SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                  For the quarterly period ended March 31, 1997


                           Commission File No. 0-26912

                             Vodavi Technology, Inc.
                             -----------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                               86-0789350
          --------                                               ----------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

            8300 E. Raintree Drive, Scottsdale, Arizona     85260
            -------------------------------------------     -----
             (Address of principal executive offices )    (Zip Code)

                                 (602) 443-6000
                                 --------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the 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

The number of shares  outstanding of registrant's  Common Stock, $.001 par value
per share, as of April 30, 1997 was 4,342,238.

                                        1
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 1997
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                                                   TABLE OF CONTENTS


                                                                                                          Page #
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PART I.           FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Consolidated Balance Sheets - March 31, 1997
                  and December 31, 1996.                                                                     3

                  Consolidated Statements of Operations - Three Months
                  Ended March 31, 1997 and 1996.                                                             4

                  Consolidated Statements of Cash Flows - Three Months
                  Ended March 31, 1997 and 1996.                                                             5

                  Notes to Consolidated Financial Statements.                                                6

Item 2.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                        6

PART II.          OTHER INFORMATION                                                                          9

                  SIGNATURES                                                                                 10
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                                        2
<PAGE>
         PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements



                             VODAVI TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  In thousands




                                                       March 31,    December 31,
                                                         1997            1996
                                                       --------        --------
                                                      (Unaudited)
CURRENT ASSETS:
    Cash                                               $  1,008        $  1,152
    Accounts Receivable, net                              7,095           7,790
    Inventory, net                                        6,915           7,229
    Prepaids                                                407             420
                                                       --------        --------
                                                         15,425          16,591

PROPERTY AND EQUIPMENT, net                               2,641           2,465

GOODWILL, net                                             2,509           2,547

OTHER LONG-TERM ASSETS, net                                 827             815
                                                       --------        --------
                                                       $ 21,402        $ 22,418
                                                       ========        ========

CURRENT LIABILITIES:
   Current Portion of Long-Term Debt                   $    313        $    258
   Accounts Payable                                       3,421           4,464
   Accrued Liabilities                                    2,488           2,518
                                                       --------        --------
                                                          6,222           7,240
                                                       --------        --------

LONG-TERM DEBT                                            5,517           5,777
                                                       --------        --------

STOCKHOLDERS' EQUITY:
   Common Stock                                               4               4
   Additional Paid-In Capital                            12,308          12,308
   Accumulated Deficit                                   (2,649)         (2,911)
                                                       --------        --------
                                                          9,663           9,401
                                                       --------        --------
                                                       $ 21,402        $ 22,418
                                                       ========        ========



The  accompanying  notes  are an  integral  part of these  consolidated  balance
sheets.

                                        3
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       In thousands, except share amounts
                                   (Unaudited)




                                                       Three Months Ended
                                                            March 31,
                                                            ---------
                                                      1997              1996
                                                   -----------      -----------



REVENUE, net                                       $    11,528      $    10,355

COST OF GOODS SOLD                                       7,628            6,922
                                                   -----------      -----------
   GROSS MARGIN                                          3,900            3,433

OPERATING EXPENSES
 Engineering and product development                       483              501
 Selling, general and administrative                     2,803            2,775
                                                   -----------      -----------


OPERATING INCOME                                           614              157

INTEREST EXPENSE                                           178              235
                                                   -----------      -----------

INCOME (LOSS) BEFORE INCOME TAXES                          436              (78)

PROVISION FOR INCOME TAXES                                 174               21
                                                   -----------      -----------

NET INCOME (LOSS)                                  $       262      $       (99)
                                                   ===========      ===========

NET INCOME (LOSS) PER SHARE                        $       .06      $      (.02)
                                                   ===========      ===========

WEIGHTED AVERAGE SHARES
   OUTSTANDING                                       4,342,238        4,342,238
                                                   ===========      ===========



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

                                        4
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  In thousands
                                   (Unaudited)





                                                          Three months ended
                                                               March 31,
                                                               ---------

