SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

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

                For the quarterly period ended September 30, 1999

                           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)

                                 (480) 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 November 11, 1999 was 4,342,238.
<PAGE>
                             VODAVI TECHNOLOGY, INC.

                          QUARTERLY REPORT ON FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999

                                TABLE OF CONTENTS

                                                                           Page
                                                                           ----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

        Condensed Consolidated Balance Sheets - September 30, 1999
        and December 31, 1998.                                               3

        Condensed Consolidated Statements of Operations -
        Three and Nine Months Ended September 30, 1999 and 1998.             4

        Condensed Consolidated Statements of Cash Flows - Nine Months
        Ended September 30, 1999 and 1998.                                   5

        Notes to Condensed Consolidated Financial Statements.                6

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                  7

PART II. OTHER INFORMATION                                                  12

SIGNATURES                                                                  13

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                             VODAVI TECHNOLOGY, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  In thousands

                                              September 30,        December 31,
                                                 1999                 1998
                                              (Unaudited)
                                             -------------        ------------
CURRENT ASSETS:
  Cash                                         $  2,382              $    796
  Accounts Receivable, net                       12,814                 8,888
  Inventory, net                                  5,386                 6,385
  Prepaids and other current assets               1,077                   697
                                               --------              --------
                                                 21,659                16,766

PROPERTY AND EQUIPMENT, net                       2,462                 2,663

GOODWILL, net                                     1,939                 2,244

OTHER LONG-TERM ASSETS, net                       1,321                 1,169
                                               --------              --------
                                               $ 27,381              $ 22,842
                                               ========              ========

CURRENT LIABILITIES:
  Accounts Payable                                3,821                 2,355
  Accrued Liabilities                             2,140                 1,854
  Current Portion of Long-Term Debt                  --                   124
                                               --------              --------
                                                  5,961                 4,333
                                               --------              --------

LONG-TERM DEBT                                    9,741                 7,910
                                               --------              --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common Stock                                        4                     4
  Additional Paid-In Capital                     12,308                12,308
  Accumulated Deficit                              (633)               (1,713)
                                               --------              --------
                                                 11,679                10,599
                                               --------              --------
                                               $ 27,381              $ 22,842
                                               ========              ========

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

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

<TABLE>
<CAPTION>
                                           Three Months Ended            Nine Months Ended
                                             September 30,                 September 30,
                                            1999          1998           1999          1998
                                        ----------    ----------      ----------    ----------
<S>                                     <C>           <C>             <C>           <C>
REVENUE, net                            $   14,033    $   13,073      $   37,981    $   37,402

COST OF GOODS SOLD                           8,986         8,599          24,615        24,853
                                        ----------    ----------      ----------    ----------
GROSS MARGIN                                 5,047         4,474          13,366        12,549

OPERATING EXPENSES
  Engineering and product development          347           337             983         1,304
  Selling, general and administrative        3,537         3,219          10,178         9,599
                                        ----------    ----------      ----------    ----------

OPERATING INCOME                             1,163           918           2,205         1,646

INTEREST EXPENSE                               189           204             478           616
                                        ----------    ----------      ----------    ----------

INCOME BEFORE INCOME TAXES                     974           714           1,727         1,030

PROVISION FOR INCOME TAXES                     365           250             647           367
                                        ----------    ----------      ----------    ----------

NET INCOME                              $      609    $      464      $    1,080    $      663
                                        ==========    ==========      ==========    ==========

BASIC AND DILUTED EARNINGS PER SHARE    $     0.14    $     0.11      $     0.25    $     0.15
                                        ==========    ==========      ==========    ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC AND DILUTED          4,342,238     4,342,238       4,342,238     4,342,238
                                        ==========    ==========      ==========    ==========
</TABLE>

