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, 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 August 12, 1999 was 4,342,238.
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1999

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

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

         Consolidated Statements of Operations - Three and Six Months          4
         Ended June 30, 1999 and 1998.

         Consolidated Statements of Cash Flows - Six Months
         Ended June 30, 1999 and 1998.                                         5

         Notes to 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                                                           14

                                        2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                             VODAVI TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  In thousands


                                                      June 30,      December 31,
                                                        1999            1998
                                                      --------        --------
                                                     (Unaudited)
CURRENT ASSETS:
  Cash                                                $    352        $    796
  Accounts receivable, net                              10,437           8,888
  Inventory, net                                         7,155           6,385
  Prepaids and other current assets                      1,842             697
                                                      --------        --------
                                                        19,786          16,766

PROPERTY AND EQUIPMENT, net                              2,505           2,663

GOODWILL, net                                            1,973           2,244

OTHER LONG-TERM ASSETS, net                              1,154           1,169
                                                      --------        --------
                                                      $ 25,418        $ 22,842
                                                      ========        ========
CURRENT LIABILITIES:
  Current portion of long-term debt                         --             124
  Accounts payable                                       4,783           2,355
  Accrued liabilities                                    1,510           1,854
                                                      --------        --------
                                                         6,293           4,333
                                                      --------        --------
LONG-TERM DEBT                                           8,055           7,910
                                                      --------        --------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock                                               4               4
  Additional paid-in capital                            12,308          12,308
  Accumulated deficit                                   (1,242)         (1,713)
                                                      --------        --------
                                                        11,070          10,599
                                                      --------        --------
                                                      $ 25,418        $ 22,842
                                                      ========        ========

              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 June 30, Six Months Ended June 30,
                             -----------------------    -----------------------
                                1999         1998          1999         1998
                             ----------   ----------    ----------   ----------
REVENUE, net                 $   12,641   $   12,287    $   23,948   $   24,329

COST OF GOODS SOLD                8,174        8,088        15,630       16,254
                             ----------   ----------    ----------   ----------
  GROSS MARGIN                    4,467        4,199         8,318        8,075

OPERATING EXPENSES
  Engineering and product
    development                     354          465           636        1,021
  Selling, general and
    administrative                3,598        3,416         6,641        6,327
                             ----------   ----------    ----------   ----------
  OPERATING INCOME                  515          318         1,041          727

INTEREST EXPENSE                    150          207           289          413
                             ----------   ----------    ----------   ----------
  INCOME BEFORE INCOME TAXES        365          111           752          314

PROVISION FOR INCOME TAXES          133           39           281          116
                             ----------   ----------    ----------   ----------
  NET INCOME                 $      232   $       72    $      471   $      198
                             ==========   ==========    ==========   ==========
DILUTED EARNINGS PER SHARE   $     0.05   $     0.02    $     0.11   $     0.05
                             ==========   ==========    ==========   ==========
WEIGHTED AVERAGE SHARES
  OUTSTANDING - DILUTED       4,342,238    4,342,238     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)

                                                            Six months ended
                                                                June 30,
                                                         ----------------------
                                                           1999          1998
                                                         --------      --------
OPERATING ACTIVITIES:
  Net income                                             $    471      $    198
  Adjustments:
    Depreciation and amortization                             299           361
    Loss on sale of repair center division                     95            --
    Rent levelization                                          (9)            9
    Changes in working capital:
      Accounts receivable                                  (1,154)          594
      Inventory                                              (671)         (621)
      Prepaids and other current assets                    (1,488)          328
      Other long-term assets                                    8           (20)
      Accounts payable                                      2,428           257
      Accrued liabilities                                    (403)         (194)
                                                         --------      --------
NET CASH FLOWS - OPERATING ACTIVITIES                        (424)          912
                                                         --------      --------
INVESTING ACTIVITIES:
  Purchase of property and equipment                         (151)         (341)
  Proceeds from sale of repair center division                100            --
                                                         --------      --------
NET CASH FLOWS - INVESTING ACTIVITIES                         (51)         (341)
                                                         --------      --------
FINANCING ACTIVITIES:
  Payments on capital leases                                 (124)         (193)
  Borrowings on line of credit                             22,923        23,540
  Payments on line of credit                              (22,768)      (24,319)
                                                         --------      --------
NET CASH FLOWS - FINANCING ACTIVITIES                          31          (972)
                                                         --------      --------
DECREASE IN CASH                                             (444)         (401)

CASH, beginning of period                                     796           634
                                                         --------      --------
CASH, end of period                                      $    352      $    233
                                                         ========      ========

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.

