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 June 30, 1998

                           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 August 7, 1998 was 4,342,238.
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1998

                                TABLE OF CONTENTS

                                                                      Page
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets - June 30, 1998
          and December 31, 1997.                                        3

          Consolidated Statements of Operations - Three and Six         4
          Months Ended June 30, 1998 and 1997.

          Consolidated Statements of Cash Flows - Six Months
          Ended June 30, 1998 and 1997.                                 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                                             11

          SIGNATURES                                                    12


                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             VODAVI TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  In thousands

                                                        June 30,    December 31,
                                                          1998         1997
                                                          ----         ----
                                                       (Unaudited)
CURRENT ASSETS:
     Cash                                              $    233       $    634
     Accounts Receivable, net                             9,088          9,682
     Inventory, net                                       8,907          8,286
     Prepaids                                               577            905
                                                       --------       --------
                                                         18,805         19,507

PROPERTY AND EQUIPMENT, net                               2,688          2,616

GOODWILL, net                                             2,319          2,395

OTHER LONG-TERM ASSETS, net                               1,150          1,146
                                                       --------       --------

                                                       $ 24,962       $ 25,664
                                                       ========       ========
CURRENT LIABILITIES:
     Current Portion of Long-Term Debt                      361            379
     Accounts Payable                                     4,577          4,320
     Accrued Liabilities                                  2,222          2,416
                                                       --------       --------
                                                          7,160          7,115
                                                       --------       --------

LONG-TERM DEBT                                            7,989          8,934
                                                       --------       --------
STOCKHOLDERS' EQUITY:
     Common Stock                                             4              4
     Additional Paid-In Capital                          12,308         12,308
     Accumulated Deficit                                 (2,499)        (2,697)
                                                       --------       --------
                                                          9,813          9,615
                                                       --------       --------

                                                       $ 24,962       $ 25,664
                                                       ========       ========

                   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)
<TABLE>
<CAPTION>
                                          Three Months Ended June 30,   Six Months Ended June 30,
                                              1998         1997            1998         1997
                                              ----         ----            ----         ----
<S>                                        <C>          <C>             <C>          <C>       
REVENUE, net                               $   12,287   $   11,917      $   24,329   $   23,445

COST OF GOODS SOLD                              8,088        7,944          16,254       15,572
                                           ----------   ----------      ----------   ----------
     GROSS MARGIN                               4,199        3,973           8,075        7,873

OPERATING EXPENSES
     Engineering and product development          465          499           1,021          982
     Selling, general and administrative        3,416        2,739           6,327        5,542
                                           ----------   ----------      ----------   ----------

     OPERATING INCOME                             318          735             727        1,349

INTEREST EXPENSE                                  207          161             413          338
                                           ----------   ----------      ----------   ----------
     INCOME BEFORE INCOME TAXES                   111          574             314        1,011

PROVISION FOR INCOME TAXES                         39          227             116          400
                                           ----------   ----------      ----------   ----------

      NET INCOME                           $       72   $      347      $      198   $      611
                                           ==========   ==========      ==========   ==========

DILUTED EARNINGS PER SHARE                 $     0.02   $     0.08      $     0.05   $     0.14
                                           ==========   ==========      ==========   ==========

WEIGHTED AVERAGE SHARES
     OUTSTANDING - DILUTED                  4,342,238    4,342,238       4,342,238    4,342,238
                                           ==========   ==========      ==========   ==========
</TABLE>

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

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

                                                           Six months ended
                                                               June 30,
                                                          -------------------
                                                          1998           1997
                                                          ----           ----

OPERATING ACTIVITIES:
     Net Income                                         $    198       $    611
     Adjustments:
       Depreciation and amortization                         361            326
       Rent levelization                                       9             25
       Changes in working capital:
           Accounts receivable                               594           (189)
           Inventory                                        (621)            41
           Prepaids                                          328           (148)
           Other long-term assets                            (20)          (258)
           Accounts payable                                  257           (905)
           Accrued liabilities                              (194)           (29)
                                                        --------       --------
NET CASH FLOWS - OPERATING ACTIVITIES                        912           (526)
                                                        --------       --------

