SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2002

                           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.)


4717 EAST HILTON AVENUE, PHOENIX, ARIZONA                           85034
 (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 May 10, 2002 was 4,349,788.
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2002

                                TABLE OF CONTENTS

                                                                            Page
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets - March 31, 2002 and
         December 31, 2001                                                     3

         Consolidated Statements of Operations -
         Three Months Ended March 31, 2002 and 2001                            4

         Consolidated Statements of Cash Flows -
         Three Months Ended March 31, 2002 and 2000                            5

         Notes to Consolidated Financial Statements                            6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   8

Item 3.  Quantitative and Qualitative Disclosures about Market Risk           14

PART II. OTHER INFORMATION                                                    15

SIGNATURES                                                                    16

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                                                    March 31, 2002  December 31,
                                                      (Unaudited)       2001
                                                       ---------      --------
CURRENT ASSETS:
  Cash                                                  $  1,142      $    340
  Accounts receivable, net of reserves for doubtful
   accounts and sales returns of $717 and
   $730, respectively                                      7,002         6,996
  Inventory                                                4,378         5,331
  Income tax receivable                                       --           839
  Prepaids and other current assets                          579           574
                                                        --------      --------
     Total current assets                                 13,101        14,080

PROPERTY AND EQUIPMENT, net                                1,862         1,581

GOODWILL, net                                                734         1,638

DEFERRED TAXES                                               994           622

OTHER LONG-TERM ASSETS                                       162           193
                                                        --------      --------
                                                        $ 16,853      $ 18,114
                                                        ========      ========
CURRENT LIABILITIES:
  Accounts payable                                      $  3,042      $  2,438
  Accrued liabilities                                      1,631         2,014
  Revolving credit facility                                2,065         2,593
                                                        --------      --------
    Total current liabilities                              6,738         7,045
                                                        --------      --------
DEFERRED RENT OBLIGATIONS                                     33            41
                                                        --------      --------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $.001 par value;
    1,000,000 shares authorized, no shares issued             --            --
  Common stock, $.001 par value; 10,000,000 shares
    authorized; 4,668,488 and 4,553,488 shares
    issued, respectively                                       5             5
  Additional paid-in capital                              13,513        13,363
  Accumulated deficit                                     (2,677)       (1,581)
  Treasury stock, 318,700 shares at cost                    (759)         (759)
                                                        --------      --------
                                                          10,082        11,028
                                                        --------      --------
                                                        $ 16,853      $ 18,114
                                                        ========      ========

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

                                       3
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      IN THOUSANDS EXCEPT PER SHARE AMOUNTS
                                   (Unaudited)

                                                             Three Months Ended
                                                                  March 31,
                                                             ------------------
                                                               2002       2001
                                                             -------    -------
REVENUE, net                                                 $ 8,790    $ 6,060

COST OF GOODS SOLD                                             5,639      4,908
                                                             -------    -------
GROSS MARGIN                                                   3,151      1,152
                                                             -------    -------
OPERATING EXPENSES:
  Engineering and product development                            489        496
  Selling, general and administrative                          2,352      3,786
                                                             -------    -------
                                                               2,841      4,282
                                                             -------    -------
OPERATING INCOME (LOSS)                                          310     (3,130)

INTEREST EXPENSE                                                  31        161
                                                             -------    -------

INCOME (LOSS) BEFORE INCOME TAXES
AND CHANGE IN ACCOUNTING PRINCIPLE                               279     (3,291)

INCOME TAX PROVISION (BENEFIT)                                   112     (1,207)
                                                             -------    -------
INCOME (LOSS) BEFORE CHANGE
IN ACCOUNTING PRINCIPLE                                          167     (2,084)

CHANGE IN ACCOUNTING PRINCIPLE,
net of tax                                                    (1,263)        --
                                                             -------    -------

NET LOSS                                                     $(1,096)   $(2,084)
                                                             =======    =======

EARNINGS PER COMMON SHARE:
Basic and Diluted -
  Income (loss) before change in accounting principle        $  0.04    $ (0.49)
  Change in accounting principle                               (0.30)        --
                                                             -------    -------
  Net loss                                                   $ (0.26)   $ (0.49)
                                                             =======    =======
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and Diluted                                              4,273      4,235
                                                             =======    =======

