<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

(Mark one)
        [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1997

        [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]


                     For the transition period from __ to__.

                           Commission File No. 0-20698

                           BROOKTROUT TECHNOLOGY, INC.
             (Exact name of registrant as specified in its charter)

              MASSACHUSETTS                                 04-2184792
         (State or other jurisdiction of                  (I.R.S.  Employer
         incorporation or organization)                   Identification No.)

                 410 FIRST AVENUE, NEEDHAM, MASSACHUSETTS 02194
               (Address of principal executive offices)(Zip Code)

       Registrant's telephone number, including area code: (781) 449-4100

        Securities registered pursuant to Section 12(b) of the Act: None

                                                 NAME OF EXCHANGE
                  TITLE OF EACH CLASS           ON WHICH REGISTERED
                       ---------                    ----------


    Securities registered pursuant to Section 12(g) of the Act: Common Stock
                                                             (Title of Class)

        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

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

        As of March 20, 1998, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $164 million, based
on the closing price on such date of the Company's Common Stock on the Nasdaq
National Market ("Nasdaq").

        As of March 20, 1998, 10,753,834 shares of Common Stock, $.01 par value
per share, were outstanding.
<PAGE>   2
                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of (i) the Company's Annual Report for the fiscal year ended
December 31, 1997 are incorporated into Part II of this Form 10-K and (ii) the
Company's Proxy Statement relating to the 1998 Annual Meeting of Shareholders of
the Company are incorporated into Part III of this Form 10-K.

        "TR114", "Universal Port", "QuadraFax", "Show N Tel", "BTStack323",
"PowerBlock" and "IP/FaxRouter" are trademarks of Brooktrout Technology, Inc.
"TR Series" and "TruFax" are registered trademarks of Brooktrout Technology,
Inc. "MVIP" is a trademark of Natural MicroSystems, Inc. "Touch-Tone" is a
registered trademark and "UNIX"is a trademark of AT&T. "Merlin" is a registered
trademark and "Legend", "Merlin Legend", "Merlin Mail", "Merlin Multi-Lingual
Version" and "Partner Mail" are trademarks of Lucent Technologies, Inc.
("Lucent".) "Microsoft" and "MS-DOS" are registered trademarks and "Microsoft
Windows Sound System" and "Windows NT" are trademarks of Microsoft Corporation.
"OS/2" is a registered trademark of International Business Machines Corp.
"UnixWare" is a trademark of Univel. "QNX" is trademark of QNX, Inc. "Netaccess"
and "Instant ISDN" are trademarks of Netaccess, Inc. "Instant RAS" is a
registered trademark of Netaccess, Inc.

<PAGE>   3

                                     PART I

BUSINESS

        Brooktrout Technology, Inc. ("Brooktrout" or the "Company") is a
Massachusetts corporation founded in 1984 to design, manufacture and market
computer hardware and software for use in electronic messaging applications in
telecommunications and networking environments. Brooktrout is a supplier of
advanced software and hardware products for system vendors and service providers
in the electronic messaging market. The Company's products enable its customers
to deliver a wide range of solutions for the integration and management of image
(fax), voice and data communications in telecommunications and networking
environments. The Company sells its products primarily to service providers,
original equipment manufacturers ("OEMs") and value added resellers ("VARs")
both domestically and internationally through a direct sales force. The Company
has direct sales offices in California, Illinois, Maryland, New Hampshire and
Massachusetts and has established sales and support offices in Belgium, England
and Singapore. The Company's international sales efforts, principally exports
from the United States, are initiated from corporate headquarters in the United
States and internationally located sales and support offices. In addition to
direct international sales, significant additional revenue is derived from
international sales by Brooktrout's customers of systems which incorporate
Brooktrout's products.

        On April 1, 1993, the Company acquired all of the assets of DAFcom
Corporation ("DAFcom"), a producer of fax routing products for private data
networks. DAFcom, based in Dallas, Texas, is now operating as a wholly owned
subsidiary of the Company under the name "Brooktrout Networks Group, Inc."

        On May 29, l996, the Company acquired Technically Speaking, Inc.
("TSI"), a supplier of graphical, object-oriented software application
development tools for the electronic messaging market. TSI is now operating as a
division of the Company.

        On June 30, 1997, the Company acquired the assets and assumed certain
liabilities of Netaccess, Inc. (Netaccess), a worldwide supplier of Primary Rate
and Basic Rate ISDN network interface products and multiport modem products for
standards-based, open remote access and computer telephony systems. Netaccess is
now operating as a wholly-owned subsidiary of the Company.

        During 1997, the Company formed Interspeed, Inc., a new subsidiary that
will focus exclusively on high-speed network access in the data communications
segment.


BROOKTROUT'S PRODUCTS
<PAGE>   4
        The Company's first products were voice processing boards and voice mail
systems based on those boards. The Company became a significant supplier of
personal computer-based voice mail systems to OEMs of small telephone systems.

        As it developed its voice processing business, the Company began to
explore computer-based fax processing using digital signal processing ("DSP")
technology. DSP is a technology which permits the complex signals transmitted
through the telecommunications network, including voice and fax signals, to be
interpreted and rapidly processed in much the same manner as basic numerical
data. The Company introduced its first TR Series fax processing product in 1987
and followed this with more advanced fax products in subsequent years.