INVESTING ACTIVITIES:
     Purchase of property and equipment                     (341)          (107)
                                                        --------       --------
NET CASH FLOWS - INVESTING ACTIVITIES                       (341)          (107)
                                                        --------       --------

FINANCING ACTIVITIES:
     Payments on capital leases                             (193)           (66)
     Debt financing costs paid                                --            (23)
     Borrowings from GE Capital                           23,540         23,517
     Payments to GE Capital                              (24,319)       (22,147)
                                                        --------       --------
NET CASH FLOWS - FINANCING ACTIVITIES                       (972)         1,281
                                                        --------       --------

INCREASE (DECREASE) IN CASH                                 (401)           648

CASH, beginning of period                                    634          1,152
                                                        --------       --------

CASH, end of period                                     $    233       $  1,800
                                                        --------       --------

                   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
                                  JUNE 30, 1998

a) Vodavi  Technology,  Inc. (the  Company),  a Delaware  corporation,  designs,
develops,  markets,  and  supports  a broad  range  of  communication  products,
computer-telephony products, and voice processing products 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 June 30,  1998 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, 1997 financial statements and accompanying notes thereto.

(c) Diluted earnings per share for the periods ended June 30, 1998 and 1997 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.

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

Results of Operations

Three Months Ended June 30, 1998 and 1997:

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

                                                  Three Months Ended
                                                       June 30,
                                               -------------------------
                                               1998                 1997
                                               ----                 ----

Revenue                                        100.0%               100.0%
Cost of goods sold                              65.8%                66.7%
                                               -----                -----

Gross margin                                    34.2%                33.3%
Operating expenses:
     Engineering and product development         3.8%                 4.1%
     Selling, general and administrative        27.8%                23.0%
                                               -----                -----

Operating income                                 2.6%                 6.2%
Interest expense                                 1.7%                 1.4%
                                               -----                -----

Pre-tax income                                   0.9%                 4.8%
Income taxes                                     0.3%                 1.9%
                                               -----                -----

Net income                                       0.6%                 2.9%
                                               =====                =====

                                       6
<PAGE>
         Revenue

Revenue  was  approximately  $12.3  million  in the second  quarter of 1998,  an
increase of  approximately  $370,000,  or 3.1%, over the second quarter of 1997.
The Company attributes the increase to the successful launch of its new Starplus
Triad series product line, as well as the continued success of the Company's new
entry-level voice processing products.  The increase in product sales was offset
by an increase in  promotional  rebates and  discounts  related to new marketing
programs.

         Gross Margin

Gross margins increased to approximately  34.2% of revenue in the second quarter
of 1998 as  compared  with 33.3% in the  second  quarter  of 1997.  The  Company
negotiated  discounts  with its largest  suppliers  in 1997 and is  beginning to
recognize the benefits of these discounts.

         Engineering and Product Development

Expenditures  related to engineering and product development remained relatively
constant in the second  quarter of 1998 as compared  with the second  quarter of
1997.

         Selling, General and Administrative

Selling,  general and administrative  expenses increased  approximately $680,000
during the second  quarter of 1998 as compared  with the second  quarter of 1997
primarily due to increases in personnel in sales and marketing functions.

         Interest Expense

Interest  expense was  approximately  $207,000 in the second quarter of 1998, an
increase of $46,000,  or 28.6%, over the second quarter of 1997. The increase is
attributable  to  increased  borrowings  as a  result  of  increased  levels  of
inventory.

         Income Taxes

The Company has provided for income taxes using an effective  rate of 35% in the
second  quarter of 1998, as compared  with 39.6% in the second  quarter of 1997.
The decrease is the result of the Company's expected use of tax credits in 1998.


