SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                  --------------------------------------------

                                    FORM 10-Q
                   -------------------------------------------

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  --------------------------------------------

For Quarter ended December 31, 1995.

Commission file Number 0-13627.

                            COMPUTER TELEPHONE CORP.
             (Exact name of registrant as specified in its charter)

Massachusetts                                                      04-2731202
--------------------------------------------------------------------------------
(State or other jurisdiction of                                    (IRS Employer
incorporation or organization)                               Identification No.)

360 Second Avenue, Waltham, Massachusetts                               02154
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

                                 (617) 466-8080
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

--------------------------------------------------------------------------------
(Former name,former address and former fiscal year,if changed since last report)

Indicate by check mark whether the registrant (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
                                               ----------        -----   

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
Common  Stock,  as of the  latest  practicable  date:

As of January 31, 1996 9,584,464 shares of Class I, $.01 par value, Common Stock
were outstanding.



<PAGE>


                            COMPUTER TELEPHONE CORP.
                                    FORM 10-Q
                                      INDEX
<TABLE>
<CAPTION>
<C>     <C>                <C>                                                                   <C>
Part I            FINANCIAL STATEMENTS                                                           PAGE NO.

         Item 1.           Financial Statements

                           Condensed Balance Sheets
                           As of December 31 and March 31, 1995                                    3

                           Condensed Statements of Income
                           Three Months Ended
                           December 31, 1995 and 1994                                              4

                           Condensed Statements of Income
                           Nine Months Ended
                           December 31, 1995 and 1994                                              5

                           Condensed Statements of Cash Flows
                           Nine Months Ended December 31, 1995 and 1994                            6

                           Notes to Condensed Financial Statements                                 7

         Item 2.           Management's Discussion and Analysis of
                           Financial Condition and Results of Operations                           8-10

Part II           OTHER INFORMATION

         Item 1.           Legal Proceedings                                                       Inapplicable

         Item 2.           Changes in Securities                                                   Inapplicable

         Item 3.           Default Upon Senior Securities                                          Inapplicable

         Item 4.           Submission of Matters to a
                           Vote of Security Holders                                                Inapplicable

         Item 5.           Other Information                                                       Inapplicable

         Item 6.           Exhibits and Reports on 8-K

                           The following exhibit is included herein:

                           (11)     Statements Regarding Computation of
                                    Per Share Earnings
                                    Three and Nine Months Ended
                                    December 31, 1995 and 1994                                     11

</TABLE>

The Company did not file any reports on Form 8-K during the nine months ended
December 31, 1995.

                                       2

<PAGE>



                            COMPUTER TELEPHONE CORP.

                            CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                                                December 30,             March 31,
                                                                                    1995                   1995
                                                                                -------------            ---------  
ASSETS

Current Assets

<S>                                                                             <C>                  <C>          
Cash and cash equivalents                                                       $ 3,717,906          $ 2,390,546 
Accounts receivable, net                                                          6,010,684            3,639,220
Inventories                                                                          26,190               36,512
Prepaid expenses and other current assets                                           514,426              353,381
                                                                                -----------          ----------- 
        Total Current Assets                                                     10,269,206            6,419,659
                      

Furniture, Fixtures and Equipment                                                 5,665,099            5,287,289
Less accumulated depreciation                                                    (4,601,417)          (4,162,417)
                                                                                -----------          ----------- 
        Total Equipment                                                           1,063,682            1,124,872

Deferred tax asset                                                                  153,000              153,000
Other assets 24,685 28,285
                                                                                -----------          ----------- 
        Total Assets                                                            $11,510,573          $ 7,725,816
                                                                                ===========          ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable and accrued expenses                                             $ 891,074            $ 456,094
Accrued salaries and related taxes                                                2,289,289            1,445,937
Accrued income taxes                                                                (90,925)             281,569
Deferred revenue                                                                          0                4,209
Customer deposits                                                                    12,412               12,412
                                                                                -----------          ----------- 
        Total Current Liabilities                                                 3,101,850            2,200,221
                     

Stockholders' Equity

Common stock                                                                         95,668               31,244
Additional paid in capital                                                        4,854,095            4,871,302
Retained-earnings                                                                 3,608,645              796,734
                                                                                  8,558,408            5,699,280
Amounts due from stockholders                                                      (135,825)            (159,825)
Less treasury stock, at cost                                                        (13,860)             (13,860)
                                                                                -----------          ----------- 
        Total Stockholders' Equity                                                8,408,723            5,525,595
                                                                                -----------          -----------                
                     

        Total Liabilities and
        Stockholders' Equity                                                    $11,510,573          $ 7,725,816
                                                                                -----------          ----------- 
</TABLE>
                      
The accompanying notes are an integral part of these financial statements.