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

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

                                                             Three Months Ended
                                                                  March 31,
                                                             ------------------
                                                               2002       2001
                                                             -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                   $(1,096)   $(2,084)
  Adjustments to reconcile net loss to net cash
   flows provided by operating activities:
    Depreciation and amortization                                175        273
    Deferred rent obligations                                     (8)       (21)
    Change in accounting principle                             1,263         --
  Changes in working capital:
    Accounts receivable, net                                      (6)     6,180
    Inventory                                                    973     (1,804)
    Income tax receivable                                        839         --
    Prepaids and other current assets                              4     (1,055)
    Other long-term assets and deferred taxes                    (19)        41
    Accounts payable                                             604     (1,411)
    Accrued liabilities                                         (422)       231
                                                             -------    -------
      Net cash flows provided by
       operating activities                                    2,307        350
                                                             -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid to acquire property and equipment                   (353)       (36)
  Cash paid to acquire DataSpeak Systems, Inc.                  (624)        --
                                                             -------    -------
      Net cash flows used in investing activities               (977)       (36)
                                                             -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net payments on revolving credit facility                     (528)      (581)
                                                             -------    -------
      Net cash flows used in financing activities               (528)      (581)
                                                             -------    -------
INCREASE (DECREASE) IN CASH                                      802       (267)

CASH, beginning of period                                        340        564
                                                             -------    -------

CASH, end of period                                          $ 1,142    $   297
                                                             =======    =======
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest                                     $    31    $   161
                                                             =======    =======

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

                                       5
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2002
                                    UNAUDITED


(a)  INTERIM FINANCIAL REPORTING

The accompanying  unaudited Consolidated Financial Statements have been prepared
by Vodavi Technology, Inc. and subsidiaries ("Vodavi" or the "Company") pursuant
to the rules and regulations of the Securities and Exchange  Commission  ("SEC")
and,  in the opinion of the  Company,  include all  adjustments  (consisting  of
normal recurring accruals and adjustments)  necessary for a fair presentation of
results  of  operations,  financial  position,  and cash flows as of and for the
periods presented.

The  preparation of financial  statements and related  disclosures in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities  at the date of the  financial  statements  and revenue and expenses
during the period  reported.  Actual results could differ from those  estimates.
Estimates are used in accounting  for,  among other things,  customer  incentive
programs,  allowances for bad debts and sales returns,  inventory  obsolescence,
product warranty,  depreciation,  taxes and other  contingencies.  Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the Consolidated Financial Statements in the period they are determined to be
necessary.

The  results  for the three  months  ended  March 31,  2002 are not  necessarily
indicative of financial  results for the full year.  These financial  statements
should be read in conjunction with the audited Consolidated Financial Statements
and notes thereto  included in Vodavi's  Annual Report on Form 10-K for the year
ended December 31, 2001.

(b)  CALCULATION OF EARNINGS PER SHARE

In accordance with SFAS No. 128,  EARNINGS PER SHARE, the Company displays basic
and diluted  earnings per share (EPS).  Basic EPS is  determined by dividing net
income by the weighted  average number of common shares  outstanding.  The basic
weighted  average  number of common  shares  outstanding  excludes  all dilutive
securities.  Diluted EPS is  determined  by dividing  net income by the weighted
average  number of common  shares and dilutive  securities  outstanding.  As the
Company reported a net loss in both three-month periods ended March 31, 2002 and
2001, no dilutive securities were included in the calculation of diluted EPS, as
their effects would be antidilutive.

(c)  SEGMENT REPORTING

The Company  operates in one reportable  segment,  the  distribution of business
telecommunications  equipment.  Accordingly,  the  Company  has  only  presented
financial information for its one reportable segment.

(d)  CHANGE IN ACCOUNTING PRINCIPLE AND RECENT ACCOUNTING PRONOUNCEMENTS

In 2001, the Financial  Accounting Standards Board ("FASB") issued Statement No.
141, ACCOUNTING FOR BUSINESS  COMBINATIONS,  and Statement No. 142, GOODWILL AND
OTHER  INTANGIBLE  ASSETS.  These  statements  modified  accounting for business
combinations  after  June 30,  2001 and  affected  the  Company's  treatment  of
goodwill and other intangible  assets effective  January 1, 2002. The statements
require that goodwill  existing at the date of adoption be reviewed for possible
impairment  and that  impairment  tests be  performed  at least  annually,  with
impaired assets written-down to fair value. Additionally,  existing goodwill and
intangible   assets  must  be  assessed  and  classified   consistent  with  the
statements'  criteria.  Intangible  assets  with  estimated  useful  lives  will
continue to be  amortized  over those  periods.  Amortization  of  goodwill  and
intangible assets with indeterminate lives will cease.