    Carrying amount of net assets sold                                 $    531
    Notes receivable from buyer                                            (395)
    Liabilities incurred                                                     59
    Loss on sale                                                            (95)
                                                                       --------
      Cash proceeds from disposition of repair center division         $    100
                                                                       ========

              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, 1999

(a) Vodavi  Technology,  Inc. (the Company),  a Delaware  corporation,  designs,
develops,  markets, and supports a broad range of  telecommunication  solutions,
including   digital   telephone   systems,   voice   processing   systems,   and
computer-telephony products for a wide variety of business 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,  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 June 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 the  three-month  period  ended June 30,  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.

(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.

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

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 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
                                                           June 30,
                                                     -------------------
                                                     1999          1998
                                                     -----         -----
     Revenue                                         100.0%        100.0%
     Cost of goods sold                               64.7%         65.8%
                                                     -----         -----
     Gross margin                                     35.3%         34.2%
     Operating expenses:
       Engineering and product development             2.8%          3.8%
       Selling, general and administrative            28.4%         27.8%
                                                     -----         -----
     Operating income                                  4.1%          2.6%
     Interest expense                                  1.2%          1.7%
                                                     -----         -----
     Income before income taxes                        2.9%          0.9%
     Provision for income taxes                        1.1%          0.3%
                                                     -----         -----
     Net income                                        1.8%          0.6%
                                                     =====         =====

     REVENUE

Revenue  was  approximately  $12.6  million  in the second  quarter of 1999,  an
increase of  approximately  $350,000,  or 2.9%, over the second quarter of 1998.
The increase in net revenue is primarily  due to reduced  discounts  provided to
the Company's wholesale  distribution partners and increased rebates provided to
the Company by its vendors.  Additionally,  there was an approximately  $100,000
increase in sales of higher-margined voice processing products.

     GROSS MARGIN

Gross margin increased to  approximately  35.3% of revenue in the second quarter
of 1999 as compared with 34.2% in the second quarter of 1998. The improvement in
gross  margin  in the  second  quarter  of 1999  is  primarily  attributable  to
decreased  discounts  provided  to  wholesale  customers  during  that period as
compared with  discounts  given during the second  quarter of 1998.  The Company
also successfully  negotiated  additional vendor discounts in the second quarter
of 1999.  Gross margin also improved  slightly during the second quarter of 1999
as a result of an approximately $100,000 decrease in import duties.

     ENGINEERING AND PRODUCT DEVELOPMENT

Expenditures  related  to  engineering  and  product  development  decreased  to
approximately  $354,000,  or 2.8% of revenue,  in the second  quarter of 1999 as
compared with approximately  $465,000, or 3.8% of revenue, in the second quarter
of 1998.  The decrease was due to the  elimination  of several  engineering  and
product development positions within the Company during fiscal 1998.

     SELLING, GENERAL AND ADMINISTRATIVE

Selling,  general and administrative  expenses as a percentage of sales remained
consistent during the second quarter of 1999 as compared with the second quarter
of 1998.

                                        7
<PAGE>
     INTEREST EXPENSE

Interest  expense was  approximately  $150,000 in the second  quarter of 1999, a
decrease of $57,000,  or 27.5%, over the second quarter of 1998. The decrease is
attributable  to a decrease in average  borrowings  during the second quarter of
1999 as a result of reduced inventory levels. Net inventory at June 30, 1999 was
approximately $7.2 million as compared to approximately $8.9 million at June 30,
1998.

     INCOME TAXES

The Company has provided  for income  taxes using an effective  rate of 36.4% in
the second  quarter of 1999,  as  compared  with 35.1% in the second  quarter of
1998.

SIX MONTHS ENDED JUNE 30, 1999 AND 1998:

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

                                                       Six Months Ended
                                                            June 30,
                                                     ---------------------
                                                      1999           1998
                                                     ------         ------
     Revenue                                         100.00%         100.0%
     Cost of goods sold                                65.3%          66.8%
                                                     ------         ------
       Gross margin                                    34.7%          33.2%
     Operating Expenses:
       Engineering and product development              2.7%           4.2%
       Selling, general and administrative             27.7%          26.0%
                                                     ------         ------
     Operating income                                   4.3%           3.0%
     Interest expense                                   1.2%           1.7%
                                                     ------         ------
     Income before income taxes                         3.1%           1.3%
     Provision for income taxes                         1.1%           0.5%
                                                     ------         ------
     Net income                                         2.0%           0.8%
                                                     ======         ======

     REVENUE

Revenue was  approximately  $23.9  million  for the first six months of 1999,  a
decrease of approximately  $381,000,  or 1.6% over the first six months of 1998.
Wholesale  distribution  revenue (net of discounts)  decreased by  approximately
$1.0 million, which the Company attributes to its strategy of reducing inventory
in the channel. This decrease was partially offset by an approximately  $400,000
increase in dealer direct sales,  primarily  voice-mail  systems,  and increased
rebates of approximately $260,000 provided to the Company by its vendors.