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

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

                                                            Nine months ended
                                                               September 30,
                                                            1999          1998
                                                          -------       -------
OPERATING ACTIVITIES:
  Net income                                              $ 1,080       $   663
  Adjustments:
  Depreciation and amortization                               486           558
  Loss on sale of repair center division                       86            --
  Rent levelization                                            (7)           14
  Changes in working capital:
    Accounts receivable                                    (3,764)          (26)
    Inventory                                                 757           612
    Prepaids and other current assets                        (382)          448
    Other long-term assets                                    335            24
    Accounts payable                                        1,466          (706)
    Accrued liabilities                                       (43)         (317)
    Income taxes payable                                      329           346
                                                          -------       -------
NET CASH FLOWS - OPERATING ACTIVITES                          343         1,616
                                                          -------       -------
INVESTING ACTIVITIES:
  Cash paid for License Agreement                            (500)           --
  Purchase of property and equipment                         (254)         (583)
  Proceeds from sale of repair center division                282            --
                                                          -------       -------
NET CASH FLOWS - INVESTING ACTIVITIES                        (472)         (583)
                                                          -------       -------
FINANCING ACTIVITIES:
  Payments on capital leases                                 (124)         (284)
  Net borrowings (payments) on line of credit               1,839        (1,057)
                                                          -------       -------
NET CASH FLOWS - FINANCING ACTIVITIES                       1,715        (1,341)
                                                          -------       -------

INCREASE (DECREASE) IN CASH                                 1,586          (308)

CASH, beginning of period                                     796           634
                                                          -------       -------
CASH, end of period                                       $ 2,382       $   326
                                                          =======       =======

Supplemental schedule of non-cash investing and financing activities:

     The Company sold substantially all of the assets of the repair
     center division during the second quarter of 1999. As of
     September 30, 1999:
        Carrying amount of net assets sold                              $   531
        Notes receivable from buyer                                        (163)
        Loss on sale                                                        (86)
                                                                        -------
           Cash proceeds from disposition of repair center division     $   282
                                                                        =======

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

                                  5
<PAGE>
                        VODAVI TECHNOLOGY, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
                          SEPTEMBER 30, 1999

(a) Vodavi  Technology,  Inc. (the Company),  a Delaware  corporation,  designs,
develops,  markets,  and  supports a broad range of  business  telecommunication
solutions.  Vodavi products include digital telecommunications systems, computer
telephony products, and voice-processing systems including voice mail, fax mail,
Internet  messaging,  and IVR (interactive voice response) 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  September  30,  1999 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, 1998 financial statements and accompanying notes thereto.

(c) Diluted earnings per share for the periods ended September 30, 1999 and 1998
were determined by dividing net income by the weighted  average number of common
and common equivalent shares  outstanding,  as outlined in Financial  Accounting
Standard (SFAS) No. 128, Earnings Per Share.

(d)  During  June  1999,  the  Company  sold its repair  center  division's  net
inventory,  property,  and other  assets with a net book value of  approximately
$531,000.  The buyer paid to the Company  consideration of $100,000 cash, a note
receivable of $200,000 due July 31, 1999, and a note receivable of approximately
$195,000  with  monthly  payments of  approximately  $16,000  for twelve  months
commencing   August  1,  1999.   The  Company  also  incurred   liabilities   of
approximately $59,000 in connection with this transaction.

During  the third  quarter of 1999,  the  Company  collected  the  principal  of
$200,000 on the note receivable due July 31, 1999, and two monthly  installments
on the $195,000  note  receivable.  At September 30, 1999,  the  remaining  note
receivable balance was approximately $163,000. Additionally, the Company settled
the liabilities of $59,000 for $50,000.

(e) The Company has determined that it has one reportable operating segment. The
Company has three  operating  segments,  which it manages based on the Company's
product  categories of key telephone  systems,  voice  processing  systems,  and
computer-telephony   products.   The  Company's  voice  processing  systems  and
computer-telephony  products categories do not meet the reportable thresholds of
SFAS  No.  131,   DISCLOSURES  ABOUT  SEGMENTS  OF  AN  ENTERPRISE  AND  RELATED
INFORMATION. As a result of the foregoing, the Company has determined that it is
appropriate to present one reportable  segment  consistent  with the guidance in
SFAS No. 131.  Accordingly,  the Company has not  presented  separate  financial
information for each of its operating  segments,  as the Company's  consolidated
financial statements present its one reportable segment.