        In addition to hardware products, the Company has emphasized the
development of firmware and software development tools that support rapid and
flexible applications development by software developers. Initially the Company
began making software drivers for its hardware products. In August 1991, the
Company introduced a higher-level TR Series Fax & Voice Applications Programming
Interface ("API"). The API provides a development environment which permits
access to the functionality of Brooktrout's TR Series hardware products. Using
the API, a developer of fax or voice software may readily program commands to
direct a TR Series hardware product to carry out any of its signal processing
functions by calling routines within the API that interpret the program's
instructions in the form of detailed hardware commands. In May 1996, the Company
added Show N Tel, a graphical object oriented software application development
tool to the software product line through the acquisition of TSI.

        In 1993, the Company formed Brooktrout Networks Group, Inc., through the
acquisition of all of the assets of DAFcom, to develop a new product which
provides fax networking solutions.

        In June 1997, the Company added multi-channel Primary Rate ISDN,
multi-channel Basic Rate ISDN, and multiport modem products by acquiring
Netaccess, Inc. These products provide data communications and networking
capabilities for remote access applications and for integration into computer
telephony systems.

        In June 1997, the Company introduced the Brooktrout Open System
Telephony architecture (BOSTON), a next generation Universal Port software
architecture for electronic messaging applications. BOSTON will enable the
Company to provide (i) a comprehensive universal port development environment
for electronic messaging applications, (ii) development tools that have the
potential to reduce the time and cost of maintaining application software, and
(iii) cost-effective DSP resource boards for a wide variety of applications and
system configurations.

        In September 1997, the Company announced that it would add to its TR
Series product line new software and hardware products for real-time
transmission of voice and fax over packet data networks using the Internet
Protocol (IP). These products include DSP resource boards, firmware,
communication protocol "stacks" and enhancements to the TR Series API, all of
which will be integrated into the BOSTON architecture.
<PAGE>   5
        The Company has six major product lines, all of which serve the
electronic messaging market: fax and voice processing boards, IP telephony
boards, network interface boards, application development tools, fax systems,
and OEM systems. The following table describes Brooktrout's principal products
and the markets which they serve:


<TABLE>
<CAPTION>
                 Products                       Description                      Target Customers
                 --------                       -----------                      ----------------
<S>                                        <C>                                 <C>
Fax & Voice Processing Boards

TR114 Series Universal Port Fax &          Multichannel boards with            Service providers, OEMs
Voice boards                               advanced fax and voice              and VARs implementing
                                           processing capabilities             medium to high density
                                           available with 2, 4, 8,12 or 16     fax and voice systems
                                           channels/board

TruFax Series Fax boards                   Two channel fax boards with         OEMs and VARs
                                           general purpose features            implementing low
                                                                               density, general purpose
                                                                               fax systems

IP/Telephony Boards

TR2000 Series boards                       Multichannel boards that            Service providers and
                                           support real-time voice and fax     OEMs implementing
                                           transmission over IP networks       medium and high density
                                                                               "gateways" and other IP
                                                                               telephony systems

Network Interface Boards

PRI/BRI WAN Interface boards               Multi-span ISDN/T1/E1/BRI           OEMs and system
                                           boards for data, voice, video       integrators implementing
                                           applications available in           data networking and
                                           multiple bus types                  computer telephony
                                                                               applications

Instant RAS Open Remote Access             A family of remote access           VARs and system
Server products                            software and hardware for           integrators providing
                                           industry standard platforms         remote access solutions
                                           providing analog and digital        for office and
                                           connectivity                        departmental applications

Application Development Tools

TR Series API                              C-language application              Service providers, OEMs
                                           development software for the        and VARs developing
                                           TR Series and TruFax boards         high performance fax and
                                                                               voice applications with
                                                                               specific custom
                                                                               requirements
</TABLE>
<PAGE>   6
<TABLE>
<S>                                        <C>                                 <C>
Show N Tel                                 A graphical, object-oriented        Service providers, OEMs
                                           development environment for         and VARs developing
                                           enterprise-wide voice, fax and      enterprise computer
                                           computer telephony                  telephony systems
                                           applications                        seeking an easy-to-use
                                                                               application development
                                                                               and prototyping tool
Fax Systems

IP/FaxRouter                               An embedded system platform         OEMs and VARs
                                           for routing faxes over the          providing solutions for
                                           Internet and other IP networks      businesses with high fax
                                                                               transmission expenses
                                                                               that have access to the
                                                                               Internet or other IP
                                                                               network services


OEM Systems

Lucent Technologies, Inc.'s                Voice messaging systems             Provided to Lucent on a
MerlinMail and                             designed for Lucent's Merlin        private label basis for sale
PartnerMail systems                        Partner and Merlin Legend           to purchasers of Merlin
                                           telephone switches                  Partner and Merlin
                                                                               Legend telephone
                                                                               systems
</TABLE>

Fax, Voice & Data Messaging

        TR114 Series. Introduced in 1992 and periodically enhanced since then,
the TR114 Series Universal Port boards are designed for high performance fax and
fax and voice messaging systems, such as those used by telecommunications
service providers, messaging system vendors and network communication server
vendors. The TR114 Series Universal Port boards offer full fax and voice
processing on each channel of a single multi-channel board. Advanced fax and
voice features, such as file conversions and file transfer protocols, are
supported on the TR114 Series. Boards are available in a range of
configurations; with two, four, eight, twelve or sixteen channels per board. The
TR114 Series boards are designed to be approved by telecommunications regulatory
agencies worldwide and have been approved for use in 32 countries including the
United States, Japan, England, France and Germany.

