SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 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, SUITE 400, 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 [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

The number of shares  outstanding of registrant's  Common Stock, $.001 par value
per share, as of November 12, 2002 was 4,349,788 .
<PAGE>
                             VODAVI TECHNOLOGY, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

                                TABLE OF CONTENTS

                                                                            Page
PART I.   FINANCIAL INFORMATION

Item 1.   Unaudited Financial Statements

          Consolidated Balance Sheets - September 30, 2002
          and December 31, 2001                                                3

          Consolidated Statements of Operations - Three and Nine
          Months Ended September 30, 2002 and 2001                             4

          Consolidated Statements of Cash Flows - Nine Months
          Ended September 30, 2002 and 2001                                    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          16

Item 4.   Controls and Procedures                                             16

PART II.  OTHER INFORMATION                                                   16

Item 1.   Legal Proceedings                                                   16

Item 2.   Changes In Securities and Use of Proceeds                           16

Item 3.   Defaults Upon Senior Securities                                     16

Item 4.   Submission of Matters to a Vote of Security Holders                 17

Item 5.   Other Information                                                   17

Item 6.   Exhibits and Reports on Form 8-K                                    17

          SIGNATURES                                                          18

          CERTIFICATIONS                                                      19

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                             VODAVI TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEETS
                       IN THOUSANDS, EXCEPT SHARE AMOUNTS

                                                      September 30, December 31,
                                                          2002          2001
                                                        --------      --------
                                                       (Unaudited)

CURRENT ASSETS:
  Cash                                                  $  1,424      $    340
  Accounts receivable, net of reserves for doubtful
    accounts and sales returns of $876 and
    $730, respectively                                     7,620         6,996
  Inventory                                                4,130         5,331
  Income tax receivable                                       --           839
  Prepaids and other current assets                          848           574
                                                        --------      --------
      Total current assets                                14,022        14,080

PROPERTY AND EQUIPMENT, net                                1,684         1,581

GOODWILL                                                     734         1,638

DEFERRED TAXES                                               994           622

OTHER LONG-TERM ASSETS                                        49           193
                                                        --------      --------
                                                        $ 17,483      $ 18,114
                                                        ========      ========

CURRENT LIABILITIES:
  Accounts payable                                      $  1,092      $  1,454
  Accrued liabilities                                      1,892         2,014
  Accounts payable to related parties                      3,873           984
  Revolving credit facility                                   --         2,593
                                                        --------      --------
      Total current liabilities                            6,857         7,045
                                                        --------      --------

  OTHER LONG-TERM OBLIGATIONS                                 21            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                                     (2,154)       (1,581)
  Treasury stock, 318,700 shares at cost                    (759)         (759)
                                                        --------      --------
                                                          10,605        11,028
                                                        --------      --------
                                                        $ 17,483      $ 18,114
                                                        ========      ========

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

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

<TABLE>
<CAPTION>
                                                                        Three Months Ended     Nine Months Ended
                                                                          September 30,         September 30,
                                                                       -------------------   --------------------
                                                                         2002       2001       2002        2001
                                                                       --------   --------   --------    --------
<S>                                                                    <C>        <C>        <C>         <C>
REVENUE, net                                                           $ 10,541   $  9,664   $ 28,790    $ 25,327

COST OF GOODS SOLD                                                        6,600      6,191     18,234      17,261
                                                                       --------   --------   --------    --------

GROSS MARGIN                                                              3,941      3,473     10,556       8,066
                                                                       --------   --------   --------    --------

OPERATING EXPENSES:
Engineering and product development                                         637        514      1,696       1,505
Selling, general and administrative                                       2,916      2,453      7,635       8,819
                                                                       --------   --------   --------    --------
                                                                          3,553      2,967      9,331      10,324
                                                                       --------   --------   --------    --------

OPERATING INCOME (LOSS)                                                     388        506      1,225      (2,258)

INTEREST EXPENSE                                                             22         84         82         353
                                                                       --------   --------   --------    --------

INCOME (LOSS) BEFORE INCOME TAXES AND CHANGE IN ACCOUNTING PRINCIPLE        366        422      1,143      (2,611)

INCOME TAX PROVISION (BENEFIT)                                              145        169        453        (939)
                                                                       --------   --------   --------    --------

INCOME (LOSS) BEFORE CHANGE IN ACCOUNTING PRINCIPLE                         221        253        690      (1,672)