                                       7
<PAGE>

Six Months Ended June 30, 1998 and 1997:

The  following  table  summarizes  the  operating  results  of the  Company as a
percentage of sales for the periods indicated.
                                                      Six Months Ended
                                                          June 30,
                                                  -------------------------
                                                  1998                1997
                                                  ----                ----
Revenue                                          100.0%               100.0%
Cost of goods sold                                66.8%                66.4%
                                                 -----                -----
     Gross margin                                 33.2%                33.6%
Operating Expenses:
     Engineering and product development           4.2%                 4.2%
     Selling, general and administrative          26.0%                23.6%
                                                 -----                -----
Operating income                                   3.0%                 5.8%
Interest expense                                   1.7%                 1.5%
                                                 -----                -----
Pre-tax income                                     1.3%                 4.3%
Income taxes                                       0.5%                 1.7%
                                                 -----                -----
Net income                                         0.8%                 2.6%
                                                 =====                =====

         Revenue

Revenue was  approximately  $24.3  million for the first six months of 1998,  an
increase of approximately  $880,000,  or 3.8% over the first six months of 1997.
The Company  attributes the increase to the  successful  launch of its new Triad
series  product  line as well as the  continued  success  of the  Company's  new
entry-level voice processing products.  The increase in product sales was offset
by an increase in  promotional  rebates and  discounts  related to new marketing
programs.

         Gross Margin

Gross margin remained  relatively constant at 34.2% of revenue for the first six
months of 1998 as  compared  with  33.6% in the first six  months of 1997 as the
Company is beginning to recognize the benefits of discounts  negotiated with its
largest suppliers in late 1997.

         Engineering and Product Development

Expenditures  related to engineering and product development remained relatively
constant in the first six months of 1998 as compared with the first six
months of 1997.

         Selling, General and Administrative

Selling, general and administrative expenses increased $785,000 in the first six
months of 1998 as compared with the first six months of 1997. As a percentage of
revenue,  selling,  general and  administrative  expenses  increased to 26.0% of
revenue in the first six months of 1998 as compared  with 23.6% in the first six
months of 1997 due to increases in personnel in sales and marketing functions.

         Interest Expense

Interest expense was  approximately  $413,000 in the first six months of 1998, a
$75,000,  or 22.2%,  increase over the first six months of 1997. The increase is
attributable  to an increase in  borrowings  as a result of increased  levels of
inventory (See Liquidity and Capital Resources).

                                       8
<PAGE>
         Income Taxes

The Company has provided  for income  taxes using an effective  rate of 36.9% in
the first six months of 1998 as  compared  with 39.6% in the first six months of
1997. The decrease is the result of the Company's expected use of tax credits in
1998.

Liquidity and Capital Resources

The Company's cash and cash equivalents were approximately  $233,000 at June 30,
1998.  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 June 30, 1998, were approximately $7.8
million,  which  represents a decrease of $800,000  from its  borrowings of $8.6
million at December 31, 1997. At June 30, 1998,  availability  was $3.9 million,
with $200,000  reserved for standby letters of credit and $100,000  reserved for
maintaining  the minimum  availability  covenant,  with a net  available of $3.6
million.

The Company  maintains a $12.0  million  line of credit  with  General  Electric
Capital Corporation (GE Capital) which expires in April 2000. The line of credit
bears interest at 2.5% over the 30-day  commercial  paper rate or 8% at June 30,
1998.  Advances under the line of credit are based upon the accounts  receivable
and  inventories 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 June 30,  1998,  the  Company  was in  violation  of two  financial
covenants related to (i) intercompany loans and (ii) number of days of inventory
maintained by the Company. The Company has secured a waiver of these violations.

The Company has financed  approximately  $800,000 in capital  expenditures  with
third-party leasing companies.  The terms of these financings  generally provide
for interest rates at approximately 13% with 24-month repayment  periods.  As of
June 30, 1998,  the net remaining  balance  under these leases is  approximately
$310,000.

While the Company  believes that its working  capital and credit  facilities are
sufficient  to finance  its  internal  growth in the near term,  the  Company is
currently negotiating an expansion of its credit facility to $15 million as well
as term financing  relative to its fixed asset  additions.  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. The current
economic  situation  in Asia is not  expected to have any adverse  impact on the
Company's operations.

