the
outstanding Debentures was $5,015,000.

        Interest  on the  Debentures  is  payable  on July 1 of each  year.  The
aggregate  accrued  interest  payable  on the  remaining  Debentures  (including
amounts in arrears) was approximately  $603,000 as of June 30, 1996. The Company
is presently in default under the interest payment provisions of the Debentures.
Accordingly, such debt has been classified as current at June 30, 1996.

Note 8: Long-Term Debt

        At June 30, 1996, the Company's  long-term debt consisted of senior debt
under its credit  facility with Foothill  Capital  Corporation  in the amount of
$18,016,000.  During  the  quarter  ended  June  30,  1996  the  Company  repaid
$3,456,000  of   outstanding   principal  from  the  proceeds  of  the  sale  of
discontinued operations (see Note 3).

        Financial  debt  covenants  include an interest  coverage ratio measured
quarterly  commencing with the quarter ending June 30, 1996,  limitations on the
incurrence  of   indebtedness,   limitations   on  capital   expenditures,   and
prohibitions on declarations of any cash or stock dividends or the repurchase of
the Company's  stock. As of June 30, 1996, the Company is in compliance with the
above covenants.


                               Page 8 of 15 pages


<PAGE>

Note 9: Legal Matters

        During  the  quarter  ended  June 30,  1996,  the  Company  settled  its
previously  disclosed class actions.  The settlement  includes a cash payment by
the  Company's  insurers  and  issuance by the Company of 220,000  shares of its
common stock,  to be distributed in accordance  with a Plan of Allocation,  also
approved  by the Court.  Following  a  settlement  fairness  hearing,  the Court
approved  the  settlement  in an  order  dated  June  18,  1996.  As part of the
settlement,  the Company has been  released  from all claims where were or could
have  been  asserted  in the  class  actions  and all such  claims  against  the
defendants  have  been  dismissed  with   prejudice.   In  connection  with  the
settlement,  the Company recorded a charge to income of $1,100,000 in the fourth
quarter of 1995, representing an estimation of the market value of the shares to
be issued.

        In July 1996,  an action was commenced in the Supreme Court of the State
of New York, New York County by certain  stockholders and warrant holders of the
Company who acquired their  securities in connection with the acquisition by the
Company of Aster Corporation  against the Company and certain present and former
directors.  The  complaint  alleges  breach of contract  against the Company and
breach of fiduciary  against the directors  arising out of an alleged failure to
register  certain  restricted  shares and warrants owned by the plaintiffs.  The
complaint  seeks damages of $62,000;  however,  counsel for the  plaintiff  have
advised the Company that  additional  plaintiffs  may be added and, as a result,
the amount of  damages  claimed  may be  substantially  greater  than the amount
presently claimed.  The Company believes that the defendants have valid defenses
to the claims.

Note 10: Capital

        On June 6, 1996, the  stockholders of the Company  approved an amendment
to the  Company's  certificate  of  incorporation  to  increase  the  number  of
authorized shares of Common Stock from 20,000,000 to 40,000,000 shares.

        In addition, on June 6, 1996, the stockholders of the Company approved a
one-for-five  reverse split (the "Reverse Split") of the Company's common stock.
As a result of the Reverse Split,  each share of common stock outstanding at the
effective  time of the  Reverse  Split,  without  any  action on the part of the
holder thereof,  became  one-fifth  share of common stock.  The par value of the
common stock was not effected by the Reverse Split.

        The increase in  authorized  common  stock and the Reverse  Split became
effective  upon filing with the  Delaware  Secretary of State of an amendment to
the Company's certificate of incorporation on August 2, 1996.  Accordingly,  the
Company has reclassified  approximately  $84,000 from common stock to additional
paid-in  capital for the period  ended June 30, 1996 and all share and per share
data have been restated to give effect to the Reverse Split.