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

NET INCOME (LOSS)                                                      $    221   $    253   $   (573)   $ (1,672)
                                                                       ========   ========   ========    ========


EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted -
Income (loss) before change in accounting principle                    $   0.05   $   0.06   $   0.16    $  (0.39)
Change in accounting principle                                               --         --      (0.29)         --
                                                                       --------   --------   --------    --------
Net income (loss)                                                      $   0.05   $   0.06   $  (0.13)   $  (0.39)
                                                                       ========   ========   ========    ========

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic                                                                     4,350      4,235      4,324       4,235
                                                                       ========   ========   ========    ========
Diluted                                                                   4,469      4,235      4,418       4,235
                                                                       ========   ========   ========    ========
</TABLE>

                                       4

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

                                                              Nine Months Ended
                                                                September 30,
                                                             ------------------
                                                               2002       2001
                                                             -------    -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                     $  (573)   $(1,672)
Adjustments to reconcile net loss to net cash
  flows provided by operating activities:
    Depreciation and amortization                                513        681
    Rent levelization                                            (20)       (67)
    Change in accounting principle                             1,263         --
Changes in working capital:
Accounts receivable, net                                        (624)     3,659
Inventory                                                      1,221      1,020
Income tax receivable                                            839       (960)
Prepaids and other current assets                               (265)       330
Other long-term assets and deferred taxes                         --         95
Accounts payable, including payables to related parties        2,527       (291)
Accrued liabilities                                             (162)      (374)
                                                             -------    -------
          Net cash flows provided by operating activities      4,719      2,421
                                                             -------    -------


CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid to acquire property and equipment                     (418)       (93)
Cash paid to acquire DataSpeak Systems, Inc.                    (624)        --
                                                             -------    -------
          Net cash flows used in investing activities         (1,042)       (93)
                                                             -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on revolving credit facility                     (2,593)    (2,416)
                                                             -------    -------
    Net cash flows used in financing activities               (2,593)    (2,416)
                                                             -------    -------

INCREASE (DECREASE) IN CASH                                    1,084        (88)

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

CASH, end of period                                          $ 1,424    $   476
                                                             =======    =======

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest                                       $    82    $   353
                                                             =======    =======

SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common stock issued to acquire DataSpeak Systems, Inc.       $   135    $    --
                                                             =======    =======

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

                                       5
<PAGE>
                             VODAVI TECHNOLOGY, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002

(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  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
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,  bad  debts,  sales  returns,  excess  and  obsolete  inventory,   and
contingencies   and   litigation.   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  nine  months  ended  September  30,  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  latest Annual Report on Form
10-K for the year ended December 31, 2001.

(b) CALCULATION OF EARNINGS PER SHARE

     In accordance with Statement of Financial  Accounting  Standards (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.  Except for  119,000  and 94,000
dilutive  securities in the three and  nine-month  periods  ended  September 30,
2002,   respectively,   there  were  no  dilutive  securities  included  in  the
calculation of diluted EPS for any other period reported.

(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 SFAS No.
141, ACCOUNTING FOR BUSINESS COMBINATIONS,  and SFAS No. 142, GOODWILL AND OTHER
INTANGIBLE   ASSETS.   These   statements   modified   accounting  for  business
combinations  after  September 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  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 SFAS No. 142.

                                       6
<PAGE>
     The following table sets forth,  for the periods  presented,  pro forma net
income  (loss) as if the  Company  had  adopted  SFAS No. 142 from the  earliest
period presented:

<TABLE>
<CAPTION>
                                                   Three Months Ended        Nine Months Ended
                                                      September 30,             September 30,
                                                  --------------------      --------------------
                                                    2002         2001         2002         2001
                                                  -------      -------      -------      -------
<S>                                               <C>          <C>          <C>          <C>
Income (loss) before change in
 accounting principle, as reported                $   221      $   253      $   690      $(1,672)
Add back goodwill amortization, net of taxes           --           25           --           75
                                                  -------      -------      -------      -------
Adjusted net  income (loss)                       $   221      $   278      $   690      $(1,597)
                                                  =======      =======      =======      =======
</TABLE>

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

     In July  2001,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize  costs  associated  with  exit or  disposal  activities  when they are
incurred  rather than at the date of a commitment  to an exit or disposal  plan.
SFAS No. 146 replaced EITF Issue No. 94-3,  "Liability  Recognition  for certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (including
Certain Costs Incurred in a Restructuring),"  and will apply to exit or disposal
activities  initiated after December 31, 2002. We have reviewed the requirements
of SFAS No. 146 and  believe  the  adoption  of this  statement  will not have a
material impact on our financial statements.