     GROSS MARGIN

Gross  margin  increased  to  approximately  34.7% of revenue  for the first six
months of 1999 as  compared  with  33.2% for the first six  months of 1998.  The
improvement  in gross margin is primarily  attributable  to decreased  discounts
provided to wholesale  customers  during that period as compared with  discounts
given during the first six months of 1998.

     ENGINEERING AND PRODUCT DEVELOPMENT

Expenditures  related  to  engineering  and  product  development  decreased  to
approximately  $636,000,  or 2.7% of revenue, in the first six months of 1999 as
compared with $1,021,000,  or 4.2% of revenue,  in the first six months of

                                        8
<PAGE>
1998. The decrease was due to the elimination of several engineering and product
development positions during fiscal 1998.

     SELLING, GENERAL AND ADMINISTRATIVE

As a percentage of sales, selling,  general and administrative expenses remained
consistent  during the first six months of 1999 as  compared  with the first six
months of 1998.

     INTEREST EXPENSE

Interest expense was  approximately  $289,000 in the first six months of 1999, a
$124,000,  or 30%,  decrease over the first six months of 1998.  The decrease is
attributable  to a  decrease  in  borrowings  as a result of  reduced  levels of
inventory (See Liquidity and Capital Resources).

     INCOME TAXES

The Company has provided  for income  taxes using an effective  rate of 37.4% in
the first six months of 1999,  as compared with 36.9% in the first six months of
1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents were approximately  $352,000 at June 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 June 30, 1999, were approximately $7.8
million,  which  represents an increase of $100,000 from its  borrowings of $7.7
million at December  31,  1998.  At June 30,  1999,  the  Company had  borrowing
availability  of $1.9  million,  with $260,000  reserved for standby  letters of
credit and $1.25  million  reserved  for  maintaining  the minimum  availability
covenant, with a net available of $430,000.

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 7.35% at June
30,  1999.  Advances  under  the line of  credit  are  based  upon the  accounts
receivable and inventory balances 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, 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
$5.7  million at June 30, 1999 from  approximately  $4.8 million at December 31,
1998. This increase is  attributable to increases in prepaid  expenses and other
current assets,  inventory, and net accounts receivable,  partially offset by an
increase  in accounts  payable as a result of timing of  payments  to  inventory
suppliers.

On June 24, 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.  As part of the  transaction,  the  Company
entered into a seven-year  repair and  refurbishment  agreement  with the buyer.
Under  this  agreement,  the  Company  appointed  the  buyer  as  the  exclusive
authorized  repair  center for  products  manufactured  and  distributed  by the
Company.

During May,  1999,  the Company  entered into a 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.  The  final  payment  of  $200,000  will be paid in the third
quarter of 1999.

                                        9
<PAGE>
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.  The Company has initiated but has
not yet  completed  an  internal  system  assessment  to  determine  whether its
existing computer hardware and software systems are "Year 2000" compliant.

The Company  currently is evaluating its entire internal computer system and has
engaged a third-party  consultant  in connection  with the upgrade of certain of
its existing  financial and accounting  systems,  including  software related to
order entry, inventory management,  materials planning, and accounts payable and
receivable.  These  upgrades are 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. As of the filing date of this Report,  these projects are
approximately  95% complete.  The Company  successfully  performed  tests on the
system upgrades during June 1999. These tests were performed on fully functional
test platforms and the results were satisfactory. The upgrades are scheduled for
installation  to the live platform during the third quarter of 1999. The $25,000
estimated cost for these upgrades has not been exceeded.

The Company has been advised that certain of the computer  processing  platforms
and  networks  and  certain   software  systems  used  in  connection  with  its
operations, other than the financial and accounting systems described above, may
not be Year 2000  compliant.  The Company  currently is assessing  the extent of
such non-compliance and intends to develop a program to bring those systems into
Year 2000  compliance  by September  30,  1999.  The Company  believes  that any
modifications  required to computer processing  platforms,  networks and certain
software systems, as defined by the program,  will be addressed and completed by
November 30,  1999.  A failure of its computer  systems as a result of Year 2000
issues could have a material adverse effect on the Company's operations.