                               Page 9 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:
<TABLE>
<CAPTION>

                                              Six Months Ended       Three Months Ended 
                                                  June 30,                June 30,
                                               1996     1995           1996     1995
                                               ----     ----           ----     ----
<S>                                            <C>      <C>            <C>       <C> 
                                               100%     100%           100%      100%
Cost of Sales                                   66%      78%            65%      85%
Gross Profit                                    34%      22%            35%      15%
Selling, general and administrative expenses    23%      26%            20%      22%
Research and development expenses                7%       7%             7%       7%
     Operating income(loss)                      4%     (12%)            8%     (14%)
Interest expense - net                         (12%)    (11%)           (8%)    (11%)
Other income (expense)                           8%     ( 2%)           18%     ( 1%)
Minority interest                                1%      (1%)            1%     ( 1%)
Provision for discontinued operations            0%     (11%)            0%     (20%)
Extraordinary item                              13%       6%             3%       0%
Net income (loss)                               14%     (30%)           22%     (47%)
</TABLE>
                                                               
        The Company's  sales by product line for the periods ended June 30, 1996
and 1995 are as follows:

                                                         Six Months Ended
                                                             June 30,
                                                      1996               1995
                                                      ----               ----
                                                      (Dollars in thousands)

Line connection/protection equipment*          $ 12,705   47%    $ 16,105    49%
OSS equipment                                    10,633   40%      14,396    43%
Signal Processing                                 3,377   12%       2,412     7%
Other                                               148    1%         265     1%
                                               --------------    ---------------
                                               $ 26,863  100%    $ 33,178   100%
                                               ==============    ===============

                                                        Three Months Ended
                                                             June 30,
                                                      1996               1995
                                                      ----               ----
                                                      (Dollars in thousands)

Line connection/protection equipment*           $ 6,908   51%    $  7,088    41%
OSS equipment                                     4,733   35%       8,923    52%
Signal Processing                                 1,940   14%       1,064     6%
Other                                                61    0%         160     1%
                                                -------------    ---------------
                                                $13,642  100%    $17,235    100%
                                                =============    ===============

*Includes  sales of fiber optics  products of $452,000 and $0 for the six months
and three months ended June 30, 1996 and  $3,684,000  and $1,415,000 for the six
months and three months ended June 30, 1995, respectively.


                               Page 10 of 15 pages


<PAGE>

Financial Condition

        The  Company's  working  capital  deficit  changed  from  $8,197,000  at
December 31, 1995 to $416,000 at June 30, 1996. The reduced deficit is primarily
the result of the sale of the fiber optics  business  which provided the Company
with funds to reduce  certain of its  current  liabilities,  the  conversion  of
approximately  86% of the 6% convertible  subordinated  debentures which reduced
approximately  $2,225,000  of  accrued  interest  expense  and the sale of stock
issued  in  respect  of the sale of  discontinued  operations  which was used to
reduce its obligations to its senior lender.

        During the quarter ended June 30, 1996, the Company received  $3,456,000
from the sale of  common  stock  issued in  respect  of the  obligations  of the
purchaser of the Company's discontinued operations. A gain of $2,264,000, net of
related expenses,  was recorded. The receivable had previously been written down
to $1,000,000 as a result of the Israeli receivership  proceedings involving the
purchaser of the discontinued  operation.  The gain had previously been reported
as a gain  from the  sale of  discontinued  operations.  The net  proceeds  were
applied to reduce the outstanding  principal balance of the Company's  long-term
loan with its senior lender.

        In March 1996, the Company's loan and security agreement with its senior
secured lender, Foothill Capital Corporation ("Foothill"), was amended. Pursuant
to the amendment,  the Company's obligations were extended from November 1996 to
November  1998 and  defaults  at  December  31, 1995 and through the date of the
amendment,  were waived by Foothill.  As a result the Company's  indebtedness to
Foothill  has  been  classified  as  a  long-term  liability.  As  part  of  the
consideration  to Foothill for the amendment,  the Company is obligated to pay a
monthly facility fee of $50,000 commencing November 30, 1996.

        The Company's  obligations to Foothill are secured by substantially  all
of the assets of the Company and its  subsidiaries.  The agreement with Foothill
requires the Company to continue to meet certain  financial  covenants.  At June
30, 1996, the Company is in compliance with its covenants under the agreement.

        On  November  30,  1995,  the  Company  offered  the  holders  of its 6%
Convertible  Subordinated  Debentures  due  July 1,  2002  (the  Debentures)  an
exchange  of such debt for  common  stock and zero  coupon  senior  subordinated
convertible  notes (the Notes) due January 2, 1998.  The exchange  ratio is 19.4
shares of common  stock and $767.22 of principal of Notes in exchange for $1,000
principal amount of Debentures. Accrued interest on the Debentures would also be
eliminated.