                                        3

<PAGE>

                            COMPUTER TELEPHONE CORP.
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                      December 31,          December 31,
                                                          1995                  1994
                                                     -------------         --------------
<S>                                                  <C>                   <C>           
Revenue
    Network service commission income                $   6,826,572         $    4,801,263
    Long distance usage income                           1,323,601                834,728
                                                     -------------         --------------
                                                         8,150,173              5,635,991

Costs and expenses
    Cost of long distance network                        1,021,660                670,026
    Selling, general & administrative  expenses          5,186,249              4,258,190
                                                     -------------         --------------
                                                         6,207,909              4,928,216
                                                     -------------         --------------
Income from operations                                   1,942,264                707,775

Other
    Interest income                                         49,727                 10,019
    Interest expense                                           (34)                (2,629)
    Other                                                       43                    310
                                                     -------------         --------------
                                                            49,736                  7,700
                                                     -------------         --------------
Income before income taxes                               1,992,000                715,475

Provision for income taxes                                 817,000                248,900
                                                     -------------         --------------

Net income                                           $   1,175,000         $      466,575
                                                     =============         ==============

Net income per common share
      Primary                                        $        0.11         $         0.05
                                                     =============         ==============
      Fully diluted                                  $        0.11         $         0.05
                                                     =============         ==============

Weighted average number of common shares
      Primary                                           10,672,928              9,621,064
                                                     =============         ==============
      Fully diluted                                     10,672,928              9,950,708
                                                     =============         ==============
</TABLE>

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

                                       4

<PAGE>

                            COMPUTER TELEPHONE CORP.
                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                      December 31,          December 31,
                                                          1995                  1994
                                                     -------------         --------------
<S>                                                  <C>                   <C>           
Revenue
    Network service ommission income                 $  19,268,327         $   13,323,429
    Long distance usage income                           3,668,316              2,128,744
                                                     -------------         --------------
                                                        22,936,643             15,452,173

Costs and expenses
    Cost of long  distance network                       2,837,851              1,691,874
    Selling, general  & administrative  expenses        15,486,049             12,357,007
                                                     -------------         --------------
                                                        18,323,900             14,048,881
                                                     -------------         --------------
Income from operations                                   4,612,743              1,403,292

Other
    Interest income                                        117,299                 33,280
    Interest expense                                          (604)                (6,046)
    Other                                                    9,162                  6,017
                                                     -------------         --------------
                                                           125,857                 33,251
                                                     -------------         --------------
Income before income taxes                               4,738,600              1,436,543

Provision for income taxes                               1,925,850                500,400
                                                     -------------         --------------

Net income                                           $   2,812,750         $      936,143
                                                     =============         ==============

Net income per common share
    Primary                                          $        0.27         $         0.11
                                                     =============         ==============
    Fully diluted                                    $        0.27         $         0.10
                                                     =============         ==============

Weighted average number of common shares
     Primary                                            10,487,978              8,776,429
                                                     =============         ==============
     Fully diluted                                      10,529,669              8,939,164
                                                     =============         ==============
</TABLE>

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

                                        5


<PAGE>


                            COMPUTER TELEPHONE CORP.
                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                      December 31,          December 31,
                                                          1995                  1994
                                                     -------------         --------------
<S>                                                  <C>                   <C>           

OPERATING ACTIVITIES

Net Income                                           $   2,812,750         $      936,142
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Depreciation and amortization                            439,000                486,000