(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 business, 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  totaled  approximately  $1.8
million,  consisting of both cash and non-cash charges, which is included in the
accompanying  statement of operations for the nine-month  period ended September

                                       7
<PAGE>
30,  2001.  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

     In October  2002,  the  Company  reached an  out-of-court  settlement  with
Paradygm  Communications  Inc. and its principal owner relating to a contractual
dispute dating back to 1998. See Part II, Item 1, "Legal  Proceedings"  included
elsewhere in this quarterly report for more  information.  Pursuant to the terms
of the  settlement  agreement,  the Company  paid the  plaintiffs  $250,000  and
accrued  $50,000 of unbilled  legal fees. The $300,000  financial  impact of the
settlement  agreement  is included  in  "Selling,  general  and  administrative"
expenses in the accompanying consolidated financial statements for the quarterly
period ended September 30, 2002.

     The  Company  is  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  in 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  through  a  distribution   model   consisting   primarily  of  wholesale
distributors and direct dealers.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

     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. 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 revenues and expenses
during the reporting period. On an on-going 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 reduce our revenue to account for customer incentive programs, including
special pricing agreements,  price protection for our distributors,  promotions,
and other  volume-related  rebate  programs.  Such  reductions  to  revenue  are
estimates  that are  based on a number of  factors,  including  our  assumptions
related to customer redemption rates, sales volumes, and inventory levels at our

                                       8
<PAGE>
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 September 30,
2002, Graybar accounted for 44.1% 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.

SALES RETURNS

     We  maintain   reserves  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 the  discontinuance of
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 discussion  above is not intended to be a  comprehensive  discussion 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 generally accepted accounting principles in the United States.

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.

                                       9
<PAGE>
                                        Three Months Ended   Nine Months Ended
                                           September 30,        September 30,
                                         -----------------   ------------------
                                          2002      2001      2002       2001
                                         ------    ------    ------     ------
Revenue, net                              100.0%    100.0%    100.0%     100.0%
Cost of goods sold                         62.6      64.1      63.3       68.2
                                         ------    ------    ------     ------
Gross margin                               37.4      35.9      36.7       31.8
Operating expenses:
Engineering and product development         6.0       5.3       5.9        5.9
Selling, general and administrative        27.7      25.4      26.5       34.8
                                         ------    ------    ------     ------
                                           33.7      30.7      32.4       40.7
                                         ------    ------    ------     ------
Operating income (loss)                     3.7       5.2       4.3       (8.9)
Interest expense                            0.2       0.9       0.3        1.4
                                         ------    ------    ------     ------
Income (loss) before income tax
and change in accounting principle          3.5       4.3       4.0      (10.3)
Income tax provision (benefit)              1.4       1.7       1.6       (3.7)
                                         ------    ------    ------     ------
Income (loss) before change in
accounting principle                        2.1       2.6       2.4       (6.6)
Change in accounting principle               --        --      (4.4)        --
                                         ------    ------    ------     ------
Net income (loss)                           2.1%      2.6%     (2.0)%     (6.6)%
                                         ======    ======    ======     ======

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 2001

REVENUE

     Revenue  totaled  $10.5  million in the third  quarter of 2002  compared to
revenue of $9.7 million in the third quarter of 2001.  Sales to our supply house
customers  accounted  for  approximately  $6.2  million,  or 58.9% of our  total
revenue during the third quarter of 2002 compared with $5.9 million, or 61.1% of
our total revenue in the same period of 2001.  Sales through our INFINITE direct
dealer program totaled $4.0 million, or 38.2% of our total revenue for the third
quarter of 2002 compared  with $3.7  million,  or 38.3% of our total revenue for
the same period a year ago. Sales through our newly acquired direct sales office
totaled $596,000,  or 5.7% of our total revenue during the third quarter of 2002
compared  to zero in the same  period in 2001.  This  analysis  does not include
inter-company  eliminations  and other  adjustments to revenue of  approximately
$300,000 in the 2002 quarter and $100,000 in the 2001 quarter.