                                                         1997            1996
                                                       --------        --------
OPERATING ACTIVITIES:
  Net Income (Loss)                                    $    262        $    (99)
  Adjustments:
    Depreciation and amortization                           184             242
    Changes in working capital:
       Accounts receivable                                  695          (1,151)
          Inventory                                         314           1,428
          Prepaid expenses                                   14             224
          Other long term assets                            (37)            (14)
          Accounts payable                               (1,043)            (31)
          Accrued liabilities                               (30)           (225)
                                                       --------        --------
NET CASH FLOWS - OPERATING ACTIVITIES                       359             374
                                                       --------        --------

INVESTING ACTIVITIES:
  Purchase of fixed assets                                  (95)           (236)
                                                       --------        --------
NET CASH FLOWS - INVESTING ACTIVITIES                       (95)           (236)
                                                       --------        --------

FINANCING ACTIVITIES:
  Payments on Capital Leases                                (84)           --
  Borrowings from GE Capital                             11,800           8,110
  Payments to GE Capital                                (12,124)         (8,876)
                                                       --------        --------
NET CASH FLOWS - FINANCING ACTIVITIES                      (408)           (766)
                                                       --------        --------

DECREASE IN CASH                                           (144)           (628)

CASH, beginning of period                                 1,152           1,944
                                                       --------        --------

CASH, end of period                                    $  1,008        $  1,316
                                                       ========        ========


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

                                        5
<PAGE>
                             VODAVI TECHNOLOGY, INC.
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
                                 MARCH 31, 1997

a) Vodavi  Technology,  Inc. (the  Company),  a Delaware  corporation,  designs,
develops,  markets,  and supports a broad range of  telecommunications  systems,
commercial grade telephones,  computer-telephony  products, and voice processing
products,  including voice mail, fax mail, Internet  messaging,  and interactive
voice response systems for a wide variety of commercial applications.

(b) The  accompanying  unaudited  consolidated  financial  statements  have been
prepared by the Company without audit,  pursuant to the rules and regulations of
the Securities and Exchange  Commission.  These financial statements reflect all
adjustments (consisting of normal recurring accruals and adjustments) which are,
in the opinion of management,  necessary to fairly state the financial  position
as of March 31,  1997 and the  operating  results and cash flows for the periods
presented.   Operating  results  for  the  interim  periods  presented  are  not
necessarily  indicative  of the  operating  results that may be expected for the
entire year. These financial  statements  should be read in conjunction with the
Company's December 31, 1996 financial statements and accompanying notes thereto.

(c) In the fourth quarter of 1996,  certain events ocurred which resulted in the
Company  recording an impairment  loss related to the goodwill  associated  with
Enhanced  Systems,  Inc.  (Enhanced).  See  footnotes  1 and 4 to the  Company's
financial statements for the year ended December 31, 1996.

(d) Net income per share for the quarter ended March 31, 1997 was  determined by
dividing  net  income  by the  weighted  average  number of  common  and  common
equivalent shares outstanding.

Net loss per share  for the  quarter  ended  March 31,  1996 was  determined  by
dividing net loss by the weighted  average number of common shares  outstanding.
The weighted average number of common shares outstanding did not consider common
equivalent  shares  such as options and  warrants as the effect  would have been
anti-dilutive.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Results of Operations

         Three Months Ended March 31, 1997 and 1996:

The  following  table  summarizes  the  operating  results  of the  Company as a
percentage of revenue for the periods indicated.