        The range of the TR114 Series configurations allows developers
flexibility in designing systems from small corporate systems to large telephone
company service systems cost effectively. The TR114 Series two and four channel
analog boards support loop start, DID, and Basic Rate ISDN telephone service.
The TR114 Series boards are designed to be used in ISA and PCI-bus computers
which may be used as platforms for smaller systems, and special purpose
computers providing expansion slots for up to 20 boards to serve the needs of
large service providers. TR114 Series four, eight, twelve and sixteen channel
digital boards with interfaces for popular Pulse Code Modulation ("PCM")
highways, such as MVIP, SC Bus and PCM Expansion Bus ("PEB"), offer developers
options in designing systems for digital network services (such as T1, E1 and
ISDN) or with other resources, such as voice recognition, from other vendors.
<PAGE>   7
        TruFax Series. Released in January 1995, the TruFax Series fax boards
are fax processing boards designed for small to medium scale, general purpose
fax servers and systems. TruFax Series products incorporate many of the
functions that contribute to the high reliability of TR114 Series products but
do not support many of their advanced fax features, or voice processing. TruFax
Series products are lower-priced than TR Series products. The first TruFax
Series product, the TruFax 200, is a two channel fax board. At the core of each
channel is a fax modem controlled by a microprocessor. The TruFax 200 is
available with loop start telephone system interfaces.


IP/Telephony Boards

        TR2000 Series. Announced in September 1997, the TR2000 Series
IP/Telephony boards are designed for systems that send voice and fax
communications over packet data networks based in the Internet Protocol (IP).
These systems are being developed for use by service providers as well as
enterprises that will use IP networks, rather than the public switched telephone
network, for voice and fax communications. TR2000 Series products offer up to 60
channels of real-time voice and fax processing on each channel of a multichannel
board. The boards include integrated interfaces to selected digital telephone
networks. In addition, the boards include interfaces to PCM buses to enable
system developers to connect to digital network interface boards for connection
to networks not supported by the on-board telephone interface.


Network Interface Boards

        Netaccess PRI/BRI ISDN/TI/E1 Interfaces. Originally introduced in 1991
and periodically enhanced since then, the Netaccess ISDN interface boards give
OEMs and systems integrators easy to implement digital wide area network
interface solutions. When combined with Netaccess' Instant ISDN Software and
application interface, customers can develop data networking and computer
telephony solutions quickly with certifications in a large number of
jurisdictions throughout the world. Boards are available in several bus formats
including ISA, VME, and PCI with up to four interfaces per board and include
computer telephony interfaces such as MVIP.

        Instant Remote Access Server Products. Introduced originally in 1995 as
the Multiport Modem product, the Instant RAS product family provides remote
access capability for industry standard platforms, such as Microsoft's Windows
NT Server. These products are designed for end users requiring economical access
to corporate networks through a variety of connection mechanisms, including
analog modem and digital ISDN interfaces. Instant RAS products provide reliable,
easy to install and maintain, and low price per port connections for small
offices, branch offices, departments of larger corporations, and small Internet
Service Providers. These products leverage Netaccess' expertise in developing
network interface products for its OEM partners.


Application Development Tools

        TR Series API. The TR Series API, originally introduced in 1991 and
periodically enhanced since then, enables developers to quickly develop
sophisticated fax and voice applications. It is being enhanced to incorporate
support for Netaccess network interface products and real-time voice and fax on
IP networks. The API is a complete C language library of fax, voice, tone
signaling and call processing function calls. It also includes BTStack323 - an
H.323 protocol stack, time-saving sample applications, utilities and debugging
tools. The API is operating-system independent and will support most operating
systems, including Windows NT, UNIX, UnixWare, AIX, Solaris, QNX, OS/2, Windows
95 and MS DOS. Applications developed with the API run on all of the Company's
TR Series and TruFax Series products that support the features.
<PAGE>   8
        Show N Tel. Show N Tel is a graphical, object-oriented development and
prototyping environment for enterprise-wide, client/server voice, fax, and
computer telephony applications. It is designed to simplify and reduce the time
to develop complex applications. Show N Tel provides a library of over 200
PowerBlocks; graphical icons that represent common operations in
computer-telephony applications. Developers create applications by connecting
these icons on a drag-and-drop template. In addition to the core voice, fax and
computer telephony functions, optional components are available to support
functions such as database access, speech recognition, speech synthesis
(text-to-speech) and fax document creation. Show N Tel supports Microsoft's
Windows NT.


Fax Systems

        IP/FaxRouter. In June l996, Brooktrout introduced the IP/FaxRouter, an
Ethernet peripheral which sends facsimile traffic via IP wide area networks
including the Internet. The IP/FaxRouter was developed to address the escalating
costs associated with facsimile transmission. By routing fax traffic over IP
data networks like the Internet, it can reduce or eliminate fax transmission
charges normally incurred from the telephone company. In organizations with
significant international fax traffic, the IP/FaxRouter can significantly reduce
telephone charges by routing faxes over an existing data network. Configuration
Network Management System ("CNMS") software and Account Data Management System
("ADMS") software are also available with the IP/FaxRouter for centralized and
remote system management as well as tracking account activity in service
organizations.