        As of June 30, 1996,  approximately  $31,060,000 principal amount of the
Debentures,  net of unamortized discount of $3,295,000 and $2,778,000 of accrued
interest  payable was exchanged for 602,564 shares of the Company's common stock
and $23,830,000  principal  amount of Notes pursuant to the Exchange Offer.  The
unsecured Notes do not bear interest and there are no sinking fund requirements.

        As of June 30, 1996, the Company had remaining outstanding $4,522,000 of
Debentures, net of original issue discounts amortized to principal over the term
of the debt using the  effective  interest  rate method,  of $493,000.  The face
amount of the outstanding Debentures was $5,015,000.


                               Page 11 of 15 pages


<PAGE>

Financial Condition (continued)

        Interest  on the  Debentures  is  payable  on July 1 of each  year.  The
interest  accrued as of June 30, 1996 amounted to $603,000.  As of June 30, 1996
the  Company  is in  default  under  the  interest  payment  provisions  of  the
Debentures. Accordingly, such debt has been classified as a current liability at
June 30, 1996.

        The Company has no past or ongoing  interest  obligation with respect to
either the new zero coupon notes or the  Debentures  which were  exchanged.  The
aggregate  annual  interest  obligation  on the  Debentures  which have not been
exchanged at June 30, 1996 is approximately $300,000.

        On March 12, 1996, the Company sold certain assets and the buyer assumed
certain  liabilities and severance  obligations related to the operations of the
Company's  fiber optics  management  and  component  business.  Accordingly,  at
December 31, 1995, the net assets of the fiber optics business were reflected as
"assets held for sale, net" at net realizable  value,  based on the terms of the
sale. The net assets of the fiber optics business were sold for a total purchase
price of  approximately  $8,000,000  of  which  $1,100,000  was held in  escrow,
subject to certain conditions,  plus the assumption of approximately  $1,400,000
in liabilities. The proceeds were applied to reduce the Company's obligations to
Foothill in accordance with the March 1996 amendment to the Foothill  agreement.
As of June 30,  1996  certain  claims  have been  resolved  and funds  have been
disbursed from the escrow account to reduce the balance to $920,000.

        The sale of the fiber optics business  benefited the Company by allowing
it to close two facilities,  with a resultant decrease in personnel and overhead
costs.  The sale also enabled the Company to amend and extend its agreement with
Foothill, as described above, and make a significant payment to Foothill,  which
reduces its ongoing interest costs.

Results of Operations

        The  Company's  sales for the six months ended June 30, 1996 compared to
the six months ended June 30, 1995 decreased  $6,315,000 (19%) and the sales for
the quarter ended June 30, 1996  decreased by $3,593,000  (21%)  compared to the
quarter  ended June 30, 1995.  The primary  reasons were reduced OSS revenue and
the sale of the fiber optics business in March 1996.

        OSS revenue was decreased by $3,763,000  and  $4,190,000 for the six and
three months ended June 30, 1996,  respectively.  This reduced  volume is due to
lower levels of sales of our Korea joint venture  partner and to a lesser extent
sales to British Telecommunications plc.

        The line connection/protection  equipment sales for the six months ended
June 30 decreased by  approximately  $3,400,000  from 1995 to 1996. This decline
reflected  the sale of the fiber optics  division in March 1996.  Sales of fiber
optics  products were $452,000 and  $3,684,000 for the six months ended June 30,
1996 and 1995, respectively.

        Line  connection/protection  equipment revenue for the June 1996 quarter
did not materially change, but the product mix within this category changed from
the same quarter last year. Copper products increased  approximately  $1,300,000
from last year's quarter.  There were no fiber optic sales for the quarter ended
June 30, 1996  compared to  $1,415,000 of fiber sales for the quarter ended June
30, 1995 (see Note 3).

                               Page 12 of 15 pages

<PAGE>

Results of Operations (continued)

        Cost of sales for the six months and the quarter ended June 30, 1996, as
a percentage of sales  compared to the same periods of 1995,  decreased from 78%
to 66% and from 85% to 65%,  respectively.  This  improvement in gross margin is
attributed  to the  Company's  continuing  efforts to reduce direct and indirect
labor and overhead manufacturing costs which began late in the second quarter of
1995, and to a lesser  extent,  the sale of the fiber optic business as of March
1996.