The Company has determined that upon adoption of these  statements on January 1,
2002,  the entire $1.6  million  carrying  amount of the  existing  goodwill was
impaired.  This determination was based principally on the total market value of
the  Company's  issued and  outstanding  common stock on January 1, 2002 of $5.5
million  compared  to the  Company's  book value on  December  31, 2001 of $11.0

                                       6
<PAGE>
million.  Accordingly,  during the first quarter of 2002, the Company recorded a
goodwill  impairment  of $1.3  million,  net of tax. The goodwill  impairment is
presented in the  accompanying  financial  statements  as a change in accounting
principle in accordance with the provisions of FASB No. 142.

The following table sets forth, for the periods presented,  pro forma net income
(loss) as if the  Company had adopted  SFAS Nos.  142 and 141 from the  earliest
period presented:

                                                            Three Months Ended
                                                                 March 31,
                                                          ---------------------
                                                            2002          2001
                                                          -------       -------
      Income (loss) before change in accounting
       principle, as reported                             $   167       $(2,084)
      Add back goodwill amortization                           --            25
                                                          -------       -------
      Adjusted net income (loss)                          $   167       $(2,059)
                                                          =======       =======

Except as  disclosed  above,  the  adoption of these  Statements  did not have a
material impact on the Company's financial condition or results from operations.

In October  2001,  the FASB issued SFAS No. 144  ACCOUNTING  FOR  IMPAIRMENT  OR
DISPOSAL OF LONG-LIVED ASSETS. SFAS No. 144 addresses  financial  accounting and
reporting for the  impairment or disposal of long-lived  assets.  We adopted the
provisions  of SFAS No. 144  effective  January 1, 2002.  The  adoption  of this
statement  did not have any impact on our  financial  condition  or results from
operations.

(e)  RECENT ACQUISITIONS

On March 4, 2002,  the  Company,  through  its wholly  owned  subsidiary  Vodavi
Direct,  Inc.,  acquired  substantially  all of the assets and  assumed  certain
liabilities of DataSpeak Systems, Inc., an Arizona-based dealer of the Company's
products.  Under the terms of the purchase  agreement,  the Company paid cash of
$624,000 and issued 100,000 shares of restricted common stock valued at $135,000
based on the  closing  price of the  Company's  common  stock on the date of the
acquisition. The purchase price was allocated as follows: (in thousands)

                  Inventory                     $  20
                  Prepaid assets                    9
                  Property and Equipment           50
                  Goodwill                        734
                  Accrued Liabilities             (54)
                                                -----
                                                $ 759
                                                =====

(f)  SPECIAL CHARGES

During the first quarter of 2001, the Company  implemented a restructuring  plan
aimed at reducing its operating expenses to coincide with its then current sales
outlook.  Pursuant to the restructuring plan, the Company reduced its workforce,
discontinued  its  Interactive  Voice Response  product group,  and  implemented
broad-based  price  reductions on certain  voice mail  products and  single-line
telephones.  Additionally,  in  light of  deteriorating  economic  and  industry
conditions and planned  introductions of new products,  the Company re-evaluated
the carrying  amount of certain  receivables  and inventory  items  resulting in
additional accounts receivable reserve  requirements and inventory  impairments.
The pre-tax  financial impact of these  initiatives  during the first quarter of
2001 totaled  approximately  $1.8 million  consisting  of both cash and non-cash
charges.  See  Item  2,  "Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations"  contained  elsewhere  in this  quarterly
report for more information.

(g)  COMMITMENTS AND CONTINGENCIES

The Company is a defendant in various lawsuits.  See Item 3, "Legal Proceedings"
included in the Company's Form 10-K for the year ended December 31, 2001.  There

                                       7
<PAGE>
have been no significant  developments in these lawsuits since the filing of the
Company's  Form 10-K.  The Company has not made any material  provisions  in its
financial statements for these lawsuits.  The Company is also subject to certain
asserted and unasserted claims encountered in the normal course of business. The
Company  believes that the  resolution of these matters will not have a material
adverse effect on its financial  position or results of operations.  The Company
cannot  provide  assurance,  however,  that  damages  that  result in a material
adverse  effect on its financial  position or results of operations  will not be
imposed by these matters.

