SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                  For the quarterly period ended March 31, 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 April 30, 1998 was 4,342,238.
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 1998

                                TABLE OF CONTENTS

                                                                            Page
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

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

            Consolidated Statements of Operations - Three Months             4
            Ended March 31, 1998 and 1997.

            Consolidated Statements of Cash Flows - Three Months
            Ended March 31, 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                                                9

            SIGNATURES                                                       10
                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             VODAVI TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  In thousands

                                                       March 31,    December 31,
                                                         1998           1997
                                                         ----           ----
                                                     (Unaudited)
CURRENT ASSETS:
     Cash                                              $    516      $    634
     Accounts Receivable, net                             9,280         9,682
     Inventory, net                                       7,562         8,286
     Prepaids                                               630           905
                                                       --------      --------
                                                         17,988        19,507

PROPERTY AND EQUIPMENT, net                               2,661         2,616

GOODWILL, net                                             2,357         2,395

OTHER LONG-TERM ASSETS, net                               1,117         1,146
                                                       --------      --------

                                                       $ 24,123      $ 25,664
                                                       ========      ========

CURRENT LIABILITIES:
     Current Portion of Long-Term Debt                 $    361      $    379
     Accounts Payable                                     2,008         4,320
     Accrued Liabilities                                  2,173         2,416
                                                       --------      --------
                                                          4,542         7,115
                                                       --------      --------

LONG-TERM DEBT                                            9,842         8,934
                                                       --------      --------

STOCKHOLDERS' EQUITY:
     Common Stock                                             4             4
     Additional Paid-In Capital                          12,308        12,308
     Accumulated Deficit                                 (2,573)       (2,697)
                                                       --------      --------
                                                          9,739         9,615
                                                       --------      --------

                                                       $ 24,123      $ 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)

                                                    Three Months Ended March 31,

                                                        1998            1997
                                                        ----            ----

REVENUE, net                                         $   12,005      $   11,528

COST OF GOODS SOLD                                        8,129           7,628
                                                     ----------      ----------

         GROSS MARGIN                                     3,876           3,900

OPERATING EXPENSES
   Engineering and product development                      555             483
   Selling, general and administrative                    2,911           2,803
                                                     ----------      ----------

OPERATING INCOME                                            410             614

INTEREST EXPENSE                                            208             178
                                                     ----------      ----------

INCOME BEFORE INCOME TAXES                                  202             436

PROVISION FOR INCOME TAXES                                   78             174
                                                     ----------      ----------

NET INCOME                                           $      124      $      262
                                                     ==========      ==========

DILUTED EARNINGS PER SHARE                           $     0.03      $     0.06
                                                     ==========      ==========

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

The accompanying notes are an integral part of these consolidated statements.
                                       4
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  In thousands
                                   (Unaudited)

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

                                                         1998            1997
                                                         ----            ----

OPERATING ACTIVITIES
Net income                                             $    124        $    262
  Adjustments:
    Depreciation and amortization                           186             184
    Changes in working capital:
         Accounts receivable                                401             695
         Inventory                                          725             314
         Prepaid expenses                                   142              14
         Other long term assets                              20             (37)
         Accounts payable                                (2,311)         (1,043)
         Accrued liabilities                               (110)            (30)
                                                       --------        --------

NET CASH FLOWS - OPERATING ACTIVITIES                      (823)            359
                                                       --------        --------

INVESTING ACTIVITIES:
  Purchase of fixed assets                                 (180)            (95)
                                                       --------        --------

NET CASH FLOWS - INVESTING ACTIVITIES                      (180)            (95)
                                                       --------        --------

FINANCING ACTIVITIES:
  Payments on capital leases                               (104)            (84)
  Borrowings from GE Capital                             13,665          11,800
  Payments to GE Capital                                (12,676)        (12,124)
                                                       --------        --------

NET CASH FLOWS - FINANCING ACTIVITIES                       885            (408)
                                                       --------        --------

DECREASE IN CASH                                           (118)           (144)

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

CASH, end of period                                    $    516        $  1,008
                                                       ========        ========

The accompanying notes are an integral part of these consolidated statements.
                                       5
<PAGE>
                             VODAVI TECHNOLOGY, INC.
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
                                 MARCH 31, 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 March 31,  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 March 31, 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 March 31, 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
                                                                  March 31,
                                                                  ---------
                                                             1998          1997

Revenue                                                     100.0%        100.0%
Cost of goods sold                                           67.7%         66.2%
                                                           ------        ------

Gross margin                                                 32.3%         33.8%
Operating expenses:
     Engineering and product development                      4.6%          4.2%
     Selling, general and administrative                     24.3%         24.3%
                                                           ------        ------

Operating income                                              3.4%          5.3%
Interest expense                                              1.7%          1.5%
                                                           ------        ------

Pre-tax income                                                1.7%          3.8%
Income taxes                                                  0.6%          1.5%
                                                           ------        ------

Net income                                                    1.1%          2.3%
                                                           ======        ======
                                       6
<PAGE>
         Revenue

Revenue  was  approximately  $12.0  million  in the first  quarter  of 1998,  an
increase of approximately $500,000, or 4.1%, over the first quarter of 1997. The
Company  attributes the increase to new marketing  programs designed to increase
its dealers' sales as well as the successful launch of its new  voice-processing
platform. The increase in product sales was offset by an increase in promotional
rebates and discounts related to the marketing programs.