     Revenue  for the  third  quarter  of 2002 was  negatively  impacted  by our
decision to exit the retail Interactive Voice Response business during the first
quarter of 2001. We did not generate any revenue from this business in the third
quarter of 2002 compared to revenue of $200,000 in the same period of 2001.

GROSS MARGIN

     Our gross margin was $3.9 million during the third quarter of 2002 compared
with  $3.5  million  during  the same  period  of 2001.  Our  gross  margin as a
percentage of total  revenue  increased to 37.4% during 2002 compared with 35.9%
during  the  comparable  period of 2001.  The  improvement  in our gross  margin
percentage is  attributable  to our newly  acquired  direct sales office,  which
generates higher gross margins than our other channels of distribution, improved
leverage over the fixed  component of costs of goods sold,  which includes labor
and other  warehouse  and  distribution  costs,  and the  recognition  of volume
purchase rebates from our largest suppliers.

ENGINEERING AND PRODUCT DEVELOPMENT

     Engineering and product development  expenditures  increased  approximately
$123,000  to  $637,000  from  $514,000 a year ago.  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.

                                       10
<PAGE>
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

     Selling,  general, and administrative expenses were $2.9 million during the
third  quarter of 2002  compared  with $2.5  million in the same period in 2001.
This  increase  is the net  effect  of a number  of  factors,  including  (a) an
increase in sales and  marketing  expenses  of  approximately  $95,000;  (b) the
settlement of litigation and related legal fees of $300,000;  and (c) additional
operating  expenses  associated  with our newly acquired  direct sales office of
approximately  $215,000.  These expense  increases were partially  offset by the
elimination  of   approximately   $150,000  of  expenses   associated  with  our
discontinued IVR business.

INTEREST EXPENSE

     Interest  expense  decreased to $22,000 for the third  quarter of 2002 from
$84,000 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
39.6% for the 2002 third quarter compared with an effective rate of 40.0% during
2001.  The change in  effective  rates  between  periods  reflects the impact of
permanent  book/tax  differences,  primarily  related  to the  deductibility  of
goodwill amortization.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 2001

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  shutdown  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  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 nine months ended  September 30,
2001:

                                     Amount             Inclusion in
                                     ($000)        Statement of Operations
                                     ------        -----------------------
     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
                                        250    expenses
                                     ------
                                        699
                                     ------
                                     $1,761
                                     ======

                                       11
<PAGE>
The following  table sets forth the activity of accrued cash charges  during the
nine-month period ended September 30, 2002: (IN THOUSANDS)

                                             Balance                  Balance
                                             Dec. 31,                Sept. 30,
                                               2001      Payments      2002
                                               ----      --------      ----
     Distributor price protection             $  86       $ (86)      $  --
     Severance-related costs                     54         (54)         --
     Other shut-down costs                      144        (144)         --
                                              -----       -----       -----
                                              $ 284       $(284)      $  --
                                              =====       =====       =====

REVENUE

     Revenue for the  nine-month  period ended  September 30, 2002 totaled $28.8
million,  an increase of $3.5 million,  or 13.8%,  from revenue of $25.3 million
for the same period of 2001.  Sales to our supply house customers  accounted for
approximately $16.6 million, or 57.8% of our total revenue during the first nine
months of 2002 compared with $14.0 million, or 55.5% of our total revenue in the
same period of 2001,  representing a year-to-date increase of $2.6 million, from
the same period in 2001. The increase in sales to our supply house  customers in
the first three quarters of 2002 is principally related to inventory  reductions
at the supply houses in the first nine months of 2001, the magnitude of which we
did not experience in the first three quarters of 2002.

     Sales through our INFINITE direct dealer program totaled $11.2 million,  or
38.8% of our total revenue for the first nine months of 2002 compared with $11.0
million,  or 43.4% 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.  Sales  through our newly  acquired  direct  sales
office  totaled $1.2 million or 4.2% of our total revenue  during the first half
of 2002 compared to zero in the same period of 2001.

     Revenue  in first  nine  months  of 2002  was  negatively  impacted  by our
decision to exit the retail Interactive Voice Response business in 2001. Revenue
attributable to this business  totaled  $135,000 during the first nine months of
2002 compared with $871,000 during the first nine months of 2001.