(f)  Effective  September  30, 1999,  the Company  negotiated an increase in its
credit facility with General  Electric  Capital  Corporation ("GE Capital") from
$12.0  million to $15.0  million.  The line  expires in April 2003.  The line of
credit bears interest at 2.5% over the 30-day commercial paper rate, or 7.82% at
September  30, 1999.  Advances  under the line of credit are based upon eligible
accounts  receivable  and  inventory  of  Vodavi  Communications  Systems,  Inc.
("VCS"),  a  wholly  owned  subsidiary  of  the  Company,  and  are  secured  by
substantially  all of the assets of the Company.  The  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.

                                  6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998:

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

                                                        Three Months Ended
                                                           September 30,
                                                        ------------------
                                                         1999        1998
                                                        ------      ------

     Revenue                                            100.0%      100.0%
     Cost of goods sold                                  64.0%       65.8%
                                                        ------      ------
     Gross margin                                        36.0%       34.2%
     Operating expenses:
       Engineering and product development                2.5%        2.6%
       Selling, general and administrative               25.2%       24.6%
                                                        ------      ------
     Operating income                                     8.3%        7.0%
     Interest expense                                     1.4%        1.6%
                                                        ------      ------
     Income before income taxes                           6.9%        5.4%
     Provision for income taxes                           2.6%        1.9%
                                                        ------      ------
     Net income                                           4.3%        3.5%
                                                        ======      ======


     REVENUE

Revenue  was  approximately  $14.0  million  in the third  quarter  of 1999,  an
increase of approximately $960,000, or 7.3%, over the third quarter of 1998. The
increase  in net  revenue  is  primarily  due to an  increase  of  approximately
$760,000,  or 41%, in dealer-direct revenue from sales to the Company's INFINITE
dealers.  Approximately  $520,000  of  this  increase  was  in  sales  of  voice
processing  products.  The Company also experienced a decrease in repair revenue
due to the sale of the repair center division during the second quarter of 1999.
Repair  revenue  for the  three-month  period  ended  September  30,  1999,  was
approximately  $90,000,  compared with repair revenue of approximately  $345,000
during the comparable period in 1998.

     GROSS MARGIN

Gross margins  increased to approximately  36.0% of revenue in the third quarter
of 1999 as compared with 34.2% in the third quarter of 1998. The  improvement in
gross margin in the third quarter of 1999 is attributable to a number of factors
including an increase in sales of higher-margined  voice processing products, an
improvement in negotiated  vendor discounts as compared to 1998,  elimination of
expenses  related to the Company's  repair center division which was sold during
the second quarter of 1999, and a decrease in import duties.

     ENGINEERING AND PRODUCT DEVELOPMENT

For the quarter ended  September 30, 1999,  expenditures  related to engineering
and product  development  remained  consistent  with  expenditures  in the third
quarter of 1998.

                                  7
<PAGE>
     SELLING, GENERAL AND ADMINISTRATIVE

Selling,  general  and  administrative  expenses  ("SG&A")  increased  9.9% from
$3,219,000 in the third  quarter of 1998 to $3,537,000  for the third quarter of
1999.  For this  same  period,  as a  percentage  of  sales,  SG&A  expenditures
increased  by  0.6%.  The  addition  of  several  new  sales  personnel  and the
completion of the executive  management team accounted for a significant portion
of this increase.

     INTEREST EXPENSE

Interest  expense was  approximately  $189,000 in the third  quarter of 1999,  a
decrease of $15,000,  or 7.4%,  over the third quarter of 1998.  The decrease is
attributable  to a decrease in average  borrowings  during the third  quarter of
1999 as a result of reduced  inventory  levels.  Net  inventory at September 30,
1999, was approximately  $5.4 million as compared to approximately  $7.7 million
at September 30, 1998.

     INCOME TAXES

The Company has provided  for income  taxes using an effective  rate of 37.5% in
the third quarter of 1999, as compared with 35.0% in the third quarter of 1998.