OEM Systems

        Merlin Legend Mail and Partner Mail Since 1990, Brooktrout has been the
supplier of the Merlin Mail voice messaging/automated attendant system for the
Lucent Merlin small business telephone system. In 1991, the Company introduced a
second generation of Merlin Mail designed for Lucent's Merlin Legend system, a
new, small business telephone system. In 1992, the Company introduced the
Partner Mail voice messaging/automated attendant system for Lucent's Partner
small business telephone system. In 1993, the Company introduced the third
generation of Merlin Mail: Merlin Mail Multi-Lingual Version which incorporates
English, Spanish and French languages in one system and is integrated with
Lucent's Merlin Legend system. In 1997, the Company began shipping Merlin Legend
Mail which delivers the Merlin Mail application software in a low-cost board
integrated into the Merlin Legend system. The Merlin Mail, Partner Mail, Merlin
Legend Mail and Merlin Mail Multi-Lingual Version products are based on the
voice boards developed and manufactured by the Company.

SALES AND MARKETING

        The Company markets its products primarily to service providers, OEMs
and VARs. The TR Series, TruFax Series, Show N Tel and IP/Fax Router products
provide fax and voice processing, computer telephony or fax routing
functionality for systems sold by these customers. Network interface boards
provide analog and digital connectivity for data, voice and video applications
in multiple bus types. The Company's OEM systems encompassing a complete
solution are sold to Lucent as part of that customer's products sold to end
users.

Service Providers and OEMs

        Providers of enhanced telecommunications services develop, or purchase
from developers, large, complex systems incorporating the Company's products to
deliver electronic messaging applications. These systems typically require long
development times and result in periodic deployments of large systems. OEMs
design, manufacture and market electronic messaging systems that include the
Company's products. OEMs generally have long product design and development
processes that precede the release of products.
<PAGE>   9
        Making sales to both of these types of customers can be a complex and
time-consuming process which is often focused on technical requirements. To
serve these customers in North America, the Company sells its products through a
direct sales force located in Massachusetts, California, Connecticut, Illinois,
Maryland and New Hampshire.

VARs

        VARs typically purchase the Company's products for resale to an end-user
customer together with application software purchased from an ISV. The Company
has established a network of resellers, including many who are designated
Brooktrout Authorized Resellers. The Company employs direct sales people and
manufacturers' representatives to recruit, train and assist VARs. The Company
also uses two tier distribution for some of its network interface and multiport
modem products, utilizing national distributors who then sell to VARs.

International

        The Company sells its products to service providers, OEMs and VARs
internationally through a direct sales force organized by region. The Company
has established sales offices in Belgium, England and Singapore.

        The Company's international sales efforts are initiated from corporate
headquarters in the United States and internationally located sales and support
offices. International sales, principally exports from the United States,
accounted for approximately $13.4 million or 19% of revenue for the year ended
December 31, 1997, $10.6 million or 18% of revenue for the year ended December
31, 1996 and $4.3 million or 11% of revenue for the year ended December 31,
1995. In addition to direct international sales, significant additional revenue
is derived from international sales by Brooktrout's customers of systems which
incorporate Brooktrout's products.

        Most countries require technical approvals from their telecommunications
regulatory agencies for products which operate in conjunction with the telephone
system. Obtaining these approvals is generally a prerequisite for sales in a
given jurisdiction. Obtaining requisite approvals may require from two months to
a year or more depending on the product and the jurisdiction. Approval of the
Company's fax products in Germany, France and Japan has taken up to twelve
months or more. The Company does not believe that these delays have had a
material impact on the Company's operations. The Company has not yet encountered
any situation in which it has proved impossible to obtain approval in a foreign
jurisdiction. The Company, its distributors or its customers have received
product approvals for certain Brooktrout fax and voice products from agencies in
Australia, Canada, France, Germany, Hong Kong, Italy, Japan, Malaysia,
Netherlands, New Zealand, Singapore, Sweden, Switzerland, Mexico, Ireland,
Norway, Denmark, India, Czech Republic, the United Kingdom, Austria, Belgium,
Finland, Greece, Luxembourg, Portugal, Spain, China, Thailand, Argentina,
Iceland and the United States.

TECHNICAL SUPPORT

        Brooktrout seeks to deliver unmatched support and service to customers.
By listening to customers and thoroughly understanding their requirements, the
Company believes it can provide innovative high-value products which meet or
exceed customer expectations. Beyond delivery, Brooktrout backs its products
with responsive engineering level support. Generally, the Company's technical
support staff members hold bachelor's degrees in electrical engineering or
computer science. Staff members place the highest priority on providing timely,
accurate information as well as advice on how to take advantage of Brooktrout's
sophisticated product line. Brooktrout's technical support personnel have been a
source of product improvements and new features and functions due to close
working relationships with customers. Brooktrout's technical support department
reports directly to the Company's President as further evidence of Brooktrout's
commitment to provide partnership-level support to customers. The Company's
technical support activities represent an integral element of its marketing
strategy. The Company believes that its technical support capability represents
a significant competitive advantage.
<PAGE>   10
        The Company warrants its hardware products against defects in materials
and workmanship generally for twelve to eighteen months. Extended warranties of
up to three years have been provided to some customers for additional
consideration.

        The Company ordinarily sells its products on the basis of purchase
orders received from customers. The Company has entered into agreements with
many of its customers which establish terms and conditions for sales made under
these agreements from time to time. These agreements generally do not establish
any long-term fixed purchase or supply commitments for either party.