                                                           Three Months Ended
                                                                March 31,
                                                                ---------
                                                           1997          1996
                                                          ------        ------

Revenue                                                   100.0%        100.0%
Cost of goods sold                                         66.2%         66.8%
                                                          ------        ------
  Gross margin                                             33.8%         33.2%
Operating expenses:
   Engineering and product development                      4.2%          4.8%
   Selling, general and administrative                     24.3%         26.8%
                                                          ------        ------
Operating income                                            5.3%          1.5%
Interest expense                                            1.5%          2.3%
                                                          ------        ------
Pre-tax income (Loss)                                       3.8%         (0.8%)
Income taxes                                                1.5%          0.2%
                                                          ------        ------
Net income (Loss)                                           2.3%         (1.0%)
                                                          ======        ======
Revenue

                                        6
<PAGE>
Revenue  was  approximately  $11.5  million  in the first  quarter  of 1997,  an
increase  of $1.1  million,  or  11.3%,  over the  first  quarter  of 1996.  The
increased  revenue is attributed to the core consumer  premise  equipment  (CPE)
business  (consisting  primarily of key telephone  systems and commercial  grade
telephones).

         Gross Margin

Gross margins  increased to approximately  33.8% of revenue in the first quarter
of 1997 as compared  with 33.2% in the first  quarter of 1996.  The gross margin
for the  first  quarter  of 1996 was  negatively  impacted  by the  issuance  of
approximately $225,000 in price protection credits which did not recur in 1997.

         Engineering and Product Development

Expenditures  related to engineering and product development remained relatively
flat  during the first  quarter of 1997 as  compared  with the first  quarter of
1996.

         Selling, General and Administrative

Selling, general and administrative expenses remained relatively flat during the
first  quarter  of 1997 as  compared  with  the  first  quarter  of  1996.  As a
percentage of revenue,  however,  selling,  general and administrative  expenses
declined to 24.3% of revenue in the first quarter of 1997 as compared with 26.8%
in the first quarter of 1996. The  recognition of the impairment loss related to
Enhanced  in  the  fourth  quarter  of  1996  has  eliminated  ongoing  goodwill
amortization of approximately $115,000 per quarter.

         Interest Expense

Interest  expense was  approximately  $178,000 in the first  quarter of 1997,  a
decrease of $57,000,  or 24.3%,  over the first quarter of 1996. The decrease is
attributable to a decrease in borrowings as a result of positive  operating cash
flows and improved asset management.

         Income Taxes

The Company has provided  for income  taxes using an effective  rate of 39.9% in
the first quarter of 1997.  The provision for income taxes for the first quarter
of 1996  reflects  the impact of the non-tax  deductible  goodwill  amortization
related to Enhanced.

Liquidity and Capital Resources

The Company's cash and cash equivalents were approximately $1.0 million at March
31, 1997.  The Company's cash accounts are swept  regularly and applied  against
the Company's  line of credit.  The Company's  borrowings  against its available
operating  line  of  credit  (as  described   below)  at  March  31,  1997  were
approximately  $5.1  million,  which  represents a $300,000  reduction  from its
borrowings of $5.4 million at December 31, 1996.  The reduction is attributed to
several  factors,  including cash generated from  operations and  utilization of
capital leases to finance capital expenditures, as described below. At March 31,
1997,  the Company had  approximately  $3.9  million  available  to it under its
operating line of credit.

The Company  maintains a $12.0  million  line of credit  with  General  Electric
Capital Corporation (GE Capital).  During the first quarter of 1997, the line of
credit bore interest,  payable monthly, at 4.5% over the 30-day commercial paper
rate, or a total of 10.2% at March 31, 1997. The Company has recently reached an
agreement in principal to extend the  facility,  which  expired  April 12, 1997,
through April 2000.  The terms of the extension  will lower the interest rate to
2.5% over the  30-day  commercial  paper  rate,  or a total of 8.2% at March 31,
1997. The Company has received a two month  extension of its existing  facility,
adjusted to reflect the new  interest  rates,  while the new  agreement is being
finalized.

Advances  under the line of credit are based upon the  accounts  receivable  and
inventories of Vodavi Communications Systems (VCS), a wholly owned subsidiary of
the Company,  and are secured by substantially all of the assets of the Company.
The
                                        7
<PAGE>
revolving  line of credit  contains  covenants  that are  customary  for similar
credit facilities and also prohibits the Company's  operating  subsidiaries from
paying  dividends to the Company without the consent of GE Capital. 