GROSS MARGIN

     Our gross  margin was $10.6  million  during the first nine  months of 2002
compared with $8.1 million during the same period of 2001. Our gross margin as a
percentage of total  revenue  increased to 36.7% during 2002 compared with 31.8%
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 first nine months of 2002; (b) improved
leverage over the fixed  component of costs of goods sold,  which includes labor
and other  warehouse  and  distribution  costs;  (c)  increased  sales of larger
systems,  which typically carry higher profit margins;  (d) higher gross margins
generated by our direct sales office; and (e) the recognition of volume purchase
rebates  from our major  suppliers in the 2002 period that we did not achieve in
the same period of 2001.

ENGINEERING AND PRODUCT DEVELOPMENT

     Engineering and product development  expenditures  increased  approximately
$191,000 to $1.7 million from $1.5 million for each of the  respective  periods.
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 $7.6 million during the
first nine months of 2002 compared with $8.8 million in the same period in 2001,
a reduction of $1.2 million. Excluding special charges of approximately $761,000
recorded in the first  quarter of 2001,  selling,  general,  and  administrative
expenses in the first three quarters of 2002 declined by $423,000, or 5.3%, 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;  (d) strict

                                       12
<PAGE>
cost controls over  discretionary  spending;  and (e)  approximately  $99,000 of
goodwill  amortization during 2001 that was eliminated in 2002 upon our adoption
of SFAS No.  142.  These  expense  reductions  have  been  partially  offset  by
additional  expenses in 2002 for our direct sales office and the  settlement  of
litigation.

INTEREST EXPENSE

     Interest  expense  decreased  to $82,000  for the first nine months of 2002
from $353,000 for the same period a year ago. Our interest  expense for the 2002
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
39.6% for the first nine months of 2002 compared with an effective rate of 36.0%
for the same  period in 2001.  The change in  effective  rates  between  periods
reflects the impact of permanent book/tax differences.

LIQUIDITY AND CAPITAL RESOURCES

     Our net working  capital  position was $7.2  million at September  30, 2002
compared  with $7.0 million at December 31, 2001.  We had a cash balance of $1.4
million at September  30, 2002.  Changes in working  capital that  increased our
cash  position  during the first nine  months of 2002  included a  reduction  in
inventory of $1.2 million, the receipt of an income tax refund of $843,000,  and
an increase in accounts payable of approximately  $2.5 million primarily related
to extended payment terms from our largest  suppliers.  Factors that reduced our
cash balance during the first nine months of 2002 included cash payments of $2.6
million on our revolving credit facility, $418,000 for purchases of property and
equipment, and $624,000 for the acquisition of DataSpeak Systems, Inc.

     Our  days  sales   outstanding,   calculated  on  quarterly   sales,   were
approximately  63 days as of September  30, 2002 compared to 71 days at 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 56% of our total accounts  receivable as of
September 30, 2002 and 48% of our total  accounts  receivable as of December 31,
2001.

     Our inventory  turnover  measured in terms of days sales  outstanding  on a
quarterly basis, improved to 51 days as of September 30, 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 slower moving inventory.

     Trade payables and accrued  liabilities,  including payables to third-party
and related-party manufacturers, were approximately $6.9 million as of September
30, 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.  As of August 1, 2002 we modified our payment  terms
from 30 days to 60 days with our largest  suppliers.  We generally pay all other
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,  under  which we had no amounts
outstanding  as of September 30, 2002. The line of credit bears interest at 2.5%
over the 30-day  commercial  paper  rate,  or 4.21% as of  September  30,  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,
including a minimum fixed charges  coverage ratio and inventory  turnover ratio.
The credit  agreement  also  prohibits  our operating  subsidiaries  from paying
dividends to our company without the consent of GE Capital.  As of September 30,
2002, we were in compliance with all of the covenants.

                                       13
<PAGE>
     We had total borrowing  capacity of  approximately  $8.3 million,  based on
eligible  accounts  receivable  and  inventory,  under the  credit  facility  at
September 30, 2002.  Our current  credit  facility will expire in April 2003. We
are currently seeking a renewal or replacement facility;  however,  there can be
no assurance that we will be able to renew this credit  facility or obtain a new
facility when our current credit facility expires.