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998:

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


                                                          Nine Months Ended
                                                            September 30,
                                                          -----------------
                                                           1999        1998
                                                           ----        ----

     Revenue                                              100.0%      100.0%
     Cost of goods sold                                    64.8%       66.4%
                                                          -----       -----
       Gross margin                                        35.2%       33.6%

     Operating Expenses:
       Engineering and product development                  2.6%        3.5%
       Selling, general and administrative                 26.8%       25.7%
                                                          -----       -----
     Operating income                                       5.8%        4.4%
     Interest expense                                       1.3%        1.6%
                                                          -----       -----
     Income before income taxes                             4.5%        2.8%
     Provision for income taxes                             1.7%        1.0%
                                                          -----       -----
     Net income                                             2.8%        1.8%
                                                          =====       =====


     REVENUE

Revenue was  approximately  $38.0  million for the first nine months of 1999, an
increase of approximately $579,000, or 1.5%, over the first nine months of 1998.
The  increase in net revenue is  primarily  due to an increase in dealer  direct
revenue  from sales to the  Company's  INFINITE  dealers of  approximately  $1.2
million,  or 21%.  Approximately  $1.0 million of this  increase was in sales of
voice  processing  products.  Voice  processing  revenue for other  distribution
channels  increased  approximately  $275,000 for 1999 as compared to 1998. These
increases  were  partially  offset  by an  approximately  $550,000  decrease  in
distribution revenue, net of discounts,  primarily due to a decrease of $700,000
in sales of single line  systems as the Company  discontinued  sales of the 2600
model and replaced it with the 2700 model. Additionally,  repair revenue for the
nine months ended  September 30, 1999,  was  approximately  $505,000  lower than
repair revenue for the comparable  prior year period,  primarily due to the sale
of the repair center division in June 1999.

                                        8
<PAGE>
     GROSS MARGIN

Gross margin  increased to 35.2% of revenue for the first nine months of 1999 as
compared with 33.6% for the first nine months of 1998. The  improvement in gross
margin is  primarily  attributable  to an increase  in sales of  higher-margined
voice   processing   products,   decreased   discounts   provided  to  wholesale
distributors, an improvement in negotiated vendor discounts as compared to 1998,
elimination of expenses  related to the Company's  repair center  division which
was sold during the second quarter of 1999, and a decrease in import duties.

     ENGINEERING AND PRODUCT DEVELOPMENT

Expenses   related  to  engineering   and  product   development   decreased  to
approximately  $983,000  in the  first  nine  months  of 1999 as  compared  with
approximately  $1.3 million the first nine months of 1998.  The decrease was due
to the elimination of several engineering and product  development  positions in
July 1998.

     SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses increased $579,000, or 6.0%, in the
first nine months of 1999 as compared  with the first nine months of 1998.  This
increase is  primarily a result of the  addition of several new sales  personnel
and the completion of the executive management team.

     INTEREST EXPENSE

Interest expense was approximately  $478,000 in the first nine months of 1999, a
$138,000,  or 22%,  decrease over the first nine months of 1998. The decrease is
attributable  to a  decrease  in  borrowings  as a result of  reduced  levels of
inventory.

     INCOME TAXES

The Company has provided for income taxes using an effective rate of 37.5% in
the first nine months of 1999 as compared with 35.6% in the first nine months of
1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash of  approximately  $2.4 million at September 30, 1999.  The
Company's  cash accounts are swept  regularly and applied  against the Company's
line of credit,  as  described  below.  The  Company's  borrowings  against  its
available  operating  line of credit at September 30, 1999,  were  approximately
$9.5 million,  which  represents an increase of $1.8 million from its borrowings
of $7.7 million at December 31, 1998.  This  increase was  primarily  due to the
timing of payments received on accounts receivable  balances from customers.  At
September 30, 1999, net eligible availability was approximately $1.7 million.

Effective  September 30, 1999, the Company  negotiated an increase in its credit
facility with General  Electric  Capital  Corporation  ("GE Capital") from $12.0
million to $15.0  million.  The line  expires in April 2003.  The line of credit
bears  interest  at 2.5% over the  30-day  commercial  paper  rate,  or 7.82% at
September  30, 1999.  Advances  under the line of credit are based upon eligible
accounts  receivable  and  inventory  of  Vodavi  Communications  Systems,  Inc.
("VCS"),  a  wholly  owned  subsidiary  of  the  Company,  and  are  secured  by
substantially  all of the assets of the Company.  The  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.  At September 30, 1999,  the Company
was in compliance with all of the covenants.