        In 1995, 1996 and 1997, sales to Lucent, the Company's largest customer,
accounted for 36%, 33%, and 30% respectively, of the Company's total revenues.
The Company sells essentially all of its major products to a number of separate
business units within Lucent, although sales of the Merlin Legend Mail, Merlin
Mail Multi-Lingual Version and Partner Mail systems have constituted 81%, 88%
and 82% of the revenue from Lucent in 1995, 1996 and 1997, respectively. Merlin
Legend Mail and Partner Mail and other products are sold to Lucent under
purchase orders issued by Lucent on an as-required basis. The Company and Lucent
consult closely with respect to expected future requirements and timing of
orders. No other single customer accounted for more than 10% of the Company's
total sales in 1995, 1996 or 1997.

PRODUCT DEVELOPMENT

        The market for electronic messaging products is characterized by rapid
technological change, changes in customer requirements, frequent new product
introductions and enhancements and emerging industry standards. The Company
focuses significant resources on improving its products in response to changes
in operating systems, application software, computer and telephony hardware,
networking software, programming tools and computer language technology. During
the years ended December 31, 1995, 1996 and 1997 the Company spent approximately
$4.8 million, $7.2 million and $13.6 million, or 12%, 12% and 19% of revenue,
respectively, on research and development. Research and development expenses
have generally been charged to operations as incurred. The Company is continuing
its development efforts for its current products, as well as developing next
generation versions of its current products. The Company believes significant
investments in product development are required to remain competitive. As a
consequence, the Company intends to continue to increase the dollar amount of
its product development expenditures in the future.

        The Company believes that its software and hardware development team
provides a significant competitive advantage for the Company. The team is
comprised of members with experience in computer-based fax, voice processing,
telephony, device driver development, object-oriented software development,
graphical user interface ("GUI") development, and computer networking. The
Company believes this assembly of diverse technical expertise contributes to the
highly integrated functionality of its products. The Company's ability to
attract and retain highly qualified employees will be one of the principal
determinants of its success in maintaining technological leadership.

COMPETITION

        The Company is in direct competition with companies offering similar
products or products responsive to similar applications in each of its six major
product lines. In addition, there is always the potential for new entrants into
the Company's markets by other companies in related computer and communications
companies including the Company's customers and suppliers. The Company believes
that the principal competitive factors affecting the market for the Company's
products and services include product functionality and features, product
quality, performance and price, ease of product integration, and quality of
customer support services. The relative importance of each of these factors
depends upon the specific customer environment. Although the Company believes
that its products and services currently compete favorably with respect to such
factors, there can be no assurance that the Company can maintain its competitive
position against current and potential competitors.
<PAGE>   11
        Many of the Company's current and potential competitors have longer
operating histories, significantly greater financial, technical, product
development and marketing resources, greater name recognition and larger
customer bases than the Company. The Company's present or future competitors may
be able to develop products comparable or superior to those developed by the
Company, adapt more quickly than the Company to new technologies, evolving
industry trends or customer requirements, or devote greater resources to the
development, promotion and license of their products than the Company.
Accordingly, there can be no assurance that competition will not intensify or
that the Company will be able to compete effectively in its market.

        The Company expects that it will face increasing pricing pressures from
its current competitors and new market entrants. The Company's competitors may
engage in pricing practices that cause the Company to reduce the average selling
prices of its products. To offset declining average selling prices, the Company
believes that it must successfully develop and introduce on a timely basis new
products or products that incorporate new features that can be sold at gross
margins comparable to those on existing products. To the extent that such new
products are not developed in a timely manner, do not achieve customer
acceptance or do not generate comparable gross margins, the Company's
profitability may decline.

BACKLOG

        At December 31, 1997, the Company's backlog of orders for products and
services was approximately $12,532,000 compared with approximately $11,362,000
at December 31, 1996. All of the backlog is expected to be shipped or provided
before the end of 1998. All orders believed to be firm for products or services
to be shipped or provided in the future are included in the backlog. The Company
regards all orders as firm orders and has experienced an order cancellation rate
in the past which the Company considers to be immaterial, although no assurance
can be given that adverse effects may not result from order cancellations in the
future. Because of the possibility of customer changes in delivery schedules or
cancellation of orders, the Company's backlog as of any particular date may not
be indicative of actual sales for any particular future period. The period of
time between placement of an order and delivery of the product varies from one
day for certain TR Series products to ten months for certain OEM systems
products.

MANUFACTURING

        Brooktrout's manufacturing operations consist primarily of final
assembly and testing of components, subsystems and systems. The Company tests
its products at various stages in the manufacturing process. Each product
undergoes a final load and functional test at the Company's Needham,
Massachusetts or Salem, New Hampshire facility prior to shipment.

        The Company uses independent manufacturers, one of which is Lucent, to
perform printed circuit board assembly and testing. The Company believes it has
good relationships with its subcontractors and has generally experienced timely
delivery of products and satisfactory quality with respect to products
manufactured by subcontractors. In December 1995, the Company's Needham,
Massachusetts facility achieved ISO 9002 certification.