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

BUSINESS OVERVIEW

We  design,   develop,   market,   and   support  a  broad   range  of  business
telecommunications  solutions,  including telephony  products,  voice processing
products,  and  computer-telephony  products  for a  wide  variety  of  business
applications.   Our  telecommunications   solutions  incorporate   sophisticated
features,  such as automatic call  distribution  and Internet  protocol,  or IP,
gateways.  Our voice  processing  products  include  interactive  voice response
systems,  automated  attendant,  and voice and fax mail. Our  computer-telephony
products enable users to integrate the  functionality of their telephone systems
with their  computer  systems.  We market our  products  primarily in the United
States as well as in foreign countries  through a distribution  model consisting
primarily of wholesale distributors and direct dealers.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations  discusses our  consolidated  financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and assumptions  that affect the reported amounts of assets
and liabilities  and the disclosure of contingent  assets and liabilities at the
date of the  financial  statements  and the  reported  amounts  of  revenue  and
expenses  during the  reporting  period.  On an ongoing  basis,  we evaluate our
estimates and judgments,  including  those related to customer  incentives,  bad
debts,  sales returns,  excess and obsolete  inventory,  and  contingencies  and
litigation.  We base our estimates and judgments on historical experience and on
various other factors that are reasonable under the  circumstances,  the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

     We believe  the  following  critical  accounting  policies  affect our more
significant  judgments and estimates used in the preparation of our consolidated
financial statements:

CUSTOMER INCENTIVES

     We record estimated  reductions to revenue for customer incentive programs,
including  special pricing  agreements,  price protection for our  distributors,
promotions, and other volume-related rebate programs. Our estimates are based on
a number of factors,  including our assumptions  related to customer  redemption
rates,  sales  volumes,  and  inventory  levels at our  distributors.  If actual
results  differ  from  our  original  assumptions,  revisions  are  made  to our
estimates that could result in additional  reductions to our reported revenue in
the period the revisions are made.  Additionally,  if market  conditions were to
decline,  we may take  actions  to  increase  the  level of  customer  incentive
offerings that could result in an incremental reduction of revenue in the period
in which we offer the incentive.

BAD DEBTS

     We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments.  If the financial
condition of our customers  were to  deteriorate,  resulting in an impairment of
their  ability  to  make  payments,   additional  allowances  may  be  required.
Additionally,  we have a significant  concentration of accounts  receivable with
our largest  distributor,  Graybar Electric Company,  Inc. As of March 31, 2002,
Graybar  accounted  for 36.6% of our total  accounts  receivable.  If  Graybar's
financial  condition were to  deteriorate,  resulting in their inability to make
payments  to us,  it could  have a  material  adverse  impact  on our  financial
condition and results of operations.

                                       8
<PAGE>
SALES RETURNS

     We  maintain  allowances  for  estimated  sales  returns.   While  we  have
distribution  agreements with our largest  distributors that limit the amount of
sales  returns on active  products,  we  generally  allow  unlimited  returns of
products that we discontinue. Accordingly, the timing and amount of revisions to
our  estimates  for sales  returns is largely  influenced  by our  decisions  to
discontinue  product  lines and our ability to predict the  inventory  levels of
such products at our largest distributors. Revisions to these estimates have the
effect of increasing or decreasing the reported  amount of revenue in the period
in which the revisions are made. We generally do not accept product returns from
our direct dealers unless the product is damaged.

EXCESS AND OBSOLETE INVENTORY

     We  record  our  inventory  at the  lower  of cost  or  market  value.  Our
assessment of market value is determined by, among other things,  historical and
forecasted  sales  activity,  the  condition of specific  inventory  items,  and
competitive pricing considerations.  When the assessed market value is less than
the historical cost, provision is made in the financial statements to write-down
the carrying amount of the respective inventory items to market value. If actual
results are less favorable than our original  assumptions for determining market
value, additional inventory write-downs may be required.

     The  above  listing  is not  intended  to be a  comprehensive  list  of our
accounting policies. See our audited consolidated financial statements and notes
thereto  included in our Annual Report on Form 10-K for the year ended  December
31, 2001, which contains accounting  policies and other disclosures  required by
accounting principles generally accepted in the United States of America.