Working  capital,  reduced by  outstanding  borrowings  on the  credit  facility
(reported as long term debt on the balance  sheet),  increased to  approximately
$6.2 million at September 30, 1999 from  approximately  $4.8 million at December
31, 1998.  This increase is  attributable  to increases in accounts  receivables
(primarily  due to timing of receipts),  and prepaids and other current  assets,
partially  offset by a decrease in inventory and  increases in accounts  payable
and the line of credit.

                                        9
<PAGE>
During May 1999, the Company entered into a perpetual,  non-exclusive  licensing
agreement with Santa Barbara Connected Systems Corporation ("Connected Systems")
to acquire the licensing and  manufacturing  rights to the Company's  "Talkpath"
and  "Dispatch"  product  lines.  Since 1997,  the Company had  purchased  these
products  from  Connected  Systems  for  private-labeled  sales to  distribution
partners and  customers.  According to the terms of the  agreement,  the Company
paid Connected  Systems  $300,000 during the second quarter of 1999 and $200,000
during the third  quarter of 1999.  No  additional  payments  are due under this
agreement.

In October  1999,  the Board of  Directors  approved a buy-back of up to 400,000
shares of the  Company's  outstanding  common  stock  over the next six  months.
Financing  for the  buy-back  will be  provided  through the  Company's  line of
credit.

The  Company  believes  that its  working  capital  and  credit  facilities  are
sufficient to finance its internal growth in the near term. 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.

INTERNATIONAL MANUFACTURING SOURCES

The  Company   currently   obtains   certain  of  its  products   under  various
manufacturing  arrangements  with  third-party  manufacturers in Asia. As of the
date of this  report,  the Company  does not believe  that the current  economic
situations in Asia will have any adverse impact on the Company's operations.

YEAR 2000 COMPLIANCE

Many currently  installed  computer  systems and software  products are coded to
accept  only  two-digit  entries  to  represent  years in the date  code  field.
Computer  systems and products that do not accept  four-digit  year entries will
need to be  upgraded or replaced  to accept  four-digit  entries to  distinguish
years beginning with 2000 from prior years.

During  the  third  quarter  of 1999,  the  Company  completed  upgrades  to its
financial and accounting  systems,  including  software  related to order entry,
inventory management,  materials planning,  and accounts payable and receivable.
These upgrades improved the content, quality, and flow of information within the
Company,  as well as addressing Year 2000 issues.  Also during the third quarter
of 1999,  the Company  completed  Year 2000  compliance  upgrades  for  computer
processing platforms, networks, and software systems used in connection with its
operations, other than the financial and accounting systems described above.

A significant portion of the Company's business  communications systems products
is  manufactured  by third  parties  in  Asia.  The  Company  has  completed  an
assessment  of the  Year  2000  risks  associated  with the  inability  of those
manufacturers  to bring  their  production  processes  and other  computer-based
systems into Year 2000 compliance.  Because the manufacturing processes utilized
do not rely upon date-related information, the Company currently believes that a
failure on the part of its overseas  manufacturers  to bring their processes and
equipment  into Year 2000  compliance  does not represent a material risk to the
Company's  ability to obtain its  products  on a timely  basis.  As part of this
assessment,  all of the  manufacturers  have  advised  the  Company  that  their
processes  and  systems  are  Year  2000  compliant.   The  Company's   overseas
manufacturers  may be at risk with respect to suppliers of necessary  resources,
particularly  suppliers  of  power,  water,  and  telecommunications,  if  those
suppliers are not Year 2000 compliant. Because of the nature of the ordering and
manufacturing  cycles for the  Company's  products,  the Company  believes  that
disruptions in its manufacturers' operations of up to two weeks would not have a
material adverse effect on the Company's business.  Extended  disruptions in the
overseas  manufacturers'  operations  would,  however,  materially and adversely
impact the Company's ability to obtain its products on a timely basis.