PROPRIETARY TECHNOLOGIES

        The Company does not hold patents on a large part of its product line.
The Company's software and firmware are protected by copyright laws. Because
on-board and downloadable firmware represent an important element of the value
of the Company's hardware products, the Company believes that it obtains
significant protection for its proprietary interest in its hardware products, as
well as its software products, from copyright laws. Certain design features,
including ASICs (application specific integrated circuits), software and
firmware, receive some protection under trade secret laws. Each employee of the
Company has executed a proprietary information agreement designed to protect the
trade secrets of the Company, inventions created in the course of employment
with the Company and other proprietary
<PAGE>   12
information of the Company. There can be no assurance, however, that copyright
and trade secret protection will be sufficient to prevent competitors from
developing software and other technology similar to the software and other
technology upon which the Company relies for a significant portion of its
revenue.

        The Company has acquired licenses under certain patents covering aspects
of voice processing technology, and licenses from third parties of software for
its voice and fax products. The Company pays royalties under these licenses with
respect to its sales of certain products. The licenses generally extend for the
life of the patent in question (in the case of patents) or in perpetuity (in the
case of software), and are subject to termination only in the event of a breach.
Royalties constitute a percentage of sales of particular products or product
elements, or a fixed amount per unit of hardware or software distributed, and do
not account for a material part of the Company's cost of product sold.

        The Company has periodically received, and may receive in the future,
communications from third parties asserting patent rights with respect to
certain of the Company's products and features. The Company is a defendant in
two patent infringement cases, which it believes will not have a material effect
on the Company. Except as described under Legal Proceedings below, there is no
pending litigation against the Company regarding any of these claims, nor has
the Company to date believed it necessary to license any patent rights referred
to in such communications, except as described above and except for certain
other minor cases involving no payment of ongoing royalties.

EMPLOYEES

        As of December 31, 1997, the Company had 260 full-time employees, of
which 113 were engaged in engineering and product development, 30 in
administration, 33 in manufacturing and 84 in sales, marketing and technical
support. None of the Company's employees are represented by any labor union and
the Company believes its relations with its employees are good.
<PAGE>   13
Telecommunications Union -- Telephony (ITU-T) facsimile standards. Mr. Duehren
is also a member of the Institute of Electrical Electronic Engineers (IEEE) and
has been a member of the SCSA work group on facsimile API standards. Mr. Duehren
received a Bachelor of Science degree and Master of Science degree in Electrical
Engineering from the Massachusetts Institute of Technology.

        Patrick T. Hynes is a Company founder and has been Vice President of
Advanced Product Engineering since January 1994 and a Director of Brooktrout
from the Company's inception in 1984. Mr. Hynes was Vice President of
Engineering from the Company's inception to December 1993. Mr. Hynes is a member
of the Institute of Electrical Electronic Engineers (IEEE). Mr. Hynes received a
Bachelor of Science degree in Electrical Engineering from the Massachusetts
Institute of Technology and a Master of Science degree in Electrical Engineering
from Columbia University.

        Stephen A. Ide has been Senior Vice President and President of
Interspeed, Inc. since January 1997. Mr. Ide was Senior Vice President of Sales
and Marketing of Brooktrout from January 1993 to December 1996 and was Vice
President of Sales and Marketing of Brooktrout from July 1987 to December 1992.
Prior to joining the Company, Mr. Ide was co-founder and president of Computer
Telephone Corporation. Mr. Ide also served as vice president of operations for
Rolm of New England Corporation.

        Robert C. Leahy has been Vice President of Finance and Operations and
Treasurer of Brooktrout since March 1988. Prior to joining Brooktrout, Mr. Leahy
held the position of corporate controller and treasurer for Cambridge Robotics.
Mr. Leahy is an active member in the Financial Executive Institute. Mr. Leahy
received a Bachelor of Science degree in accounting and a Master of Business
Administration degree from Bentley College.

        R. Andrew O'Brien has been Vice President of Marketing and Business
Development of Brooktrout since July 1993, and Director of Marketing and
Business Development from January 1993 to June 1993. Prior to joining the
Company, Mr. O'Brien was at McKinsey & Company from September 1986 to January
1993. Mr. O'Brien received a Bachelor of Arts degree from Yale University and a
Master of Business Administration degree from Harvard Business School.

        Jonathan J. Sirota has been Vice President of Engineering of Brooktrout
since January 1994. Prior to joining the Company, Mr. Sirota was Senior Vice
President of Engineering and Operations for ERGO Computing, Inc. from March 1989
to January 1994. Mr. Sirota received a Bachelor of Science degree in Electrical
Engineering from Rensselaer Polytechnic Institute and a Master of Science degree
in Electrical Engineering from Massachusetts Institute of Technology.

        Michael E. Donoghue has been Vice President of Worldwide Sales since
January 1997. Mr. Donoghue was Director of International Sales from January 1995
to December 1996 and Managing Director of Brooktrout Technology Europe in
Brussels, Belgium from January 1993 to December l995. He was a National Sales
Manager from January l990 to December l992 and was a Major Account Manager from
December l987 to December l989. Mr. Donoghue received a Bachelors of Science in
Mechanical Engineering from the University of Massachusetts Amherst in l987.

        William F. Rosenberger has been a Vice President of Brooktrout
Technology, Inc., since June 1997 and President of Netaccess since 1996. Prior
to becoming president of Netaccess, Mr. Rosenberger held various executive
management positions in communications and networking companies including Wang
Laboratories, ACSYS Incorporated, Netronix Incorporated and the Yankee Group.
Mr. Rosenberger has a Bachelors of Science degree from the State University of
New York.