Changes in noncash working capital items:
  Accounts receivable                                   (2,375,672)            (1,133,269)
  Inventories                                               10,322                 (3,158)
  Other current assets                                    (161,045)                21,874
  Income tax receivable                                          0                 50,000
  Other assets                                               3,600                  3,210
  Accounts payable                                         434,980               (230,089)
  Accrued liabilities                                      843,352                517,858
  Deferred revenue                                               0                190,251
  Customer deposits                                              0                145,000
  Accrued taxes                                           (372,494)                99,140
                                                     -------------         --------------
Net cash provided by operating activities                1,634,793              1,082,959

INVESTING ACTIVITIES
Additions to equipment                                    (377,810)              (496,715)
                                                     -------------         --------------
Net cash used in investing activities                     (377,810)              (496,715)

FINANCING ACTIVITIES
Proceeds from the issuance of common stock                  71,217                 13,992
Dividends Paid                                                (840)                     0
Repayment of capital lease obligations                           0                 (9,621)
                                                     -------------         --------------
Net cash used by financing activities                       70,377                  4,371

Increase (decrease) in cash                              1,327,360                590,615
Cash at beginning of year                                2,390,546              1,238,811
                                                     -------------         --------------
Cash and cash equivalents
  at end of period                                   $   3,717,906         $    1,829,426
                                                     =============         ==============
</TABLE>

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

                                        6


<PAGE>

                            COMPUTER TELEPHONE CORP.
                          NOTES TO FINANCIAL STATEMENTS


Note 1:    BASIS OF PRESENTATION

The accompanying condensed financial statements have been prepared in accordance
with the  instructions  to Form 10-Q and do not include all the  information and
footnote  disclosures  required by generally accepted accounting  principles for
complete  financial  statements.  In the opinion of management  all  adjustments
(consisting of normal recurring accruals) necessary for a fair presentation have
been  included.  Operating  results for the three and nine months ended December
31, 1995 are not necessarily  indicative of the results that may be expected for
the year ending March 31, 1996. These  statements  should be read in conjunction
with the financial statements and related notes included in the Company's Annual
Report to Shareholders on Form 10-K for the year ended March 31, 1995.

NOTE 2:    CASH DIVIDENDS

The Company has not paid cash dividends during the period presented.

NOTE 3:    COMMITMENTS AND CONTINGENCIES

The Company is party to suits  arising in the normal  course of  business  which
either individually or in the aggregate are not material.

NOTE 4:    COMMON STOCK TRANSACTIONS SUBSEQUENT TO
           SEPTEMBER 30, 1995

On January 29, 1996, the Computer Telephone Corp.  Employees Stock Purchase Plan
purchased  2,345  shares of Class 1 Common  Stock from the Company at $11.05 per
share for the purchase period ended December 31, 1995.

On October  10,  1995,  the  Company  declared a two for one stock  split to all
shareholders of record at the close of business on October 23, 1995. The payable
date of this transaction was on November 6, 1995.

NOTE 5:    NET INCOME PER SHARE

Net Income per share is computer based on the weighted  average number of common
stock and, if dilutive,  common stock equivalent shares  outstanding  during the
period.  Common  stock shares  result from the assumed  exercise of common stock
options using the treasury stock method.

                                        7


<PAGE>



Part I

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

The  following  discussion  should  be read in  conjunction  with the  Financial
Statements and Notes set forth elsewhere in this Report.

Results of Operations - Three months and nine months ended  December 31, 1995 as
compared to the three months and nine months ended December 31, 1994.

Total   revenues  for  the  third  quarter  of  Fiscal  1996  increased  45%  to
approximately  $8,150,000 as compared to  approximately  $5,636,000 for the same
period of the preceding year (Fiscal 1995).  Network service  commission income,
which  represents  fees earned by the  Company in it's  capacity as an agent for
various telephone companies,  increased 42% to approximately  $6,827,000 for the
three months ended  December 31, 1995, as compared to  approximately  $4,801,000
for the  third  quarter  of Fiscal  1995.  Long  distance  usage  income,  which
represents the gross billings to mid-sized  commercial accounts on the Company's
long distance network,  increased 59% to approximately $1,324,000 as compared to
approximately $835,000 for the same period of the preceding fiscal year.