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 those
of 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 believes that it
will be able to pass along to its customers costs related to upgrading installed
products that are no longer  covered by the Company's  product  warranties.  The
Company also  believes that the costs  related to upgrading  installed  products
that remain under the Company's product

                                       10
<PAGE>
warranties would be relatively insignificant.  To date, the Company has incurred
approximately  $15,000 in costs  associated  with the  development  of Year 2000
compliance  upgrades.  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  Company  is unable to fully  assess the impact of the Year 2000 issue as of
the filing date of this Report.  The Company  currently is  evaluating  the Year
2000  issue as it  relates  to  computer  systems  operated  by all of the third
parties,   including   manufacturers,   suppliers,   customers,   and  financial
institutions,  with which the Company's  systems  interface.  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 currently is developing
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.  As of the filing date of this
Report,  the Company has not  formulated a contingency  plan with respect to any
longer-term issues that may arise as a result of the Year 2000 compliance issues
described above.










--------------------------------------------------------------------------------
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 November 9, 1998, Paradygm  Communications,  Inc.  ("Paradygm") and R.C.
     Patel  ("Patel")  filed  a  lawsuit  against  the  Company's  wholly  owned
     subsidiary  Vodavi  Communications  Systems,  Inc.  ("VCS") in the Superior
     Court of Gwinnett  County,  Georgia (Case No.  98-A-8744-6).  The complaint
     alleges  that  VCS (i)  breached  its  strategic  alliance  agreement  with
     Paradygm,  as well as its warranty of product  fitness  under the strategic
     alliance agreement;  (ii) failed to provide reasonable  technical and sales
     training  assistance  to  Paradygm's  employees to support  Paradygm in its
     efforts to sell products under the agreement;  and (iii) engaged in conduct
     that constitutes intentional or negligent misrepresentation.  The complaint
     requests  compensatory,  punitive,  incidental,  and consequential damages,
     attorneys'  fees,  plus any additional  relief.  VCS answered the complaint
     denying the foregoing  allegations,  asserting that the complaint  fails to
     state a claim and, for various  reasons,  the relief sought by Paradygm and
     Patel is  barred.  VCS  also  has  filed a  counterclaim  against  Paradygm
     alleging  that Paradygm  breached the  agreement  because of its failure to
     meet its payment obligations to VCS. The counterclaim  requests amounts due
     pursuant to the strategic alliance agreement, the costs of litigation,  and
     reasonable  attorneys' fees. The Company intends to vigorously  defend this
     lawsuit.

     On December 21, 1998,  the case was removed from the Superior  Court to the
     United States District Court for the Northern District of Georgia - Atlanta
     Division.  On March 24, 1999, the plaintiffs filed an amended  complaint to
     add the Company's  subsidiary  Vodavi-CT,  Inc. (formerly Enhanced Systems,
     Inc.)  ("Vodavi-CT")  as an  additional  defendent.  The amended  complaint
     alleges claims against  Vodavi-CT  similar to those alleged in the original
     complaint.  On July 28,  1999,  Vodavi-CT  filed an answer and denied those
     allegations  on the  same  basis  as  VCS'  original  answer.  The  parties
     currently are conducting discovery.

ITEM 2. CHANGES IN SECURITIES

     Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable

                                       12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company's 1999 Annual Meeting of Stockholders was held on June 7, 1999.
     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                        3,738,795                     16,701
     Gilbert H. Engels                      3,738,795                     16,701
     Stephen A  McConnell                   3,253,215                    502,281
     Nam K. Woo                             3,738,795                     16,701
     Emmett E. Mitchell                     3,253,215                    502,281

     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, 1999.

     Votes in Favor         Opposed         Abstained            Broker Non-Vote
     --------------         -------         ---------            ---------------
       3,741,526             4,540            9,430                     0


ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     a)   Exhibits

          Exhibit  10.34.  Bill of Sale and  Assignment  dated  June  24,  1999,
          between Vodavi  Communication  Systems,  Inc. and Aztec  International
          LLC.

          Exhibit 10.35. Repair and Refurbishment Agreement dated June 24, 1999,
          between Vodavi  Communication  Systems,  Inc. and Aztec  International
          LLC.

          Exhibit 10.36.  License  Agreement  dated May 17, 1999,  between Santa
          Barbara Connected Systems Corporation and Vodavi Technology, Inc.

          Exhibit 10.37.  Object Code Software  License  Agreement dated May 24,
          1999, between D2 Technologies, Inc. and Vodavi Technology, Inc.

          Exhibit 27. Financial Data Schedule

     b)   Reports on Form 8-K

          Not applicable

                                       13
<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 13, 1999                  /s/ Gregory K. Roeper
                                        ----------------------------------------
                                        Gregory K. Roeper
                                        President, Chief Operating Officer, and
                                        Secretary


Dated: August 13, 1999                  /s/ Tammy M. Powers
                                        ----------------------------------------
                                        Tammy M. Powers
                                        Chief Financial Officer, Vice President
                                        - Finance, and Treasurer (Principal
                                        Financial and Accounting Officer)

                                       14