                        [SPACE INTENTIONALLY LEFT BLANK]







                                       9
<PAGE>
RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated the percentage of
total revenue  represented by certain  revenue and expense items.  The table and
the  discussion  below  should  be read in  conjunction  with  the  consolidated
financial statements and notes thereto that appear elsewhere in this report.

                                                             Three Months Ended
                                                                   March 31,
                                                             ------------------
                                                              2002         2001
                                                             -----        -----
Revenue                                                      100.0%       100.0%
Cost of goods sold                                            64.2         81.0
                                                             -----        -----
Gross margin                                                  35.8         19.0

Operating expenses:
Engineering and product development                            5.6          8.2
Selling, general, and administrative                          26.7         62.4
                                                             -----        -----
                                                              32.3         70.6

Operating income (loss)                                        3.5        (51.6)
Interest expense, net                                          0.3          2.7
                                                             -----        -----
Pretax income (loss)                                           3.2        (54.3)
Income tax expense (benefit)                                   1.3        (19.9)
                                                             -----        -----
Income (loss) before change in accounting principle            1.9        (34.4)
Change in accounting principle                               (14.4)          --
                                                             -----        -----
Net income (loss)                                            (12.5)%       34.4%
                                                             =====        =====

2001 SPECIAL CHARGES

     During the first quarter of 2001, we implemented a restructuring plan aimed
at reducing our operating  expenses to coincide with our revised sales  outlook.
Pursuant to the restructuring  plan, we reduced our workforce,  discontinued our
Interactive  Voice Response  product group,  and implemented  broad-based  price
reductions on certain  product lines.  These actions  created  severance-related
obligations of $168,000,  estimated  shut-down costs of $265,000,  and estimated
distributor price protection obligations of $432,000.

     Additionally,  in light of deteriorating  economic and industry  conditions
and planned  introductions of new products,  we re-evaluated the carrying amount
of certain  receivables  and inventory  items  resulting in additional  accounts
receivable  reserve  requirements  of  $328,000  and  inventory  impairments  of
$568,000.

     The pre-tax financial impact of these initiatives  during the first quarter
of 2001 totaled  approximately $1.8 million consisting of both cash and non-cash
charges.  The following table sets forth the components of these special charges
included in the accompanying  consolidated  statement of operations for the year
ended December 31, 2001:

                                       10
<PAGE>
<TABLE>
<CAPTION>
                                      Amount                    Inclusion in
                                      ($000)              Statement of Operations
                                      ------              -----------------------
<S>                                   <C>      <C>
    Non-cash Charges:
      Inventory impairments           $  568   Cost of goods sold
      Allowance for bad debts            328   Selling, general & administrative expenses
      Distributor price protection       151   Revenue
      Property and equipment              15   Selling, general & administrative expenses
                                      ------
                                       1,062
                                      ------
    Cash Charges:
      Distributor price protection       281   Revenue
      Severance-related costs            168   Selling, general & administrative expenses
      Other shut-down costs              250   Selling, general & administrative expenses
                                      ------
                                         699
                                      ------
                                      $1,761
                                      ======
</TABLE>

The  following  table sets forth the  activity of accrued  cash  charges for the
three-month period ended March 31, 2002: (IN THOUSANDS)

                                          Balance                    Balance
                                          Dec 31,                   March 31,
                                            2001      Reductions       2002
                                          -------     ----------    ---------
    Distributor price protection           $  86        $ (86)        $  --
    Severance-related costs                   54          (54)           --
    Other shut-down costs                    144          (35)          109
                                           -----        -----         -----
                                           $ 284        $(175)        $ 109
                                           =====        =====         =====

QUARTERLY PERIOD ENDED MARCH 31, 2002 COMPARED WITH QUARTERLY PERIOD ENDED
MARCH 31, 2001

REVENUE

     Revenue  for the three month  period  ended  March 31,  2002  totaled  $8.8
million, an increase of $2.7 million, or 44.3%, from revenue of $6.1 million for
the same  period of 2001.  Sales to our supply  house  customers  accounted  for
approximately $4.8 million,  or 54.5% of our total revenue during the 2002 first
quarter  compared with $2.4  million,  or 39.3% of our total revenue in the 2001
first quarter.  The increase in sales to our supply house  customers in the 2002
first  quarter is  principally  related to  inventory  reductions  at the supply
houses in the 2001 first  quarter,  the magnitude of which we did not experience
in the most recent quarter.