In 1996, the Company entered into leasing facilities in order to finance capital
expenditures.  The  facilities  provide the Company with up to $800,000 at rates
ranging  from  9% to 13%.  As of  March  31,  1997,  the  Company  had  utilized
approximately  $700,000 of these facilities and had commitments  outstanding for
the remaining balance.

As of March 31, 1997,  the Company had  commitments  in connection  with its new
product developments.  Such commitments aggregate approximately $300,000 and are
payable  through  December  31,  1997.  The  commitments   include  payments  in
connection with the development of the Company's  wireless  product and payments
to develop new tooling for its existing and future digital products.

The Company  believes  that its working  capital and credit  facilities  will be
sufficient to finance its internal growth for the foreseeable  future.  Although
the Company  currently  has no  acquisition  targets,  it intends to continue to
explore  acquisition  opportunities  as they arise and may be  required  to seek
additional financing in the future to meet such opportunities.



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


This report contains forward-looking statements,  including statements regarding
the Company's business strategies,  the Company's business,  and the industry in
which the Company operates. These forward-looking statements are based primarily
on the  Company's  expectations  and  are  subject  to a  number  of  risks  and
uncertainties,  some of which are beyond the Company's  control.  Actual results
could  differ  materially  from the  forward-looking  statements  as a result of
numerous  factors,  including those set forth in the Company's Form 10-K on file
with the SEC.

                                        8
<PAGE>
                           PART II - OTHER INFORMATION

Item 1.           LEGAL PROCEEDINGS

On September  20, 1996,  the Company and Enhanced  filed a lawsuit in the United
States  District  Court for the  District of Arizona  (No.  CIV 96-2184 PHX SMM)
against Michael Mittel and Fereydoun  Taslimi,  former officers and directors of
Enhanced.  The lawsuit  alleges,  among other  things,  that Messrs.  Mittel and
Taslimi violated  federal and Arizona  securities laws and engaged in fraudulent
activities in connection  with the  Company's  acquisition  of Enhanced in 1995;
breached certain terms of their respective  employment  contracts with Enhanced;
and converted  certain  corporate  assets of Enhanced,  breached their fiduciary
duties to Enhanced,  and  misappropriated  certain  corporate  opportunities for
their own  benefit.  The  Company and  Enhanced  are  seeking  compensatory  and
punitive  damages  against  Messrs.  Mittel and Taslimi.  On September 24, 1996,
Messrs.  Mittel and Taslimi filed a lawsuit in the United States  District Court
for the  Northern  District  of Georgia,  Atlanta  Division  (No.  196-CV-2463),
against the Company and Enhanced.  The lawsuit  alleges that  Enhanced  breached
Messrs.  Mittel's and Taslimi's respective  employment agreements by terminating
their employment.

The parties  have  agreed to attempt to settle  these  matters at a  non-binding
mediation  tentatively  scheduled  for May  15,  1997.  In the  event  that  the
mediation  is  unsuccessful,  the  Company  intends to proceed  with its lawsuit
against Messrs. Mittel and Taslimi and to vigorously defend the lawsuit filed by
them against the Company and Enhanced.


Item 2.           CHANGES IN SECURITIES
                  Not applicable.

Item 3.           DEFAULTS UPON SENIOR SECURITIES
                  Not applicable.

Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                  Not applicable.

Item 5.           OTHER INFORMATION
                  Not applicable.

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K
         a)       Exhibits
                  Exhibit 27.  Financial Data Schedule.

         b)       Reports on Form 8-K
                  Not applicable.

                                        9
<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.


                                        Vodavi Technology, Inc.




Dated:            May 12, 1997          /s/Glenn R. Fitchet
                                        -------------------
                                        Glenn R. Fitchet
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)



Dated:            May 12, 1997          /s/Gregory K. Roeper
                                        --------------------
                                        Gregory K. Roeper
                                        Vice President Finance and
                                        Chief Financial Officer
                                        (Principal Financial and 
                                          Accounting Officer)

                                       10