Total  revenues for the nine month period ended  December 31, 1995 increased 48%
to approximately  $22,937,000 as compared to  approximately  $15,452,000 for the
same period of Fiscal 1995.  Network service  commission income increased 45% to
approximately  $19,268,000 as compared to $13,323,000 for the same period of the
preceding  fiscal year. For the nine month period,  the Company  recognized long
distance  usage  income of  $3,668,000  as compared to  $2,129,000  for the same
period of Fiscal 1995, an increase of 72%.

These increases in revenue are primarily attributable to two factors. First, the
growing base of customers in the Northeast, where the Company is paid a residual
fee to actively  manage a  substantial  group of accounts on behalf of NYNEX New
England, NYNEX- New York, and Southern New England Telephone, is a direct result
of additional  account  executives added during the first six months of calendar
1995. In addition,  the Company has further developed its strategy of leveraging
these  relationships  with additional  product offerings in order to influence a
great  amount of each  customers  communication  dollar  expenditure.  It is the
Company 's plan to continue both efforts throughout 1996.

                                        8


<PAGE>

Selling,  general and  administrative  expenses  for the third  quarter  totaled
$5,186,000,  an increase of approximately $928,000 over the same period one year
ago.  For the nine month period ended  December  31, 1995  selling,  general and
administrative   costs  totaled   $15,486,000,   an  increase  of  approximately
$3,129,000 over the same period of the preceding fiscal year.

These increases are directly attributable to the increases in the variable sales
commission  and bonus  expenses  incurred  in  connection  with the  substantial
increases in revenues. As a percentage of revenues,  these selling,  general and
administrative  expenses were  approximately 64% and 68%  respectively,  for the
three  and nine  months  periods  of Fiscal  1996,  as  compared  to 76% and 80%
respectively,  for the  corresponding  periods of Fiscal  1995.  These  relative
reductions  reflect the continuing  efforts by the Company to control  operating
expenses,  as well as the financial impact of increasing sales  opportunities to
the same customer base.

Operating income for the third quarter of Fiscal 1996 increased to approximately
$1,175,000,  as compared to approximately $467,000 for the same period of Fiscal
1995. For the nine months ended December 31, 1995, operating income increased to
approximately  $2,813,000,  as compared to  approximately  $936,000 for the same
nine month period of Fiscal 1995. The Company  estimates that it will utilize an
effective tax rate of approximately 40% for the balance of Fiscal 1996.

On October 10, 1995,  the Company  announced a 2-for-1  stock  split,  effective
October 23, 1995. On July 13, 1995, the Company announced a 3-for-2 stock split,
effective  as of July 25,  1995.  On January 18,  1995,  the Company  declared a
twenty five percent stock  dividend,  effective as of March 1, 1995.  All income
per share and weighted  average share  information  included in the accompanying
financial statements have been restated to reflect these changes.

The  period  ended  December  31,  1995 marks the tenth  consecutive  quarter of
profits for the Company.  Management believes that its strategy of building long
term  relationships  and offering  additional  products to these same customers,
when combined with  continuing  efforts to control  costs,  should  results in a
continuation of this trend throughout the balance of Fiscal 1996.

                                       9


<PAGE>

Liquidity and Capital Resources

Working  capital at December 31, 1995  amounted to  approximately  $7,167,000 as
compared to  $4,219,000  at March 31, 1995, an increase of 70%. Cash balances at
December 31, 1995 totaled approximately  $3,718,000 an increase of approximately
$397,000 over the September 30, 1995 balance.

On April 28, 1995, the Company  amended its revolving  line of credit  agreement
with Fleet Bank, which is available under certain conditions,  to provide for an
increase  in the credit line to  $3,000,000  from  $1,000,000  and to reduce the
interest rate to the prime rate from prime plus one-half percent.

In  addition,  the  Company  entered  into an  agreement  with  Fleet Bank which
provides up the $500,000 of term financing for capital expenditures at the prime
rate of interest plus one percent.

The Company  presently  has no bank debt and expects that the  revolving  credit
line,  together with cash flows from operations,  will be sufficient to meet the
cash requirements of the Company for the foreseeable future.

                                       10