     Revenue in the 2002 first quarter was  negatively  impacted by our decision
to exit the retail  Interactive Voice Response business during the first quarter
of 2001. Revenue  attributable to this business totaled $135,000 during the 2002
quarter compared with $362,000 during the 2001 first quarter.

     Sales through our INFINITE direct dealer program  totaled $3.7 million,  or
42.0% of our total  revenue  for the first  quarter of 2002  compared  with $3.5
million,  or 57.4% of our total  revenue for the same period a year ago.  During
2002,  we  continued  our  program to focus on selling to fewer,  but larger and
better-established,  dealers.  Although  not  significantly,  this  quarter also
benefited from revenue  generated by our newly  acquired  direct sales office in
the Phoenix metropolitan area

GROSS MARGIN

     Our gross margin was $3.2 million  during the 2002  quarter  compared  with
$1.2 million  during the first quarter of 2001. Our gross margin as a percentage
of total  revenue  increased to 35.8% during 2002 compared with 19.0% during the
comparable  period of 2001. The increase in our gross margin  percentage  during
2002 is a direct  result  of (a)  inventory  impairments  and  price  protection
obligations of $1.0 million  recorded during the first quarter of 2001, which we
did not  experience in the 2002 first  quarter;  (b) improved  leverage over the
fixed component of costs of goods sold, which includes labor and other warehouse
and  distribution  costs;  and (c)  increased  sales of  larger  systems,  which
typically carry higher profit margins.

                                       11
<PAGE>
ENGINEERING AND PRODUCT DEVELOPMENT

     Engineering and product  development  expenditures  remained  consistent at
approximately  $500,000  for each of the  respective  quarters.  We  continue to
invest in the development efforts on our next generation IP Key Telephone System
as  well as  enhancements  to our  existing  Key  Telephone  Systems  and  voice
processing products.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

     Selling,  general, and administrative expenses were $2.4 million during the
first quarter of 2002 compared  with $3.8 million in the 2001 first  quarter,  a
reduction of $1.4 million, or 36.8%.  Excluding special charges of approximately
$760,000  recorded  in  the  first  quarter  of  2001,  selling,   general,  and
administrative  expenses in the most recent  quarter  declined by  $674,000,  or
21.7%,  from the same  period a year ago.  This  decrease is the net effect of a
number of factors,  including (a) headcount reductions;  (b) decreased marketing
and promotional  expenses;  (c) the discontinuance of our IVR business;  and (d)
strict cost controls over discretionary spending.

INTEREST EXPENSE

     Interest  expense  decreased  to $31,000 for the first three months of 2002
from  $161,000  for the same  period a year ago.  Our  interest  expense for the
current period was positively  impacted by a sharp reduction in both the average
outstanding balance and the applicable borrowing rate from a year ago.

INCOME TAXES

     We provided for federal and state  income taxes using an effective  rate of
40.1%  during 2002  compared  with an effective  rate of 36.7% during 2001.  The
change in  effective  rates  between  periods  reflects  the impact of permanent
book/tax differences in loss years versus years with positive pre-tax earnings.

LIQUIDITY AND CAPITAL RESOURCES

     Our net  working  capital  position  was $6.4  million  at March  31,  2002
compared  with $7.0  million at  December  31,  2001.  We had a cash  balance of
$1,142,000 at March 31, 2002. Changes in working capital that increased our cash
position during the first three months of 2002 included a reduction in inventory
of $973,000  and the receipt of an income tax refund of  $839,000.  Factors that
reduced our cash balance during the 2002 first quarter included cash payments of
$528,000 on our revolving  credit  facility,  $353,000 for purchases of property
and equipment, and $624,000 for the acquisition of DataSpeak Systems, Inc.

     Our  days  sales   outstanding,   calculated   on  quarterly   sales,   was
approximately 71 days as of March 31, 2002 and December 31, 2001. Our days sales
outstanding,  and our liquidity,  is  significantly  influenced by the timing of
payments received from our largest  distributors.  Our two largest  distributors
comprised 49% of our total  accounts  receivable as of March 31, 2002 and 48% of
our total accounts receivable as of December 31, 2001.