        Mark Flanagan has been the Vice President of Brooktrout Technology, Inc.
and the General Manager of its Software and Systems Division since January 1998.
Prior to joining Brooktrout, Mr. Flanagan was executive vice president of
Lernout & Hauspie's Dictation Division and general manager of its PC
Applications Group. Previously, he held senior management positions with
International Data Group, Lotus Development Corporation and International
Thomson Organisation. Mr. Flanagan holds
<PAGE>   14
a Bachelor of Arts degree from the University of Rochester and he also attended
the School of Management at Boston College.


ITEM 2.        PROPERTIES

        The Company leases a stand-alone facility in Needham, Massachusetts that
is approximately 38,000 square feet. The lease commenced March 1, 1996 and
expires October 31, 2006. The facility accommodates corporate headquarters as
well as research and development, engineering, manufacturing, sales, marketing
and administration.

        The Company also occupies approximately 16,515 square feet in
Southborough, Massachusetts, which it took over as a lessee in connection with
its acquisition of TSI. This facility accommodates research and development,
engineering and technical support. The lease for this facility commenced on May
1, 1995 and expires on April 30, 2001.

        In 1997, the Company signed an additional lease for space in Needham,
Massachusetts for its manufacturing operations. The stand alone facility is
approximately 31,000 square feet. The lease commenced April 7, 1997 and expires
April 6, 2006.

        The Company leases approximately 26,000 square feet in Salem, New
Hampshire, for Netaccess' administrative, sales, marketing, engineering, and
manufacturing operations. This lease commenced on May 1, 1997 and expires on
August 31, 2000. The Company also leases Netaccess sales office space in
Columbia, Maryland and Sunnyvale, California both of which are leased for six
month periods with automatic renewal clauses.

        The Company leases Brooktrout Networks Group, Inc. approximately 3,200
square feet in Richardson, Texas for research and development. The Company
signed a new lease for this facility which commenced on February 1, 1998 and
expires on January 31, 2001.

        The Company has also signed operating lease commitments for office space
in Belgium, Singapore, California, Connecticut, and Illinois. The Belgium lease
is for a period of 2 years and the California lease is for 5 years, while the
rest of the leases are for 1 year or less.

        The Company believes that its present facilities are adequate for its
current needs and that suitable additional space will be available as needed.

ITEM 3.        LEGAL PROCEEDINGS

        In August 1995, Spectron Miscrosystems, Inc. ("Spectron"), a subsidiary
of Dialogic Corporation ("Dialogic") filed a lawsuit against the Company in
Federal District Court for the District of New Jersey, alleging infringement by
the Company's products of patents owned by the plaintiff and seeking damages,
special damages and injunctive relief. The Company has filed an Answer and
Counterclaim asserting noninfringement and further asserting that the patent was
licensed to the Company, and seeking declaratory and monetary relief. In
February 1996, on motion of the Company, this action was transferred to the
Federal District Court for the District of Massachusetts.

        In November, 1995, the Company filed, in the Federal District Court for
the District of Massachusetts, a lawsuit against Dialogic and certain affiliated
parties, seeking rescission of a Settlement Agreement entered into in settlement
of prior litigation, damages, special damages, an order vacating the dismissal
of the previously litigated cases, and specific enforcement of an earlier
agreement regarding the settlement. Dialogic filed an Answer and Counterclaim on
January 30, 1996. The Counterclaim seeks an award of damages and special
damages.
<PAGE>   15
        In December, l996, the Defendants' Motion for Summary Judgment on the
Company's claims for rescission and specific enforcement in the litigation
described above was allowed. The Company's claim for special damages under
Chapter 93A of the Massachusetts General Laws and the Defendants' counterclaims
remain to be litigated.

        On October 4, l996, Syntellect Technology Corp. ("Syntellect") filed a
Complaint against the Company in the United States District Court for the
Northern District of Texas, alleging infringement of certain patents held by
Syntellect relating to certain aspects of "automated attendant" technology.
Syntellect's Complaint does not identify the products of the Company which
allegedly infringe Syntellect's patents. The Complaint seeks injunctive relief,
damages in an unspecified amount, and multiple damages on account of alleged
willful infringement. In December, l996, the Company filed a Motion to Dismiss
the action, which was denied in July 1997. In October 1997, the Company filed a
Motion for summary judgment in the action which remains pending. The Company is
reviewing the patents at issue, and intends to defend the case vigorously.

        The Company believes that neither the currently pending litigated cases
nor an adverse decision in any of such cases will have a material adverse effect
on the Company's business, financial condition or results of operations.

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

        None.
<PAGE>   16
                                     PART II

ITEM 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDERS MATTERS

        Information in response to this item appears under the caption "Stock
Market Information" of the Company's Annual Report for the year ended December
31, 1997, which is incorporated in this report by reference.

ITEM 6.        SELECTED FINANCIAL DATA

        Information in response to this item appears under the caption "Selected
Consolidated Financial Data" of the Company's Annual Report for the year ended
December 31, 1997, which is incorporated in this report by reference.

ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
               AND FINANCIAL CONDITION

        Information in response to this item appears under the caption
"Management's Discussion & Analysis of Financial Condition and Results of
Operations" contained in the Company's Annual Report for the year ended December
31, 1997, which is incorporated in this report by reference.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Information in response to this item is contained in the Company's
Annual Report for the year ended December 31, 1997, which is incorporated in
this report by reference.

ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE

        None.
<PAGE>   17
                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Directors. The information appearing under the caption "Information
Regarding Nominees and Directors" of the Company's Proxy Statement for its 1998
Annual Meeting of Stockholders is incorporated in this report by reference.

        Executive Officers. Information with respect to executive officers
appears under the caption "Executive Officers" in Item 1 of this report.

ITEM 11.       EXECUTIVE COMPENSATION

        Information in response to this Item appears under the caption
"Executive Compensation" of the Company's Proxy Statement for its 1998 Annual
Meeting of Stockholders, which is incorporated in this report by reference.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

        Information in response to this Item appears under the captions
"Principal Stockholders" and "Ownership by Management of Equity Securities" of
the Company's Proxy Statement for its 1998 Annual Meeting of Stockholders, which
is incorporated in this report by reference.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        None.
<PAGE>   18
                                     PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
               8-K

                      (a)(1) Financial Statements

        The following is included in Part II of this report, incorporated by
reference from the Company's Annual Report for the year ended December 31, 1997:

                                                                        Page No.
--------------------------------------------------------------------------------
        Independent Auditors' Report
        Consolidated Balance Sheets as of December 31, 1997 and 1996
        Consolidated Statements of Income for the Years Ended
               December 31, 1997, 1996 and 1995
        Consolidated Statements of Stockholders Equity (Deficiency) for the
               Years Ended December 31, 1997, 1996 and 1995
        Consolidated Statements of Cash Flows for the
               Years Ended December 31, 1997, 1996 and 1995
        Notes to Consolidated Financial Statements

        (a)(2) Financial Statement Schedule

        The following are contained on the indicated pages of this report:

                                                                        Page No.

       Independent Auditors' Report on Schedule.........................

       Schedule IX Valuation and Qualifying Accounts....................


        Schedules not listed above are omitted because they are not required or
because the required information is given in the Consolidated Financial
Statements or Notes thereto.


















<PAGE>   19
        (a)(3) Exhibits

        The following exhibits are filed as part of this report. Where such
filing is made by incorporation by reference to a previously filed statement,
such statement is identified.


 Exhibit
 No.                          Title
----------------------------------------------------------------------------
3.1          Restated Articles of Organization of the Company (1)

3.2          Amended and Restated By-laws of the Company (2)

4.1          Specimen certificate for shares of Common Stock, $.01 par
             value, of the Company (2)

10.1         Lease between the Company and Trustees of Needham 152
             Second Avenue Trust dated April 7, 1997

11.1         Computation of Earnings Per Share

13.1         1997 Annual Report of Brooktrout Technology, Inc.

21.1         Subsidiaries of the Company (see exhibit 13.1)

23.1         Independent Auditors' Consent

27.1         Financial Data Schedule
------------------------

   (1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, as filed on March 31, 1993.

   (2) Filed as an exhibit to the Company's Registration Statement on Form S-1
with respect to its initial public offering of Common Stock as initially filed
on August 28, 1992 (File No. 33-51424).





<PAGE>   20
                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                       BROOKTROUT TECHNOLOGY, INC.


                                       By: /s/ Eric R. Giler
                                          ---------------------------
                                           Eric R. Giler
                                           President

Date: March 27, 1998


                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

     Signatures                   Title                          Date

/s/                     President and Director (Principal
--------------------
Eric R. Giler           Executive Officer)

/s/                     Vice President of Finance
--------------------
Robert C. Leahy         and Operations and Treasurer
                        (Principal Financial and
                        Accounting Officer)

/s/                     Vice President and Director
--------------------
David W. Duehren

/s/                     Vice President and Director
--------------------
Patrick T. Hynes

/s/                     Director
--------------------
Robert G. Barrett

/s/                     Director
--------------------
David L. Chapman

/s/                     Director
--------------------
W. Brooke Tunstall
<PAGE>   21
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
   Brooktrout Technology, Inc.:
We have audited the consolidated financial statements of Brooktrout
Technology, Inc. as of December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997, and have issued our report thereon
dated February 11, 1998; such consolidated financial statements and report are
included in your 1997 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedules of
Brooktrout Technology, Inc., listed in Item 14. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

                                     By:  /s/ Deloitte & Touche LLP
                                         --------------------------
                                         Deloitte & Touche LLP

Deloitte & Touche LLP
Boston, Massachusetts
February 11, 1998
<PAGE>   22

                                                                     SCHEDULE IX

                           BROOKTROUT TECHNOLOGY, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                                 (In Thousands)



<TABLE>
<CAPTION>
                                       BALANCE AT  CHARGED TO                   BALANCE
                                        BEGINNING  COST AND                     AT END
                                         OF YEAR   EXPENSES    DEDUCTIONS       OF YEAR
                                       -------------------------------------------------------------
<S>                                     <C>         <C>           <C>            <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the year ended December 31, 1995    $364        $157          $(72)          $449

For the year ended December 31, 1996    $449        $144          $(69)          $524

For the year ended December 31, 1997    $524        $748         $(108)        $1,164


ACCRUED WARRANTY COSTS:
For the year ended December 31, 1995    $364        $251         $(278)          $337

For the year ended December 31, 1996    $337        $207          $(98)          $446

For the year ended December 31, 1997    $446        $672         $(268)          $850
</TABLE>