        Selling,  general and  administration  expenses  decreased by $2,547,000
(29%) from  $8,734,000  to  $6,187,000  for the six months  ended June 30,  1996
compared to 1995. For the quarter ended June 30, 1996 and 1995 selling,  general
and administration expenses decreased by $944,000 (24%). This reduction reflects
the  Company's  efforts  to  reduce  personnel  costs and  associated  expenses,
especially in the area of sales and marketing  support,  the  elimination of the
expenses  associated with the fiber business and to a lesser extent,  a reversal
of a December 1995 accrued expense of approximately $342,000 (see Note 4).

        Research and  development  expenses  decreased by $630,000  (26%) and by
$228,000  (20%)  for the six and  three  months  ended  June 30,  1996  from the
comparable  periods  in 1995,  respectively.  This  reduced  cost  reflects  the
Company's  efforts to streamline  its  operations by focusing on those  projects
with the highest  potential for success and to a lesser extent,  the elimination
of those expenses related to fiber activities.

        As a result  of the  above,  for the six  months  ended  June  30,  1996
compared to 1995,  the  Company had  operating  income of  $1,128,000  versus an
operating loss of $3,837,000.  The Company had an operating income of $1,073,000
for the quarter  ended June 30, 1996 as  compared to a loss of  $2,350,000  from
operations  for the  quarter  ended  June  30,  1995.  The  Company's  operating
improvement  for the six  months  and the  quarter  ended  June 30,  1996,  when
compared to the comparable  periods ended June 30, 1995, were the results of its
continuing  efforts  to bring its costs and  expenses  in line with its  current
level of sales and the sale of the fiber optics business.

        Interest expense  decreased for the six months ended June 30 by $584,000
from  $3,810,000 in 1995 to  $3,226,000 in 1996.  For the quarter ended June 30,
interest expense  decreased by $836,000 from $1,884,000 in 1995 to $1,048,000 in
1996.  This change is attributable  primarily to a decrease in interest  expense
related to the exchange of the Company's  Debentures  and repayment of principal
to the  Company's  senior  lender  from the  proceeds  of the sale of the  fiber
business  and the  sale  of  common  stock  issued  in  respect  of the  sale of
discontinued  operations.  (see Notes 3 and 4).  These  reductions  of  interest
expense are offset by an increase in interest expense  associated with increased
borrowing costs.

        During the six month period ended June 30, 1996, the Company  recorded a
$3,390,000  gain  from  the  early  extingushment  of  approximately  86% of its
Debentures.  Of this gain, $357,000 was recognized in the second quarter of 1996
as an additional 6% of the  Debentures  were  exchanged (See Note 8). During the
six month period ended June 30, 1995, the Company recorded an extraordinary gain
of $1,871,000  arising from the Company's  repurchase from its senior lender and
retirement of $3,900,000 of its Debentures for approximately $2,500,000.


                               Page 13 of 15 pages

<PAGE>

Results of Operations (continued)

        During the quarter ended June 30, 1996, the Company received  $3,456,000
from the sale of  common  stock  issued in  respect  of the  obligations  of the
purchaser of the discontinued  operations resulting in a gain of $2,264,000 (see
Note 3).  During  the  quarter  ended  June 30,  1995,  the  Company  recorded a
$3,500,000 loss from the sale of discontinued operations.  At that time the best
estimate  for  recovery  was  $1,000,000  as a  result  of the  liquidation  and
receivership of the purchaser of such operations.

        As the  result of the  foregoing  the  Company  generated  net income of
$3,843,000, $0.90 per share for the six months ended June 30, 1996 compared with
a net loss of  $9,966,000,  $6.97 per share,  for the six months  ended June 30,
1995 and net income for the quarter ended June 30, 1996 of $2,978,000, $0.61 per
share and a net loss for the quarter  ended June 30, 1995 of  $8,106,000,  $5.67
per share.  The calculation of the weighted  average shares,  for the period and
quarter  ended June 30,  1996,  assumes  the  conversion  of the Notes which are
considered to be a common stock equivalent.


                               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.

         Dated November 6, 1996                      By /s/William V. Carney
                                                        --------------------
                                                        William V. Carney
                                                        Chairman of the Board

         Dated November 6, 1996                      By /s/Edward B. Kornfeld
                                                        ---------------------
                                                        Edward B. Kornfeld
                                                        Vice President and 
                                                        Chief Financial Officer




                               Page 15 of 15 pages