     Our inventory  turnover,  measured in terms of day's sales outstanding on a
quarterly  basis,  improved  to 70 days as of March 31,  2002 from 84 days as of
December 31, 2001. The  improvement in inventory  turnover  reflects our ongoing
efforts to enhance the  procurement  process to coincide with our sales forecast
and our efforts to reduce the levels of slow moving inventory.

     Trade payables and accrued  liabilities,  including payables to third-party
and related-party manufacturers, were approximately $4.7 million as of March 31,
2002 compared with $4.5 million as of December 31, 2001.  The level of our trade
payables and accrued  liabilities  between periods is largely  influenced by the
timing of payments  we make to our largest  suppliers  for  inventory  items and
payments to cover payroll.  We generally pay trade payables  within 45 days from
the invoice date.

     We maintain a $15.0 million credit facility with General  Electric  Capital
Corporation that expires during April 2003. The line of credit bears interest at
2.5% over the  30-day  commercial  paper  rate,  or 4.28% as of March 31,  2002.
Advances  under the line of credit are based upon eligible  accounts  receivable
and  inventory of our wholly owned  subsidiary  Vodavi  Communications  Systems,
Inc., and are secured by substantially all of our assets.  The revolving line of
credit contains  covenants that are customary for similar credit  facilities and
also prohibit our operating  subsidiaries  from paying  dividends to our company
without the consent of GE Capital.  As of March 31, 2002,  we were in compliance
with all of the covenants. We had total borrowing capacity of approximately $8.2

                                       12
<PAGE>
million  under the credit  facility at March 31, 2002, of which $2.1 million was
outstanding and $6.1 million was unused and available.

     During March 2002 we acquired  substantially  all of the assets and assumed
certain liabilities of DataSpeak Systems,  Inc., an Arizona-based  dealer of our
products.  Under the terms of the purchase  agreement,  we paid cash of $624,000
and issued  100,000 shares of restricted  common stock.  The cash portion of the
acquisition was funded through proceeds available under our credit facility.

     We  have  no  special  purpose  entities  or off  balance  sheet  financing
arrangements,  commitments, or guarantees other than certain long-term operating
lease agreements for our office and warehouse facilities and short-term purchase
commitments to our  third-party  suppliers.  The following  table sets forth all
known  commitments as of March 31, 2002 and the year in which those  commitments
become due or are expected to be settled (IN THOUSANDS):

                                                      Accounts
                                                     Payable &
               Operating     Credit    Purchase       Accrued
Year             Leases    Facility   Commitments   Liabilities    Total
----           ---------   --------   -----------   -----------   -------
2002            $   809     $    --     $ 3,920       $ 4,673     $ 9,402
2003                965       2,065          --            --       3,030
2004                965          --          --            --         965
2005                785          --          --            --         785
2006                785          --          --            --         785
Thereafter        3,927          --          --            --       3,927
                -------     -------     -------       -------     -------
Total           $ 8,236     $ 2,065     $ 3,920       $ 4,673     $18,894
                =======     =======     =======       =======     =======

     We are a  defendant  in  various  lawsuits.  We have not made any  material
provisions in our financial  statements  for these  lawsuits.  The imposition of
damages in any of these  matters  could have a  material  adverse  effect on our
results of operations and financial position.

     From time to time we also are subject to certain  asserted  and  unasserted
claims  encountered  in the  normal  course of  business.  We  believe  that the
resolution  of these  matters  will not have a  material  adverse  effect on our
financial  position  or  results of  operations.  We cannot  provide  assurance,
however,  that damages that result in a material adverse effect on our financial
position or results of operations will not be imposed in these matters.

     We believe that our working capital and credit facilities are sufficient to
fund our capital needs during the next 12 months.  Although we currently have no
acquisition targets, we intend 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

     We  currently  obtain  most of our  products  under  various  manufacturing
arrangements  with  third-party  manufacturers  in Asia,  including LGE who owns
approximately  20% of our  outstanding  common  stock.  As of the  date  of this
report, we do not believe that the current economic or political  environment in
Asia will have any adverse impact on our operations.