     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 valued at $135,000.  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 September 30,
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            $   341    $     --       $ 5,438        $ 6,857      $12,636
2003              1,008          --            --             --        1,008
2004              1,009          --            --             --        1,009
2005                831          --            --             --          831
2006                814          --            --             --          814
Thereafter        3,927          --            --             --        3,927
                -------    --------       -------        -------      -------
Total           $ 7,930    $     --       $ 5,438        $ 6,857      $20,225
                =======    ========       =======        =======      =======

     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 for
such opportunities.

INTERNATIONAL MANUFACTURING SOURCES

     We  currently  obtain  most of our  products  under  various  manufacturing
arrangements  with  third  party  and  related-party  manufacturers  in Asia,  a
majority  of  which we  purchase  from  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.

     Our  operations  are  dependent  on a  continued  source of supply of these
products from Asia.  These products are  transported to the United States aboard
container  ships,  which dock  primarily  in the Los Angeles,  California  area.
Unloading of these containers  involves union workers and the current West Coast
union agreement  expired on July 1, 2002. The parties have been  unsuccessful in
negotiating a new contract,  which has resulted in port closures.  The ports are
currently  operating  pursuant  to a court  order  under  the  Taft-Hartly  Act.
Negotiations are underway for a new contract, but there can be no assurance that
an agreement  will be reached  without a shutdown of ports on the West Coast.  A
strike,  work slow  down,  or a lockout  at any of the West  Coast  ports  would
disrupt the flow of our products and would likely have a material adverse impact
on our sales and earnings.

                                       14
<PAGE>
IMPACT OF RECENTLY ISSUED STANDARDS

     In  2001,   the  FASB  issued  SFAS  No.  141,   ACCOUNTING   FOR  BUSINESS
COMBINATIONS,  and SFAS 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.

     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 SFAS 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:

<TABLE>
<CAPTION>
                                                 Three Months Ended       Nine Months Ended
                                                    September 30,           September 30,
                                                 -------------------     -------------------
                                                   2002        2001        2002        2001
                                                 -------     -------     -------     -------
<S>                                              <C>         <C>         <C>         <C>
Income (loss) before change in accounting
  principle, as reported                         $   221     $   253     $   690     $(1,672)
Add back goodwill amortization, net of taxes          --          25          --          75
                                                 -------     -------     -------     -------
Adjusted net income (loss)                       $   221     $   278     $   690     $(1,597)
                                                 =======     =======     =======     =======
</TABLE>

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

     In July  2001,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize  costs  associated  with  exit or  disposal  activities  when they are
incurred  rather than at the date of a commitment  to an exit or disposal  plan.
SFAS No. 146 replaced EITF Issue No. 94-3,  "Liability  Recognition  for certain
Employee  Termination  Benefits  and Other Costs to Exit an Activity  (including
Certain Costs Incurred in a Restructuring),"  and will apply to exit or disposal
activities  initiated after December 31, 2002. We have reviewed the requirements
of SFAS No. 146 and  believe  the  adoption  of this  statement  will not have a
material impact on our financial statements.

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 this report and 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.

                                       15
<PAGE>
     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 4.21% at September 30, 2002. The principal of
loans under this line of credit is due in April 2003.  At September  30, 2002 we
had no outstanding borrowings on the line of credit.

ITEM 4. CONTROLS AND PROCEDURES

     As of a date within 90 days prior to the date of the filing of this report,
our Chief  Executive  Officer and Chief  Financial  Officer  have  reviewed  and
evaluated the  effectiveness  of our disclosure  controls and procedures,  which
included  inquiries  made to  certain  other  of our  employees.  Based on their
evaluation,  our Chief Executive  Officer and Chief Financial  Officer have each
concluded  that our  disclosure  controls and procedures are effective to assure
that we record,  process,  summarize,  and  report  information  required  to be
disclosed by us in our periodic reports filed under the Securities  Exchange Act
within the time periods  specified by the Securities  and Exchange  Commission's
rules and forms. Subsequent to the date of their evaluation, there have not been
any significant  changes in our internal controls or in other factors that could
significantly affect these controls, including any corrective action with regard
to significant deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