Year 2000 Compliance

The Company has initiated but has not completed an internal system assessment to
determine whether its existing software programs are "Year 2000" compliant.  The
Company currently is evaluating its entire internal computer system with respect
to a proposed  program to upgrade  its  existing  hardware  and  software  or to
install new  hardware  and  software  systems  intended to improve the  content,
quality,  and flow of  information  within the Company as well as to address any
Year 2000 issues that may exist.  Although  the  Company has not  completed  the
evaluation of Year 2000 issues that may exist,  the Company  currently  does not
believe  that  the  total  cost to the  Company  of  addressing  its  Year  2000
compliance issues will have a material adverse effect on the Company's financial
condition or results of operations.  The Company  currently is developing a plan
to evaluate  the Year 2000 issue as it relates to computer  systems  operated by
third parties, including suppliers,  customers, and financial institutions, with
which the Company's  systems  interface.  Any 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. 
                                       9
<PAGE>
The Company has identified those of its existing products that are not Year 2000
compliant and has completed a schedule to ensure that upgrades or  modifications
for its products will be available by January 1999. The Company believes that it
will be able to pass  along to its  customers  the cost of  upgrading  installed
products that are no longer covered by the Company's product warranties.

















--------------------------------------------------------------------------------
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 for the
year  ended  December  31,  1997,  as filed  with the  Securities  and  Exchange
Commission.

                                       10
<PAGE>
                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

        Reference is made to the  disclosure  included  under this Item in the
        Company's  Quarterly  Report on Form 10-Q for the quarter  ended March
        31, 1998, as filed on May 14, 1998.

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

        The Company's 1998 Annual Meeting of Stockholders  was held on
        June 29,  1998.  The  following  nominees  were elected to the
        Company's Board of Directors,  to serve until their successors
        are elected or have been  qualified,  or until  their  earlier
        resignation or removal:

        Nominee                Votes in Favor               Withheld
        -------                --------------               --------

        William J. Hinz           3,864,522                  390,503
        Glenn R. Fitchet          3,864,522                  390,503
        Nam Woo                   3,864,522                  390,503
        Gilbert H. Engels         3,854,522                  400,503
        Stephen A. McConnell      3,875,772                  379,253

        The   following   item  was  voted   upon  by  the   Company's
        stockholders:

        a)       Proposal to ratify the appointment of Arthur Andersen
                 LLP as the  independent  auditors  of the Company for
                 the fiscal year ending December 31, 1998.

        Votes in Favor         Opposed      Abstained        Broker Non-Vote
        --------------         -------      ---------        ---------------
        4,238,775              16,250           0                  0

Item 5. Other Information

        Pursuant to Rule 14a-4 under the  Securities  Exchange  Act of
        1934, as amended,  the Company intends to retain discretionary
        authority  to  vote   proxies  with  respect  to   shareholder
        proposals for which the proponent  does not seek  inclusion of
        the proposed  matter in the Company's  proxy statement for the
        annual  meeting to be held  during  calendar  1999,  except in
        circumstances  where (i) the  Company  receives  notice of the
        proposed  matter no later  than April 14,  1999,  and (ii) the
        proponent  complies with the other  requirements  set forth in
        Rule 14a-4.

Item 6. Exhibits and Reports on Form 8-K
        a)   Exhibits
             Exhibit 27.  Financial Data Schedule

        b)   Reports on Form 8-K
             Not applicable

                                       11
<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: August 11, 1998         /s/ Glenn R. Fitchet
      ----------------         ------------------------------------
                               Glenn R. Fitchet
                               President and Chief Executive Officer
                               (Principal Executive Officer)

Dated: August 11, 1998         /s/ Gregory K. Roeper
      ----------------         ------------------------------------
                               Gregory K. Roeper
                               Chief Operating Officer, Chief Financial Officer,
                               Secretary, and Treasurer
                               (Principal Financial and Accounting Officer)


                                       12