IMPACT OF RECENTLY ISSUED STANDARDS

In  2001,   the  FASB  issued   Statement  No.  141,   ACCOUNTING  FOR  BUSINESS
COMBINATIONS, and Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These
statements modified accounting for business combinations after June 30, 2001 and
affected our treatment of goodwill and other intangible assets effective January
1, 2002. The statements  require that goodwill  existing at the date of adoption
be reviewed for possible  impairment and that  impairment  tests be performed at
least annually,  with impaired assets written-down to fair value.  Additionally,
existing  goodwill  and  intangible  assets  must  be  assessed  and  classified
consistent  with the  statements'  criteria.  Intangible  assets with  estimated
useful lives will continue to be amortized over those periods.  Amortization  of
goodwill and intangible assets with indeterminate lives will cease.

                                       13
<PAGE>
We have  determined  that upon adoption of these  statements on January 1, 2002,
the entire $1.6 million  carrying amount of the existing  goodwill was impaired.
This determination was based principally on the total market value of our issued
and outstanding  common stock on January 1, 2002 of $5.5 million compared to our
book value on December 31, 2001 of $11.0 million. Accordingly,  during the first
quarter of 2002, we recorded a goodwill impairment of $1.3 million,  net of tax.
The goodwill impairment is presented in the accompanying financial statements as
a change in accounting  principle in accordance  with the provisions of FASB No.
142.

The following table sets forth, for the periods presented,  pro forma net income
(loss) as if we had  adopted  SFAS  Nos.  142 and 141 from the  earliest  period
presented:

                                                            Three Months Ended
                                                                 March 31,
                                                          ---------------------
                                                            2002          2001
                                                          -------       -------
      Income (loss) before change in accounting
       principle, as reported                             $   167       $(2,084)
      Add back goodwill amortization                           --            25
                                                          -------       -------
      Adjusted net income (loss)                          $   167       $(2,059)
                                                          =======       =======

Except as  disclosed  above,  the  adoption of these  statements  did not have a
material impact on our financial condition or results from operations.

In October  2001,  the FASB issued SFAS No. 144  ACCOUNTING  FOR  IMPAIRMENT  OR
DISPOSAL OF LONG-LIVED ASSETS. SFAS No. 144 addresses  financial  accounting and
reporting for the  impairment or disposal of long-lived  assets.  This statement
also extends the reporting  requirements to report  separately,  as discontinued
operations,  components  of an entity that have  either been  disposed of or are
classified as held-for-sale. We adopted the provisions of SFAS No. 144 effective
January 1, 2002.  The adoption of this  statement did not have any impact on our
financial condition or results from operations.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements,  including statements regarding
our business  strategies,  our  business,  and the industry in which we operate.
These forward-looking statements are based primarily on our expectations and are
subject  to a number of risks and  uncertainties,  some of which are  beyond our
control.  Actual  results  could  differ  materially  from  the  forward-looking
statements  as a result of numerous  factors,  including  those set forth in our
Form 10-K for the year ended December 31, 2001, as filed with the Securities and
Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We  do  not  participate  in  any  activities   involving  derivative  financial
instruments or other  financial and commodity  instruments  for which fair value
disclosure would be required under Statement of Financial  Accounting  Standards
No. 107.

We do not hold  investment  securities  that would require  disclosure of market
risk. Our market risk exposure is limited to interest rate risk  associated with
our credit  instruments.  We incur interest on loans made under a revolving line
of credit at variable  interest rates of 2.5% over the 30-day  commercial  paper
rate, a total of 4.28% at March 31, 2002. The principal of loans under this line
of credit is due in April 2003. At March 31, 2002 we had outstanding  borrowings
on the line of credit of approximately $2.1 million.

                                       14
<PAGE>
                           PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

     Not applicable.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     On March 4, 2002,  we issued  100,000  shares of common  stock at $1.35 per
     share to DataSpeak Systems,  Inc. in connection with our acquisition of all
     of the assets of  DataSpeak.  The shares were issued  without  registration
     under the Securities  Act in reliance on the exemption  provided by Section
     4(2) of the  Securities  Act as a transaction  by an issuer not involving a
     public offering.

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

     Not applicable.

                                       15
<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 14, 2002                     /s/ Gregory K. Roeper
                                        -------------------------------
                                        Gregory K. Roeper
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)


Dated: May 14, 2002                     /s/ David A. Husband
                                        -------------------------------
                                        David A. Husband
                                        Chief Financial Officer and
                                        Vice President - Finance
                                        (Principal Financial and
                                        Accounting Officer)

                                       16