Certain of the  Company's  products  contain  software and hardware that perform
functions based upon  date-related  information.  The Company has identified its
existing products that are not Year 2000 compliant and has completed development
of upgrades or  modifications to those products that will enable them to process
Year 2000 dates without  malfunctioning.  The Company will be able to pass costs

                                       10
<PAGE>
related  to  upgrading  installed  products  that are no longer  covered  by the
Company's product  warranties along to its customers.  The Company also believes
that the costs  related to upgrading  installed  products  that remain under the
Company's product warranties would be relatively insignificant. The inability of
the Company to develop and provide on a timely basis product  modifications that
may be  required  could  result in a  material  adverse  effect on the  Company,
including increased warranty costs,  customer satisfaction issues, and potential
litigation.

The failure of the Company's  computer system or the systems of third parties to
timely achieve Year 2000 compliance  could have a material adverse effect on the
Company's business,  financial condition,  and operating results. The Company is
substantially  completed with the development of a contingency  plan under which
it would  use a manual  system  for order  processing,  shipping  and  receiving
functions, and accounting systems on a short-term basis in the event the Company
or third parties  experience  computer  system failures as a result of Year 2000
issues.




--------------------------------------------------------------------------------
This report contains forward-looking statements,  including statements regarding
the  Company's  business,  strategies,  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 for the year ended December 31, 1998,
as filed with the Securities and Exchange Commission.

                                       11
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        On  September  20,  1996,  the Company  and  Vodavi-CT,  Inc.  (formerly
Enhanced Systems, Inc.) ("Vodavi-CT") filed a lawsuit against Michael Mittel and
Fereydoun  Taslimi,  former  officers and directors of Vodavi-CT,  in the United
States District Court for the District of Arizona.  The lawsuit subsequently was
transferred  to  the  Northern  District  of  Georgia,   Atlanta  Division  (No.
1-98-CV-18-CAM).  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 Vodavi-CT
in 1995;  breached certain terms of their respective  employment  contracts with
Vodavi-CT;  and converted certain corporate opportunities for their own benefit.
The Company and Vodavi-CT 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-2563),  against the Company and Vodavi-CT.
That lawsuit  alleged that  Vodavi-CT  breached  Messrs.  Mittel's and Taslimi's
respective  employment  agreements by terminating their  employment.  In January
1999, the parties filed motions for summary judgment with respect to portions of
their  respective  claims.  In February  1999,  the parties  filed a stipulation
dismissing  the claims of the Company and Vodavi-CT  that alleged  violations of
federal and Arizona securities laws and constructive fraud under Georgia law.

        On September 27, 1999, the court entered an order granting the motion of
the  Company  and  Vodavi-CT  for  summary  judgment as to the claims of Messrs.
Mittel and  Taslimi for breach of their  respective  employment  agreements.  In
addition,  the court denied Messrs.  Mittel's and Taslimi's  motions for summary
judgment  as to  the  claims  of the  Company  and  Vodavi-CT  with  respect  to
fraudulent misrepresentation and/or nondisclosure,  negligent misrepresentation,
conversion or misappropriation of corporate assets,  breach of contract,  breach
of implied  covenant of good faith and fair dealing,  breach of fiduciary  duty,
constructive fraud, and  misappropriation of corporate assets. The court granted
the motion of Messrs.  Mittel and Taslimi for summary  judgment as to the claims
of the Company and Vodavi-CT with respect to unjust  enrichment and constructive
trust.  The Company and  Vodavi-CT  intend to proceed  with the lawsuit  against
Messrs. Mittel and Taslimi.

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 10.38. Fourth Amendment to Credit Agreement with General
            Electric Capital Corporation.

            Exhibit 27. Financial Data Schedule

        (b) Reports on Form 8-K

            Not applicable


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<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: November 12, 1999      /s/ Gregory K. Roeper
                              -------------------------------------------------
                              Gregory K. Roeper
                              President, Chief Operating Officer, and Secretary
                              (Principal Executive Officer)

Dated: November 12, 1999      /s/ Tammy M. Powers
                              -------------------------------------------------
                              Tammy M. Powers
                              Chief Financial Officer, Vice President - Finance,
                              and Treasurer (Principal Financial and
                              Accounting Officer)


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