          On November 9, 1998,  Paradygm  Communications,  Inc.  and R.C.  Patel
     filed a lawsuit  against our  subsidiary,  Vodavi  Communications  Systems,
     Inc.,  or VCS in the United States  District  Court,  Northern  District of
     Georgia,  Atlanta  Division (Civil Action File No.  1:98-CV-3637-WBH).  The
     complaint  alleged 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 requested compensatory,  punitive,  incidental, and consequential
     damages,  attorneys'  fees,  plus any  additional  relief.  We 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. We also filed a counterclaim against Paradygm
     alleging  that Paradygm  breached the  agreement  because of its failure to
     meet its payment obligations to us. The counterclaim  requested amounts due
     pursuant to the strategic alliance agreement, the costs of litigation,  and
     reasonable  attorneys'  fees.  During October 2002, the parties settled the
     dispute.  As a result,  we paid Paradygm and Patel  $250,000 and we accrued
     $50,000 of unbilled legal fees. The financial  impact of this settlement is
     included in our  consolidated  financial  statements for the three and nine
     month periods ended September 30, 2002.

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable

                                       16
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          We held our 2002 Annual Meeting of  Stockholders on July 15, 2002. The
     following  nominees  were  elected to our Board of Directors to serve until
     the next annual meeting of stockholders, until their successors are elected
     or have been qualified, or until their earlier resignation or removal:

     Nominee                       Votes in Favor            Withheld
     -------                       --------------            --------
     William J. Hinz                  3,779,683               83,300
     Gregory K. Roeper                3,774,683               88,300
     Jack A. Henry                    3,776,883               86,100
     Kyeong-Woo Lee                   3,779,183               83,800
     Stephen A McConnell              3,779,683               83,300
     Emmett E. Mitchell               3,779,683               83,300
     Frederick M. Pakis               3,777,183               85,800

     Our stockholders approved a proposal to approve an amendment to our Amended
     and Restated 1994 Stock Option Plan to increase the number of shares of our
     common stock  reserved for issuance  pursuant to the plan from 1,100,000 to
     1,600,000.

     Votes in Favor       Opposed       Abstained       Broker Non-Vote
     --------------       -------       ---------       ---------------
        1,957,552         210,981         16,690           1,677,760

Item 5. OTHER INFORMATION

     Not applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

     Exhibits:

       99.1     Certification of the Chief Executive  Officer of the Registrant,
                pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
                Section 906 of the Sarbanes-Oxley Act of 2002.

       99.2     Certification of the Chief Financial  Officer of the Registrant,
                pursuant to 18 U.S.C.  Section of 1350,  as adopted  pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002.

     Reports on Form 8-K:
     Not applicable

                                       17
<PAGE>
                                   SIGNATURES

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

                                        VODAVI TECHNOLOGY, INC.

Dated: November 12, 2002                /s/ Gregory K. Roeper
                                        ----------------------------------------
                                        Gregory K. Roeper
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

Dated: November 12, 2002                /s/ David A. Husband
                                        ----------------------------------------
                                        David A. Husband
                                        Chief Financial Officer and Vice
                                        President - Finance (Principal Financial
                                        and Accounting Officer)

                                       18
<PAGE>
                                  CERTIFICATION

     I, Gregory K. Roeper, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Vodavi Technology,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial condition,  results of operations,  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) Designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  Presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee of the  registrant's  board of directors  (or persons  performing  the
equivalent function):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize,  and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly report whether there were significant  changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date: November 12, 2002


                                        /s/ Gregory K. Roeper
                                        ----------------------------------------
                                        Gregory K. Roeper
                                        Chief Executive Officer and President

                                       19
<PAGE>
                                  CERTIFICATION

     I, David A. Husband, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Vodavi Technology,
Inc.;

     2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

     3. Based on my knowledge,  the financial  statements,  and other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial condition,  results of operations,  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

     4. The  registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

          a) Designed  such  disclosure  controls and  procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the period in which  this  quarterly  report is being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

          c)  Presented  in this  quarterly  report  our  conclusions  about the
     effectiveness  of the  disclosure  controls  and  procedures  based  on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying  officers and I have disclosed,  based
on our most  recent  evaluation,  to the  registrant's  auditors  and the  audit
committee of the  registrant's  board of directors  (or persons  performing  the
equivalent function):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize,  and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud,  whether or not material,  that  involves  management or
     other employees who have a significant  role in the  registrant's  internal
     controls; and

     6. The registrant's other certifying  officers and I have indicated in this
quarterly report whether there were significant  changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date: November 12, 2002

                                        /s/ David A. Husband
                                        ----------------------------------------
                                        David A. Husband
                                        Chief Financial Officer and
                                        Vice President -- Finance

                                       20