         Gross Margin

Gross margins  decreased to approximately  32.3% of revenue in the first quarter
of 1998 as  compared  with  33.8% in the  first  quarter  of 1997.  The  Company
negotiated  discounts  with its  largest  vendors  in 1997 and is  beginning  to
recognize the benefits of these  discounts.  The promotional  rebates  discussed
above however, offset the effect of the discounts obtained on product cost.

         Engineering and Product Development

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

         Selling, General and Administrative

Selling, general and administrative expenses remained relatively flat during the
first quarter of 1998 as compared  with the first quarter of 1997,  but declined
significantly  from the  fourth  quarter of 1997.  The  Company  attributes  the
decline from the fourth quarter of 1997 to the impact of the restructuring  plan
adopted at the end of 1997.

         Interest Expense

Interest  expense was  approximately  $208,000 in the first  quarter of 1998, an
increase of $30,000,  or 16.9%,  over the first quarter of 1997. The increase is
attributable to an increase in borrowings as a result of the Company's  decision
to begin taking advantage of early payment discounts from its largest vendor, LG
Electronics, Inc. (LGE).

         Income Taxes

The Company has provided  for income  taxes using an effective  rate of 38.6% in
the first  quarter of 1998, as compared with 39.9% in the first quarter 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 $516,000 at March 31,
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 March 31, 1998,  were  approximately
$9.6 million,  which  represents an increase of $1.0 million from its borrowings
of $8.6  million at  December  31,  1997.  The  increase  is  attributed  to the
prepayments  to LGE,  as  described  above.  As a result  of this,  the  Company
violated a minimum  availability  covenant  requiring the Company to maintain no
less than $1.25 million in  availability.  In addition,  the Company  violated a
covenant  covering  intercompany loan balances during the first quarter of 1998.
The  Company  has  obtained a waiver that  decreased  the  minimum  availability
covenant to $100,000  through  September 30, 1998 and modifies the  intercompany
loan covenant  through  September 30, 1998. At March 31, 1998,  availability was
$1.3 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 $1.0 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 8.02% at
                                       7
<PAGE>
April 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.

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
March 31, 1998,  the net remaining  balance under these leases is  approximately
$400,000.

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.


























--------------------------------------------------------------------------------
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.
                                       8
<PAGE>
                           PART II - OTHER INFORMATION

Item 1.               Legal Proceedings

On September 20, 1996,  the Company and Enhanced  Systems,  Inc.  (Enhanced),  a
wholly owned  subsidiary of the Company,  filed a lawsuit against Michael Mittel
and Fereydoun Taslimi,  former officers and directors of Enhanced, 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 Enhanced
in 1995;  breached certain terms of their respective  employment  contracts with
Enhanced,  and  misappropriated  certain  corporate  opportunities for their own
benefit.  The Company and Enhanced are seeking compensatory and punitive damages
against Messrs.  Mittel and Taslimi.  On September 24, 1996, Messrs.  Mittel and
Taslimi  filed a lawsuit in the United  States  District  court for the Northern
District of Georgia, Atlanta Division (No. 196-CV-2563), against the Company and
Enhanced.  The  lawsuit  alleges  that  Enhanced  breached  Messrs.  Mittel  and
Taslimi's  respective  employment  agreements by terminating  their  employment.
Messrs.  Mittel and Taslimi are seeking damages in an amount to be determined at
trial, plus cost and attorneys fees. The parties have recently commenced written
discovery  in both  lawsuits.  The Company  intends to proceed  with its lawsuit
against Messrs. Mittel and Taslimi and is vigorously defending the lawsuit filed
by them against the Company and Enhanced.


Item 2.           Changes In Securities
                  Not applicable

Item 3.           Defaults Upon Senior Securities
                  Not applicable

Item 4.           Submission of Matters to a Vote of Security Holders
                  Not applicable

Item 5.           Other Information
                  Not applicable

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

                  b)   Reports on Form 8-K
                       Not applicable
                                       9
<PAGE>
                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.
 
                               Vodavi Technology, Inc.

Dated:    May 13 , 1998        /s/Glenn R. Fitchet
              --               -------------------

                               Glenn R. Fitchet
                               President and Chief Executive Officer
                               (Principal Executive Officer)

Dated:    May 13, 1998         /s/Gregory K. Roeper
              --               --------------------

                               Gregory K. Roeper
                               Executive Vice President Finance, Administration 
                               and Operations; Chief Financial Officer; 
                               Secretary; and Treasurer (Principal Financial and
                               Accounting Officer)
                                       10